10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

☐ 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 001-37971

PGT Innovations, Inc.

1070 Technology Drive

North Venice, FL 34275

Registrant’s telephone number: 941-480-1600

Delaware	20-0634715
State of Incorporation	IRS Employer Identification No.

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  ☒            No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒            No  ☐*

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐  (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.

Yes  ☐            No  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐            No  ☒

Common Stock, $0.01 par value, outstanding was 49,660,699 shares, as of November 2, 2017.

PGT INNOVATIONS, INC.

TABLE OF CONTENTS

Form 10-Q for the Three and Nine Months Ended September 30, 2017

	Page
	Number
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Statements of Comprehensive Income		3
Condensed Consolidated Balance Sheets		4
Condensed Consolidated Statements of Cash Flows		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		32
Part II. Other Information
Item 1. Legal Proceedings		33
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3. Defaults Upon Senior Securities		33
Item 4. Mine Safety Disclosure		33
Item 5. Other Information		33
Item 6. Exhibits		34

2

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

	Three Months Ended					Nine Months Ended
	September 30,		October 1,			September 30,		October 1,
	2017		2016			2017		2016
	(unaudited)					(unaudited)
Net sales	$	126,876	$	129,807		$	376,981	$	349,046
Cost of sales		87,128		88,721			260,941		240,507
Gross profit		39,748		41,086			116,040		108,539
Selling, general and administrative expenses		24,950		22,533			72,385		63,209
Fair value adjustment to contingent consideration		—		(3,000	)		—		(3,000	)
Income from operations		14,798		21,553			43,655		48,330
Interest expense, net		5,514		5,495			14,992		14,935
Debt extinguishment costs		—		—			—		3,431
Income before income taxes		9,284		16,058			28,663		29,964
Income tax expense		2,992		5,262			9,117		10,339
Net income	$	6,292	$	10,796		$	19,546	$	19,625
Net income per common share:
Basic	$	0.13	$	0.22		$	0.40	$	0.40
Diluted	$	0.12	$	0.21		$	0.38	$	0.39
Weighted average shares outstanding:
Basic		49,629		48,941			49,455		48,782
Diluted		51,809		50,672			51,670		50,528
Comprehensive income	$	6,292	$	10,796		$	19,546	$	19,625

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

	September 30,			December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	44,727		$	39,210
Accounts receivable, net		55,949			41,646
Inventories		39,131			30,511
Prepaid expenses		2,959			2,645
Other current assets		6,329			8,365
Total current assets		149,095			122,377
Property, plant and equipment, net		84,469			84,209
Trade name and other intangible assets, net		116,702			120,930
Goodwill		108,060			108,060
Other assets, net		1,272			1,072
Total assets	$	459,598		$	436,648
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	40,338		$	22,803
Current portion of long-term debt		290			—
Total current liabilities		40,628			22,803
Long-term debt, less current portion		231,177			247,873
Deferred income taxes		31,838			31,838
Other liabilities		1,466			1,282
Total liabilities		305,109			303,796
Shareholders’ equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; none outstanding		—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 52,376 and 51,887 shares issued and 49,660 and 49,176 shares outstanding at September 30, 2017 and December 31, 2016, respectively		524			519
Additional paid-in-capital		251,733			249,647
Accumulated deficit		(85,009	)		(104,555	)
Shareholders’ equity		167,248			145,611
Less: Treasury stock at cost		(12,759	)		(12,759	)
Total shareholders’ equity		154,489			132,852
Total liabilities and shareholders’ equity	$	459,598		$	436,648

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended
	September 30,			October 1,
	2017			2016
	(unaudited)
Cash flows from operating activities:
Net income	$	19,546		$	19,625
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,502			6,983
Amortization		4,818			4,501
Provision for (recovery on) allowance for doubtful accounts		249			(76	)
Stock-based compensation		1,568			1,552
Amortization and write-off of deferred financing costs and debt discount		3,065			6,108
Deferred income taxes		—			633
Excess tax benefits on stock-based compensation		—			(1,630	)
Fair value adjustment to contingent consideration		—			(3,000	)
Gain on disposal of assets		(59	)		(6	)
Change in operating assets and liabilities (net of the effect of the acquisition):
Accounts receivable		(15,644	)		(16,115	)
Inventories		(8,620	)		(464	)
Prepaid expenses, other current and other assets		(261	)		2,626
Accounts payable, accrued and other liabilities		20,506			12,456
Net cash provided by operating activities		34,670			33,193
Cash flows from investing activities:
Purchases of property, plant and equipment		(9,650	)		(13,287	)
Business acquisition		—			(101,338	)
Proceeds from sale of equipment		59			6
Net cash used in investing activities		(9,591	)		(114,619	)
Cash flows from financing activities:
Payments of long-term debt		(20,062	)		(203,525	)
Proceeds from issuance of long-term debt		—			261,030
Payments of financing costs		—			(7,178	)
Purchases of treasury stock		—			(2,722	)
Taxes paid relating to shares withheld on employee equity awards		(181	)		(54	)
Proceeds from exercise of stock options		681			652
Proceeds from issuance of common stock under employee stock purchase plan		23			27
Excess tax benefits on stock-based compensation		—			1,630
Other		(23	)		(23	)
Net cash (used in) provided by financing activities		(19,562	)		49,837
Net increase (decrease) in cash and cash equivalents		5,517			(31,589	)
Cash and cash equivalents at beginning of period		39,210			61,493
Cash and cash equivalents at end of period	$	44,727		$	29,904
Non-cash activity:
Financed purchase of software license	$	590		$	—
Property, plant and equipment additions in accounts payable	$	343		$	1,181
Contingent consideration reversed out of accrued liabilities	$	—		$	3,000
Portion of USI purchase price held back in escrow	$	—		$	100

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

PGT INNOVATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of PGT Innovations, Inc. and its wholly-owned subsidiary, PGT Industries, Inc., and its wholly-owned subsidiaries CGI Window and Holdings, Inc. (“CGI”), which includes its wholly-owned subsidiary, CGI Commercial, Inc. (“CGIC”), and WinDoor, Incorporated (collectively the “Company”), after elimination of intercompany accounts and transactions.

These condensed consolidated financial 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 adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period is 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 September 30, 2017, and October 1, 2016, consisted of 13 weeks.

The condensed consolidated balance sheet as of December 31, 2016, is derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of December 31, 2016, and the unaudited condensed consolidated financial statements as of and for the periods ended September 30, 2017, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2016, included in the Company’s most recent Annual Report on Form 10-K. Except for the adoption of the guidance relating to the accounting for stock-based compensation expense discussed below, the 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 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation, Improvements to Employee Share-Based payment Accounting (Topic 718)”. This update is intended to provide simplification of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted this update effective for our fiscal year beginning January 1, 2017. Impacts of the adoption of ASU 2016-09 are as follows:

• ASU 2016-09 requires employers to make a policy election as to whether they will continue to use previous generally accepted accounting principles, which required employers to recognize stock-based compensation expense on grants of equity awards net of an estimate of the amount that will be forfeited, or to recognize forfeitures on an actual basis in the period they occur. We have elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur, adopted on a modified-retrospective basis. This resulted in an adjustment to increase accumulated deficit for previously unrecognized stock compensation expense of approximately $0.1 million as of December 31, 2016, net of tax effect, with an offsetting increase in additional paid-in capital of approximately $0.2 million.

• ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as a financing activity. The Company withholds shares of its common stock from employees to satisfy the employee’s tax withholding obligations in connection with the exercise of stock options and lapse of restrictions on stock awards, which are then immediately retired. We previously included these cash flows in financing activities, therefore, there was no impact upon adoption.

• ASU 2016-09 requires that excess tax benefits resulting from the exercise of stock options and lapse of restriction on stock awards be recognized as a discrete item in tax expense, where previously such tax effects had been recognized in additional paid-in-capital. See Note 10 for a discussion of the impacts of the adoption of ASU 2016-09 on the Company’s income tax expense for the three and nine months ended September 30, 2017.

• ASU 2016-09 requires previously unrecognized excess tax benefits to be recognized on a modified-retrospective basis, which results from taking a deduction for tax benefits relating to stock-based compensation that does not result in a reduction in taxes payable. Upon adoption, we recorded an adjustment to decrease the accumulated deficit for excess tax benefits that had not yet been recognized of approximately $0.3 million as of December 31, 2016, with an offsetting reduction in our net deferred tax liability resulting from the recognition of previously unrecorded deferred tax assets for tax credits in the state of Florida.

6

• ASU 2016-09 requires excess tax benefits to be presented as an operating activity on the statement of cash flows, either prospectively or on a full-retrospective basis, rather than as previously required as a financing activity. We have elected to present excess tax benefits in the operating section of the statement of cash flows on a prospective basis.

The effects on the Company’s consolidated balance sheet as of December 31, 2016, relating to the adoption of ASU 2016-09 is as follows (in thousands):

	Previously Reported			After Adoption
Deferred income taxes	$	32,171		$	31,838
Total liabilities	$	304,129		$	303,796
Additional paid-in-capital	$	249,469		$	249,647
Accumulated deficit	$	(104,710	)	$	(104,555	)
Shareholders’ equity	$	145,278		$	145,611
Total shareholders’ equity	$	132,519		$	132,852

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This guidance changed the subsequent measurement of inventory, excluding inventory accounted for under LIFO or the retail inventory method, to be at lower of cost and net realizable value. Topic 330, Inventory, previously required an entity to measure inventory at the lower of cost or market. Market could have been replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Under this ASU, an entity measures inventory within its scope at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 was effective for us as of January 1, 2017. We prospectively adopted ASU 2015-11 effective on January 1, 2017. The adoption of ASU 2015-11 had no impact on our financial statements.

Recently Issued Accounting Pronouncements

In addition to the pronouncements issued during 2017, ASU 2016-02, “Leases (Topic 842), and ASU 2014-09, “Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form 10-K for the year ended December 31, 2016.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments under ASU 2017-12 refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 becomes effective for us in the first quarter of 2019. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income—Gain and Losses from the Derecognition of Nonfinancial Assets.” ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU 2014-09, provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. This update is effective at the same time as the amendments in ASU 2014-09, therefore, for our fiscal year beginning after December 15, 2017, and may be applied either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

7

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) – Clarifying the Definition of a Business.” ASU 2017-01 affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We will apply the provisions of this guidance once it becomes effective.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

Approaching Adoption of ASU 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. The FASB also issued ASU 2015-14, “Deferral of Effective Date”. ASU 2015-14 deferred the effective date for the new guidance until the annual reporting period beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, but not before the original effective date (periods beginning after December 15, 2016). The standard permits the use of either the full-retrospective (restating all years presented in the Company’s financial statements), or modified-retrospective (recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU 2016-10, “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies identification of a performance obligation and addresses revenue recognition associated with the licensing of intellectual property, ASU 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients”, which clarifies assessment of collectability criterion, non-cash consideration and other technical corrections, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.

The Company completed its preliminary assessment of the impact of its upcoming adoption of ASU 2014-09 on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU 2014-09, to one based on the transfer of control of the product to the customer. Under ASU 2014-09, revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is not required in order for transfer of control of the product to the customer to have occurred.

8

ASU 2014-09 states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that, of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to-date. ASU 2014-09 further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

The Company is a manufacturer of fully-customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The Company’s initial assessment is that its goods have no alternative use, as that term is defined in ASU 2014-09, and that control of the product passes to the customer no later than completion of the manufacturing of each or all of the products in an order, but before delivery of the products to the customer. Additionally, the Company has an enforceable right to payment at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its customers.

Based on this initial assessment, the Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion of the manufacturing process, from its current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products have no alternative use and the recognition of revenue should begin. However, because revenue will have been recognized on at least all products for which manufacturing has been completed, the Company believes that upon adoption of ASU 2014-09, inventories on its consolidated balance sheets will no longer include finished goods. The Company also believes that it will recognize revenue at an earlier point than prior to the adoption of ASU 2014-09, but that such effect may not materially affect its consolidated statements of operations post-adoption due to the fact that such effects will exist at both the beginning and end of fiscal periods after the initial transition.

ASU 2014-09 also requires entities, primarily in the manufacturing segment, to make policy elections relating to shipping and handling charges. Entities may elect to treat shipping and handling as a separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat shipping and handling as a fulfillment activity, which will require shipping and handling costs for undelivered products to be accrued in order to match this cost with the revenue previously recognized over time. The Company currently recognizes shipping and handling costs as a fulfillment activity, and has preliminarily determined to continue to treat such costs as a fulfillment activity.

The Company expects to continue to evaluate the impact of the adoption of ASU 2014-09 on its consolidated financial statements, and will provide updates and additional information as the effective date of adoption approaches.

NOTE 2. WARRANTY

Most of our manufactured products are sold with warranties. Warranty periods, which vary by product components, generally range from 1 to 10 years; however, the warranty period for a limited number of specifically identified components in certain applications is a lifetime. 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 the current net sales.

During the three months ended September 30, 2017, we recorded warranty expense at a rate of approximately 2.04% of sales, which decreased from the rate in the second quarter of 2017 of 2.22%. During the three months ended October 1, 2016, we recorded warranty expense at a rate of approximately 2.21% of sales.

9

The following table summarizes: current period charges, adjustments to previous estimates, if necessary, as well as settlements, which represent actual costs incurred during the period for the three and nine months ended September 30, 2017, and October 1, 2016. The reserve is determined through specific identification and assessing Company history. Expected future obligations are discounted to a current value using a risk-free rate for obligations with similar maturities.

	Beginning				Charged								End of
Accrued Warranty	of Period		Acquired		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended September 30, 2017	$	5,679	$	—	$	2,593	$	46		$	(2,412	)	$	5,906
Three months ended October 1, 2016	$	5,103	$	10	$	2,875	$	(19	)	$	(2,493	)	$	5,476
Nine months ended September 30, 2017	$	5,569	$	—	$	8,681	$	(18	)	$	(8,326	)	$	5,906
Nine months ended October 1, 2016	$	4,237	$	274	$	8,111	$	751		$	(7,897	)	$	5,476

NOTE 3. 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 and usually ship upon completion. Finished goods inventory and work-in-progress costs include direct materials, direct labor, and overhead. All inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Inventories consisted of the following:

	September 30, 2017		December 31, 2016
	(in thousands)
Raw materials	$	29,591	$	24,946
Work-in-progress		3,543		2,521
Finished goods		5,997		3,044
	$	39,131	$	30,511

NOTE 4. STOCK BASED-COMPENSATION

Exercises

For the three months ended September 30, 2017, there were 90,159 options exercised at a weighted average exercise price of $1.99 per share. For the nine months ended September 30, 2017, there were 341,069 options exercised at a weighted average exercise price of $2.00 per share.

Issuance

On March 4, 2017, we granted 251,474 restricted stock awards to certain executives and non-executive employees of the Company. The restrictions on these stock awards lapse over time based solely on continued service. However, the quantity of restricted shares granted on half of these shares, or 125,737 shares, is fixed, whereas the quantity granted on the remaining half, or 125,737 shares, is subject to Company-specific performance criteria. The restricted stock awards have a fair value on date of grant of $10.20 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. Those restricted shares whose quantity is fixed vest in equal amounts over a three-year period on the first, second and third anniversary dates of the grant. Those restricted shares whose quantity is subject to Company performance criteria vest in equal amounts on the second and third anniversary dates of the grant.

The performance criteria, as defined in the share awards, provides for a graded awarding of shares based on the percentage by which the Company meets earnings before interest and taxes, as defined, in our 2017 business plan. The performance percentages, ranging from less than 80% to greater than 120%, provide for the awarding of shares ranging from no shares to 150% of the original amount of shares.

On May 19, 2017, we granted 34,699 restricted stock awards to the seven non-management members of the board of directors of the Company relating to their annual compensation for service on the board. The restricted stock awards have a fair value on date of grant of $11.60 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. The restrictions on these stock awards lapse based solely on continued service on the first anniversary date of the grant.

10

Stock Compensation Expense

We record stock compensation expense over an award’s vesting period based on the award’s fair value at the date of grant. Effective on January 1, 2017, we adopted the provisions of ASU 2016-09, pursuant to which we elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur. For more information, see Note 1 under “Recently Adopted Accounting Pronouncements”. We recorded compensation expense for stock based awards of $0.5 million for the three months ended September 30, 2017, and $0.4 million for the three months ended October 1, 2016. We recorded compensation expense for stock based awards of $1.6 million for the nine months ended September 30, 2017, and $1.6 million for the nine months ended October 1, 2016. As of September 30, 2017, and October 1, 2016, there was $2.4 million and $1.9 million, respectively, of total unrecognized compensation cost related primarily to restricted share awards. These costs are expected to be recognized in earnings on an accelerated basis over the weighted average remaining vesting period of 1.5 years at September 30, 2017.

NOTE 5. NET INCOME PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing net income available to common shareholders, by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the dilutive effect of potential common shares from securities such as stock options.

Weighted average shares outstanding for the nine months ended September 30, 2017, and for the three and nine months ended October 1, 2016, excludes underlying options of 20 thousand because their effects were anti-dilutive. There were no anti-dilutive securities outstanding for the three months ended September 30, 2017.

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				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
	2017		2016		2017		2016
	(in thousands, except per share amounts)
Net income	$	6,292	$	10,796	$	19,546	$	19,625
Weighted-average common shares—Basic		49,629		48,941		49,455		48,782
Add: Dilutive effect of stock compensation plans		2,180		1,731		2,215		1,746
Weighted-average common shares—Diluted		51,809		50,672		51,670		50,528
Net income per common share:
Basic	$	0.13	$	0.22	$	0.40	$	0.40
Diluted	$	0.12	$	0.21	$	0.38	$	0.39

Effective on January 1, 2017, we adopted ASU 2016-09. ASU 2016-09 changes the accounting for excess tax benefits by requiring that they be treated as discrete items of income tax expense in the period they occur. For the three and nine months ended September 30, 2017, income tax expense has been reduced by $347 thousand and $1.1 million, respectively, relating to excess tax benefits on the exercise of stock options and the lapse of restrictions on stock awards. ASU 2016-09 also changed the treasury stock method of calculating diluted shares outstanding to exclude the presumption that common stock equivalents can be reduced by repurchasing shares using excess tax benefits. For the three and nine months ended September 30, 2017, diluted shares outstanding includes 724 thousand and 724 thousand shares, respectively, that prior to the adoption of ASU 2016-09 would have been presumed to be bought-back, and therefore not outstanding, using the proceeds of excess tax benefits. For the three and nine months ended October 1, 2016, diluted shares outstanding would have increased by 826 thousand and 827 thousand shares, respectively, if we had adopted ASU 2016-09 at the beginning of our 2016 fiscal year.

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NOTE 6. SALE OF ASSETS AND ACQUISITIONS

Sale of Door Glass Processing Assets

On September 22, 2017, we entered into an Asset Purchase Agreement (APA) with Cardinal LG Company (Cardinal) for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors for a cash purchase price of $28 million. Contemporaneously with entering into the APA, we entered into a seven-year supply agreement (SA) with Cardinal for Cardinal to supply us with glass components for PGT-branded doors. The Company determined to sell these assets, whose net book value at September 30, 2017 was $5.6 million, and enter into the SA in order to allow us to heighten our focus in our core areas of window and door manufacturing and, at the same time, strengthen our supply chain for high-quality door glass from a supplier with whom we have been doing business for many years.

The APA provides for the transfer of the assets from the Company to Cardinal in two phases, with the first date being on or about November 1, 2017, and the second date being on or about March 1, 2018. Under the APA, the cash purchase price of $28 million is to be paid by Cardinal to the Company in three separate payments of $3 million at the time of the first transfer of the assets to Cardinal, $10 million on January 15, 2018, and $15 million at the time of the second transfer of assets to Cardinal.

The SA provides that the Company will purchase, and Cardinal will supply, all of the Company’s requirements for certain glass components used in PGT-branded doors through the end of 2024. The terms of the manufacture by Cardinal and purchase by the Company of such glass components as to purchase orders, forecasts of purchases, pricing, invoicing, delivery and payment terms and other terms, are all as described in the SA.

The Company has determined that, although the APA and SA are separate agreements, they were negotiated contemporaneously. Therefore, the Company has concluded that the $28 million of proceeds under the APA should be bifurcated between the sale of the door glass manufacturing assets, and payment for the Company’s commitment to buy glass components for PGT-branded doors from Cardinal under the SA, and that such bifurcation is predicated on the fair value of the door glass manufacturing assets being sold on or about the date of sale. The Company has engaged an independent machinery and equipment valuation specialist to provide a fair market value appraisal of the assets sold to Cardinal, which is currently in process. Accordingly, as the fair market value appraisal is not yet finalized, and there had been no exchanges of assets or cash under the APA as of September 30, 2017, and no purchases or sales of glass components for PGT-branded doors under the SA as of September 30, 2017, no amounts relating to either the APA or SA have been recognized in the accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017.

WinDoor Acquisition

On February 16, 2016 (“closing date”), we completed the acquisition of WinDoor, which became a wholly-owned subsidiary of PGT Industries, Inc. The fair value of consideration transferred in the acquisition was $102.6 million, including the then estimated fair value of contingent consideration of $3.0 million, which has been allocated to the net assets acquired and liabilities assumed as of the acquisition date, in accordance with ASC 805, “Business Combinations”. The cash portion of the acquisition was financed with borrowings under the 2016 Credit Agreement, and with $43.5 million of cash on hand.

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The estimated fair value of assets acquired and liabilities assumed as of the closing date, were as follows (in thousands):

	Final Allocation
Accounts and notes receivable	$	3,882
Inventories		6,778
Prepaid expenses		246
Property and equipment		5,029
Intangible assets		47,100
Goodwill		41,856
Accounts payable and accrued liabilities		(2,320	)
Purchase price	$	102,571
Consideration:
Cash	$	99,571
Earn-out contingency		3,000
Total fair value of consideration	$	102,571

The fair value of working capital related items, such as accounts receivable, inventories, prepaids, and accounts payable and accrued liabilities, approximated their book values at the date of acquisition. Valuations of the intangible assets (See Note 7) were valued using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs.

Acquisition costs totaling $0.9 million are included in selling, general, and administrative expenses on the condensed consolidated statement of comprehensive income for the nine months ended October 1, 2016, and relate to legal expenses, representations and warranties insurance, diligence, and accounting services.

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, was determined to be $41.9 million, of which $38.9 million is expected to be deductible for tax purposes. Goodwill represents the increased value of the combined entity through additional sales channel opportunities as well as operational efficiencies.

The stock purchase agreement for the acquisition of WinDoor (“SPA”) provided for the potential for an earn-out contingency payment to sellers had WinDoor achieved a certain level of sales in the calendar year ended December 31, 2016. The potential undiscounted amount of all future payments that could be required to be paid under the contingent earn-out consideration arrangement was between $0 and $3.0 million. We had recorded an earn-out contingency liability of $3.0 million on the closing date, which represented its then estimated fair value using undiscounted cash flows, based on probability adjusted level of revenues with a range whose minimum was $51.0 million. Based on revised estimates using actual sales through the end of the 2016 third quarter, we concluded the probability was remote that WinDoor’s actual sales for 2016 would reach the $46.0 million minimum level required for the minimum payment of $2.7 million possible under the earn-out contingency arrangement and, therefore, determined that the entire initial estimated fair value of $3.0 million should be reversed. For tax purposes, contingent consideration does not become part of tax goodwill until paid. As such, the amount of goodwill deductible for tax purposes is $3.0 million less than the amount recorded for book purposes.

The SPA had a post-closing working capital calculation whereby we were required to prepare, and deliver to the sellers, a final statement of purchase price, including our calculation of the amount we find net working capital actually to have been as of the closing date. During the third quarter of 2016, the Company and the sellers reached agreement on the calculation of net working capital, which resulted in a payment of $0.7 million to the Company from sellers, resulting in a decrease in the purchase price which we recorded as a reduction in goodwill.

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include WinDoor’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of WinDoor adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the 2016 Credit Agreement entered into in connection with the acquisition. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.

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	Nine Months Ended
	October 1, 2016
(in thousands, except per share amounts)
Pro Forma Results
Net sales	$	351,507
Net income	$	18,280
Net income per common share:
Basic	$	0.37
Diluted	$	0.36

US Impact Systems, Inc. Acquisition

On August 31, 2016, CGIC, a wholly-owned subsidiary of CGI, which is wholly-owned by PGT Industries, Inc., which, in turn, is wholly-owned by the Company, entered into an asset purchase agreement with US Impact Systems, Inc. (USI) and its stockholders whereby CGIC purchased the operations and certain assets of, and assumed certain liabilities of USI. USI was an established fabricator of storefront window and door products. The fair value of the consideration transferred in the acquisition was $1.9 million, which was allocated to current and other assets totaling $1.8 million and amortizable intangible assets totaling $0.6 million, and goodwill of $0.6 million, less the assumption of accounts payable and accrued liabilities with estimated fair values totaling $1.2 million, in accordance with ASC 805, “Business Combinations”. This transaction did not have a significant impact on our financial position or operating results for 2016.

NOTE 7. GOODWILL, TRADE NAMES, AND OTHER INTANGIBLE ASSETS

Goodwill, trade names, and other intangible assets, net, are as follows:

							Initial
	September 30,			December 31,			Useful Life
	2017			2016			(in years)
	(in thousands)
Goodwill	$	108,060		$	108,060			indefinite
Trade names and other intangible assets:
Trade names	$	75,841		$	75,841			indefinite
Customer relationships		106,647			106,647			3-10
Developed technology		3,000			3,000			9-10
Non-compete agreement		1,668			1,668			2-5
Software license		590			—			2
Less: Accumulated amortization		(71,044	)		(66,226	)
Subtotal		40,861			45,089
Other intangible assets, net	$	116,702		$	120,930

Software License

In July 2017, we purchased an enterprise-wide software license relating to office productivity software. We estimated the then fair value of this software license to be $590 thousand, our purchase price. The software license is being amortized on a straight-line basis over its estimated useful life, which we have determined to be two years.

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NOTE 8. LONG-TERM DEBT

	September 30, 2017			December 31, 2016
	(in thousands)
Term loan payable under the 2016 Credit Agreement	$	243,975		$	263,975
Other debt		529			—
Fees, costs and original issue discount		(13,037	)		(16,102	)
Long-term debt		231,467			247,873
Less current portion of long-term debt		(290	)		—
Long-term debt, less current portion	$	231,177		$	247,873

2016 Credit Agreement

On February 16, 2016, we entered into a Credit Agreement (“2016 Credit Agreement”), among us, the lending institutions identified in the 2016 Credit Agreement, and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent. The 2016 Credit Agreement establishes senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility maturing in six years that will amortize on a basis of 1% annually during the six-year term, and a $40.0 million revolving credit facility maturing in five years that includes a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement are secured by substantially all of our assets as well as our direct and indirect subsidiaries’ assets. As of September 30, 2017, there were $0.2 million of letters of credit outstanding and $39.8 million available on the revolver.

Interest on all loans under the 2016 Credit Agreement is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Prior to amending the 2016 Credit Agreement on February 17, 2017, as described below, borrowings under the term loans and the revolving credit facility accrued interest at a rate equal to, at our option, LIBOR (with a floor of 100 basis points in respect of the term loan), or a base rate (with a floor of 200 basis points in respect of the term loan) plus an applicable margin. The applicable margin was 575 basis points in the case of LIBOR and 475 basis points in the case of the base rate. We will pay quarterly fees on the unused portion of the revolving credit facility equal to 50 basis points per annum as well as a quarterly letter of credit fee at 575 basis points per annum plus a 12.5 basis point facing fee per annum on the face amount of any outstanding letters of credit. The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit agreement was 6.02% as of September 30, 2017, and was 5.75% at December 31, 2016.

On February 17, 2017, we entered into an amendment of our 2016 Credit Agreement (“First Amendment”). The First Amendment, among other things, (a) decreases the applicable interest rate margins for the Initial Term Loans (as defined in the Credit Agreement) from (i) 4.75% to 3.75%, in the case of the Base Rate Loans (as defined in the Credit Agreement), and (ii) 5.75% to 4.75%, in the case of the Eurodollar Loans (as defined in the Credit Agreement), and (b) adds a soft call premium equal to 1.0% of the principal repaid or repriced if the Initial Term Loans are voluntarily refinanced or repriced pursuant to certain refinancing transactions within twelve months of the effective date of the First Amendment.

The 2016 Credit Agreement contains a springing financial covenant, if we draw in excess of twenty percent (20%) of the revolving facility, which requires us to maintain a maximum total net leverage ratio (based on the ratio of total debt for borrowed money to trailing EBITDA, each as defined in the 2016 Credit Agreement), and will be tested quarterly based on the last four fiscal quarters and is set at levels as described in the 2016 Credit Agreement. As of September 30, 2017, no such test is required as we have not exceeded 20% of our revolving capacity. We believe that our total net leverage ratio during the third quarter of 2017 was in compliance with the 2016 Credit Agreement, and that we are in compliance with all covenants.

The 2016 Credit Agreement also contains a number of affirmative and restrictive covenants, including limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt and transactions with affiliates. The 2016 Credit Agreement also contains customary events of default. Upon the occurrence of an event of default, the amounts outstanding under the 2016 Credit Agreement may be accelerated and may become immediately due and payable. As of September 30, 2017, we were in compliance with all affirmative and restrictive covenants.

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In connection with entering into the 2016 Credit Agreement, on February 16, 2016, we terminated our prior credit agreement, dated as of September 22, 2014, among PGT Industries, Inc., as the borrower, the Company, as guarantor, the lenders from time to time party thereto and Deutsche Bank, as administrative agent and collateral agent (“2014 Credit Agreement”). Along with cash on hand, proceeds from the term loan facility under the 2016 Credit Agreement were used to repay amounts outstanding under the 2014 Credit Agreement, acquire WinDoor, and pay certain fees and expenses.

As of September 30, 2017, the face value of debt outstanding under the 2016 Credit Agreement was $244.0 million, and accrued interest was $0.4 million. During the third quarter of 2017, we made voluntary prepayments of outstanding borrowings under the term-loan portion of the 2016 Credit Agreement totaling $20.0 million, composed of a payment of $8.0 million made on September 29, 2017, and of $12.0 million made on July 7, 2017.

Other Debt

In July 2017, we entered into a two-year financing arrangement for the purchase of an enterprise-wide software license relating to office productivity software. This financing arrangement requires 24 monthly payments of $26 thousand each. We estimated the value of this financing arrangement to be $590 thousand, using an imputed annual interest rate of 6.00%, which approximates our borrowing rate under the 2016 Credit Agreement, a Level 3 input. At September 30, 2017, there was $529 thousand outstanding under this financing arrangement.

The activity relating to third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are as follows. As a result of the voluntary prepayments of debt discussed above, we accelerated the amortization of lenders fees and discount relating to the term-loan portion of the 2016 Credit Agreement of $1.0 million, which is included in interest expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017. All debt-related fees, costs and original issue discount are classified as a reduction of the carrying value of long-term debt:

(in thousands)	Total
At beginning of year	$	16,102
Amortization expense through February 17, 2017		(359	)
At time of repricing		15,743
Less: Amortization expense after repricing		(1,726	)
Less: Accelerated amortization relating to debt prepayments		(980	)
At end of period	$	13,037

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September 30, 2017, is as follows:

(in thousands)	Total
Remainder of 2017	$	670
2018		2,785
2019		2,966
2020		3,224
2021		3,011
2022		381
Total	$	13,037

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As a result of the voluntary prepayments totaling $20.0 million we made during the third quarter of 2017, we have no future scheduled repayments under the 2016 Credit Agreement until the maturity of the facility on February 21, 2022. The contractual future maturities of long-term debt outstanding, including the financing arrangement described as other debt, as of September 30, 2017, are as follows (at face value):

	(in thousands)
Remainder of 2017	$	71
2018		295
2019		163
2020		—
2021		—
2022		243,975
Total	$	244,504

NOTE 9. 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 10. INCOME TAXES

Income tax expense was $3.0 million for the three months ended September 30, 2017, compared with $5.3 million for the three months ended October 1, 2016. Our effective tax rate for the three months ended September 30, 2017, was 32.2%, and was 32.8% for the three months ended October 1, 2016. Income tax expense was $9.1 million for the nine months ended September 30, 2017, compared with $10.3 million for the nine months ended October 1, 2016. Our effective tax rate for the nine months ended September 30, 2017, was 31.8%, and was 34.5% for the nine months ended October 1, 2016.

Income tax expense in the three and nine months ended September 30, 2017, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards treated as a discrete item of income tax upon our adoption of ASU 2016-09 effective on January 1, 2017, totaling $347 thousand and $1.1 million, respectively. Excluding this discrete item of income tax expense, the effective tax rates for the three and nine months ended September 30, 2017, would have been 36.0% and 35.8%, respectively.

The effective tax rates in all periods, excluding the effect of the discrete item discussed above in the 2017 periods, were lower than our combined statutory federal and state tax rate of 38.8% primarily as the result of the estimated impact of the section 199 domestic manufacturing deduction, partially offset by the 50% deductibility-disallowance of meals and entertainment expenses.

At September 30, 2017, an accrued federal income tax payable of $6.6 million was classified within accrued liabilities in the accompanying condensed consolidated balance sheet. At December 31, 2016, a federal income tax receivable of $2.6 million was classified within other current assets in the accompanying condensed consolidated balance sheet. During the three or nine months ended September 30, 2017, we did not make a payment of estimated federal income taxes, nor did we receive any refunds of federal income taxes. Pursuant to tax relief from the Internal Revenue Service relating to taxpayers in certain designated areas of Florida impacted by Hurricane Irma, which includes all counties in Florida in which we operate, the deadline for remitting our required 2017 third quarter estimated payment for corporate income taxes, as well as the deadline for filing our 2016 fiscal year corporate income tax return, has been extended to January 31, 2018.

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NOTE 11. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The accounting guidance concerning fair value allows us to elect to measure financial instruments at fair value and report the changes in fair value through earnings. This election can only be made at certain specified dates and is irrevocable once made. We do not have a policy regarding specific assets or liabilities to elect to measure at fair value, but rather we make the election on an instrument-by-instrument basis as they are acquired or incurred.

During the three months ended September 30, 2017, or October 1, 2016, we did not make any transfers between Level 2 and Level 3 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

Fair Value of Financial Instruments

Our financial instruments include cash, accounts and notes receivable, and accounts payable, and accrued liabilities whose carrying amounts approximate their fair values due to their short-term nature. Our financial instruments also include long-term debt. The fair value of our long-term debt is based on debt with similar terms and characteristics and was approximately $248.5 million as of September 30, 2017, compared to a principal outstanding value of $244.0 million, and $264.6 million as of December 31, 2016, compared to a principal outstanding value of $264.0 million. Fair values were determined based on observed trading prices of our debt between domestic financial institutions.

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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 December 31, 2016, included in our most recent Annual Report on Form 10-K as well as our reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited.

Special Note Regarding Forward-Looking Statements

Except for historical information contained herein, the matters set forth in this Quarterly Report on Form 10-Q are forward-looking statements. These statements are based on management’s current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,”“believe,” “expect,” “forecast,” “guidance,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” and similar terminology. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause our actual results to differ materially from those set forth in the forward looking statements. Those risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to:

• Changes in new home starts and home remodeling trends

• The economy in the U.S. generally or in Florida, where the substantial portion of our sales are generated

• Raw material prices, especially for aluminum, glass and vinyl

• Transportation costs

• Our level of indebtedness

• Dependence on our impact-resistant product lines

• Integration of acquisition(s), including our acquisition of WinDoor, Inc.

• Product liability and warranty claims made against us

• Federal, and state and local regulations, including changes to state and local building codes

• Dependence on our limited number of manufacturing facilities

• The continuing impact of Hurricane Irma on our sales and profitability

• The risks and uncertainties discussed under Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Any forward-looking statements made by us or on our behalf speak only as of the date they are made and, except as may be required by law, we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

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EXECUTIVE OVERVIEW

Sales and Operations

We recorded sales of $126.9 million, down 2.3 percent compared to the third quarter of 2016. Sales were $377.0 million for the nine-month period ended September 30, 2017, up 8.0 percent compared to the same period last year.

Our third quarter of 2017 started strong as sales in July and August were up over 5 percent compared to last year, which benefitted operational performance. During this period, we were regularly recording order weeks of between $10 and $11 million, and daily order volumes remained steady during the early part of September.

On September 10th, Hurricane Irma (Irma), a Category 4 storm with sustained 130-mph winds, made landfall in the Florida Keys, one of our primary markets. Impacts from this 400-mile-wide storm were felt over the entire state of Florida, which represents 90 percent of our consolidated sales.

As Irma advanced towards Florida, our daily order levels began to decrease, dropping by as much as 50 percent at times during the month as many customers in our key Florida markets suspended operations. Some of the most severely impacted areas were in our most important markets in southeast and southwest Florida, which represents approximately 70 percent of our sales. When Irma arrived, we were forced to cease operations for a period of up to six days in certain locations, a period during which we did not ship or produce any products.

We estimate that Irma caused a negative sales impact of approximately $13 million to our 2017 third quarter. Irma also caused an added $1.1 million in operating costs, which included $345 thousand classified within cost of sales, and $746 thousand classified within selling, general and administrative expenses. We expect some portion of those sales to be recovered in the 2017 fourth quarter, with the remainder falling into 2018, as some of our customers are still working through their post-Irma recovery efforts. For the month of October 2017, sales finished up 5 percent compared to October 2016, which has driven solid operational performance.

Looking to the balance of 2017, we are making meaningful advertising investments to capture opportunities for growth we expect to see in 2018 and beyond from the heighten awareness of our impact-resistant products following this active hurricane season. We are also looking forward to the opportunity we have to sharpen our focus on window and door manufacturing, having partnered with Cardinal for them to supply us with high-quality door glass. Our recently announced agreement for the sale of glass manufacturing assets to Cardinal, and the related 7-year PGT- branded door glass supply agreement for Cardinal to provide us with PGT-branded door glass will benefit both parties. The $28 million in cash proceeds we expect to receive from the sales of these assets provides us with an added ability to continue to pay down debt, and further strengthen our already strong balance sheet.

For the full year 2017, the Company expects to finish within the previous guidance range for consolidated sales of $490 to $500 million.

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Performance Summary

The following table presents financial data derived from our unaudited condensed consolidated statements of comprehensive income as a percentage of total net sales for the periods indicated (in thousands, except percentages):

	Three Months Ended
	September 30,				October 1,
	2017				2016
	(unaudited)
Net sales	$	126,876	100.0	%	$	129,807		100.0	%
Cost of sales		87,128	68.7	%		88,721		68.3	%
Gross profit		39,748	31.3	%		41,086		31.7	%
Selling, general and administrative expenses		24,950	19.7	%		22,533		17.4	%
Fair value adjustment to contingent consideration		—	—			(3,000	)	(2.3	)%
Income from operations		14,798	11.7	%		21,553		16.6	%
Interest expense, net		5,514	4.3	%		5,495		4.2	%
Income before income taxes		9,284	7.3	%		16,058		12.4	%
Income tax expense		2,992	2.4	%		5,262		4.1	%
Net income	$	6,292	5.0	%	$	10,796		8.3	%

	Nine Months Ended
	September 30,				October 1,
	2017				2016
	(unaudited)
Net sales	$	376,981	100.0	%	$	349,046		100.0	%
Cost of sales		260,941	69.2	%		240,507		68.9	%
Gross profit		116,040	30.8	%		108,539		31.1	%
Selling, general and administrative expenses		72,385	19.2	%		63,209		18.1	%
Fair value adjustment to contingent consideration		—	—			(3,000	)	(0.9	)%
Income from operations		43,655	11.6	%		48,330		13.8	%
Interest expense, net		14,992	4.0	%		14,935		4.3	%
Debt extinguishment costs		—	—			3,431		1.0	%
Income before income taxes		28,663	7.6	%		29,964		8.6	%
Income tax expense		9,117	2.4	%		10,339		3.0	%
Net income	$	19,546	5.2	%	$	19,625		5.6	%

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND OCTOBER 1, 2016

The following table represents total sales by product category for the three months ended September 30, 2017, and October 1, 2016 (in millions):

	Three Months Ended
	September 30, 2017					October 1, 2016
	Sales		% of sales			Sales		% of sales			% change
Product category:
Impact-resistant windows and door products	$	108.8		85.7	%	$	110.2		84.9	%		(1.3	)%
Non-Impact window and door products		18.1		14.3	%		19.6		15.1	%		(7.7	)%
Total net sales	$	126.9		100.0	%	$	129.8		100.0	%		(2.3	)%

Total net sales during the third quarter of 2017 were $126.9 million, a decrease of $2.9 million, or 2.3%, from $129.8 million in total net sales for the third quarter of 2016. Our primary market is the State of Florida, from which we derive approximately 90% of our sales. On September 10, 2017, Hurricane Irma made landfall in the Florida Keys and moved north over the entire state, affecting all areas of Florida. Irma caused disruption to our ability to manufacture and distribute our products, and required us to shut-down and cease operations for a period of up to six days at certain of our locations. Irma also affected our customers’ ability to accept deliveries of our products. We estimate that lost sales directly attributable to the disruption caused by Irma for the three months ended September 30, 2017, totaled approximately $13 million.

Net sales of impact-resistant window and door products were $108.8 million for the third quarter of 2017, a decrease of $1.4 million, or 1.3%, from $110.2 million in net sales for the third quarter of 2016. Included in sales of our impact-resistant window and door products were $77.2 million of aluminum impact sales, a decrease of $4.3 million, or 5.3%, and $31.6 million of vinyl impact sales, an increase of $2.9 million, or 10.2%.

Net sales of non-impact window and door products were $18.1 million for the third quarter of 2017, a decrease of $1.5 million, or 7.7%, from $19.6 million in net sales for the third quarter of 2016.

Gross profit and gross margin

Gross profit was $39.7 million in the third quarter of 2017, a decrease of $1.3 million, or 3.3%, from $41.1 million in the third quarter of 2016. The gross margin percentage was 31.3% in the third quarter of 2017, compared to 31.7% in the prior year third quarter, a decrease of 0.4%. Adjusting for costs relating to Hurricane Irma, and transition costs associated with WinDoor leadership and the glass supply-chain, which combined totaled $1.0 million in the 2017 three-month period, and product line termination costs totaling $0.8 million in the 2016 three-month period, the gross margin percentage was 32.1% in the third quarter of 2017, compared to 32.3% in the prior year third quarter, a decrease of 0.2%. Improvements in scrap rates and efficiencies, which benefitted gross margin by 0.5% during the third quarter of 2017, and a price increase, which benefitted gross margin by 0.7%, were more than offset by decreases of 0.6% due to the impact of higher depreciation on higher capital spending in recent years, 0.7% due to higher aluminum prices compared to last year’s third quarter, and 0.1% due to the combined effects of lower sales volume and mix of sales.

Selling, general and administrative expenses

Selling, general and administrative expenses were $25.0 million in the third quarter of 2017, an increase of approximately $2.4 million, or 10.7%, from $22.5 million in the third quarter of 2016. As a percentage of sales, these costs increased to 19.7%, an increase of 2.3%, from 17.4% from the third quarter of 2016. Selling, general and administrative expenses increased in the third quarter of 2017, compared to the third quarter of last year, due to higher distribution costs due to disruptions caused by Irma. Selling, general and administrative expenses during the three months ended September 30, 2017, also increased due to our community outreach activities which we undertook to assist those affected by Irma locally.

We record warranty costs as a selling expense within selling, general and administrative expenses. During the three months ended September 30, 2017, we recorded warranty expense at a rate of 2.04% of sales, which decreased when compared to the rate in the second quarter of 2017 of 2.22%. During the three months ended October 1, 2016, we recorded warranty expense at a rate of 2.21% of sales. We believe the decrease in warranty expense as a percentage of sales was the result of our workforce becoming more seasoned through experience and training. We expect that, as our team members continue to gain in experience, and are exposed to improved training initiatives we have implemented, combined with the use of our new thermal plastic spacer system, an innovative technology for the production of insulated glass, warranty expense, as a percentage of sales, will further decline.

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Fair Value Adjustment of Contingent Consideration

The stock purchase agreement for the acquisition of WinDoor provided for the potential for an earn-out contingency payment to sellers had WinDoor achieved a certain level of sales in the calendar year ended December 31, 2016. The potential undiscounted amount of all future payments that could be required to be paid under the contingent earn-out consideration arrangement was between $0 and $3.0 million. We had recorded an earn-out contingency liability of $3.0 million on the closing date, which represented its then estimated fair value using undiscounted cash flows, based on probability adjusted level of revenues with a range whose minimum was $51.0 million. Based on revised estimates using actual sales through the end of the 2016 third quarter, we concluded the probability was remote that WinDoor’s actual sales for 2016 would reach the $46.0 million minimum level required for the minimum payment of $2.7 million possible under the earn-out contingency arrangement and, therefore, determined that the entire initial estimated fair value of $3.0 million should be reversed.

Interest expense, net

Interest expense was $5.5 million in the third quarter of 2017, representing no change from $5.5 million in the third quarter of 2016. Interest expense decreased due to a decrease in the average level of outstanding debt during the third quarter of 2017, compared to the third quarter of 2016, as the result of a total of $20 million in voluntary prepayments made during the third quarter of 2017, offset by an increase in interest expense due to accelerated amortization of lenders fees and discount of $1.0 million, which is included in interest expense in the accompanying condensed consolidated comprehensive income for the three months ended September 30, 2017.

As a result of recent increases in LIBOR, the weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement was 6.02% as of September 30, 2017.

Income tax expense

Our income tax expense was $3.0 million for the third quarter of 2017, compared with $5.3 million for the third quarter of 2016. Our effective tax rate for the third quarter of 2017 was 32.2%, and was 32.8% for the third quarter of 2016. Income tax expense in the third quarter of 2017 is net of excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards treated as discrete items of income tax upon our adoption of ASU 2016-09 effective on January 1, 2017, totaling $347 thousand. Excluding this discrete item of income tax expense, the effective tax rate for the third quarter of 2017 would have been 36.0%.

The effective tax rates in all periods, excluding the effect of the discrete item relating to the treatment of excess tax benefits as discussed above, were lower than our combined statutory federal and state tax rate of 38.8% primarily as the result of the estimated impact of the section 199 domestic manufacturing deduction, partially offset by the 50% deductibility-disallowance of meals and entertainment expenses.

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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND OCTOBER 1, 2016

The following table represents total sales by product category for the nine months ended September 30, 2017, and October 1, 2016 (in millions):

	Nine Months Ended
	September 30, 2017					October 1, 2016
	Sales		% of sales			Sales		% of sales			% change
Product category:
Impact-resistant window and door products	$	320.2		84.9	%	$	291.1		83.4	%		10.0	%
Non-impact window and door products		56.8		15.1	%		57.9		16.6	%		(2.0	)%
Total net sales	$	377.0		100.0	%	$	349.0		100.0	%		8.0	%

Total net sales during the first nine months of 2017 were $377.0 million, an increase of over $27.9 million, or 8.0%, from $349.0 million in total net sales for the first nine months of 2016. Our primary market is the State of Florida, from which we derive approximately 90% of our sales. On September 10, 2017, Hurricane Irma made landfall in the Florida Keys and moved north over the entire state, affecting all areas of Florida. Irma caused disruption to our ability to manufacture and distribute our products, and required us to shut-down and cease operations for a period of up to six days at certain of our locations. Irma also affected our customers’ ability to accept deliveries of our products. We estimate that lost sales directly attributable to the disruptions caused by Irma for the three months ended, and therefore the nine months ended, September 30, 2017, totaled approximately $13 million.

Net sales of impact-resistant window and door products were $320.2 million for the first nine months of 2017, an increase of $29.1 million, or 10.0%, from $291.1 million in net sales for the first nine months of 2016. Included in sales of our impact-resistant window and door products were $227.3 million of aluminum impact sales, an increase of $13.6 million, or 6.4%, and $93.0 million of vinyl impact sales, an increase of $15.5 million, or 20.0%.

Net sales of non-impact window and door products were $56.8 million for the first nine months of 2017, an decrease of $1.1 million, or 2.0%, from $57.9 million in net sales for the first nine months of 2016.

Gross profit and gross margin

Gross profit was $116.0 million in the first nine months of 2017, an increase of $7.5 million, or 6.9%, from $108.5 million in the first nine months of 2016. The gross margin percentage was 30.8% in the first nine months of 2017, compared to 31.1% in the prior year first nine months, a decrease of 0.3%. Adjusting for costs relating to Hurricane Irma, transition costs associated with WinDoor leadership and the glass supply-chain, and costs relating to the start-up of our Thermal Plastic Spacer system line totaling $1.5 million in the 2017 nine-month period, and product line termination costs totaling $0.8 million in the 2016 nine-month period, the gross margin percentage was 31.2% in the first nine-months of 2017, compared to 31.3% in the prior year first nine-months, a decrease of 0.1%. Gross margin in the first nine months of 2017 was negatively impacted by higher material costs, primarily related to aluminum costs, which lowered gross margin by 0.7%, and by higher depreciation on higher capital spending in recent years, which lowered gross margin by 0.6%. These decreases were partially offset by a benefit of 0.4% from improvements in scrap rates and efficiencies, a benefit of 0.5% from an improved mix of sales, to higher margin products in our repair and modeling markets, and a benefit of 0.3% due to a price increase.

Selling, general and administrative expenses

Selling, general and administrative expenses were $72.4 million in the first nine months of 2017, an increase of $9.2 million, or 14.5%, from $63.2 million in the first nine months of 2016. As a percentage of sales, these costs increased to 19.2%, an increase of 1.1%, from 18.1% from the first nine months of 2016. The increase in selling, general and administrative expenses was primarily related to $3.1 million in higher accrued incentive costs as a result of the improved performance, $0.7 million of costs related to management reorganization actions, $0.9 million of costs from our attendance at and participation in the National Association of Home Builders’ International Builders Show in Orlando, Florida in January 2017, higher distribution costs on the higher level of sales, and added delivery costs due to disruptions caused by Irma, and $0.7 million in higher costs directly related to Irma. Selling, general and administrative expenses during the nine months ended September 30, 2017, also increased due to our community outreach activities which we undertook to assist those affected by Irma locally.

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We record warranty costs as a selling expense within selling, general and administrative expenses. During the three months ended September 30, 2017, we recorded warranty expense at a rate of 2.04% of sales, resulting in a rate of 2.30% of sales for the nine months ended September 30, 2017. During the nine months ended October 1, 2016, we recorded warranty expense at a rate of 2.32% of sales. We believe the decrease in warranty expense as a percentage of sales was the result of our workforce becoming more seasoned through experience and training. We expect that, as our team members continue to gain in experience, and are exposed to improved training initiatives we have implemented, combined with the use of our new thermal plastic spacer system, an innovative technology for the production of insulated glass, warranty expense, as a percentage of sales, will further decline.

Fair Value Adjustment of Contingent Consideration

The stock purchase agreement for the acquisition of WinDoor provided for the potential for an earn-out contingency payment to sellers had WinDoor achieved a certain level of sales in the calendar year ended December 31, 2016. The potential undiscounted amount of all future payments that could be required to be paid under the contingent earn-out consideration arrangement was between $0 and $3.0 million. We had recorded an earn-out contingency liability of $3.0 million on the closing date, which represented its then estimated fair value using undiscounted cash flows, based on probability adjusted level of revenues with a range whose minimum was $51.0 million. Based on revised estimates using actual sales through the end of the 2016 third quarter, we concluded the probability was remote that WinDoor’s actual sales for 2016 would reach the $46.0 million minimum level required for the minimum payment of $2.7 million possible under the earn-out contingency arrangement and, therefore, determined that the entire initial estimated fair value of $3.0 million should be reversed.

Interest expense, net

Interest expense was $15.0 million in the first nine months of 2017, an increase of $0.1 million, from $14.9 million in the first nine months of 2016. During 2016, concurrent with the acquisition of WinDoor in the middle of the first quarter of 2016, we refinanced our then existing credit agreement into the 2016 Credit Agreement, a $270 million senior secured credit facility, which increased our outstanding debt balance to $270 million, up from $197.5 million at the time of the refinancing. The increase in interest expense was due primarily to the increase in outstanding debt under the new credit facility and resulting increase in average outstanding debt balance during the first nine months of 2017, compared to the first nine months of 2016, but was partially offset by a decrease in the average level of outstanding debt as the result of a total of $20 million in voluntary prepayments made during the third quarter of 2017. Interest expense in the first nine months of 2017 also benefitted from the February 17, 2017 repricing of the 2016 Credit Agreement, which resulted in a one-percentage point reduction in the interest rate under the term loan portion of the facility. This benefit was offset by the accelerated amortization of lenders fees and discount of $1.0 million relating to the third quarter 2017 voluntary prepayments of term loan borrowings, which is included in interest expense in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2017.

As a result of recent increases in LIBOR, the weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement was 6.02% as of September 30, 2017.

Debt extinguishment costs

Debt extinguishment costs were $3.4 million in the first nine months of 2016. These costs related to the write-off of deferred financing costs and debt discount in connection with entering into the 2016 Credit Agreement effective on February 16, 2016, which resulted in certain then existing lenders exiting the facility, and certain continuing lenders being considered debt extinguishments in the refinancing. This resulted in the write-offs of portions of the deferred financing costs and original issue discount allocated to these lenders.

Income tax expense

Our income tax expense was $9.1 million for the first nine months of 2017, compared with $10.3 million for the first nine months of 2016. Our effective tax rate for the first nine months of 2017 was 31.8%, and was 34.5% for the first nine months of 2016. Income tax expense in the first nine months of 2017 is net of excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards treated as discrete items of income tax upon our adoption of ASU 2016-09 effective on January 1, 2017, totaling $1.1 million. Excluding this discrete item of income tax expense, the effective tax rate for the first nine months of 2017 would have been 35.8%.

The effective tax rates in all periods, excluding the effect of the discrete item relating to the treatment of excess tax benefits as discussed above, were lower than our combined statutory federal and state tax rate of 38.8% primarily as the result of the estimated impact of the section 199 domestic manufacturing deduction, partially offset by the 50% deductibility-disallowance of meals and entertainment expenses.

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LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is cash flow generated by operations and supplemented by borrowings under our credit facilities. We expect that this cash generating capability will provide us with financial flexibility in meeting operating and investing needs. Our primary capital requirements are to fund working capital needs, meet required debt service payments on our credit facilities and fund capital expenditures.

Consolidated Cash Flows

Operating activities. Cash provided by operating activities during the first nine months of 2017 was $34.7 million, compared to $33.2 million in the first nine months of 2016. The reduction in cash provided by operating activities for the first nine months of 2017, as compared to the first nine months of 2016, was due to the factors set forth in the table below.

Direct cash flows from operations for the first nine months of 2017 and 2016 are as follows:

	Direct Operating Cash Flows
	Nine Months Ended
(in millions)	September 30, 2017			October 1, 2016
Collections from customers	$	373.4		$	341.5
Other collections of cash		3.9			3.9
Disbursements to vendors		(230.2	)		(208.2	)
Personnel related disbursements		(99.1	)		(93.9	)
Income taxes refunded, net		—			1.3
Debt service payments		(13.3	)		(11.4	)
Cash from operations	$	34.7		$	33.2

Days sales outstanding (DSO), which we calculate as accounts receivable divided by quarterly average daily sales, was 42 days at September 30, 2017, compared to 36 days at October 1, 2016. Our DSO’s to begin the month of September 2017, were 36 days, but were negatively impacted by Irma, which caused disruptions to our customers’ invoice-payment activities, resulting in an increase in our accounts receivable balance as of September 30, 2017. DSO’s were also affected by certain larger customer projects for CGI and WinDoor, which have longer payment terms.

Inventory on hand as of September 30, 2017, was $39.1 million, compared to $30.5 million at December 31, 2016, an increase of $8.6 million. The increase in inventory was due to the seasonal inventory build-up due to the summer continuation of the repair and remodeling season, but also due to delivery disruptions caused by Irma, which affected our customers’ ability to accept deliveries of our products, which required us to return finished products to our warehouses until such time as our customers were able to accept deliveries.

We monitor and evaluate raw material inventory levels based on the need for each discrete item to fulfill short-term requirements calculated from current order patterns and to provide appropriate safety stock. Because all of our products are made-to-order, we have only a small amount of finished goods and work-in-process inventory. As a result of these factors, our inventories are not excessive and we believe the value of such inventories will be realized through sales.

Investing activities. Cash used in investing activities was $9.6 million for the first nine months of 2017, compared to cash used in investing activities of $114.6 million for the first nine months of 2016. We used $101.3 million of cash in the first nine months of 2016 to acquire businesses. Excluding cash used to acquire businesses, there was a decrease in cash used in investing activities due to a decrease in capital expenditures of $3.6 million, which went from $13.3 million in the first nine months of 2016, to $9.7 million in the first nine months of 2017.

Financing activities. Cash used in financing activities was $19.6 million in the first nine months of 2017, compared to cash provided by financing activities of $49.8 million in the first nine months of 2016, a decrease in cash provided of $69.4 million. We made repayments of long-term debt of $20.1 million in the first nine months of 2017, including a total of $20.0 million in voluntary prepayments of outstanding borrowing under the term loan facility of the 2016 Credit Agreement, compared to cash used for repayments of long-term debt in the first nine months of 2016 of $203.5 million. Cash used for payments of long-term debt of $203.5 million in the first nine months of 2016 was the result of the February 2016 refinancing and contemporaneous pay-down of $197.5 million of our then existing credit facility. Subsequent to the refinancing, $2.0 million had been repaid as scheduled debt repayments through the end of the third quarter of 2016. In addition, we made a voluntary prepayment of $4.0 million on September 30, 2016.

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The February 2016 refinancing resulted in $261.0 million in net proceeds from the issuance of long-term debt. In addition, there were payments of financing costs of $7.2 million related to the refinancing. Taxes paid relating to common stock withheld from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards were $0.2 million in the first nine months of 2017, versus $0.1 million in the first nine months of 2016, an increase in cash used of $0.1 million. There was a decrease of $2.7 million in cash used to purchase treasury shares. Proceeds from the exercises of stock options were approximately equal in the first nine months of 2017, versus the first nine months of 2016. Also, there was a $1.6 million decrease relating to excess tax benefits due to our adoption of ASU 2016-09, which no longer requires excess tax benefits to be presented as a financing activity.

Capital Resources and Debt Covenant. On February 16, 2016, we entered into the 2016 Credit Agreement, among us, the lending institutions identified in the 2016 Credit Agreement, and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent. The 2016 Credit Agreement establishes new senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility maturing in six years that will amortize on a basis of 1% annually during the six-year term, and a $40.0 million revolving credit facility maturing in five years that includes a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement are secured by substantially all of our assets as well as our direct and indirect subsidiaries’ assets. As of September 30, 2017, there were $0.2 million of letters of credit outstanding and $39.8 million available on the revolver.

Interest on all loans under the 2016 Credit Agreement is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Prior to amending the 2016 Credit Agreement on February 17, 2017, as described below, borrowings under the term loans and the revolving credit facility accrued interest at a rate equal to, at our option, LIBOR (with a floor of 100 basis points in respect of the term loan), or a base rate (with a floor of 200 basis points in respect of the term loan) plus an applicable margin. The applicable margin was 575 basis points in the case of LIBOR and 475 basis points in the case of the base rate. We pay quarterly fees on the unused portion of the revolving credit facility equal to 50 basis points per annum as well as a quarterly letter of credit fee at 575 basis points per annum plus a 12.5 basis point facing fee per annum on the face amount of any outstanding letters of credit. The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement was 6.02% as of September 30, 2017, and was 5.75% at December 31, 2016.

On February 17, 2017, we entered into an amendment of our 2016 Credit Agreement. The First Amendment, among other things, (a) decreases the applicable interest rate margins for the Initial Term Loans (as defined in the Credit Agreement) from (i) 4.75% to 3.75%, in the case of the Base Rate Loans (as defined in the Credit Agreement), and (ii) 5.75% to 4.75%, in the case of the Eurodollar Loans (as defined in the Credit Agreement), and (b) adds a soft call premium equal to 1.0% of the principal repaid or repriced if the Initial Term Loans are voluntarily refinanced or repriced pursuant to certain refinancing transactions within twelve months of the effective date of the First Amendment.

The 2016 Credit Agreement contains a springing financial covenant, if we draw in excess of twenty percent (20%) of the revolving facility, which requires us to maintain a maximum total net leverage ratio (based on the ratio of total debt for borrowed money to EBITDA, each as defined in the 2016 Credit Agreement), and is tested quarterly based on the last four fiscal quarters and is set at levels as described in the 2016 Credit Agreement. As of September 30, 2017, no test is required as we have not exceeded 20% of our revolving capacity. During 2017, the maximum permitted total net leverage ratio as stated in the 2016 Credit agreement is 4.25:1. We believe that our total net leverage ratio during 2017 has been and will continue to be in compliance with the 2016 Credit Agreement, and that we are in compliance with all covenants.

The 2016 Credit Agreement also contains a number of affirmative and restrictive covenants, including limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt and transactions with affiliates. The 2016 Credit Agreement also contains customary events of default. Upon the occurrence of an event of default, the amounts outstanding under the 2016 Credit Agreement may be accelerated and may become immediately due and payable. As of September 30, 2017, we were in compliance with all affirmative and restrictive covenants.

As of September 30, 2017, the face value of debt outstanding under the 2016 Credit Agreement was $244.0 million, and accrued interest was $0.4 million. During the third quarter of 2017, we made voluntary prepayments of outstanding borrowings under the term-loan portion of the 2016 Credit Agreement totaling $20.0 million, composed of a payment of $8.0 million made on September 29, 2017, and of $12.0 million made on July 7, 2017.

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The activity relating to third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are set forth in the table below. As a result of the voluntary prepayments of debt discussed above, we accelerated the amortization of lenders fees and discount relating to the term-loan portion of the 2016 Credit Agreement of $1.0 million, which is included in interest expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017. All debt-related fees, costs and original issue discount are classified as a reduction of the carrying value of long-term debt:

(in thousands)	Total
At beginning of year	$	16,102
Amortization expense through February 17, 2017		(359	)
At time of repricing		15,743
Less: Amortization expense after repricing		(1,726	)
Less: Accelerated amortization relating to debt prepayments		(980	)
At end of period	$	13,037

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September 30, 2017, is as follows:

(in thousands)	Total
Remainder of 2017	$	670
2018		2,785
2019		2,966
2020		3,224
2021		3,011
2022		381
Total	$	13,037

As a result of the voluntary prepayments totaling $20.0 million we made during the third quarter of 2017, we have no future scheduled repayments under the 2016 Credit Agreement until the maturity of the facility on February 21, 2022. The contractual future maturities of long-term debt outstanding, including the financing arrangement described as other debt, as of September 30, 2017, are as follows (at face value):

	(in thousands)
Remainder of 2017	$	71
2018		295
2019		163
2020		—
2021		—
2022		243,975
Total	$	244,504

Capital Expenditures. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. For the first nine months of 2017, capital expenditures were $9.7 million, compared to $13.3 million for the first nine months of 2016. In 2017, we expect to spend approximately $12-$15 million on capital expenditures, primarily including machinery and equipment, and distribution equipment such as tractors and trailers.

Share Repurchase Program. On October 28, 2015, the Board of Directors authorized and approved a share repurchase program of up to $20 million. Repurchases are made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, our 2016 Credit Agreement, and other relevant factors. We do not intend to repurchase any shares from directors, officers, or other affiliates. The program does not obligate us to acquire any specific number of shares. The timing, manner, price and amount of repurchases will be determined at the Company’s discretion,

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subject to the approval of its Board of Directors, and the program may be suspended, terminated or modified at any time for any reason. During the first nine months of 2017, we made no repurchases of our common stock under this program. In the future, we may make opportunistic repurchases of our common stock as we see fit, subject to the approval of our Board of Directors.

Sale of Door Glass Processing Assets. On September 22, 2017, we entered into an Asset Purchase Agreement (APA) with Cardinal LG Company (Cardinal) for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors for a cash purchase price of $28 million. Contemporaneously with entering into the APA, we entered into a seven-year supply agreement (SA) with Cardinal for Cardinal to supply us with glass components for PGT-branded doors. The Company determined to sell these assets, whose net book value at September 30, 2017, was $5.6 million, and enter into the SA in order to allow us to heighten our focus in our core areas of window and door manufacturing and, at the same time, strengthen our supply chain for high-quality door glass from a supplier with whom we have been doing business for many years.

The APA provides for the transfer of the assets from the Company to Cardinal in two phases, with the first date being on or about November 1, 2017, and the second date being on or about March 1, 2018. Under the APA, the cash purchase price of $28 million is to be paid by Cardinal to the Company in three separate payments of $3 million at the time of the first transfer of the assets to Cardinal, $10 million on January 15, 2018, and $15 million at the time of the second transfer of assets to Cardinal.

The SA provides that the Company will purchase, and Cardinal will supply, all of the Company’s requirements for certain glass components used in PGT-branded doors through the end of 2024. The terms of the manufacture by Cardinal and purchase by the Company of such glass components as to purchase orders, forecasts of purchases, pricing, invoicing, delivery and payment terms and other terms, are all as described in the SA.

The Company has determined that, although the APA and SA are separate agreements, they were negotiated contemporaneously. Therefore, the Company has concluded that the $28 million of proceeds under the APA should be bifurcated between the sale of the door glass manufacturing assets, and payment for the Company’s commitment to buy glass components for PGT-branded doors from Cardinal under the SA, and that such bifurcation is predicated on the fair value of the door glass manufacturing assets being sold on or about the date of sale. The Company has engaged an independent machinery and equipment valuation specialist to provide a fair market value appraisal of the assets sold to Cardinal, which is currently in process. Accordingly, as the fair market value appraisal is not yet finalized, and there had been no exchanges of assets or cash under the APA as of September 30, 2017, and no purchases or sales of glass components for PGT-branded doors under the SA as of September 30, 2017, no amounts relating to either the APA or SA have been recognized in the accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017.

Contractual Obligations

There have been no significant changes to the “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 December 31, 2016.

Significant Accounting Policies and Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Significant accounting policies are those that are both important to the accurate portrayal of a Company’s financial condition and results, and those that 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 significant accounting policies in our Form 10-K annual report for the year ended December 31, 2016. There have been no changes to our critical accounting policies during the first nine months of 2017.

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Recently Issued Accounting Pronouncements

In addition to the pronouncements issued during 2017, ASU 2016-02, “Leases”, and ASU 2014-09, “Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form 10-K for the year ended December 31, 2016.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments under ASU 2017-12 refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 becomes effective for us in the first quarter of 2019. We are currently assessing the impact the adoption of this ASU will have on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income - Gain and Losses from the Derecognition of Nonfinancial Assets.” ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU 2014-09, provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. This update is effective at the same time as the amendments in ASU 2014-09, therefore, for our fiscal year beginning after December 15, 2017, and may apply them either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) – Clarifying the Definition of a Business.” ASU 2017-01 affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We do not expect adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

Approaching Adoption of ASU 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. The FASB also issued ASU 2015-14, “Deferral of Effective Date”. ASU 2015-14 deferred the effective date for the new guidance until the annual reporting period beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, but not before the original effective date (periods beginning after December 15, 2016). The standard permits the use of either the full-retrospective (restating all years presented in the Company’s financial

30

statements), or modified-retrospective (recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU 2016-10, “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies identification of a performance obligation and addresses revenue recognition associated with the licensing of intellectual property, ASU 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients”, which clarifies assessment of collectability criterion, non-cash consideration and other technical corrections, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.

The Company completed its preliminary assessment of the impact of its upcoming adoption of ASU 2014-09 on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU 2014-09, to one based on the transfer of control of the product to the customer. Under ASU 2014-09, revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is not required in order for transfer of control of the product to the customer to have occurred.

ASU 2014-09 states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that, of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to-date. ASU 2014-09 further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

The Company is a manufacturer of fully-customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The Company’s initial assessment is that its goods have no alternative use, as that term is defined in ASU 2014-09, and that control of the product passes to the customer no later than completion of the manufacturing of each or all of the products in an order, but before delivery of the products to the customer. Additionally, the Company has an enforceable right to payment at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its customers.

Based on this initial assessment, the Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion of the manufacturing process, from its current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products have no alternative use and the recognition of revenue should begin. However, because revenue will have been recognized on at least all products for which manufacturing has been completed, the Company believes that upon adoption of ASU 2014-09, inventories on its consolidated balance sheets will no longer include finished goods. The Company also believes that it will recognize revenue at an earlier point than prior to the adoption of ASU 2014-09, but that such effect may not materially affect its consolidated statements of operations post-adoption due to the fact that such effects will exist at both the beginning and end of fiscal periods after the initial transition.

ASU 2014-09 also requires entities, primarily in the manufacturing segment, to make policy elections relating to shipping and handling charges. Entities may elect to treat shipping and handling as a separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat shipping and handling as a fulfillment activity, which will require shipping and handling costs for undelivered products to be accrued in order to match this cost with the revenue previously recognized over time. The Company currently recognizes shipping and handling costs as a fulfillment activity, and has preliminarily determined to continue to treat such costs as a fulfillment activity.

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The Company expects to continue to evaluate the impact of the adoption of ASU 2014-09 on its consolidated financial statements, and will provide updates and additional information as the effective date of adoption approaches.

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 as of the date of filing of this Quarterly Report on Form 10-Q, of $244.0 million, a 100 basis point increase in interest rate would result in approximately $2.4 million of additional interest costs annually.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of 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 (“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.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 with respect to claims and lawsuits. We do not believe that the ultimate resolution of the matters pending or threatened against us at this time 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.

ITEM 1A. RISK FACTORS

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” of our Form 10-K annual report for the year ended December 31, 2016, which could materially affect our business, financial condition, or future results.

Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial, may also 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 and Use of Proceeds

None during the quarter.

Issuer Purchases of Equity

None during the quarter.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

10.1*	First Amendment to Supply Agreement, dated July 1, 2017, by and between PGT Industries, Inc. and ENERGI Fenestration Solutions USA, Inc., which amends that certain Supply Agreement, dated April 28, 2014, by and between PGT Industries, Inc. and Royal Group, Inc., which such Supply Agreement subsequently was assigned to ENERGI Fenestration Solutions USA, Inc., in connection with ENERGI Fenestration Solutions USA, Inc.’s purchase of the window and door division of Royal Group, Inc.
10.2	Supply Agreement dated as of September 22, 2017, by and between PGT Industries, Inc. and Cardinal LG Company (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K dated September 22, 2017, filed with the Securities and Exchange Commission on September 22, 2017, Registration No. 001-37971)
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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

** Furnished herewith.

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SIGNATURE

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 INNOVATIONS, INC.
	(Registrant)
Date: November 2, 2017	/s/ Bradley West
	Bradley West
	Senior Vice President and Chief Financial Officer

35

EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO SUPPLY AGREEMENT

This First Amendment to Supply Agreement (the “Amendment”) is made and entered into this 1^st day of July, 2017, by and between PGT Industries, Inc. (“Customer”) and ENERGI Fenestration Solutions USA, Inc. (“Supplier”), and amends that certain Supply Agreement, dated April 28, 2014, by and between Customer and Royal Group, Inc. (the “Original Agreement,” and together with the Amendment, the “Agreement”), which Original Agreement subsequently was assigned to Supplier in connection with Supplier’s purchase of the window and door division of Royal Group, Inc.;

WHEREAS, Customer and Supplier (each a “Party” and collectively, the “Parties”) desire to amend the Original Agreement to, among other things, have Supplier provide additional products to Customer and lengthen the duration of the term of the Original Agreement, all pursuant to the terms expressly set forth in this Amendment; and

WHEREAS, the Parties wish to memorialize their agreement to amend the Original Agreement in writing;

NOW THEREFORE, in consideration of the agreements and premises set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by both Parties hereto, the Parties, intending to be legally bound, agree as follows:

1. Scope of Supply. Section l of the Original Agreement is hereby amended and restated as follows: “This Agreement governs the supply of products and materials associated with certain of Customer’s vinyl window and door products. Customer’s estimated annual purchase volumes for each of those Supplier-provided products is set forth on Schedule A of this Amendment.

2. Term. Notwithstanding any other provision of Section 2 of the Original Agreement, this Agreement shall be effective until December 31, 2021. Thereafter, the term of this Agreement may be extended one time by the mutual written agreement of the Parties for a twenty-four month period commencing on January I, 2022 and ending on December 31, 2023, with the decision of whether to enter into any such extension to be made by each Party in its sole and absolute discretion. If that mutual written agreement, extending the term of the Agreement, has not been entered into on or before July 1, 2021, then Customer shall be free to enter into another supply arrangement with another supplier, with such alternative supply arrangement to be effective on or about January 1, 2022.

3. Definitions. The definition of the term “Products” is hereby updated as necessary to include all of the products set forth on Schedule A to this Amendment , and specifically including the new products set forth thereon (collectively, the “New Product Extrusions”) listed thereon.

4. Representations and Warranties. Supplier represents and warrants to Customer that all of the Products, including the New Product Extrusions, shall comply with the Specifications, and shall be free from all defects in material and workmanship, as such warranties are more specifically described in Section 4 and Schedule C to the Original Agreement. Those warranties set forth in Schedule D attached hereto which by their terms are intended to apply to the Products, as well as the warranty exclusions and limitations expressly set forth therein, shall apply to all of the Products, including the New Product Extrusions. New Product Extrusions In addition and notwithstanding any other provision of the Original Agreement to the contrary, Supplier warrants to Customer that none of the extrusion and/or manufacturing equipment, methods, processes and techniques used by Supplier in extruding and manufacturing the Products shall infringe the copyrights, patents or other intellectual property rights of any third party, or incorporate or utilize any trade secrets that were misappropriated from any third party.

5. Pricing and Payment Terms. The initial prices to be paid by Customer for each of the New Product Extrusions shall be as set forth on Schedule B-1 to this Amendment (the “Initial Prices”). There will be no adjustment to the Initial Prices for CDI Resin Index. CDI Resin Index adjustment for all Customer purchases excepting New Product Extrusion purchases will apply per terms outlined in Agreement Schedule B-2. Payment terms are net 60 days; invoice on shipment date. A 1% discount will apply to invoice balance if payment is received by Supplier within 15 days of invoice date.

6. Purchase Commitment. Customer agrees to purchase all of its requirements for non-solid, color New Product Extrusions from Supplier starting on or about July 1, 2017, and continuing until this Agreement expires or is terminated in accordance with its termination provisions. Customer agrees to purchase all of its requirements for all New Product Extrusions starting on or about January 1, 2018, and continuing until this Agreement expires or is terminated in accordance with its termination provisions. These exclusive purchase requirements shall be applicable to Customer if, and only if, Supplier fully satisfies all of the warranties and performance and quality standards set forth in the Agreement, including in the relevant schedules to the Agreement, and if Supplier is able to fill timely and accurately fill all of Customer’s orders for the New Product Extrusions, in accordance with the terms of the Agreement.

7. Exclusivity. The parties acknowledge and agree that the exclusivity arrangements set forth on Schedule C hereto shall apply to the Agreement and the relationship of the Parties hereunder.

(a) The Parties hereto acknowledge that, given: (i) Customer’s plans for extensive new product innovation; (ii) the overall size and complexity of Customer’s vinyl window and door product offerings/program; (iii) the critical role that Supplier will play in ensuring the success of Customer’s new product innovation and overall vinyl window and door program; and (iv) the significant commitment of time, personnel and other resources that Supplier will need to dedicate to Customer’s vinyl window and door program to assist Customer with ensuring its success, it is not feasible or practical for Supplier

to provide the level of service required by Customer, while also assisting other window and door fabricators in creating, designing, and developing other impact resistant vinyl window and door products that would be sold in the State of Florida, and/or the components/profiles thereto, or manufacturing such components/profiles for other companies, where those components/profiles will be used for impact resistant vinyl window and door products that will be sold in the State of Florida.

(b) In recognition of the factors described above in Paragraph 7(a), and in consideration of Customer agreeing to purchase from Supplier the dollar amounts of the particular Products set forth below on this Schedule C, Supplier covenants and agrees that Supplier will not, during the term of this Agreement, create, design, develop, distribute, extrude, manufacture, process or produce — or assist in the creation, design, development, distribution, engineering, extrusion, manufacturing or production of — any impact-resistant vinyl window or door system intended to be used in or as a part of impact resistant windows and doors that are to be sold to any party for sale, resale or use in the State of Florida or that are otherwise specifically designed for use in the State of Florida, or components or profiles intended to be used in any such impact resistant vinyl windows or doors, for any individual, company, corporation, firm, partnership, or other business or entity of any kind, other than Customer, except as otherwise provided in Paragraph 7(c) below. For clarity, the rights of exclusivity outlined above shall not apply if Customer’s annual purchasing volumes outlined below in this Schedule C are not met, other than due to Supplier being unable or unwilling to fill/satisfy Customer’s purchase volume requirements.

(c) Notwithstanding the provisions of Paragraph 7(b), in the event that Supplier now or in the future sells to any third party any vinyl window or door components or profiles that are used in non-impact-resistant window and door products, and that third party, without any design, development or engineering assistance or services from Supplier, subsequently begins using those same Supplier-provided components or profiles in the fabrication by the third party of impact-resistant windows or doors that are to be sold, used or installed in the State of Florida, Supplier selling those same components or profiles to that third party shall not be deemed a breach of Paragraph 7(b) hereof. For clarity, non-impact-resistant window systems and doors which Supplier designs and sells to other customers and which are later modified, without the assistance of Supplier, to render them impact-resistant certified for the State of Florida shall not be subject to the exclusivity clause in Paragraph 7(b) above. In addition, Customer and Supplier agree that Supplier shall have the right to continue selling the existing RoyalGuard impact resistant window system, with the same design that it historically has had, to the customers of Supplier listed below on this Schedule C, but to no other customers or potential customers in the State of Florida.

(d) Nothing in Sections 7(a) through 7(c) above shall be deemed to prohibit Supplier from creating, designing, developing, distributing, extruding, manufacturing, processing or producing — or assisting in the creation, design, development, distribution, engineering, extrusion, manufacturing or production of any impact-resistant vinyl window or door system intended to be used in or as a part of impact resistant windows and doors that are to be sold for use and installation outside of the State of Florida or that are otherwise specifically designed for use in any state other than the State of Florida, or components or profiles intended to be used in any such impact resistant vinyl windows or doors to be sold for use outside of the State of Florida or specifically designed for use in any state other than the State of Florida.

8. Lead Time: Minimum Order Size. The lead times for New Product Extrusions from date of order to “packed and available” for pick-up will be the same as those set forth in the Original Agreement.

9. Delivery Charge. Customer will pay Supplier the same delivery charges as those set forth in the Original Agreement.

10. Cost and Ownership of Dies. Supplier acknowledges and agrees that Supplier is fully and solely responsible for all costs and expenses of designing and creating the dies to be used to extrude the New Product Extrusions. Supplier is and shall remain the owner of the physical dies, but shall not own any rights to any of the designs of the New Product Extrusions that are extruded from those dies.

11. Ownership of Designs for New Product Extrusions. Customer is and shall remain the sole and exclusive owner of all copyright, patent and other intellectual property and common law rights in and to the designs for all of the New Product Extrusions, including with respect to all electronic or physical drawings and sketches of those designs. Supplier acknowledges and agrees that Supplier shall have no intellectual property or ownership rights of any kind in and to those designs or the drawings and sketches related thereto.

12. Confidentiality. Customer and Supplier acknowledge and agree that each of them is bound by that certain Mutual Non-Disclosure Agreement entered into between them on July 1, 2017.

13. Notices. The Supplier address set forth in Section 15(f) of the Original Agreement is hereby deleted and replaced with the following address : ENERGI Fenestration Solutions, Ltd., 30 Royal Group Crescent, Woodbridge , Ontario, L4H 1X9, Attention: Eli Cranley.

14. No Further Amendments. Except as expressly set forth in this Amendment, including the schedules hereto, there are no amendments to the Original Agreement. The un-amended terms of the Original Agreement, including the schedules thereto, shall apply to Customer’s purchases of New Product Extrusions and Supplier’s production and sale of the New Product Extrusions to Customer.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by persons authorized on their respective behalf, effective as of the date first set forth above.

PGT INDUSTRIES, INC.

By:

Printed Name:

Title:

ENERGI Fenestration Solutions USA, Inc.

By:

Printed Name:

Title:

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Rodney Hershberger, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2017, of PGT Innovations, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Rodney Hershberger

Rodney Hershberger

Chairman and Chief Executive Officer

Date: November 2, 2017

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Bradley West, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 30, 2017, of PGT Innovations, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Bradley West

Bradley West

Senior Vice President and Chief Financial Officer

Date: November 2, 2017

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the quarterly report on Form 10-Q of PGT Innovations, Inc. (the “Company”) for the quarterly period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rodney Hershberger, as Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Rodney Hershberger

Rodney Hershberger

Chairman and Chief Executive Officer

Date: November 2, 2017

A signed original of this written statement required by Section 906 has been provided to PGT Innovations, Inc. and will be retained by PGT Innovations, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350

(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the quarterly report on Form 10-Q of PGT Innovations, Inc. (the “Company”) for the quarterly period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bradley West, as Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bradley West

Bradley West

Senior Vice President and Chief Financial Officer

Date: November 2, 2017

A signed original of this written statement required by Section 906 has been provided to PGT Innovations, Inc. and will be retained by PGT Innovations, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 02, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	PGTI
Entity Registrant Name	PGT Innovations, Inc.
Entity Central Index Key	0001354327
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		49,660,699

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Income Statement [Abstract]
Net sales	$ 126,876	$ 129,807	$ 376,981	$ 349,046
Cost of sales	87,128	88,721	260,941	240,507
Gross profit	39,748	41,086	116,040	108,539
Selling, general and administrative expenses	24,950	22,533	72,385	63,209
Fair value adjustment to contingent consideration		(3,000)		(3,000)
Income from operations	14,798	21,553	43,655	48,330
Interest expense, net	5,514	5,495	14,992	14,935
Debt extinguishment costs				3,431
Income before income taxes	9,284	16,058	28,663	29,964
Income tax expense	2,992	5,262	9,117	10,339
Net income	$ 6,292	$ 10,796	$ 19,546	$ 19,625
Net income per common share:
Basic	$ 0.13	$ 0.22	$ 0.40	$ 0.40
Diluted	$ 0.12	$ 0.21	$ 0.38	$ 0.39
Weighted average shares outstanding:
Basic	49,629	48,941	49,455	48,782
Diluted	51,809	50,672	51,670	50,528
Comprehensive income	$ 6,292	$ 10,796	$ 19,546	$ 19,625

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 44,727	$ 39,210
Accounts receivable, net	55,949	41,646
Inventories	39,131	30,511
Prepaid expenses	2,959	2,645
Other current assets	6,329	8,365
Total current assets	149,095	122,377
Property, plant and equipment, net	84,469	84,209
Trade name and other intangible assets, net	116,702	120,930
Goodwill	108,060	108,060
Other assets, net	1,272	1,072
Total assets	459,598	436,648
Current liabilities:
Accounts payable and accrued liabilities	40,338	22,803
Current portion of long-term debt	290
Total current liabilities	40,628	22,803
Long-term debt, less current portion	231,177	247,873
Deferred income taxes	31,838	31,838
Other liabilities	1,466	1,282
Total liabilities	305,109	303,796
Shareholders' equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; none outstanding
Common stock; par value $.01 per share; 200,000 shares authorized; 52,376 and 51,887 shares issued and 49,660 and 49,176 shares outstanding at September 30, 2017 and December 31, 2016, respectively	524	519
Additional paid-in-capital	251,733	249,647
Accumulated deficit	(85,009)	(104,555)
Shareholders' equity	167,248	145,611
Less: Treasury stock at cost	(12,759)	(12,759)
Total shareholders' equity	154,489	132,852
Total liabilities and shareholders' equity	$ 459,598	$ 436,648

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, Shares authorized	10,000,000	10,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, Shares authorized	200,000,000	200,000,000
Common stock, shares issued	52,376,000	51,887,000
Common stock, shares outstanding	49,660,000	49,176,000

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016
Cash flows from operating activities:
Net income	$ 19,546	$ 19,625
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	9,502	6,983
Amortization	4,818	4,501
Provision for (recovery on) allowance for doubtful accounts	249	(76)
Stock-based compensation	1,568	1,552
Amortization and write-off of deferred financing costs and debt discount	3,065	6,108
Deferred income taxes		633
Excess tax benefits on stock-based compensation		(1,630)
Fair value adjustment to contingent consideration		(3,000)
Gain on disposal of assets	(59)	(6)
Change in operating assets and liabilities (net of the effect of the acquisition):
Accounts receivable	(15,644)	(16,115)
Inventories	(8,620)	(464)
Prepaid expenses, other current and other assets	(261)	2,626
Accounts payable, accrued and other liabilities	20,506	12,456
Net cash provided by operating activities	34,670	33,193
Cash flows from investing activities:
Purchases of property, plant and equipment	(9,650)	(13,287)
Business acquisition		(101,338)
Proceeds from sale of equipment	59	6
Net cash used in investing activities	(9,591)	(114,619)
Cash flows from financing activities:
Payments of long-term debt	(20,062)	(203,525)
Proceeds from issuance of long-term debt		261,030
Payments of financing costs		(7,178)
Purchases of treasury stock		(2,722)
Taxes paid relating to shares withheld on employee equity awards	(181)	(54)
Proceeds from exercise of stock options	681	652
Proceeds from issuance of common stock under employee stock purchase plan	23	27
Excess tax benefits on stock-based compensation		1,630
Other	(23)	(23)
Net cash (used in) provided by financing activities	(19,562)	49,837
Net increase (decrease) in cash and cash equivalents	5,517	(31,589)
Cash and cash equivalents at beginning of period	39,210	61,493
Cash and cash equivalents at end of period	44,727	29,904
Non-cash activity:
Financed purchase of software license	590
Property, plant and equipment additions in accounts payable	$ 343	1,181
Contingent consideration reversed out of accrued liabilities		3,000
Portion of USI purchase price held back in escrow		$ 100

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include the accounts of PGT Innovations, Inc. and its wholly-owned subsidiary, PGT Industries, Inc., and its wholly-owned subsidiaries CGI Window and Holdings, Inc. (“CGI”), which includes its wholly-owned subsidiary, CGI Commercial, Inc. (“CGIC”), and WinDoor, Incorporated (collectively the “Company”), after elimination of intercompany accounts and transactions.

These condensed consolidated financial 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 adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period is 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 September 30, 2017, and October 1, 2016, consisted of 13 weeks.

The condensed consolidated balance sheet as of December 31, 2016, is derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of December 31, 2016, and the unaudited condensed consolidated financial statements as of and for the periods ended September 30, 2017, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2016, included in the Company’s most recent Annual Report on Form 10-K.Except for the adoption of the guidance relating to the accounting for stock-based compensation expense discussed below, the 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 Annual Report on Form 10-K.

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation, Improvements to Employee Share-Based payment Accounting (Topic 718)”. This update is intended to provide simplification of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted this update effective for our fiscal year beginning January 1, 2017. Impacts of the adoption of ASU 2016-09 are as follows:

• ASU 2016-09 requires employers to make a policy election as to whether they will continue to use previous generally accepted accounting principles, which required employers to recognize stock-based compensation expense on grants of equity awards net of an estimate of the amount that will be forfeited, or to recognize forfeitures on an actual basis in the period they occur. We have elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur, adopted on a modified-retrospective basis. This resulted in an adjustment to increase accumulated deficit for previously unrecognized stock compensation expense of approximately $0.1 million as of December 31, 2016, net of tax effect, with an offsetting increase in additional paid-in capital of approximately $0.2 million.

• ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as a financing activity. The Company withholds shares of its common stock from employees to satisfy the employee’s tax withholding obligations in connection with the exercise of stock options and lapse of restrictions on stock awards, which are then immediately retired. We previously included these cash flows in financing activities, therefore, there was no impact upon adoption.

• ASU 2016-09 requires that excess tax benefits resulting from the exercise of stock options and lapse of restriction on stock awards be recognized as a discrete item in tax expense, where previously such tax effects had been recognized in additional paid-in-capital. See Note 10 for a discussion of the impacts of the adoption of ASU 2016-09 on the Company’s income tax expense for the three and nine months ended September 30, 2017.

• ASU 2016-09 requires previously unrecognized excess tax benefits to be recognized on a modified-retrospective basis, which results from taking a deduction for tax benefits relating to stock-based compensation that does not result in a reduction in taxes payable. Upon adoption, we recorded an adjustment to decrease the accumulated deficit for excess tax benefits that had not yet been recognized of approximately $0.3 million as of December 31, 2016, with an offsetting reduction in our net deferred tax liability resulting from the recognition of previously unrecorded deferred tax assets for tax credits in the state of Florida.

• ASU 2016-09 requires excess tax benefits to be presented as an operating activity on the statement of cash flows, either prospectively or on a full-retrospective basis, rather than as previously required as a financing activity. We have elected to present excess tax benefits in the operating section of the statement of cash flows on a prospective basis.

The effects on the Company’s consolidated balance sheet as of December 31, 2016, relating to the adoption of ASU 2016-09 is as follows (in thousands):

	Previously Reported			After Adoption
Deferred income taxes	$	32,171		$	31,838
Total liabilities	$	304,129		$	303,796
Additional paid-in-capital	$	249,469		$	249,647
Accumulated deficit	$	(104,710	)	$	(104,555	)
Shareholders’ equity	$	145,278		$	145,611
Total shareholders’ equity	$	132,519		$	132,852

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This guidance changed the subsequent measurement of inventory, excluding inventory accounted for under LIFO or the retail inventory method, to be at lower of cost and net realizable value. Topic 330, Inventory, previously required an entity to measure inventory at the lower of cost or market. Market could have been replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Under this ASU, an entity measures inventory within its scope at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 was effective for us as of January 1, 2017. We prospectively adopted ASU 2015-11 effective on January 1, 2017. The adoption of ASU 2015-11 had no impact on our financial statements.

Recently Issued Accounting Pronouncements

In addition to the pronouncements issued during 2017, ASU 2016-02, “Leases (Topic 842), and ASU 2014-09, “Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form 10-K for the year ended December 31, 2016.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments under ASU 2017-12 refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 becomes effective for us in the first quarter of 2019. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income—Gain and Losses from the Derecognition of Nonfinancial Assets.” ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU 2014-09, provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. This update is effective at the same time as the amendments in ASU 2014-09, therefore, for our fiscal year beginning after December 15, 2017, and may be applied either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) – Clarifying the Definition of a Business.” ASU 2017-01 affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We will apply the provisions of this guidance once it becomes effective.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

Approaching Adoption of ASU 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. The FASB also issued ASU 2015-14, “Deferral of Effective Date”. ASU 2015-14 deferred the effective date for the new guidance until the annual reporting period beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, but not before the original effective date (periods beginning after December 15, 2016). The standard permits the use of either the full-retrospective (restating all years presented in the Company’s financial statements), or modified-retrospective (recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU 2016-10, “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies identification of a performance obligation and addresses revenue recognition associated with the licensing of intellectual property, ASU 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients”, which clarifies assessment of collectability criterion, non-cash consideration and other technical corrections, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.

The Company completed its preliminary assessment of the impact of its upcoming adoption of ASU 2014-09 on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU 2014-09, to one based on the transfer of control of the product to the customer. Under ASU 2014-09, revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is not required in order for transfer of control of the product to the customer to have occurred.

ASU 2014-09 states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that, of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to-date. ASU 2014-09 further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

The Company is a manufacturer of fully-customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The Company’s initial assessment is that its goods have no alternative use, as that term is defined in ASU 2014-09, and that control of the product passes to the customer no later than completion of the manufacturing of each or all of the products in an order, but before delivery of the products to the customer. Additionally, the Company has an enforceable right to payment at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its customers.

Based on this initial assessment, the Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion of the manufacturing process, from its current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products have no alternative use and the recognition of revenue should begin. However, because revenue will have been recognized on at least all products for which manufacturing has been completed, the Company believes that upon adoption of ASU 2014-09, inventories on its consolidated balance sheets will no longer include finished goods. The Company also believes that it will recognize revenue at an earlier point than prior to the adoption of ASU 2014-09, but that such effect may not materially affect its consolidated statements of operations post-adoption due to the fact that such effects will exist at both the beginning and end of fiscal periods after the initial transition.

ASU 2014-09 also requires entities, primarily in the manufacturing segment, to make policy elections relating to shipping and handling charges. Entities may elect to treat shipping and handling as a separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat shipping and handling as a fulfillment activity, which will require shipping and handling costs for undelivered products to be accrued in order to match this cost with the revenue previously recognized over time. The Company currently recognizes shipping and handling costs as a fulfillment activity, and has preliminarily determined to continue to treat such costs as a fulfillment activity.

The Company expects to continue to evaluate the impact of the adoption of ASU 2014-09 on its consolidated financial statements, and will provide updates and additional information as the effective date of adoption approaches.

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Warranty

9 Months Ended

Sep. 30, 2017

Guarantees and Product Warranties [Abstract]

Warranty

NOTE 2. WARRANTY

Most of our manufactured products are sold with warranties. Warranty periods, which vary by product components, generally range from 1 to 10 years; however, the warranty period for a limited number of specifically identified components in certain applications is a lifetime. 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 the current net sales.

During the three months ended September 30, 2017, we recorded warranty expense at a rate of approximately 2.04% of sales, which decreased from the rate in the second quarter of 2017 of 2.22%. During the three months ended October 1, 2016, we recorded warranty expense at a rate of approximately 2.21% of sales.

The following table summarizes: current period charges, adjustments to previous estimates, if necessary, as well as settlements, which represent actual costs incurred during the period for the three and nine months ended September 30, 2017, and October 1, 2016. The reserve is determined through specific identification and assessing Company history. Expected future obligations are discounted to a current value using a risk-free rate for obligations with similar maturities.

	Beginning				Charged								End of
Accrued Warranty	of Period		Acquired		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended September 30, 2017	$	5,679	$	—	$	2,593	$	46		$	(2,412	)	$	5,906
Three months ended October 1, 2016	$	5,103	$	10	$	2,875	$	(19	)	$	(2,493	)	$	5,476
Nine months ended September 30, 2017	$	5,569	$	—	$	8,681	$	(18	)	$	(8,326	)	$	5,906
Nine months ended October 1, 2016	$	4,237	$	274	$	8,111	$	751		$	(7,897	)	$	5,476

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Inventories

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventories

NOTE 3. 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 and usually ship upon completion. Finished goods inventory and work-in-progress costs include direct materials, direct labor, and overhead. All inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Inventories consisted of the following:

	September 30, 2017		December 31, 2016
	(in thousands)
Raw materials	$	29,591	$	24,946
Work-in-progress		3,543		2,521
Finished goods		5,997		3,044
	$	39,131	$	30,511

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Stock Based-Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based-Compensation

NOTE 4. STOCK BASED-COMPENSATION

Exercises

For the three months ended September 30, 2017, there were 90,159 options exercised at a weighted average exercise price of $1.99 per share. For the nine months ended September 30, 2017, there were 341,069 options exercised at a weighted average exercise price of $2.00 per share.

Issuance

On March 4, 2017, we granted 251,474 restricted stock awards to certain executives and non-executive employees of the Company. The restrictions on these stock awards lapse over time based solely on continued service. However, the quantity of restricted shares granted on half of these shares, or 125,737 shares, is fixed, whereas the quantity granted on the remaining half, or 125,737 shares, is subject to Company-specific performance criteria. The restricted stock awards have a fair value on date of grant of $10.20 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. Those restricted shares whose quantity is fixed vest in equal amounts over a three-year period on the first, second and third anniversary dates of the grant. Those restricted shares whose quantity is subject to Company performance criteria vest in equal amounts on the second and third anniversary dates of the grant.

The performance criteria, as defined in the share awards, provides for a graded awarding of shares based on the percentage by which the Company meets earnings before interest and taxes, as defined, in our 2017 business plan. The performance percentages, ranging from less than 80% to greater than 120%, provide for the awarding of shares ranging from no shares to 150% of the original amount of shares.

On May 19, 2017, we granted 34,699 restricted stock awards to the seven non-management members of the board of directors of the Company relating to their annual compensation for service on the board. The restricted stock awards have a fair value on date of grant of $11.60 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. The restrictions on these stock awards lapse based solely on continued service on the first anniversary date of the grant.

Stock Compensation Expense

We record stock compensation expense over an award’s vesting period based on the award’s fair value at the date of grant. Effective on January 1, 2017, we adopted the provisions of ASU 2016-09, pursuant to which we elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur. For more information, see Note 1 under “Recently Adopted Accounting Pronouncements”. We recorded compensation expense for stock based awards of $0.5 million for the three months ended September 30, 2017, and $0.4 million for the three months ended October 1, 2016. We recorded compensation expense for stock based awards of $1.6 million for the nine months ended September 30, 2017, and $1.6 million for the nine months ended October 1, 2016. As of September 30, 2017, and October 1, 2016, there was $2.4 million and $1.9 million, respectively, of total unrecognized compensation cost related primarily to restricted share awards. These costs are expected to be recognized in earnings on an accelerated basis over the weighted average remaining vesting period of 1.5 years at September 30, 2017.

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Net Income Per Common Share

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Net Income Per Common Share

NOTE 5. NET INCOME PER COMMON SHARE

Basic earnings per share (“EPS”) is computed by dividing net income available to common shareholders, by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the dilutive effect of potential common shares from securities such as stock options.

Weighted average shares outstanding for the nine months ended September 30, 2017, and for the three and nine months ended October 1, 2016, excludes underlying options of 20 thousand because their effects were anti-dilutive. There were no anti-dilutive securities outstanding for the three months ended September 30, 2017.

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				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
	2017		2016		2017		2016
	(in thousands, except per share amounts)
Net income	$	6,292	$	10,796	$	19,546	$	19,625
Weighted-average common shares—Basic		49,629		48,941		49,455		48,782
Add: Dilutive effect of stock compensation plans		2,180		1,731		2,215		1,746
Weighted-average common shares—Diluted		51,809		50,672		51,670		50,528
Net income per common share:
Basic	$	0.13	$	0.22	$	0.40	$	0.40
Diluted	$	0.12	$	0.21	$	0.38	$	0.39

Effective on January 1, 2017, we adopted ASU 2016-09. ASU 2016-09 changes the accounting for excess tax benefits by requiring that they be treated as discrete items of income tax expense in the period they occur. For the three and nine months ended September 30, 2017, income tax expense has been reduced by $347 thousand and $1.1 million, respectively, relating to excess tax benefits on the exercise of stock options and the lapse of restrictions on stock awards. ASU 2016-09 also changed the treasury stock method of calculating diluted shares outstanding to exclude the presumption that common stock equivalents can be reduced by repurchasing shares using excess tax benefits. For the three and nine months ended September 30, 2017, diluted shares outstanding includes 724 thousand and 724 thousand shares, respectively, that prior to the adoption of ASU 2016-09 would have been presumed to be bought-back, and therefore not outstanding, using the proceeds of excess tax benefits. For the three and nine months ended October 1, 2016, diluted shares outstanding would have increased by 826 thousand and 827 thousand shares, respectively, if we had adopted ASU 2016-09 at the beginning of our 2016 fiscal year.

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Sale of Assets and Acquisitions

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Sale of Assets and Acquisitions

NOTE 6. SALE OF ASSETS AND ACQUISITIONS

Sale of Door Glass Processing Assets

On September 22, 2017, we entered into an Asset Purchase Agreement (APA) with Cardinal LG Company (Cardinal) for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors for a cash purchase price of $28 million. Contemporaneously with entering into the APA, we entered into a seven-year supply agreement (SA) with Cardinal for Cardinal to supply us with glass components for PGT-branded doors. The Company determined to sell these assets, whose net book value at September 30, 2017 was $5.6 million, and enter into the SA in order to allow us to heighten our focus in our core areas of window and door manufacturing and, at the same time, strengthen our supply chain for high-quality door glass from a supplier with whom we have been doing business for many years.

The APA provides for the transfer of the assets from the Company to Cardinal in two phases, with the first date being on or about November 1, 2017, and the second date being on or about March 1, 2018. Under the APA, the cash purchase price of $28 million is to be paid by Cardinal to the Company in three separate payments of $3 million at the time of the first transfer of the assets to Cardinal, $10 million on January 15, 2018, and $15 million at the time of the second transfer of assets to Cardinal.

The SA provides that the Company will purchase, and Cardinal will supply, all of the Company’s requirements for certain glass components used in PGT-branded doors through the end of 2024. The terms of the manufacture by Cardinal and purchase by the Company of such glass components as to purchase orders, forecasts of purchases, pricing, invoicing, delivery and payment terms and other terms, are all as described in the SA.

The Company has determined that, although the APA and SA are separate agreements, they were negotiated contemporaneously. Therefore, the Company has concluded that the $28 million of proceeds under the APA should be bifurcated between the sale of the door glass manufacturing assets, and payment for the Company’s commitment to buy glass components for PGT-branded doors from Cardinal under the SA, and that such bifurcation is predicated on the fair value of the door glass manufacturing assets being sold on or about the date of sale. The Company has engaged an independent machinery and equipment valuation specialist to provide a fair market value appraisal of the assets sold to Cardinal, which is currently in process. Accordingly, as the fair market value appraisal is not yet finalized, and there had been no exchanges of assets or cash under the APA as of September 30, 2017, and no purchases or sales of glass components for PGT-branded doors under the SA as of September 30, 2017, no amounts relating to either the APA or SA have been recognized in the accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017.

WinDoor Acquisition

On February 16, 2016 (“closing date”), we completed the acquisition of WinDoor, which became a wholly-owned subsidiary of PGT Industries, Inc. The fair value of consideration transferred in the acquisition was $102.6 million, including the then estimated fair value of contingent consideration of $3.0 million, which has been allocated to the net assets acquired and liabilities assumed as of the acquisition date, in accordance with ASC 805, “Business Combinations”. The cash portion of the acquisition was financed with borrowings under the 2016 Credit Agreement, and with $43.5 million of cash on hand.

The estimated fair value of assets acquired and liabilities assumed as of the closing date, were as follows (in thousands):

	Final Allocation
Accounts and notes receivable	$	3,882
Inventories		6,778
Prepaid expenses		246
Property and equipment		5,029
Intangible assets		47,100
Goodwill		41,856
Accounts payable and accrued liabilities		(2,320	)
Purchase price	$	102,571
Consideration:
Cash	$	99,571
Earn-out contingency		3,000
Total fair value of consideration	$	102,571

The fair value of working capital related items, such as accounts receivable, inventories, prepaids, and accounts payable and accrued liabilities, approximated their book values at the date of acquisition. Valuations of the intangible assets (See Note 7) were valued using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs.

Acquisition costs totaling $0.9 million are included in selling, general, and administrative expenses on the condensed consolidated statement of comprehensive income for the nine months ended October 1, 2016, and relate to legal expenses, representations and warranties insurance, diligence, and accounting services.

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, was determined to be $41.9 million, of which $38.9 million is expected to be deductible for tax purposes. Goodwill represents the increased value of the combined entity through additional sales channel opportunities as well as operational efficiencies.

The stock purchase agreement for the acquisition of WinDoor (“SPA”) provided for the potential for an earn-out contingency payment to sellers had WinDoor achieved a certain level of sales in the calendar year ended December 31, 2016. The potential undiscounted amount of all future payments that could be required to be paid under the contingent earn-out consideration arrangement was between $0 and $3.0 million. We had recorded an earn-out contingency liability of $3.0 million on the closing date, which represented its then estimated fair value using undiscounted cash flows, based on probability adjusted level of revenues with a range whose minimum was $51.0 million. Based on revised estimates using actual sales through the end of the 2016 third quarter, we concluded the probability was remote that WinDoor’s actual sales for 2016 would reach the $46.0 million minimum level required for the minimum payment of $2.7 million possible under the earn-out contingency arrangement and, therefore, determined that the entire initial estimated fair value of $3.0 million should be reversed. For tax purposes, contingent consideration does not become part of tax goodwill until paid. As such, the amount of goodwill deductible for tax purposes is $3.0 million less than the amount recorded for book purposes.

The SPA had a post-closing working capital calculation whereby we were required to prepare, and deliver to the sellers, a final statement of purchase price, including our calculation of the amount we find net working capital actually to have been as of the closing date. During the third quarter of 2016, the Company and the sellers reached agreement on the calculation of net working capital, which resulted in a payment of $0.7 million to the Company from sellers, resulting in a decrease in the purchase price which we recorded as a reduction in goodwill.

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include WinDoor’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of WinDoor adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the 2016 Credit Agreement entered into in connection with the acquisition. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.

	Nine Months Ended
	October 1, 2016
(in thousands, except per share amounts)
Pro Forma Results
Net sales	$	351,507
Net income	$	18,280
Net income per common share:
Basic	$	0.37
Diluted	$	0.36

US Impact Systems, Inc. Acquisition

On August 31, 2016, CGIC, a wholly-owned subsidiary of CGI, which is wholly-owned by PGT Industries, Inc., which, in turn, is wholly-owned by the Company, entered into an asset purchase agreement with US Impact Systems, Inc. (USI) and its stockholders whereby CGIC purchased the operations and certain assets of, and assumed certain liabilities of USI. USI was an established fabricator of storefront window and door products. The fair value of the consideration transferred in the acquisition was $1.9 million, which was allocated to current and other assets totaling $1.8 million and amortizable intangible assets totaling $0.6 million, and goodwill of $0.6 million, less the assumption of accounts payable and accrued liabilities with estimated fair values totaling $1.2 million, in accordance with ASC 805, “Business Combinations”. This transaction did not have a significant impact on our financial position or operating results for 2016.

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Goodwill, Trade Names, and Other Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Trade Names, and Other Intangible Assets

NOTE 7. GOODWILL, TRADE NAMES, AND OTHER INTANGIBLE ASSETS

Goodwill, trade names, and other intangible assets, net, are as follows:

							Initial
	September 30,			December 31,			Useful Life
	2017			2016			(in years)
	(in thousands)
Goodwill	$	108,060		$	108,060			indefinite
Trade names and other intangible assets:
Trade names	$	75,841		$	75,841			indefinite
Customer relationships		106,647			106,647			3-10
Developed technology		3,000			3,000			9-10
Non-compete agreement		1,668			1,668			2-5
Software license		590			—			2
Less: Accumulated amortization		(71,044	)		(66,226	)
Subtotal		40,861			45,089
Other intangible assets, net	$	116,702		$	120,930

Software License

In July 2017, we purchased an enterprise-wide software license relating to office productivity software. We estimated the then fair value of this software license to be $590 thousand, our purchase price. The software license is being amortized on a straight-line basis over its estimated useful life, which we have determined to be two years.

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Long-Term Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

NOTE 8. LONG-TERM DEBT

	September 30, 2017			December 31, 2016
	(in thousands)
Term loan payable under the 2016 Credit Agreement	$	243,975		$	263,975
Other debt		529			—
Fees, costs and original issue discount		(13,037	)		(16,102	)
Long-term debt		231,467			247,873
Less current portion of long-term debt		(290	)		—
Long-term debt, less current portion	$	231,177		$	247,873

2016 Credit Agreement

On February 16, 2016, we entered into a Credit Agreement (“2016 Credit Agreement”), among us, the lending institutions identified in the 2016 Credit Agreement, and Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent. The 2016 Credit Agreement establishes senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility maturing in six years that will amortize on a basis of 1% annually during the six-year term, and a $40.0 million revolving credit facility maturing in five years that includes a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement are secured by substantially all of our assets as well as our direct and indirect subsidiaries’ assets. As of September 30, 2017, there were $0.2 million of letters of credit outstanding and $39.8 million available on the revolver.

Interest on all loans under the 2016 Credit Agreement is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Prior to amending the 2016 Credit Agreement on February 17, 2017, as described below, borrowings under the term loans and the revolving credit facility accrued interest at a rate equal to, at our option, LIBOR (with a floor of 100 basis points in respect of the term loan), or a base rate (with a floor of 200 basis points in respect of the term loan) plus an applicable margin. The applicable margin was 575 basis points in the case of LIBOR and 475 basis points in the case of the base rate. We will pay quarterly fees on the unused portion of the revolving credit facility equal to 50 basis points per annum as well as a quarterly letter of credit fee at 575 basis points per annum plus a 12.5 basis point facing fee per annum on the face amount of any outstanding letters of credit. The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit agreement was 6.02% as of September 30, 2017, and was 5.75% at December 31, 2016.

On February 17, 2017, we entered into an amendment of our 2016 Credit Agreement (“First Amendment”). The First Amendment, among other things, (a) decreases the applicable interest rate margins for the Initial Term Loans (as defined in the Credit Agreement) from (i) 4.75% to 3.75%, in the case of the Base Rate Loans (as defined in the Credit Agreement), and (ii) 5.75% to 4.75%, in the case of the Eurodollar Loans (as defined in the Credit Agreement), and (b) adds a soft call premium equal to 1.0% of the principal repaid or repriced if the Initial Term Loans are voluntarily refinanced or repriced pursuant to certain refinancing transactions within twelve months of the effective date of the First Amendment.

The 2016 Credit Agreement contains a springing financial covenant, if we draw in excess of twenty percent (20%) of the revolving facility, which requires us to maintain a maximum total net leverage ratio (based on the ratio of total debt for borrowed money to trailing EBITDA, each as defined in the 2016 Credit Agreement), and will be tested quarterly based on the last four fiscal quarters and is set at levels as described in the 2016 Credit Agreement. As of September 30, 2017, no such test is required as we have not exceeded 20% of our revolving capacity. We believe that our total net leverage ratio during the third quarter of 2017 was in compliance with the 2016 Credit Agreement, and that we are in compliance with all covenants.

The 2016 Credit Agreement also contains a number of affirmative and restrictive covenants, including limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt and transactions with affiliates. The 2016 Credit Agreement also contains customary events of default. Upon the occurrence of an event of default, the amounts outstanding under the 2016 Credit Agreement may be accelerated and may become immediately due and payable. As of September 30, 2017, we were in compliance with all affirmative and restrictive covenants.

In connection with entering into the 2016 Credit Agreement, on February 16, 2016, we terminated our prior credit agreement, dated as of September 22, 2014, among PGT Industries, Inc., as the borrower, the Company, as guarantor, the lenders from time to time party thereto and Deutsche Bank, as administrative agent and collateral agent (“2014 Credit Agreement”). Along with cash on hand, proceeds from the term loan facility under the 2016 Credit Agreement were used to repay amounts outstanding under the 2014 Credit Agreement, acquire WinDoor, and pay certain fees and expenses.

As of September 30, 2017, the face value of debt outstanding under the 2016 Credit Agreement was $244.0 million, and accrued interest was $0.4 million. During the third quarter of 2017, we made voluntary prepayments of outstanding borrowings under the term-loan portion of the 2016 Credit Agreement totaling $20.0 million, composed of a payment of $8.0 million made on September 29, 2017, and of $12.0 million made on July 7, 2017.

Other Debt

In July 2017, we entered into a two-year financing arrangement for the purchase of an enterprise-wide software license relating to office productivity software. This financing arrangement requires 24 monthly payments of $26 thousand each. We estimated the value of this financing arrangement to be $590 thousand, using an imputed annual interest rate of 6.00%, which approximates our borrowing rate under the 2016 Credit Agreement, a Level 3 input. At September 30, 2017, there was $529 thousand outstanding under this financing arrangement.

The activity relating to third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are as follows. As a result of the voluntary prepayments of debt discussed above, we accelerated the amortization of lenders fees and discount relating to the term-loan portion of the 2016 Credit Agreement of $1.0 million, which is included in interest expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017. All debt-related fees, costs and original issue discount are classified as a reduction of the carrying value of long-term debt:

(in thousands)	Total
At beginning of year	$	16,102
Amortization expense through February 17, 2017		(359	)
At time of repricing		15,743
Less: Amortization expense after repricing		(1,726	)
Less: Accelerated amortization relating to debt prepayments		(980	)
At end of period	$	13,037

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September 30, 2017, is as follows:

(in thousands)	Total
Remainder of 2017	$	670
2018		2,785
2019		2,966
2020		3,224
2021		3,011
2022		381
Total	$	13,037

As a result of the voluntary prepayments totaling $20.0 million we made during the third quarter of 2017, we have no future scheduled repayments under the 2016 Credit Agreement until the maturity of the facility on February 21, 2022. The contractual future maturities of long-term debt outstanding, including the financing arrangement described as other debt, as of September 30, 2017, are as follows (at face value):

	(in thousands)
Remainder of 2017	$	71
2018		295
2019		163
2020		—
2021		—
2022		243,975
Total	$	244,504

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 9. 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.

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Income Taxes

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10. INCOME TAXES

Income tax expense was $3.0 million for the three months ended September 30, 2017, compared with $5.3 million for the three months ended October 1, 2016. Our effective tax rate for the three months ended September 30, 2017, was 32.2%, and was 32.8% for the three months ended October 1, 2016. Income tax expense was $9.1 million for the nine months ended September 30, 2017, compared with $10.3 million for the nine months ended October 1, 2016. Our effective tax rate for the nine months ended September 30, 2017, was 31.8%, and was 34.5% for the nine months ended October 1, 2016.

Income tax expense in the three and nine months ended September 30, 2017, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards treated as a discrete item of income tax upon our adoption of ASU 2016-09 effective on January 1, 2017, totaling $347 thousand and $1.1 million, respectively. Excluding this discrete item of income tax expense, the effective tax rates for the three and nine months ended September 30, 2017, would have been 36.0% and 35.8%, respectively.

The effective tax rates in all periods, excluding the effect of the discrete item discussed above in the 2017 periods, were lower than our combined statutory federal and state tax rate of 38.8% primarily as the result of the estimated impact of the section 199 domestic manufacturing deduction, partially offset by the 50% deductibility-disallowance of meals and entertainment expenses.

At September 30, 2017, an accrued federal income tax payable of $6.6 million was classified within accrued liabilities in the accompanying condensed consolidated balance sheet. At December 31, 2016, a federal income tax receivable of $2.6 million was classified within other current assets in the accompanying condensed consolidated balance sheet. During the three or nine months ended September 30, 2017, we did not make a payment of estimated federal income taxes, nor did we receive any refunds of federal income taxes. Pursuant to tax relief from the Internal Revenue Service relating to taxpayers in certain designated areas of Florida impacted by Hurricane Irma, which includes all counties in Florida in which we operate, the deadline for remitting our required 2017 third quarter estimated payment for corporate income taxes, as well as the deadline for filing our 2016 fiscal year corporate income tax return, has been extended to January 31, 2018.

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Fair Value

9 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value

NOTE 11. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A three-tier fair value hierarchy is used to prioritize the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The accounting guidance concerning fair value allows us to elect to measure financial instruments at fair value and report the changes in fair value through earnings. This election can only be made at certain specified dates and is irrevocable once made. We do not have a policy regarding specific assets or liabilities to elect to measure at fair value, but rather we make the election on an instrument-by-instrument basis as they are acquired or incurred.

During the three months ended September 30, 2017, or October 1, 2016, we did not make any transfers between Level 2 and Level 3 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

Fair Value of Financial Instruments

Our financial instruments include cash, accounts and notes receivable, and accounts payable, and accrued liabilities whose carrying amounts approximate their fair values due to their short-term nature. Our financial instruments also include long-term debt. The fair value of our long-term debt is based on debt with similar terms and characteristics and was approximately $248.5 million as of September 30, 2017, compared to a principal outstanding value of $244.0 million, and $264.6 million as of December 31, 2016, compared to a principal outstanding value of $264.0 million. Fair values were determined based on observed trading prices of our debt between domestic financial institutions.

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation, Improvements to Employee Share-Based payment Accounting (Topic 718)”. This update is intended to provide simplification of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We adopted this update effective for our fiscal year beginning January 1, 2017. Impacts of the adoption of ASU 2016-09 are as follows:

• ASU 2016-09 requires employers to make a policy election as to whether they will continue to use previous generally accepted accounting principles, which required employers to recognize stock-based compensation expense on grants of equity awards net of an estimate of the amount that will be forfeited, or to recognize forfeitures on an actual basis in the period they occur. We have elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur, adopted on a modified-retrospective basis. This resulted in an adjustment to increase accumulated deficit for previously unrecognized stock compensation expense of approximately $0.1 million as of December 31, 2016, net of tax effect, with an offsetting increase in additional paid-in capital of approximately $0.2 million.

• ASU 2016-09 requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as a financing activity. The Company withholds shares of its common stock from employees to satisfy the employee’s tax withholding obligations in connection with the exercise of stock options and lapse of restrictions on stock awards, which are then immediately retired. We previously included these cash flows in financing activities, therefore, there was no impact upon adoption.

• ASU 2016-09 requires that excess tax benefits resulting from the exercise of stock options and lapse of restriction on stock awards be recognized as a discrete item in tax expense, where previously such tax effects had been recognized in additional paid-in-capital. See Note 10 for a discussion of the impacts of the adoption of ASU 2016-09 on the Company’s income tax expense for the three and nine months ended September 30, 2017.

• ASU 2016-09 requires previously unrecognized excess tax benefits to be recognized on a modified-retrospective basis, which results from taking a deduction for tax benefits relating to stock-based compensation that does not result in a reduction in taxes payable. Upon adoption, we recorded an adjustment to decrease the accumulated deficit for excess tax benefits that had not yet been recognized of approximately $0.3 million as of December 31, 2016, with an offsetting reduction in our net deferred tax liability resulting from the recognition of previously unrecorded deferred tax assets for tax credits in the state of Florida.

• ASU 2016-09 requires excess tax benefits to be presented as an operating activity on the statement of cash flows, either prospectively or on a full-retrospective basis, rather than as previously required as a financing activity. We have elected to present excess tax benefits in the operating section of the statement of cash flows on a prospective basis.

The effects on the Company’s consolidated balance sheet as of December 31, 2016, relating to the adoption of ASU 2016-09 is as follows (in thousands):

	Previously Reported			After Adoption
Deferred income taxes	$	32,171		$	31,838
Total liabilities	$	304,129		$	303,796
Additional paid-in-capital	$	249,469		$	249,647
Accumulated deficit	$	(104,710	)	$	(104,555	)
Shareholders’ equity	$	145,278		$	145,611
Total shareholders’ equity	$	132,519		$	132,852

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This guidance changed the subsequent measurement of inventory, excluding inventory accounted for under LIFO or the retail inventory method, to be at lower of cost and net realizable value. Topic 330, Inventory, previously required an entity to measure inventory at the lower of cost or market. Market could have been replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Under this ASU, an entity measures inventory within its scope at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 was effective for us as of January 1, 2017. We prospectively adopted ASU 2015-11 effective on January 1, 2017. The adoption of ASU 2015-11 had no impact on our financial statements.

Recently Issued Accounting Pronouncements

In addition to the pronouncements issued during 2017, ASU 2016-02, “Leases (Topic 842), and ASU 2014-09, “Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form 10-K for the year ended December 31, 2016.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments under ASU 2017-12 refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 becomes effective for us in the first quarter of 2019. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, “Other Income—Gain and Losses from the Derecognition of Nonfinancial Assets.” ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU 2014-09, provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. This update is effective at the same time as the amendments in ASU 2014-09, therefore, for our fiscal year beginning after December 15, 2017, and may be applied either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) – Clarifying the Definition of a Business.” ASU 2017-01 affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We will apply the provisions of this guidance once it becomes effective.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

Approaching Adoption of ASU 2014-09, “Revenue from Contracts with Customers”

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. The FASB also issued ASU 2015-14, “Deferral of Effective Date”. ASU 2015-14 deferred the effective date for the new guidance until the annual reporting period beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted, but not before the original effective date (periods beginning after December 15, 2016). The standard permits the use of either the full-retrospective (restating all years presented in the Company’s financial statements), or modified-retrospective (recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU 2016-10, “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies identification of a performance obligation and addresses revenue recognition associated with the licensing of intellectual property, ASU 2016-12, “Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients”, which clarifies assessment of collectability criterion, non-cash consideration and other technical corrections, and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.

The Company completed its preliminary assessment of the impact of its upcoming adoption of ASU 2014-09 on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU 2014-09, to one based on the transfer of control of the product to the customer. Under ASU 2014-09, revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is not required in order for transfer of control of the product to the customer to have occurred.

ASU 2014-09 states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that, of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed to-date. ASU 2014-09 further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

The Company is a manufacturer of fully-customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The Company’s initial assessment is that its goods have no alternative use, as that term is defined in ASU 2014-09, and that control of the product passes to the customer no later than completion of the manufacturing of each or all of the products in an order, but before delivery of the products to the customer. Additionally, the Company has an enforceable right to payment at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its customers.

Based on this initial assessment, the Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion of the manufacturing process, from its current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products have no alternative use and the recognition of revenue should begin. However, because revenue will have been recognized on at least all products for which manufacturing has been completed, the Company believes that upon adoption of ASU 2014-09, inventories on its consolidated balance sheets will no longer include finished goods. The Company also believes that it will recognize revenue at an earlier point than prior to the adoption of ASU 2014-09, but that such effect may not materially affect its consolidated statements of operations post-adoption due to the fact that such effects will exist at both the beginning and end of fiscal periods after the initial transition.

ASU 2014-09 also requires entities, primarily in the manufacturing segment, to make policy elections relating to shipping and handling charges. Entities may elect to treat shipping and handling as a separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat shipping and handling as a fulfillment activity, which will require shipping and handling costs for undelivered products to be accrued in order to match this cost with the revenue previously recognized over time. The Company currently recognizes shipping and handling costs as a fulfillment activity, and has preliminarily determined to continue to treat such costs as a fulfillment activity.

The Company expects to continue to evaluate the impact of the adoption of ASU 2014-09 on its consolidated financial statements, and will provide updates and additional information as the effective date of adoption approaches.

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Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Effects on Consolidated Balance Sheet Relating to Adoption of ASU 2016-09

The effects on the Company’s consolidated balance sheet as of December 31, 2016, relating to the adoption of ASU 2016-09 is as follows (in thousands):

	Previously Reported			After Adoption
Deferred income taxes	$	32,171		$	31,838
Total liabilities	$	304,129		$	303,796
Additional paid-in-capital	$	249,469		$	249,647
Accumulated deficit	$	(104,710	)	$	(104,555	)
Shareholders’ equity	$	145,278		$	145,611
Total shareholders’ equity	$	132,519		$	132,852

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Warranty (Tables)

9 Months Ended

Sep. 30, 2017

Guarantees and Product Warranties [Abstract]

Summary of Current Period Charges, Adjustments to Previous Estimates, Settlements representing Actual Costs Incurred with regard to Accrued Warranty

The following table summarizes: current period charges, adjustments to previous estimates, if necessary, as well as settlements, which represent actual costs incurred during the period for the three and nine months ended September 30, 2017, and October 1, 2016. The reserve is determined through specific identification and assessing Company history. Expected future obligations are discounted to a current value using a risk-free rate for obligations with similar maturities.

	Beginning				Charged								End of
Accrued Warranty	of Period		Acquired		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended September 30, 2017	$	5,679	$	—	$	2,593	$	46		$	(2,412	)	$	5,906
Three months ended October 1, 2016	$	5,103	$	10	$	2,875	$	(19	)	$	(2,493	)	$	5,476
Nine months ended September 30, 2017	$	5,569	$	—	$	8,681	$	(18	)	$	(8,326	)	$	5,906
Nine months ended October 1, 2016	$	4,237	$	274	$	8,111	$	751		$	(7,897	)	$	5,476

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Inventories (Tables)

9 Months Ended

Sep. 30, 2017

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following:

	September 30, 2017		December 31, 2016
	(in thousands)
Raw materials	$	29,591	$	24,946
Work-in-progress		3,543		2,521
Finished goods		5,997		3,044
	$	39,131	$	30,511

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Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Per Share [Abstract]

Calculation of EPS and Reconciliation of Weighted Average Common Shares Used in Calculation of Basic and Diluted EPS

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				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
	2017		2016		2017		2016
	(in thousands, except per share amounts)
Net income	$	6,292	$	10,796	$	19,546	$	19,625
Weighted-average common shares—Basic		49,629		48,941		49,455		48,782
Add: Dilutive effect of stock compensation plans		2,180		1,731		2,215		1,746
Weighted-average common shares—Diluted		51,809		50,672		51,670		50,528
Net income per common share:
Basic	$	0.13	$	0.22	$	0.40	$	0.40
Diluted	$	0.12	$	0.21	$	0.38	$	0.39

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Sale of Assets and Acquisitions (Tables) - WinDoor [Member]

9 Months Ended

Sep. 30, 2017

Schedule of Fair Value of Assets and Liabilities Assumed

The estimated fair value of assets acquired and liabilities assumed as of the closing date, were as follows (in thousands):

	Final Allocation
Accounts and notes receivable	$	3,882
Inventories		6,778
Prepaid expenses		246
Property and equipment		5,029
Intangible assets		47,100
Goodwill		41,856
Accounts payable and accrued liabilities		(2,320	)
Purchase price	$	102,571
Consideration:
Cash	$	99,571
Earn-out contingency		3,000
Total fair value of consideration	$	102,571

Summary of Unaudited Pro Forma Results

The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.

	Nine Months Ended
	October 1, 2016
(in thousands, except per share amounts)
Pro Forma Results
Net sales	$	351,507
Net income	$	18,280
Net income per common share:
Basic	$	0.37
Diluted	$	0.36

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Goodwill, Trade Names, and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill, Trade Names and Other Intangible Assets Net

Goodwill, trade names, and other intangible assets, net, are as follows:

							Initial
	September 30,			December 31,			Useful Life
	2017			2016			(in years)
	(in thousands)
Goodwill	$	108,060		$	108,060			indefinite
Trade names and other intangible assets:
Trade names	$	75,841		$	75,841			indefinite
Customer relationships		106,647			106,647			3-10
Developed technology		3,000			3,000			9-10
Non-compete agreement		1,668			1,668			2-5
Software license		590			—			2
Less: Accumulated amortization		(71,044	)		(66,226	)
Subtotal		40,861			45,089
Other intangible assets, net	$	116,702		$	120,930

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Debt

	September 30, 2017			December 31, 2016
	(in thousands)
Term loan payable under the 2016 Credit Agreement	$	243,975		$	263,975
Other debt		529			—
Fees, costs and original issue discount		(13,037	)		(16,102	)
Long-term debt		231,467			247,873
Less current portion of long-term debt		(290	)		—
Long-term debt, less current portion	$	231,177		$	247,873

Activity Relating to Third-Party Fees and Costs, Lender Fees and Discount

The activity relating to third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are as follows. All debt-related fees, costs and original issue discount are classified as a reduction of the carrying value of long-term debt:

(in thousands)	Total
At beginning of year	$	16,102
Amortization expense through February 17, 2017		(359	)
At time of repricing		15,743
Less: Amortization expense after repricing		(1,726	)
Less: Accelerated amortization relating to debt prepayments		(980	)
At end of period	$	13,037

Estimated Amortization Expense Relating to Third-Party Fees and Costs, Lender Fees and Discount and Debt Issuance Costs

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September 30, 2017, is as follows:

(in thousands)	Total
Remainder of 2017	$	670
2018		2,785
2019		2,966
2020		3,224
2021		3,011
2022		381
Total	$	13,037

Contractual Future Maturities of Long-term Debt Outstanding, Including the Financing Arrangement Described as Other Debt

The contractual future maturities of long-term debt outstanding, including the financing arrangement described as other debt, as of September 30, 2017, are as follows (at face value):

	(in thousands)
Remainder of 2017	$	71
2018		295
2019		163
2020		—
2021		—
2022		243,975
Total	$	244,504

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Basis of Presentation - Additional Information (Detail) - ASU 2016-09 [Member] $ in Millions	Dec. 31, 2016 USD ($)
Accumulated Deficit [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of ASU 2016-09 stock compensation	$ (0.1)
Excess tax benefits that had not yet been recognized	0.3
Additional Paid-in Capital [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative effect of ASU 2016-09 stock compensation	$ 0.2

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Basis of Presentation - Summary of Effects on Consolidated Balance Sheet Relating to Adoption of ASU 2016-09 (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred income taxes	$ 31,838	$ 31,838
Total liabilities	305,109	303,796
Additional paid-in-capital	251,733	249,647
Accumulated deficit	(85,009)	(104,555)
Shareholders' equity	167,248	145,611
Total shareholders' equity	$ 154,489	132,852
Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Deferred income taxes		32,171
Total liabilities		304,129
Additional paid-in-capital		249,469
Accumulated deficit		(104,710)
Shareholders' equity		145,278
Total shareholders' equity		$ 132,519

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Warranty - Additional Information (Detail)	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Jul. 01, 2017	Oct. 01, 2016	Sep. 30, 2017
Product Warranty Liability [Line Items]
Warranty expense, average rate	2.04%	2.22%	2.21%
Minimum [Member]
Product Warranty Liability [Line Items]
Warranty periods				1 year
Warranty period of the majority of products sold				1 year
Maximum [Member]
Product Warranty Liability [Line Items]
Warranty periods				10 years
Warranty period of the majority of products sold				3 years

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Warranty - Summary of Current Period Charges, Adjustments to Previous Estimates, Settlements representing Actual Costs Incurred with regard to Accrued Warranty (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Guarantees and Product Warranties [Abstract]
Accrued Warranty, Beginning of Period	$ 5,679	$ 5,103	$ 5,569	$ 4,237
Accrued Warranty, Acquired		10		274
Accrued Warranty, Charged to Expense	2,593	2,875	8,681	8,111
Accrued Warranty, Adjustments	46	(19)	(18)	751
Accrued Warranty, Settlements	(2,412)	(2,493)	(8,326)	(7,897)
Accrued Warranty, End of Period	$ 5,906	$ 5,476	$ 5,906	$ 5,476

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Inventories - Inventories (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 29,591	$ 24,946
Work-in-progress	3,543	2,521
Finished goods	5,997	3,044
Inventories	$ 39,131	$ 30,511

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Stock Based-Compensation - Additional Information (Detail) $ / shares in Units, $ in Thousands			3 Months Ended		9 Months Ended
	May 19, 2017 Members $ / shares shares	Mar. 04, 2017 $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Oct. 01, 2016 USD ($)	Sep. 30, 2017 USD ($) $ / shares shares	Oct. 01, 2016 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock options exercised			90,159		341,069
Weighted average exercise price of options exercised | $ / shares			$ 1.99		$ 2.00
Compensation expense for stock based awards | $			$ 500	$ 400	$ 1,568	$ 1,552
Total unrecognized compensation cost related primarily to restricted share awards | $			$ 2,400	$ 1,900	$ 2,400	$ 1,900
Weighted average remaining period of stock option					1 year 6 months
Restricted Stock Award [Member] | Executives and Non-Executive Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards	34,699	251,474
Fair value of common stock | $ / shares	$ 11.60	$ 10.20
Number of non-management members of board of directors | Members	7
Company Performance Criteria [Member] | Executives and Non-Executive Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards		125,737
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance criteria defined in share awards					The performance percentages, ranging from less than 80% to greater than 120%, provide for the awarding of shares ranging from no shares to 150% of the original amount of shares.
Fixed Criteria [Member] | Executives and Non-Executive Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards		125,737
Options vesting period		3 years

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Net Income Per Common Share - Additional Information (Detail) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Options and Restricted Stock Awards [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities	0	20	20	20
ASU 2016-09 [Member]
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities	724	826	724	827
Excess tax benefits on exercise of stock options	$ 347		$ 1,100

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Net Income Per Common Share - Calculation of EPS and Reconciliation of Weighted Average Common Shares Used in Calculation of Basic and Diluted EPS (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016
Earnings Per Share [Abstract]
Net income	$ 6,292	$ 10,796	$ 19,546	$ 19,625
Weighted-average common shares-Basic	49,629	48,941	49,455	48,782
Add: Dilutive effect of stock compensation plans	2,180	1,731	2,215	1,746
Weighted-average common shares-Diluted	51,809	50,672	51,670	50,528
Net income per common share:
Basic	$ 0.13	$ 0.22	$ 0.40	$ 0.40
Diluted	$ 0.12	$ 0.21	$ 0.38	$ 0.39

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Sale of Assets and Acquisitions - Additional Information (Detail) - USD ($)							3 Months Ended		9 Months Ended
	Mar. 01, 2018	Jan. 15, 2018	Nov. 01, 2017	Sep. 22, 2017	Aug. 31, 2016	Feb. 16, 2016	Oct. 01, 2016	Apr. 02, 2016	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016
Business Acquisition [Line Items]
Proceeds from sale of manufacturing equipment									$ 59,000	$ 6,000
Estimated fair value of contingent consideration										3,000,000
Goodwill									108,060,000		$ 108,060,000
Cardinal [Member] | Asset Purchase Agreement [Member] | Manufacturing Equipment [Member]
Business Acquisition [Line Items]
Proceeds from sale of manufacturing equipment				$ 28,000,000
Asset supply agreement term				7 years
Net book value of assets									$ 5,600,000
Cardinal [Member] | Asset Purchase Agreement [Member] | Manufacturing Equipment [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Proceeds from sale of manufacturing equipment			$ 3,000,000
Cardinal [Member] | Asset Purchase Agreement [Member] | Manufacturing Equipment [Member] | Scenario, Forecast [Member]
Business Acquisition [Line Items]
Proceeds from sale of manufacturing equipment	$ 15,000,000	$ 10,000,000
WinDoor [Member]
Business Acquisition [Line Items]
Fair value of consideration						$ 102,571,000
Cash payment to acquire business						99,571,000
Estimated fair value of contingent consideration						3,000,000
Business combination, acquisition related costs										900,000
Goodwill						41,856,000	$ 41,856,000			41,856,000
Goodwill deductible for tax purposes							38,900,000			38,900,000
Earn-out contingency liability, basis for amount									The potential undiscounted amount of all future payments that could be required to be paid under the contingent earn-out consideration arrangement was between $0 and $3.0 million. We had recorded an earn-out contingency liability of $3.0 million on the closing date, which represented its then estimated fair value using undiscounted cash flows, based on probability adjusted level of revenues with a range whose minimum was $51.0 million.
Fair value of contingent consideration, undiscounted low range of estimates									$ 0
Fair value of contingent consideration, undiscounted high range of estimates									3,000,000
Earn-out contingency liability								$ 3,000,000
Adjustment to Goodwill deductible for tax purposes										$ 3,000,000
Decrease in the purchase price							$ 700,000
WinDoor [Member] | Cash On Hand [Member]
Business Acquisition [Line Items]
Cash payment to acquire business						$ 43,500,000
WinDoor [Member] | Minimum [Member]
Business Acquisition [Line Items]
Sales revenue achievement level for recording earn out contingency payment								$ 51,000,000	46,000,000
Amount of earn out contingency payment on sales revenue goods net									$ 2,700,000
US Impact Systems Inc. [Member]
Business Acquisition [Line Items]
Fair value of consideration					$ 1,900,000
Goodwill					600,000
Current and other assets					1,800,000
Intangible assets					600,000
Accounts payable and accrued liabilities					$ 1,200,000

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Sale of Assets and Acquisitions - Schedule of Fair Value of Assets and Liabilities Assumed (Detail) - USD ($) $ in Thousands		9 Months Ended
	Feb. 16, 2016	Oct. 01, 2016	Sep. 30, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
Goodwill			$ 108,060	$ 108,060
Earn-out contingency		$ 3,000
WinDoor [Member]
Business Acquisition [Line Items]
Accounts and notes receivable	$ 3,882
Inventories	6,778
Prepaid expenses	246
Property and equipment	5,029
Intangible assets	47,100
Goodwill	41,856	$ 41,856
Accounts payable and accrued liabilities	(2,320)
Purchase price	102,571
Cash	99,571
Earn-out contingency	3,000
Total fair value of consideration	$ 102,571

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Sale of Assets and Acquisitions - Summary of Unaudited Pro forma Results (Detail) - WinDoor [Member] $ / shares in Units, $ in Thousands	9 Months Ended
	Oct. 01, 2016 USD ($) $ / shares
Business Acquisition [Line Items]
Net sales | $	$ 351,507
Net income | $	$ 18,280
Net income per common share:
Basic | $ / shares	$ 0.37
Diluted | $ / shares	$ 0.36

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Goodwill, Trade Names, and Other Intangible Assets - Schedule of Trade Names and Other Intangible Assets Net (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Indefinite-lived Intangible Assets [Line Items]
Goodwill	$ 108,060	$ 108,060
Less: Accumulated amortization	(71,044)	(66,226)
Subtotal	40,861	45,089
Other intangible assets, net	116,702	120,930
Customer Relationships [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 106,647	106,647
Customer Relationships [Member] | Minimum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	3 years
Customer Relationships [Member] | Maximum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	10 years
Developed Technology [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 3,000	3,000
Developed Technology [Member] | Minimum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	9 years
Developed Technology [Member] | Maximum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	10 years
Noncompete Agreements [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 1,668	1,668
Noncompete Agreements [Member] | Minimum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	2 years
Noncompete Agreements [Member] | Maximum [Member]
Indefinite-lived Intangible Assets [Line Items]
Initial Useful Life (in years)	5 years
Trade Names [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 75,841	$ 75,841
Software License [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 590
Initial Useful Life (in years)	2 years

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Goodwill, Trade Names, and Other Intangible Assets - Additional Information (Detail) - WinDoor [Member] - Software License [Member] $ in Thousands	1 Months Ended
	Jul. 31, 2017 USD ($)
Indefinite-lived Intangible Assets [Line Items]
Payments for software	$ 590
Intangible assets amortization period	2 years

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Long Term Debt - Schedule of Long-term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Jul. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long term debt	$ 244,504		$ 264,000
Fees, costs and original issue discount	(13,037)		(16,102)
Long-term debt	231,467		247,873
Less current portion of long-term debt	(290)
Long-term debt, less current portion	231,177		247,873
Term Notes Payable [Member]
Debt Instrument [Line Items]
Long term debt	244,000
Term Notes Payable [Member] | 2016 Credit Agreement [Member]
Debt Instrument [Line Items]
Long term debt	243,975		$ 263,975
Financing Arrangement [Member]
Debt Instrument [Line Items]
Long term debt	$ 529	$ 590

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Long-Term Debt - Additional Information (Detail)					1 Months Ended		3 Months Ended	9 Months Ended
	Sep. 29, 2017 USD ($)	Jul. 07, 2017 USD ($)	Feb. 17, 2017	Feb. 16, 2016 USD ($)	Jul. 31, 2017 USD ($) Installment	Feb. 17, 2017	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Line of Credit Facility [Line Items]
Letters of credit outstanding							$ 200,000	$ 200,000
Minimum percentage of revolving credit facility as per financial covenant								20.00%
Long term debt							244,504,000	$ 244,504,000	$ 264,000,000
Term Notes Payable [Member]
Line of Credit Facility [Line Items]
Long term debt							244,000,000	244,000,000
Financing Arrangement [Member]
Line of Credit Facility [Line Items]
Long term debt					$ 590,000		529,000	$ 529,000
Debt Instrument, Interest Rate, Stated Percentage					6.00%
Debt Instrument, Number of installments | Installment					24
Debt Instrument, Installment Amount					$ 26,000
Base Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR						4.75%
LIBOR [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR						5.75%
2016 Credit Agreement [Member]
Line of Credit Facility [Line Items]
Interest rate terms								The First Amendment, among other things, (a) decreases the applicable interest rate margins for the Initial Term Loans (as defined in the Credit Agreement) from (i) 4.75% to 3.75%, in the case of the Base Rate Loans (as defined in the Credit Agreement), and (ii) 5.75% to 4.75%, in the case of the Eurodollar Loans (as defined in the Credit Agreement), and (b) adds a soft call premium equal to 1.0% of the principal repaid or repriced if the Initial Term Loans are voluntarily refinanced or repriced pursuant to certain refinancing transactions within [twelve months] of the effective date of the First Amendment.
Percentage soft call premium			1.00%
Credit agreement date								Feb. 16, 2016
Accrued interest								$ 400,000
Total prepayment							20,000,000
Voluntary prepayment of debt	$ 8,000,000	$ 12,000,000
Credit agreement Maturity date								Feb. 21, 2022
2016 Credit Agreement [Member] | Lenders Fees and Discount [Member]
Line of Credit Facility [Line Items]
Wrote-off lenders fees and discount relating to term-loan portion							1,000,000	$ 1,000,000
2016 Credit Agreement [Member] | Term Notes Payable [Member]
Line of Credit Facility [Line Items]
Long term debt							$ 243,975,000	$ 243,975,000	$ 263,975,000
2016 Credit Agreement [Member] | Base Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR			3.75%					4.75%
2016 Credit Agreement [Member] | Eurodollar [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR			4.75%					5.75%
2014 Credit Agreement [Member]
Line of Credit Facility [Line Items]
Credit agreement date								Sep. 22, 2014
Senior Secured Credit Facilities [Member]
Line of Credit Facility [Line Items]
Amount available under credit facility				$ 310,000,000
Term Loan Facility [Member]
Line of Credit Facility [Line Items]
Amount available under credit facility				$ 270,000,000
Maturity term of credit agreement				6 years
Credit facility amortization percentage				1.00%
weighted average interest rate							6.02%	6.02%	5.75%
Term Loan Facility [Member] | Base Rate [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR						2.00%
Term Loan Facility [Member] | LIBOR [Member]
Line of Credit Facility [Line Items]
Basis spread on LIBOR						1.00%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Amount available under credit facility				$ 40,000,000
Maturity term of credit agreement				5 years
Credit facility amortization percentage						0.50%
Credit available on revolver							$ 39,800,000	$ 39,800,000
Letter Of Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility amortization percentage						5.75%
Facing fee per annum						0.125%

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Long-Term Debt - Activity Relating to Third-Party Fees and Costs, Lender Fees and Discount (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Debt Disclosure [Abstract]
At beginning of year	$ 16,102
Amortization expense through February 17, 2017	(359)
At time of repricing	15,743
Less: Amortization expense after repricing	(1,726)
Less: Accelerated amortization relating to debt prepayments	(980)
At end of period	$ 13,037

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Long-Term Debt - Estimated Amortization Expense Relating to Third-Party Fees and Costs, Lender Fees and Discount (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Remainder of 2017	$ 670
2018	2,785
2019	2,966
2020	3,224
2021	3,011
2022	381
Total	$ 13,037	$ 15,743

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Long-Term Debt - Contractual Future Maturities of Long-term Debt Outstanding, Including the Financing Arrangement Described as Other Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Remainder of 2017	$ 71
2018	295
2019	163
2020	0
2021	0
2022	243,975
Total	$ 244,504	$ 264,000

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016
Income Taxes [Line Items]
Income tax expense	$ 2,992,000	$ 5,262,000	$ 9,117,000	$ 10,339,000
Effective tax rates	32.20%	32.80%	31.80%	34.50%
Income tax expense, discrete item	$ 347,000		$ 1,100,000
Effective tax rates, excluding discrete item of income tax expense	36.00%		35.80%
Effective income tax rate reconciliation, change in enacted tax rate, percent			38.80%
Effective income tax rate reconciliation, nondeductible expense, meals and entertainment, percent			50.00%
Payment of estimated federal income taxes	$ 0		$ 0
Refund of federal income taxes	0		0
Other Current Assets [Member]
Income Taxes [Line Items]
Federal income taxes receivable					$ 2,600,000
Other Current Liabilities [Member]
Income Taxes [Line Items]
Federal income taxes payable	$ 6,600,000		$ 6,600,000

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Fair Value - Additional Information (Detail) - USD ($)	3 Months Ended
	Sep. 30, 2017	Oct. 01, 2016	Dec. 31, 2016
Debt Instrument Fair Value Carrying Value [Abstract]
Fair value of assets, level 2 to level 3 transfers	$ 0	$ 0
Fair value of current long-term debt	248,500,000		$ 264,600,000
Principal outstanding value	$ 244,504,000		$ 264,000,000