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

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

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.

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files).

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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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 Section 13(a) of the Exchange Act.

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

Common Stock, $0.01 par value, outstanding was ~~59,627,698~~59,918,550 shares, as of ~~October 31, 2021.~~April 30, 2022.

Form 10-Q for the Three ~~and Nine~~ months Ended ~~October~~April 2, ~~2021~~2022

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


	Nine Months Ended						Three Months Ended
	October 2,			October 3,			April 2,			April 3,
	2021			2020			2022			2021
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income	$	18,368		$	35,121		$	23,826		$	12,795
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation		22,290			17,561			8,470			6,697
Amortization		15,174			14,124			8,043			4,749
Impairment of trade name		—			8,000
Non-cash portion of restructuring costs and charges		—			2,442
Provision for allowance for doubtful accounts		3,309			1,057			1,408			2,411
Stock-based compensation		5,748			4,369			2,205			1,750
Amortization of deferred financing costs, debt discount and premium		674			925			304			230
Debt extinguishment costs, including call premium classified as financing activity		25,472			—
Loss (gain) on sales of assets		105			(125	)
Loss on sales of assets								747			67
Change in operating assets and liabilities (net of effects of acquisition):
Accounts receivable		(45,997	)		(20,532	)		(39,357	)		(24,980	)
Inventories		(11,607	)		(9,060	)		(6,286	)		(4,307	)
Contract assets, net, prepaid expenses, other current and other assets		(22,843	)		(9,867	)		10,669			(20,898	)
Accounts payable, accrued and other liabilities		9,074			21,406			7,291			20,039

Net cash provided by operating activities		19,767			65,421
Net cash provided by (used in) operating activities								17,320			(1,447	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(25,663	)		(15,378	)		(8,180	)		(6,512	)
Acquisition of businesses		(106,480	)		(90,368	)
Investment in and acquisition of business								—			(94,321	)
Proceeds from sales of assets		183			651			8			7

Net cash used in investing activities		(131,960	)		(105,095	)		(8,172	)		(100,826	)

Cash flows from financing activities:
Proceeds from issuance of senior notes		638,300			53,188			—			63,300
Payments of senior notes		(425,000	)		—
Payment of call premium on redemption of senior notes		(21,518	)		—
Payments of term loan debt		(54,000	)		(10,000	)
Payments of financing costs		(10,361	)		(1,266	)		—			(1,363	)
Purchases of common stock relating to tax withholdings on employee equity awards		(1,159	)		(815	)		(1,663	)		(1,005	)
Proceeds from exercise of stock options		138			549
Proceeds from issuance of common stock under employee stock purchase plan (ESPP)		191			119

Net cash provided by financing activities		126,591			41,775
Net cash (used in) provided by financing activities								(1,663	)		60,932

Net decrease in cash and cash equivalents		14,398			2,101
Net increase (decrease) in cash and cash equivalents								7,485			(41,341	)
Cash and cash equivalents at beginning of period		100,320			97,243			96,146			100,320
Cash and cash equivalents at end of period	$	114,718		$	99,344		$	103,631		$	58,979

Non-cash activity:
Issuance of common stock in Eco Acquisition	$	6,108		$	—		$	—		$	6,108
Establish right-of-use asset	$	47,838		$	17,917		$	1,324		$	29,490
Establish operating lease liability	$	(47,838	)	$	(17,917	)	$	(1,324	)	$	(29,490	)
Property, plant and equipment additions in accounts payable	$	268		$	326		$	127		$	1,022

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

NOTE 6. ACQUISITIONS

ANLIN WINDOWS & DOORS

On October 25, 2021, we completed the acquisition of Anlin Windows & Doors. The acquisition was done by Western Window Holding LLC, a Delaware limited liability company, indirectly wholly-owned by PGT Innovations, Inc., which acquired substantially all of the assets, properties and rights owned, used or held for use in the business, as operated by Anlin Industries, a California corporation, of manufacturing vinyl windows and doors for the replacement market and the new construction market, and all activities conducted in connection therewith (the "Anlin Acquisition"), pursuant to that certain Asset Purchase Agreement dated as of September 1, 2021 (the “Anlin Purchase Agreement”), by and among the Company, and Anlin Industries. The fair value of consideration transferred in the Anlin Acquisition was $120.9 million, composed of $114.2 million in cash, including $113.5 million for purchase price and $0.7 million in estimated working capital adjustment, and estimated fair value of contingent consideration of $6.7 million, discussed in greater detail below.

The cash portion of the Anlin Acquisition of $114.2 million was financed with borrowings under the fourth amendment of our 2016 Credit Agreement due 2024 of $60.0 million, which resulted in net proceeds after fees of $59.4 million, with the remaining $54.8 million from cash on hand. Cash on hand for the Anlin Acquisition was ultimately provided by the issuance of senior notes due 2029 of $575.0 million of 4.375% and related transactions, further explained in Note 9, Long-Term Debt.

The estimated fair value of assets acquired, and liabilities assumed as of the closing date of the Anlin Acquisition, are as follows:


	Initial Allocation			Adjustments to Allocation			Preliminary Allocation
Accounts receivable	$	10,803		$	—		$	10,803
Inventories		7,633			(327	)		7,306
Contract assets, net		7,027			—			7,027
Prepaid expenses and other assets		1,626			(954	)		672
Property and equipment		22,800			1,509			24,309
Operating lease right-of-use asset		3,450			14			3,464
Intangible assets		77,800			(5,800	)		72,000
Goodwill		5,596			5,768			11,364
Total assets acquired		136,735			210			136,945
Accounts payable		(5,175	)		593			(4,582	)
Accrued and other liabilities		(7,993	)		—			(7,993	)
Operating lease liability		(3,450	)		(14	)		(3,464	)
Total liabilities assumed		(16,618	)		579			(16,039	)
Fair value of consideration transferred	$	120,117		$	789		$	120,906

Consideration:
Cash	$	114,196		$	—		$	114,196
Contingent consideration		5,921			789			6,710
Fair value of consideration transferred	$	120,117		$	789		$	120,906

The fair value of certain working capital related items, including Anlin’s accounts receivable, prepaid expenses and other assets, and accounts payable and accrued liabilities, approximated their book values at the date of the Anlin Acquisition. The fair value of inventory was estimated by major category, at net realizable value, which we believe approximates the price a market participant could achieve in a current sale. Inventories at the acquisition date was primarily composed of raw materials. Further review during the first quarter of 2022 resulted in an adjustment to decrease the estimated net realizable value of inventory. The fair value of property and equipment and remaining useful lives were estimated by management, with the assistance of a third-party valuation firm, using the cost approach. During the first quarter of 2022, additional value was assigned to acquired property and equipment, primarily due to an increase in the estimate of the fair value of acquired land. Valuations of the intangible assets were done using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs, with the assistance of a third-party valuations firm. During the first quarter of 2022, we made several adjustments to the estimated fair value of the initial valuation of certain intangible assets, given the preliminary nature of several of the valuation inputs. Additionally, we determined that a portion of the customer relationship asset we acquired related to Anlin's backlog, which had an estimated useful life of less than three months, resulting in its estimated fair value becoming fully amortized in the first quarter of 2022, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three-month period ended April 2, 2022.

We incurred acquisition costs totaling $1.8 million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the Anlin Acquisition, incurred during the year ended January 1, 2022, primarily during the third and fourth quarters.

- 13 -

The Anlin Purchase Agreement provides for the potential for an earn-out contingency payment to sellers should Anlin achieve a certain level of earnings before interest, taxes, depreciation and amortization, ("Anlin EBITDA"), as defined in the Anlin Purchase Agreement, for its fiscal years of 2021 and 2022, of up to $3.2 million to be paid out by March 31, 2022, and of up to $9.5 million to be paid out by March 31, 2023, respectively. We had recorded a preliminary earn-out contingent liability of $5.9 million as of our year ended January 1, 2022, which represented its then estimated fair value based on probability adjusted levels of estimated Anlin EBITDA. Estimated Anlin EBITDA is a significant input that is not observable in the market, which ASC 820 considers to be a Level 3 input. In the first quarter of 2022, we finalized the fair value of the earn-out contingency, which we adjusted by an additional $0.8 million, to a total of $6.7 million of estimated fair value of contingent consideration as of the effective date of the Anlin Acquisition, classified within accrued current liabilities in the accompanying condensed consolidated balance sheet as of April 2, 2022. This amount included $2.4 million for the contingent consideration relating to 2021 Anlin EBITDA and $4.3 million for the contingent consideration relating to the 2022 Anlin EBITDA.

By mutual agreement between seller and buyer, the deadline for the first payment of contingent consideration, which was March 31, 2022 as stated in the Anlin Purchase Agreement while both parties continued to negotiate the amount of the first contingent consideration payment, which was agreed to be $2.5 million, which we paid in April 2022. During the first quarter of 2022, we updated our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA, which was estimated to be $5.1 million. As such, we recognized an expense of approximately $1.0 million, representing the difference between the actual and estimated fair value of the contingent consideration relating to 2021 Anlin EBITDA, and the difference between the initial and updated estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three months ended April 2, 2022. We will continue to update our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA each reporting period, as required by ASC 805, and record any adjustments within operating income until finalized by March 31, 2022.

For tax purposes, contingent consideration does not become part of tax goodwill until paid. As such, the amount of goodwill deductible for tax purposes will not be finalized until the outcome of both earn-out contingency payments are known. As discussed, as of April 2, 2022, the estimated fair value of the earn-out contingency was $6.7 million, and goodwill according to the current allocation of consideration is $11.4 million, and is included as part of the Western reporting unit goodwill. As such, as of April 2, 2022, the amount of goodwill estimated to be tax deductible was the difference of $4.7 million. We believe goodwill relates to the expansion of our footprint in a key, strategic market we have identified as a geographic area of growth for our Company. Our estimate of the amount of tax deductible goodwill may change as we the amounts of the payments of contingent consideration are finalized.

As discussed above, we made changes to the initial estimated fair values of the trade name and customer relationships assets in the Anlin Acquisition, and we determined that a portion of our customer relationships intangible asset relates to the backlog acquired in the acquisition, which we estimated to be $2.2 million. Due to the short useful life of the customer-related backlog, its estimated fair value of $2.2 million was fully amortized by the end of the first quarter of 2022, which is classified within selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three-month period ended April 2, 2022. Our purchase price allocation is preliminary, and other items are subject to change.

The Anlin Purchase Agreement has a post-closing working capital calculation whereby we are required to prepare, and deliver to sellers, a final statement of purchase price. We expect to finalize this process during the second quarter of 2022.

Valuation of Identified Intangible Assets

The valuation of the identifiable intangible assets acquired in the Anlin Acquisition and our estimate of their respective useful lives are as follows:


								Initial
	Initial		Adjustment to			Preliminary		Useful Life
	Valuation		Valuation			Valuation		(in years)
(in thousands)
Trade name	$	35,400	$	(3,700	)	$	31,700	indefinite
Customer relationships		42,100		(4,300	)		37,800	15
Customer-related backlog		—		2,200			2,200	<1
Developed technology		300		—			300	9

Intangible assets, net	$	77,800	$	(5,800	)	$	72,000

Pro Forma Financial Information

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include Anlin's actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of Anlin adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the refinancing of the 2018 Senior Notes due 2026 and the third amendment of the 2016 Credit Agreement due 2024 into the 2021 Senior Notes due 2029 and the fourth amendment of the 2016 Credit Agreement due 2024. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the

- 14 -

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.


	Three Months Ended
	April 3,
Pro Forma Results (unaudited)	2021
(in thousands, except per share amounts)	(unaudited)
Net sales	$	295,512

Net income attributable to common shareholders	$	12,745

Net income per common share attributable to common shareholders:
Basic	$	0.21
Diluted	$	0.21

Net sales of Anlin included in the condensed consolidated statement of operations for the three months ended April 2, 2022, was $32.4 million. The net income of Anlin in the condensed consolidated statement of operations for the three months ended April 2, 2022, was $2.9 million.

CRI SOCAL, INC.

On May 2, 2021, pursuant to an asset purchase agreement dated April 9, 2021, we acquired substantially all of the assets and assumed certain liabilities of CRi SoCal, Inc. (“CRi”), a California corporation doing business in California as Combined Resources (the “CRi Acquisition”). CRi is engaged in the sales, distribution and installation of window and door products, and related design services, to homebuilders in the residential new construction market from its leased facility in Rancho Santa Margarita, California. Until its acquisition by the Company, CRi was a customer of the Company’s western business unit.

The fair value of consideration transferred in the acquisition of CRi totaled $12.5 million, and included $12.1 million in cash, funded from cash on hand, and $0.4 million in accounts receivable owed by CRi to the Company’s western business unit relating to sales prior to the acquisition, which are considered settled as a result of the acquisition. The ~~purchase price is subject to change through a net working capital adjustment, currently being finalized. The~~ preliminary estimated fair value of assets acquired and liabilities assumed totaled $17.6 million and $5.1 million, respectively, which included offsetting operating lease right of use assets and operating lease liabilities totaling $2.6 million. The estimated fair value of assets acquired also included current assets totaling $4.1 million, primarily accounts receivable, identifiable intangible assets totaling $~~6.4~~7.0 million, goodwill of $~~4.3~~3.7 million, all of which we believe is tax deductible, and a small amount of property and equipment. Liabilities assumed included the aforementioned operating lease liability, as well as a total of $2.5 million in trade accounts payable and customer deposits. Valuations of the intangible assets have been estimated using income and royalty relief approaches based on projections, which we consider to be Level 3 inputs, with the assistance of a third-party valuation firm. We believe goodwill in the acquisition relates to the expansion of our footprint in an existing market, in a way that we believe will enhance our long-term profitability in that market of our Western business.

Sales from CRi included in the ~~three and five-month post-acquisition~~three-month period ended ~~October~~April 2, ~~2021~~2022 totaled $~~4.1~~2.4 ~~million and $7.2~~ ~~million, respectively.~~million. CRi’s effect on consolidated net income was immaterial in the ~~three and five-month post acquisition~~three-month period ended ~~October~~April 2, ~~2021.~~2022.

~~- 13 -~~

~~Valuation of Identified Intangible Assets in the CRi Acquisition~~

~~The valuation of the identifiable intangible assets acquired in the CRi Acquisition and our estimate of the respective useful life is as follows:~~

Initial

Preliminary

Useful Life

Valuation

(in years)
(in thousands)

Trade name

$
800

indefinite
Customer relationships

5,600

10

Intangible assets, net

$
6,400

ECO WINDOW SYSTEMS

On February 1, 2021, we completed the acquisition of a 75% ownership stake in Eco Enterprises and its related companies, Eco Windows Systems, LLC, Eco Glass Production, LLC, and Unity Windows, LLC (together “Eco”). . Eco is a manufacturer and installer of aluminum, impact-resistant windows and doors, serving the South Florida region since 2009. Eco is headquartered in Medley, Florida, near Miami, Florida, and has 3 manufacturing locations in the region, including a glass processing facility.

The fair value consideration for Eco was $100.5 million, including $94.4 million in cash, ~~which was~~ after favorable adjustments ~~in our favor~~ totaling $5.6 million relating to working capital and customer ~~deposits. These adjustments~~deposits which were agreed to and settled in the second quarter of 2021. The fair value of consideration also included PGT Innovations, Inc. common stock with a then estimated fair value of $6.1 million. The cash portion of the purchase price was financed by a second add-on issuance of $60.0 million aggregate principal amount of 6.75% senior notes to the 2018 Senior Notes due 2026 on January 25, 2021 (the “Second Additional Senior Notes”), issued at 105.5% of their principal amount, resulting in a premium to us of $3.3 million, together with cash on hand of $31.1 million. ~~See Note 9 for a discussion of the Second Additional Senior Notes.~~

- 15 -

redeemable non-controlling interest, of $128.9 million. The fair value of the redeemable non-controlling interest has been calculated as 25% of the initial estimated fair value of the entity at the acquisition date, less a discount for seller’s lack of control in the new entity, estimated to be 5%, and a discount for the seller’s lack of marketability of the minority stake, estimated to be 10%. See Note 17 for more information regarding the redeemable non-controlling interest.

~~- 14 -~~

The estimated fair value of assets acquired, and liabilities assumed as of the closing date of the Eco Acquisition, are as follows:


	Initial Allocation			Adjustments to Allocation			Preliminary Allocation			Initial Allocation			Adjustments to Allocation			Final Allocation
Accounts receivable	$	5,031		$	(241	)	$	4,790		$	5,031		$	(241	)	$	4,790
Inventories		7,728			(865	)		6,863			7,728			(684	)		7,044
Contract assets, net		4,312			57			4,369			4,312			(123	)		4,189
Prepaid expenses and other assets		1,706			(582	)		1,124			1,706			(759	)		947
Property and equipment		24,009			(191	)		23,818			24,009			(191	)		23,818
Operating lease right-of-use asset		27,864			(1,049	)		26,815			27,864			(1,049	)		26,815
Intangible assets		72,700			(1,000	)		71,700			72,700			1,600			74,300
Goodwill		30,051			(2,043	)		28,008			30,051			(4,467	)		25,584
Total assets acquired		173,401			(5,914	)		167,487			173,401			(5,914	)		167,487
Accounts payable		(6,809	)		(116	)		(6,925	)		(6,809	)		(116	)		(6,925	)
Accrued and other liabilities, including customer deposits		(4,215	)		(604	)		(4,819	)		(4,215	)		(604	)		(4,819	)
Operating lease liability		(27,864	)		1,049			(26,815	)		(27,864	)		1,049			(26,815	)
Total liabilities assumed		(38,888	)		329			(38,559	)		(38,888	)		329			(38,559	)
Net assets acquired		134,513			(5,585	)		128,928			134,513			(5,585	)		128,928
Redeemable non-controlling interest		(34,084	)		5,620			(28,464	)		(34,084	)		5,620			(28,464	)
Fair value of consideration transferred	$	100,429		$	35		$	100,464		$	100,429		$	35		$	100,464

Consideration:
Cash	$	94,321		$	35		$	94,356		$	94,321		$	35		$	94,356
PGTI common stock		6,108			—			6,108			6,108			—			6,108
Fair value of consideration transferred	$	100,429		$	35		$	100,464		$	100,429		$	35		$	100,464

The fair value of certain working capital related items, including Eco’s accounts receivable, prepaid and other expenses, and accounts payable and accrued liabilities, approximated their book values at the date of the Eco Acquisition. Subsequent to our initial allocation, we adjusted the fair value of certain acquired commercial receivable accounts based on a further post-acquisition assessment of their collectability. The fair value of inventory was estimated by major category, at net realizable value, which we believe approximates the price a market participant could achieve in a current sale. Substantially all of inventories at the acquisition date was composed of raw materials. The fair value of property and equipment was estimated with the assistance of a third-party valuation firm, using the indirect cost approach, which we consider to be Level 3 in the fair value hierarchy. Valuations of the intangible assets have been estimated using income and royalty relief approaches based on projections, which we consider to be Level 3 inputs, with the assistance of a third-party valuation firm.

We incurred acquisition costs totaling $1.7 million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the Eco Acquisition, which includes $1.0 million in the fourth quarter of 2020, and $0.7 million in first ~~nine~~three months of 2021, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the ~~nine~~three months ended ~~October 2,~~April 3, 2021.

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, has currently been estimated to be $~~28.0~~25.6 million, classified as part of the Southeast reporting unit goodwill, which we expect the portion of goodwill relating to our 75% investment to be deductible for tax purposes. In addition, we are currently evaluating the historical book and tax bases of assets and liabilities relating to the redeemable non-controlling interest, which may not be eligible for a step-up in basis, for any deferred tax assets and liabilities that may need to be recorded in the Eco Acquisition.

As of October 2, 2021, the purchase price allocation is still preliminary, including the estimated discount relating to the fair value of PGTI common stock transferred, and the discounts for seller’s lack of control and marketability of seller’s minority share, and its finalization may result in changes to the preliminary estimate of goodwill. We believe goodwill represents the strengthening of our supply chain for glass through faster glass production, as well as diversification and expansion of product offerings in the high-growth commercial market, and an expansion of our dealer network with minimal overlap with our existing deal network.

- 1516 -

Valuation of Identified Intangible Assets in the Eco Acquisition

The valuation of the identifiable intangible assets acquired in the Eco Acquisition and our estimate of their respective useful lives are as follows:

Initial

Initial

Adjustment to

Preliminary

Useful Life

Valuation

Valuation

Valuation

(in years)
(in thousands)

Trade name

$
36,000

$
(1,000
)

$
35,000

indefinite
Customer relationships

36,700

—

36,700

5 - 15

Intangible assets, net

$
72,700

$
(1,000
)

$
71,700


								Initial
	Initial		Adjustment to			Preliminary		Useful Life
	Valuation		Valuation			Valuation		(in years)
(in thousands)
Trade names	$	36,000	$	(1,100	)	$	34,900	indefinite
Customer relationships		36,700		2,700			39,400	5 - 15

Intangible assets, net	$	72,700	$	1,600		$	74,300

Pro Forma Financial Information

The following unaudited pro forma financial information assumes the Eco Acquisition had occurred at the beginning of the earliest period presented that does not include Eco’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of Eco adjusted for the following: amortization expense related to the estimated intangible assets arising from the acquisition; interest expense to reflect the Second Additional Senior Notes; net income attributable to redeemable non-controlling interest; and, change in redemption value of redeemable non-controlling interest. 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.


	Three Months Ended		Nine Months Ended				Three Months Ended
	October 3,		October 2,		October 3,			April 3,
	2020		2021		2020			2021
			(unaudited)				(unaudited)
Net sales	$	257,949	$	864,975	$	704,778		$	279,044

Net income attributable to common shareholders	$	15,667	$	11,762	$	31,266
Net income attributable to PGTI stockholders:								$	12,542

Net income per common share attributable to common shareholders:
Net income per common share attributable to PGTI stockholders:
Basic	$	0.27	$	0.20	$	0.53		$	0.21
Diluted	$	0.26	$	0.20	$	0.53		$	0.21

Net sales of Eco included in the condensed consolidated ~~statement~~statements of operations for the three ~~and nine~~ months ended ~~October~~April 2, 2022, and April 3, 2021, was $~~24.7~~21.5 million and $~~64.3~~15.4 million, respectively, after eliminations of intercompany sales. The net income of Eco in the condensed consolidated ~~statement~~statements of operations for the three ~~and nine~~ months ended ~~October~~April 2, 2022, and April 3, 2021, was $~~846.9~~2.6 million and $~~6.6~~1.6 million, respectively, including the portions attributable to the redeemable non-controlling interest of $0.7 million and $~~1.7~~0.4 million, respectively.

On ~~February 1, 2020~~ (the “closing date”), we completed the acquisition of NewSouth Window Solutions LLC and NewSouth Window Solutions of Orlando LLC (together, “NewSouth”, and the “NewSouth Acquisition”), which became wholly-owned subsidiaries of PGT Innovations, Inc. The fair value of consideration transferred in the acquisition was $~~90.4~~ ~~million. The acquisition was financed with proceeds of $53.2~~ ~~million from an add-on issuance of $50.0~~ ~~million in 2018 Senior Notes due 2026 (“First Additional Senior Notes”), including a premium of $3.2~~ ~~million, and with $37.2~~ ~~million in cash. See Note 9 for a discussion of the First Additional Senior Notes.~~

The fair value of certain working capital related items, including NewSouth’s retail accounts receivable, prepaid expenses, and accounts payable and accrued liabilities, approximated their book values at the date of the NewSouth Acquisition. Subsequent to our initial allocation, we adjusted the fair value of certain acquired commercial receivable accounts based on a further post-acquisition assessment of their collectability. The fair value of inventory was estimated by major category, at net realizable value. The substantial majority of inventories at the acquisition date was composed of raw materials. The fair value of property and equipment and remaining useful lives were estimated by management, with the assistance of a third-party valuation firm, using the cost approach. Valuations of the intangible assets were done using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs, with the assistance of a third-party valuations firm.

~~We incurred acquisition costs totaling $2.4~~ ~~million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the NewSouth Acquisition, which includes $0.9~~ ~~million in 2020, and $1.5~~ ~~million in 2019. Of the expenses in 2020, $0.5~~ million were incurred in the first quarter of 2020, with the remainder in the second quarter of 2020, and classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three and nine months ended October 3, 2020.

~~The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, has been determined to be $52.1~~ million, all of which we expect to be deductible for tax purposes. Goodwill represents the increased value of the combined entity through new direct-to-consumer sales channel opportunities, as well as NewSouth’s extensive advertising throughout Florida, and NewSouth’s market intelligence, which we expect to utilize.

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include NewSouth’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of NewSouth adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the First Additional Senior Notes. 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.~~

NOTE 9. LONG-TERM DEBT


							April 2,			January 1,
	October 2,			January 2,			2022			2022
	2021			2021			(in thousands)
	(in thousands)
2021 Senior Notes due 2029, maturing in October 2029	$	575,000		$	-		$	575,000		$	575,000

2018 Senior Notes due 2026, maturing in August 2026		-			365,000

2016 Credit Agreement due 2022, maturing in October 2022		-			54,000
2016 Credit Agreement due 2024, maturing in October 2024								60,000			60,000

Long-term debt		575,000			419,000			635,000			635,000

Fees, costs, discount and premium		(9,335	)		(6,902	)
Deferred financing costs								(9,041	)		(9,345	)

Long-term debt, net	$	565,665		$	412,098		$	625,959		$	625,655

2021 Senior Notes due 2029

On September 24, 2021, we completed the issuance of $575.0 million aggregate principal amount of 4.375% senior notes (“2021 Senior Notes due 2029”), issued at 100% of their principal amount. The 2021 Senior Notes due 2029 are jointly and severally and fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s existing and future restricted subsidiaries, other than any restricted subsidiary of the Company that does not guarantee the existing senior secured credit facilities or any permitted refinancing thereof. The 2021 Senior Notes due 2029 are senior unsecured obligations of the Company and the guarantors, respectively, and rank pari passu in right of payment with all existing and future senior debt and senior to all existing and future subordinated debt of the Company and the guarantors. The 2021 Senior Notes due 2029 were offered under Rule 144A of the Securities Act, and in transactions outside the United States under Regulation S of the Securities Act, and have not been, and will not be, registered under the Securities Act.

The 2021 Senior Notes due 2029 mature on October 1, 2029. Interest on the 2021 Senior Notes due 2029 is payable semi-annually, in arrears, beginning on April 1, 2022, with interest accruing at a rate of 4.375% per annum from September 24, 2021. We incurred financing costs relating to bank fees and professional services costs relating to the offering and issuance of the 2021 Senior Notes due 2029 totaling $~~8.6~~8.7 million, which included a 1.25% lender spread on the total principal value of the 2021 Senior Notes due 2029, or $7.2 million, and $~~1.4~~1.5 million of other costs, all of which are being amortized under the effective interest method. See “Deferred Financing Costs” below.

~~- 21 -~~

As of ~~October~~April 2, ~~2021,~~2022, the face value of debt outstanding under the 2021 Senior Notes due 2029 was $575.0 million, and interest began accruing on September 24, 2021. Proceeds from the 2021 Senior Notes due 2029 were used, in part, to redeem in full the $425.0

- 19 -

million of 2018 Senior Notes due 2026, including the related fees, costs, and the prepayment call premium ~~discussed further below,~~of $21.5 million, representing 5.063% of the $425.0 million face value then outstanding, prepay the outstanding term loan borrowings under the 2016 Credit Agreement of $54.0 million and the related fees and costs, and finance the Anlin Acquisition ~~subsequent to~~in the ~~end of the third~~fourth quarter of 2021. See Note ~~18, Subsequent Event,~~6, Acquisitions, for a discussion of the Anlin Acquisition.

The indenture for the 2021 Senior Notes due 2029 gives us the option to redeem some or all of the 2021 Senior Notes due 2029 at the redemption prices and on the terms specified in the indenture governing the 2021 Senior Notes due 2029. The indenture governing the 2021 Senior Notes due 2029 does not require us to make any mandatory redemptions or sinking fund payments. However, upon the occurrence of a change of control, as defined in the indenture, the Company is required to offer to repurchase the notes at 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. We also may make optional redemptions at various premiums including a make-whole call at the then current treasury rate plus 50 basis points prior to October 1, 2024, then 102.188% on or after August 1, ~~2021,~~2024, 101.094% on or after August 2025, then at 100.000% on or after August 1, 2026.

The indenture for the 2021 Senior Notes due 2029 includes certain covenants limiting the ability of the Company and any guarantors to, (i) incur additional indebtedness; (ii) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments; (iii) enter into agreements that restrict distributions from restricted subsidiaries; (iv) sell or otherwise dispose of assets; (v) enter into transactions with affiliates; (vi) create or incur liens; merge, consolidate or sell all or substantially all of the Company’s assets; (vii) place restrictions on the ability of subsidiaries to pay dividends or make other payments to the Company; and (viii) designate the Company’s subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications.

~~2018 Senior Notes due 2026~~

~~On August 10, 2018, we completed the issuance of $315.0~~ ~~million aggregate principal amount of~~ ~~6.75% senior notes (“2018 Senior Notes due 2026”), issued at~~ ~~100~~% of their principal amount. The 2018 Senior Notes due 2026 were jointly and severally and fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s existing and future restricted subsidiaries, other than any restricted subsidiary of the Company that does not guarantee the existing senior secured credit facilities or any permitted refinancing thereof. The 2018 Senior Notes due 2026 were senior unsecured obligations of the Company and the guarantors, respectively, and ranked pari passu in right of payment with all existing and future senior debt and senior to all existing and future subordinated debt of the Company and the guarantors. The 2018 Senior Notes due 2026 were offered under Rule 144A of the Securities Act, and in transactions outside the United States under Regulation S of the Securities Act, and were not registered under the Securities Act.

~~On January 24, 2020, we completed an add-on issuance of $50.0~~ ~~million aggregate principal amount of~~ ~~6.75% 2018 Senior Notes due 2026, or the First Additional Senior Notes, issued at~~ ~~106.375% of their principal amount, resulting in a premium to us of $3.2~~ million. The First Additional Senior Notes were part of the same issuance of, and ranked equally and formed a single series with, the 2018 Senior Notes due 2026. Proceeds from the First Additional Senior Notes, including premium, were used, together with cash on hand, to pay the $~~90.4~~ ~~million purchase price in the NewSouth Acquisition.~~

~~On January 25, 2021, we completed a second add-on issuance of $60.0~~ ~~million aggregate principal amount of~~ ~~6.75% 2018 Senior Notes due 2026, or the Second Additional Senior Notes, issued at~~ ~~105.5% of their principal amount, resulting in a premium to us of $3.3~~ million. The Second Additional Notes were part of the same issuance of, and ranked equally and form a single series with, the 2018 Senior Notes due 2026. Proceeds from the Second Additional Senior Notes, including premium, were used, together with $~~31.1~~ ~~million in cash on hand, to pay the $94.4~~ ~~million cash portion of the $100.5~~ ~~million purchase price in the ECO Acquisition. The common stock portion of the purchase consideration was represented by the issuance of~~ ~~357,797~~ ~~shares of PGT Innovations, Inc. common stock on February 1, 2021, with a then-current value of $21.34~~ ~~per share, which we discounted by an estimate of~~ 20~~% for lack of marketability, as the common stock is are legally restricted from being sold by the recipient for a three-year period from February 1, 2021.~~

~~The 2018 Senior Notes due 2026 were to mature on~~ ~~August 10, 2026. However, effective on September 27, 2021, using proceeds from the issuance of the $575.0~~ ~~million 2021 Senior Notes due 2029, discussed above, we redeemed in-full the $425.0~~ ~~million of 2018 Senior Notes due 2026, including accrued and unpaid interest through September 27, 2021, which totaled $4.5~~ ~~million, and a pre-payment call premium of~~ ~~105.063% of face value, which totaled $21.5~~ ~~million and are classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the three and nine months ended October 2, 2021.~~

2016 Credit Agreement due 2024

On February 16, 2016, we entered into the 2016 Credit Agreement due ~~2022,~~2024, among us, the lending institutions identified in the 2016 Credit Agreement due ~~2022,~~2024, and Truist Financial Corporation (formerly known as SunTrust Bank), as Administrative Agent and Collateral Agent. The 2016 Credit Agreement due ~~2022~~2024 establishes senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility originally maturing in February 2022 that amortizes on a basis of 1%

~~- 22 -~~

annually during its six-year term, and a $40.0 million revolving credit facility originally maturing in February 2021 that included a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement due ~~2022~~2024 are, subject to exceptions, guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries that are restricted subsidiaries and secured by substantially all of our assets as well as our direct and indirect restricted subsidiaries’ assets.

On March 16, 2018, we entered into an amendment of our 2016 Credit Agreement due ~~2022~~2024 (the “Second Amendment”). The Second Amendment, among other things, decreased the applicable interest rate margins for the Initial Term Loans (as defined in the 2016 Credit Agreement due ~~2022)~~2024) from (i) 3.75% to 2.50%, in the case of the Base Rate Loans (as defined in the 2016 Credit Agreement due ~~2022)~~2024), and (ii) 4.75% to 3.50%, in the case of the Eurodollar Loans (as defined in the 2016 Credit Agreement due ~~2022)~~2024). On February 17, 2017, we entered into the first amendment to our 2016 Credit Agreement due ~~2022,~~2024, which also resulted in decreases in the applicable margins, but which, unlike the Second Amendment, did not include any changes in lender positions.

On October 31, 2019, we entered into an amendment of our 2016 Credit Agreement due ~~2022~~2024 (“Third Amendment”). The Third Amendment provided for, among other things, (i) a three-year Term A loan in the then aggregate principal amount of $64.0 million (the “Initial Term A Loan”), maturing in October 2022, which refinanced in full our existing Term B term loan facility under the 2016 Credit Agreement, and had no regularly scheduled amortization, and (ii) a new five-year revolving credit facility in an aggregate principal amount of up to $80.0 million (the “Revolving Facility”), maturing in October 2024, which replaced our then existing $40.0 million revolving credit facility under the 2016 Credit Agreement, and includes a swing-line facility and letter of credit facility. Our obligations under the 2016 Credit Agreement continue to be secured by substantially all of our assets, as well as our direct and indirect subsidiaries’ assets, and is senior in position to the 2021 Senior Notes due 2029.

On October 25, 2021, we entered into an amendment of our 2016 Credit Agreement ("Fourth Amendment"). The Fourth Amendment provides for, among other things, a three-year Term A loan in the aggregate maximum available amount of $60.0 million (the "Incremental Term A Loan"), proceeds from which were used to fund the Anlin Acquisition. ~~See Note 18, Subsequent Event, for further discussion of the Anlin Acquisition.~~ The Fourth Amendment dodoes not change any terms relating to the Revolving Facility, under which we pay quarterly fees on the unused portion of the revolving credit facility equal to a percentage spread (ranging from 0.25% to 0.35%) based on our first lien net leverage ratio. As of ~~October~~April 2, ~~2021,~~2022, there were $~~5.3~~5.7 million in letters of credit outstanding and $~~74.7~~74.3 million available under the Revolving Facility.

The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement due 2024 was 2.46% as of April 2, 2022, and was 2.10% at January 1, 2022.

- 20 -

Deferred Financing Costs

The activity relating to deferred financing costs, composed of third-party fees and costs, and lender fees, ~~discount and premiums~~ for the ~~nine~~three months ended ~~October~~April 2, ~~2021,~~2022, are as follows. All ~~debt-related fees,~~deferred financing costs ~~discount and premiums~~ are classified as a reduction of the carrying value of long-term debt:

(in thousands)

Total

At beginning of year

$
6,902

Add: Deferred financing costs from the issuance of Second Additional Senior Notes

1,363

Less: Premium on the Second Additional Senior Notes

(3,300
)
Less: Write-off of deferred costs classified as debt extinguishment costs

(3,954
)
Add: Deferred financing costs from the issuance of the 2021 Senior Notes due 2029

8,648

Add: Deferred financing costs from the refinancing of the 2016 Credit Agreement due 2024

350

Less: Amortization expense

(674
)

At end of period

$
9,335


(in thousands)	Total
At beginning of year	$	9,345
Less: Amortization expense		(304	)
At end of period	$	9,041

Estimated amortization expense relating to ~~third-party fees and~~deferred financing costs ~~lender fees, discount and premiums~~ for the years indicated as of ~~October~~April 2, ~~2021,~~2022, is as follows:


(in thousands)	Total		Total
Remainder of 2021	$	262
2022		1,075
Remainder of 2022			$	929
2023		1,120		1,282
2024		1,148		1,282
2025		1,121		1,083
2026				1,114
Thereafter		4,609		3,351

Total	$	9,335	$	9,041

~~As a result~~We have no schedule payments of outstanding debt until the ~~complete prepayments~~contractual maturity of ~~all borrowings under~~ the 2016 Credit Agreement ~~as of~~in October ~~2, 2021, we have no~~2024. Our contractual future maturities of long-term debt ~~until the 2029 maturity of the 2021 Senior Notes due 2029,~~are as follows (at face value):

~~- 23 -~~


(in thousands)
Remainder of 2021	$	0
2022		0
Remainder of 2022			$	0
2023		0		0
2024		0		60,000
2025		0		0
Thereafter (2029)		575,000
2026				0
Thereafter				575,000

Total	$	575,000	$	635,000

NOTE 10. LEASES

We lease certain of our manufacturing facilities under operating leases. We also lease production equipment, vehicles, computer equipment, storage units and office equipment under operating leases. Our leases have remaining lease terms of 1 year to ~~9 years~~10, years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. All of our leases are operating leases. We did not recognize right-of-use assets or lease liabilities for certain short-term leases that are month-to-month leases. The lease expense relating to these leases is not significant.

The components of lease expense for the three ~~and nine~~ months ended ~~October~~April 2, ~~2021~~2022 and ~~October~~April 3, ~~2020,~~2021, are as ~~follows. Certain amounts in the prior year period have been reclassified to conform to the current presentation~~follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
	October 2,		October 3,		October 2,		October 3,		April 2,		April 3,
	2021		2020		2021		2020		2022		2021

Operating lease cost	$	4,213	$	2,364	$	10,990	$	6,775	$	4,839	$	2,879
Variable lease cost		2,280		927		6,696		2,523
Short-term lease cost										2,305		2,200
Total lease cost	$	6,493	$	3,291	$	17,686	$	9,298	$	7,144	$	5,079

- 21 -

Other information relating to leases for the three ~~and nine~~ months ended ~~October~~April 2, ~~2021~~2022 and ~~October~~April 3, ~~2020,~~2021, are as follows (in thousands, except years and percentages):


	Three Months Ended						Nine Months Ended						Three Months Ended
	October 2,			October 3,			October 2,			October 3,			April 2,			April 3,
	2021			2020			2021			2020			2022			2021
Supplemental cash flows information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows relating to operating leases	$	(3,435	)	$	(2,276	)	$	(9,503	)	$	(6,497	)	$	(4,529	)	$	(2,764	)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	933		$	3,079		$	47,838		$	17,917		$	1,324		$	29,490

Weighted average remaining lease term in years
Operating leases		6.39			6.81			6.39			6.81			6.57			7.23

Weighted average discount rate
Operating leases		5.5	%		5.8	%		5.5	%		5.8	%		5.5	%		5.6	%

Future maturities under operating leases were as follows at ~~October~~April 2, ~~2021~~2022 and January ~~2, 2021~~1, 2022 (in thousands):


	April 2,			January 1,
	2022			2022
Remainder of 2022	$	-		$	17,929
2023		13,714			17,577
2024		17,947			16,990
2025		17,365			15,987
2026		16,240			15,025
2027		15,146			14,358
Thereafter		32,257			17,891

Total future minimum lease payments		112,669			115,757

Less: Imputed interest		(17,520	)		(18,674	)

Operating lease liability - total	$	95,149		$	97,083

Reported as of April 2, 2022 and January 1, 2022:
Current portion of operating lease liability	$	13,676		$	13,180
Operating lease liability, less current portion		81,473			83,903

Operating lease liability - total	$	95,149		$	97,083

~~- 24 -~~

October 2,

January 2,

2021

2021

Remainder of 2021

$
3,774

$
8,327

2022

15,562

7,626

2023

15,259

7,149

2024

14,870

6,748

2025

14,057

6,253

Thereafter

34,616

13,800

Total future minimum lease payments

98,138

49,903

Less: Imputed interest

(15,815
)

(8,641
)

Operating lease liability - total

$
82,323

$
41,262

Reported as of October 2, 2021 and January 2, 2021:

Current portion of operating lease liability

$
11,227

$
6,132

Operating lease liability, less current portion

71,096

35,130

Operating lease liability - total

$
82,323

$
41,262

As of ~~October~~April 2, ~~2021,~~2022, we had no additional operating or finance leases that have not yet commenced. Our operating leases expire at various times through ~~2029.~~2032. Lease expense was $~~6.5~~7.1 million for the three months ended ~~October~~April 2, ~~2021~~2022 and was $~~3.3~~5.1 million for the three months ended ~~October~~April 3, ~~2020.~~2021. Of the $~~6.5~~7.1 million for the three months ended ~~October~~April 2, ~~2021,~~2022, $~~0.5~~3.6 million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Of the $~~3.3~~5.1 million for the three months ended ~~October~~April 3, ~~2020, $1.6~~ million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Lease expense was $~~17.7~~ ~~million for the nine months ended October 2, 2021 and was $9.3~~ ~~million for the nine months ended October 3, 2020. Of the $17.7~~ ~~million for the nine months ended October 2,~~ 2021, $~~6.9~~ ~~million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Of the $9.3~~ ~~million for the nine months ended October 3, 2020, $4.7~~2.2 million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses.

~~The $47.8~~ ~~million in operating lease right-of-use assets obtained in exchange for operating lease obligations during the nine months ended October 2, 2021 includes $26.8~~ ~~million related to the Eco Acquisition in the first quarter of 2021, and $2.6~~ ~~million related to the CRi Acquisition in the second quarter of 2021. See Note 6 for additional information.~~

NOTE 14. DERIVATIVES

Aluminum Contracts and Midwest Transaction Premium

We enter into aluminum forward contracts to hedge the fluctuations in the purchase price of aluminum extrusion we use in production. ~~Beginning late in the first quarter of~~In early 2020, we began entering into forward contracts to hedge the fluctuations in the price of the delivery component of our aluminum extrusion purchases, known as the Midwest Transaction Premium, or MTP. Our contracts are designated as cash flow hedges since they are highly effective in offsetting changes in the cash flows attributable to forecasted purchases of aluminum and the related MTP.

We record our aluminum hedge contracts at fair value, based on trading values for aluminum forward contracts. Aluminum forward contracts identical to those held by us trade on the London Metal Exchange (“LME”). The LME provides a transparent forum and is the world’s largest center for the trading of futures contracts for non-ferrous metals. The prices are used by the metals industry worldwide as the basis for contracts for the movement of physical material throughout the production cycle. Based on this high degree of volume and liquidity in the LME, we believe the valuation price at any measurement date for contracts with identical terms as to prompt date, trade date and trade price as those we hold at any time represents a contract’s exit price to be used for purposes of determining fair value.

We record our MTP hedge contracts at fair value, based on the Platts MW US Transaction price per pound assessment, which has been a benchmark for decades in the North American aluminum industry. Platts surveys the North American market daily to capture trades, bids and offers on a delivered Midwest basis. Data is normalized to reflect the typical price per pound between the largest number of market participants, for delivery within 7 to 30 days from date of publication, net-30-day payment terms, for typical order quantities, chemistries and freight allowances. The survey is extensive and encompasses both domestic and offshore producers, traders and brokers that are varied in scope. Based on the extensive nature of this pricing mechanism, we believe the Platts MW US Transaction price at any time represents a contract’s exit price to be used for purposes of determining fair value.

- 2724 -

Guidance under the Financial Instruments Topic 825 of the Codification requires us to record our hedge contracts at fair value and consider our credit risk for contracts in a liability position, and our counter-party’s credit risk for contracts in an asset position, in determining fair value. We assess our counter-party’s risk of non-performance when measuring the fair value of financial instruments in an asset position by evaluating their financial position, including cash on hand, as well as their credit ratings. We assess our risk of non-performance when measuring the fair value of our financial instruments in a liability position by evaluating our credit ratings, our current liquidity including cash on hand and availability under our revolving credit facility as compared to the maturities of the financial liabilities. We do not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting arrangement.

At ~~October~~April 2, ~~2021,~~2022, the fair value of our aluminum forward contracts was in an asset position of $~~8.2~~9.1 million. We had 2223 outstanding forward contracts for the purchase of ~~27.2~~36.3 million pounds of aluminum through December 2022, at an average price of $~~0.99~~1.32 per pound, which excludes the Midwest premium, with maturity dates of between ~~one month~~two months and ~~fifteen~~ten months. At ~~October~~April 2, ~~2021,~~2022, the fair value of our MTP contracts was in an asset position of $~~6.8~~4.4 million. We had 187 outstanding MTP contracts to hedge the Platt US MW Transaction price per pound for the delivery of ~~35.0~~17.0 million pounds of aluminum through December 2022, at an average price of $0.12 per pound, with maturity dates of between ~~one month~~two months and ~~fifteen~~ten months. We assessed the risk of non-performance of the Company and our counterparty to these contracts, as applicable, and determined it was immaterial and, therefore, did not record any adjustment to their fair values as of ~~October~~April 2, ~~2021.~~2022.

We assess the effectiveness of our aluminum forward and MTP contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our aluminum forward contracts is reported as a component of accumulated other comprehensive income (loss) and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of income, net, recognized in the “accumulated other comprehensive income (loss)” line item in the accompanying condensed consolidated balance sheet as of ~~October~~April 2, ~~2021,~~2022, that we expect will be reclassified to earnings within the next twelve months, is approximately $~~13.2~~13.4 million.

The fair values of our aluminum hedges and MTP contracts are classified in the accompanying condensed consolidated balance sheets at ~~October~~April 2, ~~2021~~2022 and January ~~2, 2021,~~1, 2022, as follows (in thousands):


	Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
	October 2, 2021			October 2, 2021				April 2, 2022			April 2, 2022
Derivatives designated as hedging
instruments under Subtopic 815-20:	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments:
Aluminum contracts	Other current assets	$	7,374	Accrued liabilities	$	—		Other current assets	$	10,184	Accrued liabilities	$	(1,126	)
MTP contracts	Other current assets		5,875	Accrued liabilities		—		Other current assets		4,383	Accrued liabilities		—
Aluminum contracts	Other assets		777	Other liabilities		—		Other assets		—	Other liabilities		—
MTP contracts	Other assets		891	Other liabilities		—		Other assets		—	Other liabilities		—
Total derivative instruments	Total derivative assets	$	14,917	Total derivative liabilities	$	—		Total derivative assets	$	14,567	Total derivative liabilities	$	(1,126	)

	Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
	January 2, 2021			January 2, 2021				January 1, 2022			January 1, 2022
Derivatives designated as hedging
instruments under Subtopic 815-20:	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments:
Aluminum contracts	Other current assets	$	3,243	Accrued liabilities	$	(28	)	Other current assets	$	4,829	Accrued liabilities	$	—
MTP contracts	Other current assets		423	Accrued liabilities		(24	)	Other current assets		4,599	Accrued liabilities		—
Aluminum contracts	Other assets		—	Other liabilities		(25	)	Other assets		—	Other liabilities		—
MTP contracts	Other assets		26	Other liabilities		(4	)	Other assets		—	Other liabilities		—
Total derivative instruments	Total derivative assets	$	3,692	Total derivative liabilities	$	(81	)	Total derivative assets	$	9,428	Total derivative liabilities	$	—

~~- 28 -~~

The ending accumulated balance for the aluminum forward and MTP contracts included in accumulated other comprehensive income (losses), net of tax, was an accumulated other comprehensive income of $~~11.2~~10.0 million as of ~~October~~April 2, ~~2021,~~2022, and was an accumulated other comprehensive income of $~~2.7~~7.0 million at January ~~2, 2021.~~1, 2022. The income tax effects of accumulated comprehensive income (losses) are released as amounts are reclassified out of accumulated comprehensive income (losses) at the income tax rate used at the time those income tax effects were provided, which generally represents our blended statutory income tax rate.

- 25 -

The following represents the gains (losses) on derivative financial instruments, and their classifications within the accompanying condensed consolidated financial statements, for the three ~~and nine~~ months ended ~~October~~April 2, ~~2021~~2022 and ~~October~~April 3, ~~2020~~2021 (in thousands):


	Derivatives in Cash Flow Hedging Relationships											Derivatives in Cash Flow Hedging Relationships
	Amount of Gain or (Loss) Recognized in OCI(L) on Derivatives					Location of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income					Amount of Gain or (Loss) Recognized in OCI(L) on Derivatives				Location of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income
	Three Months Ended						Three Months Ended					Three Months Ended					Three Months Ended
	October 2,		October 3,				October 2,		October 3,			April 2,		April 3,			April 2,		April 3,
	2021		2020				2021		2020			2022		2021			2022		2021

Aluminum contracts	$	4,194	$	1,452		Cost of sales	$	4,271	$	(680	)	$	5,607	$	4,083	Cost of sales	$	1,378	$	1,388

MTP contracts	$	2,355	$	111		Cost of sales	$	2,425	$	148		$	468	$	4,205	Cost of sales	$	684	$	387


	Derivatives in Cash Flow Hedging Relationships
	Amount of Gain or (Loss) Recognized in OCI(L) on Derivatives					Location of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income
	Nine Months Ended						Nine Months Ended
	October 2,		October 3,				October 2,		October 3,
	2021		2020				2021		2020

Aluminum contracts	$	13,385	$	(2,152	)	Cost of sales	$	8,423	$	(2,798	)

MTP contracts	$	10,525	$	32		Cost of sales	$	4,181	$	61

NOTE 17. REEDEMABLE NON-CONTROLLING INTEREST

On February 1, 2021, we completed an acquisition of a 75% ownership stake in Eco. The seller of Eco obtained 25%the remaining equity interest in the newly formed company, Eco Enterprises. The seller’s redeemable non-controlling interest was initially established at fair value.

The agreement between PGT Innovations, Inc. and the seller provides the Company with a call right for seller’s equity interest ~~which~~in the ~~Company may exercise during the~~ ~~one-year~~ ~~period~~third year following the ~~second anniversary of the date of the acquisition.~~acquisition date. If the Company does not exercise its right to call ~~during~~by the third ~~year,~~anniversary, the agreement provides the seller with a put right which can be exercised during the ~~15-day~~15-day period following the third ~~anniversary of the date of the acquisition.~~ anniversary.Upon exercise of the put or call right, the purchase price is calculated based on a 10-multiple of the sum of Eco’s trailing twelve-month earnings before interest, taxes, depreciation and amortization (TTM EBITDA), and certain synergy-related TTM EBITDA which may result from our acquisition of Eco (both as more specifically defined in the operating agreement of Eco Enterprises).future agreed performance metric. The put option makes the non-controlling interest redeemable and, therefore, the redeemable non-controlling interest is classified as temporary equity outside of shareholders’ equity.

The Company calculates the estimated future redemption value of the non-controlling interest on a quarterly basis using a 10-multiple of TTM EBITDA as determined in accordance with the agreement as described above. After giving effect to the change from the net income (loss) attributable to the redeemable non-controlling interest, thebasis. The redeemable non-controlling interest is ~~adjusted~~accreted to ~~accreted~~the future redemption value using the effective interest method ~~based~~up to the date on ~~its currently calculated future redemption value.~~which the put-right becomes effective. Any accretion adjustment in the current reporting period of the redeemable non-controlling interest is offset against retained earnings and impacts earnings used in the calculation of earnings per share attributable to common shareholders in the reporting period.

~~- 31 -~~

Based on the formula in the operating agreement governing this transaction, the future redemption value of the redeemable non-controlling interest was estimated to be $~~57.5~~58.3 million, which we accreted to $~~34.6~~39.7 million as of ~~October~~April 2, ~~2021.~~

2022.

The following table presents the changes in the Company’s redeemable non-controlling interest for the period presented:


	Nine Months Ended		Three Months Ended
	October 2,		April 2,		April 3,
(in thousands)	2021		2022		2021
Balance at beginning of period	$	—	$	36,863	$	—
Redeemable non-controlling interest in Eco at initially estimated fair value		28,464		—		34,084
Net income attributable to redeemable non-controlling interest		1,656		657		411
Change in value of redeemable non-controlling interest		4,528		2,136		—
Balance at end of period	$	34,648	$	39,656	$	34,495

~~NOTE 18. SUBSEQUENT EVENT~~

On October 25, 2021, Western Window Holding LLC (“Buyer”), a Delaware limited liability company and indirect wholly owned subsidiary of the Company, completed its previously announced acquisition (the “Anlin Acquisition”) of substantially all of the assets, properties and rights owned, used or held for use in the business, as operated by Anlin Industries, a California corporation (“Seller” or "Anlin"), of manufacturing vinyl windows and doors for the replacement market and the new construction market, other than certain expressly excluded assets, pursuant to that certain Asset Purchase Agreement ("APA") dated as of September 1, 2021 (the “Purchase Agreement”), by and among the Company, as guarantor, Buyer and Seller. Anlin is headquartered in Clovis, CA and is recognized by dealers and customers as a top western region brand in the vinyl replacement windows and doors market and will operate under the Western Business Unit of PGT Innovations.

The aggregate purchase price at closing paid for the Seller’s assets, which includes assets typical to the operations of the business including accounts receivable, inventories, property and equipment, as well as intangibles assets which we expect will include one or more Anlin trade names, customer relationships, developed technology, and possibly other yet to be identified intangible assets, and which we expect to engage a third-party valuation firm to assist with the valuation of such assets, was approximately $~~113.5~~ ~~million, subject to certain adjustments as set forth in the APA, and earnout payments of up to approximately $12.6~~ ~~million in aggregate,~~ ~~payable in~~ 2 ~~installments on or prior to March 31 of 2022 and 2023, respectively~~, subject to certain adjustments. The purchase price is subject to a post-closing true-up mechanism as set forth in the Purchase Agreement, which is expected to be determined within approximately ninety days from the date of the closing of the Acquisition. The Anlin Acquisition was financed with net proceeds remaining from the issuance of the $~~575.0~~ ~~million~~ ~~4.375% 2021 Senior Notes due 2029, after redemption of the $425.0~~ ~~million~~ ~~6.75% 2018 Senior Notes due 2026, along with its $21.5~~ ~~million call premium paid, repayment of $54.0~~ ~~million term loan, and payments of other acquisition-related costs, and proceeds of $60.0~~ ~~million provided by the Term A Loan under the Fourth Amendment of our 2016 Credit Agreement.~~

- 3228 -

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended January ~~2, 2021,~~1, 2022, as filed with the Securities and Exchange Commission. Management's Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements that reflect our plans, estimates, and beliefs, all of which are based on our current expectations and could be affected by certain uncertainties, risks, and other factors described under Cautionary Note Regarding Forward-Looking Statements and elsewhere throughout this Quarterly Report, as well as the factors described in our Annual Report on Form 10-K for the year ended ~~December 31, 2020,~~January 1, 2022, and subsequent periodic reports filed with the Securities and Exchange Commission, particularly under "Risk Factors." Our actual results could differ materially from those discussed in the forward-looking statements.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “assume,” “believe,” “could,” “estimate,” “guidance,” “may,” “outlook,” “forecast,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” “plan,” “will” and similar references to future periods.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•

the impact of the COVID-19 pandemic (the "COVID-19 pandemic" or "Pandemic") and related measures taken by governmental or regulatory authorities to combat the ~~pandemic,~~Pandemic, including the impact of the ~~pandemic~~Pandemic and these measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance;

•

unpredictable weather and macroeconomic factors that may negatively impact the repair and remodel and new construction markets and the construction industry generally, especially in the state of Florida and the western United States, where the substantial portion of our sales are currently generated, and in the U.S. generally;

•

changes in raw material prices, especially for aluminum, glass and vinyl, including price increases due to the implementation of tariffs and other trade-related restrictions, ~~or pandemic-related~~Pandemic-related supply chain ~~interruptions;~~interruptions, or supply-chain interruptions from the conflict in Ukraine;

•

our dependence on a limited number of suppliers for certain of our key materials;

•

our dependence on our impact-resistant product lines, which increased with the Eco Acquisition, and contemporary indoor/outdoor window and door systems, and on consumer preferences for those types and styles of products;

•

the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our recent acquisitions, including Anlin, ~~NewSouth~~ and our Eco Acquisition;

•

our level of indebtedness, which increased in connection with our recent acquisition, ~~of NewSouth, and increased further in connection with~~including our Eco Acquisition, and the acquisition of Anlin;

•

increases in ~~bad debt~~credit losses from obligations owed to us by our customers in the event of a downturn in the home repair and remodel or new home construction channels in our core markets and our inability to collect such ~~debt;~~obligations from such customers;

•

the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisition ~~of NewSouth, and~~ of Anlin, and from our Eco Acquisition may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates;

•

increases in transportation costs, including increases in fuel prices;

•

our dependence on our limited number of geographically concentrated manufacturing facilities, which increased further due to our Eco Acquisition;

•

sales fluctuations to and changes in our relationships with key customers;

•

federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations;

•

risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by “hackers” and theft of data and information from our systems, and the risks that our

- 29 -

information technology systems do not function as intended or experience temporary or long-term failures to perform as intended;

•

product liability and warranty claims brought against us;

~~- 33 -~~

•

in addition to our acquisition ~~of NewSouth, and~~ of Anlin, and our Eco Acquisition, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected at the time we ~~acquired~~acquire it; and

•

the other risks and uncertainties discussed ~~under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarter ended October 2, 2021, and~~ under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended January ~~2, 2021~~1, 2022 and our other filings with the Securities and Exchange Commission.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

EXECUTIVE OVERVIEW

Sales and Operations

During the ~~third~~first quarter of ~~2021,~~2022, we experienced ~~increases in sales~~growth at both our Southeast and Western segments, as ~~demand in~~the momentum of growth we experienced over last year continued into 2022. Of our ~~key markets~~total net sales for the first quarter of ~~Florida continued~~2022 of $358.7 million, which increased 32.3% compared to ~~increase, and in~~ the ~~strong order entries we reported in prior quarters have translated into higher shipments~~first quarter of 2021, from $271.1 million in the 2021 ~~third quarter. We believe this increased demand is being driven by improved economic conditions~~first quarter, included growth both organically, and from acquisitions in 2021 and our markets in California have gained momentum since COVID restrictions were lifted, and our Texas and Arizona markets continued to strengthen. We continue to see strong demand in both our new construction and repair and remodel channels in the2021. Our Southeast regions which showed strong demand as compared to the challenging conditions of 2020 which were a result of the Pandemic. This strength has been seen in both our legacy brands and our 2021 Eco acquisition. Our sales increased due to the inclusion of thesegment's net sales ~~of our acquisition of Eco by $25~~were $271.8 million in the ~~third~~first quarter of ~~2021. Strength~~2022, compared to $233.6 million in the ~~housing sector and improving economic conditions in our key markets in the southeast and west U.S. continued to drive solid order entry as year-over-year orders were up 5% in the third~~first quarter of 2021, ~~compared to last year’s third~~an increase of $38.2 million, or 16.3%. This growth was largely organic, but for the sales of Eco being included for the entire first quarter ~~which included year-over-year order growth~~ of ~~31%~~2022, versus only the post-acquisition period in ~~our Western market, resulting in a 141% increase in backlog as of~~ the ~~end of the third~~first quarter of 2021 from February 1, 2021. Excluding Eco, our Southeast segment grew organically by 13.8%. Our Western segment's net sales were $86.9 million in the first quarter of 2022, compared to $37.5 million in the ~~third~~first quarter of ~~2020. Legacy Southeast business unit order entry decreased 8% year-over-year, as orders in~~2021, an increase of $49.4 million. Sales for the ~~2020 third~~first quarter ~~included the benefit~~ of ~~a then post-COVID sales promotion. However, legacy Southeast backlog was~~2022 of our Western segment includes acquisition growth from Anlin and CRi, but still ~~up 69% as of the end of the 2021 third quarter~~grew organically by 39.1% compared to last year's ~~third~~first quarter. We believe the organic growth we had in the first quarter of 2022 reflects the strength of our portfolio of brands across our entire geographic footprint.

~~We are optimistic that we will see this growth we have experienced continue in 2022, and we continue~~Our gross profit increased to ~~make strides in investing~~$134.6 million in the ~~resources necessary~~first quarter of 2022, producing a gross margin of 37.5%, compared to ~~meet this increasing demand,~~$94.0 million in the 2021 first quarter, and ~~face the headwinds~~a gross margin of 34.7%, an improvement in gross margin of 280 basis points from the pressure on our margins due to recruiting, training and workforce retention costs. Additionally, aluminum spot prices have increase significantly throughout the year, which leaves the unhedged portionsfirst quarter of ~~our expected aluminum usage exposed~~2021 to the ~~volatility~~first quarter of ~~changing aluminum prices,~~2022. We were able to produce this operational improvement despite headwinds of inflationary pressure being felt on material and labor costs, as well as ~~the increases in prices~~supply-chain challenges we have experienced in ~~many~~obtaining the required volumes of aluminum needed to meet demand. Our hedging programs have helped reduce the pricing impact of an extremely volatile commodity market, which we continue to monitor closely, and will take action needed to offset sharp increases in raw material spot prices, should any occur. Our Eco acquisition has provided additional glass manufacturing capacity, which has helped minimize the impacts of shortages of glass in our ~~other material costs, including glass, vinyl, hardware and supplier-based surcharges. As a result of these headwinds,~~industry. During the 2022 first quarter, we ~~announced a 3% surcharge~~have been focused on improving our manufacturing processes in ~~Florida for all existing and future orders that took effect~~order to reduce lead-times to meet the continued growing demand. Recent investments in ~~November 2021~~our team to help ~~offset these costs,~~them achieve higher talent levels have also helped generate improved operational efficiencies across our entire portfolio of brands, which we believe will ~~begin benefiting gross margin immediately and will~~ continue to benefit our gross margin ~~as we move~~ through the ~~completion~~balance of 2022.

One of the biggest events that occurred recently was the passage of Florida House Bill 7071, signed into law in early May 2022. This bill provides two-year tax relief to Florida residences who chose to "harden" their homes against the damaging effects of storms through investing in impact-resistant windows, doors, and other product categories. We're excited about this great benefit for Florida home owners which we believe will provide them with the incentive needed to improve the safety and value of their homes, and that their materials of choice will include impact-resistant windows and doors from our 2021 fiscal year. Additionally, we announced an additional , Additionally, we announced another 6% to 12% price increase for new orders beginning November 1, 2021, that we expect to begin to impact our results beginning in 2022 due to our lead times.Company's portfolio of Florida impact-resistant brands.

Because we believe housing demand in the United States will continue to be solid, we have determined to maintain our 2021 full-year sales guidance range of $1.10 billion to $1.20 billion, which was as of August 12, 2021. This range includes our Eco Acquisition from the date of our investment of February 1, 2021 at 100% of its sales.

- 3430 -

Performance Summary

The following table presents financial data derived from our unaudited condensed consolidated statements of operations as a percentage of total net sales for the periods indicated. The three-month periods ended ~~October~~April 2, ~~2021~~2022 and ~~October 3. 2020~~April 3, 2021 are composed of 13 ~~weeks. The nine-month period ended October 2, 2021 is composed of 39 weeks, whereas the nine-month period ended October 3, 2020 is composed of 40~~ weeks (in thousands, except percentages):

Three Months Ended

October 2,

October 3,

2021

2020

(unaudited)
Net sales

$
300,431

100.0 %

$
238,033

100.0 %
Cost of sales

196,228

65.3 %

151,097

63.5 %
Gross profit

104,203

34.7 %

86,936

36.5 %
Selling, general and administrative expenses

78,595

26.2 %

56,659

23.8 %
Restructuring costs and charges

—

-

321

0.1 %
Income from operations

25,608

8.5 %

29,956

12.6 %
Interest expense, net

7,686

2.6 %

6,954

2.9 %
Debt extinguishment costs

25,472

8.5 %

-

-
Income (loss) before income taxes

(7,550
)

(2.5)%

23,002

9.7 %
Income tax expense (benefit)

(2,410
)

(0.8)%

5,680

2.4 %
Net income (loss)

(5,140
)

(1.7)%

17,322

7.3 %
Less: Net income attributable to redeemable non-controlling interest

(677
)

(0.2)%

—

-
Net income (loss) attributable to the Company

$
(5,817
)

(1.9)%

$
17,322

7.3 %


	Nine Months Ended							Three Months Ended
	October 2,				October 3,			April 2,				April 3,
	2021				2020			2022				2021
	(unaudited)							(unaudited)
Net sales	$	857,023		100.0 %	$	661,020	100.0 %	$	358,662		100.0 %	$	271,092		100.0 %
Cost of sales		561,849		65.6 %		418,494	63.3 %		224,069		62.5 %		177,130		65.3 %

Gross profit		295,174		34.4 %		242,526	36.7 %		134,593		37.5 %		93,962		34.7 %

Selling, general and administrative expenses		224,106		26.1 %		164,848	24.9 %		95,882		26.7 %		69,766		25.7 %
Impairment of trade name		—		-		8,000	1.2 %
Restructuring costs and charges		—		-		4,227	0.6 %

Income from operations		71,068		8.3 %		65,451	9.9 %		38,711		10.8 %		24,196		8.9 %

Interest expense, net		22,968		2.7 %		20,979	3.2 %		7,080		2.0 %		7,457		2.8 %
Debt extinguishment costs		25,472		3.0 %		—	-

Income before income taxes		22,628		2.6 %		44,472	6.7 %		31,631		8.8 %		16,739		6.2 %

Income tax expense		4,260		0.5 %		9,351	1.4 %		7,805		2.2 %		3,944		1.5 %

Net income		18,368		2.1 %		35,121	5.3 %		23,826		6.6 %		12,795		4.7 %

Less: Net income attributable to redeemable non-controlling interest		(1,656	)	(0.2)%		—	-		(657	)	(0.2)%		(411	)	(0.2)%

Net income attributable to the Company		16,712		2.0 %		35,121	5.3 %		23,169		6.5 %		12,384		4.6 %

Change in redemption value of redeemable non-controlling interest		(4,528	)	(0.5)%		—	-		(2,136	)	(0.6)%		—		-

Net income attributable to common shareholders	$	12,184		1.4 %	$	35,121	5.3 %	$	21,033		5.9 %	$	12,384		4.6 %

- 3531 -

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED ~~OCTOBER~~APRIL 2, ~~2021~~2022 AND ~~OCTOBER~~APRIL 3, ~~2020~~2021

The three-month periods ended ~~October~~April 2, ~~2021~~2022 and ~~October~~April 3, ~~2020~~2021 are composed of 13 weeks each.

Net sales


	Three Months Ended							Three Months Ended
	October 2, 2021			October 3, 2020				April 2, 2022			April 3, 2021
	Net Sales		% of sales	Net Sales		% of sales	% change	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	255.2	84.9%	$	203.7	85.6%	25.2%	$	271.8	75.8%	$	233.6	86.2%	16.3%
Western segment		45.2	15.1%		34.3	14.4%	32.0%		86.9	24.2%		37.5	13.8%	132.0%

Total net sales	$	300.4	100.0%	$	238.0	100.0%	26.2%	$	358.7	100.0%	$	271.1	100.0%	32.3%

Net sales for the ~~third~~first quarter of ~~2021~~2022 were ~~$300.4~~$358.7 million, ~~a $62.4~~an $87.6 million, or ~~26.2%~~32.3%, increase in sales, from ~~$238.0~~$271.1 million in the ~~third~~first quarter of the prior year.

Net sales of our Southeast segment were $255.2 million in the third quarter of 2021, compared with $203.7 million in the 2020 third quarter, an increase of $51.5 million, or 25.2%. Southeast segment sales in the third quarter of 2021 includes $24.7 million from our acquisition of our 75% ownership stake in Eco inDuring the first quarter of 2021. Net sales of our Western segment were $45.2 million in the third quarter of 2021, compared with $34.3 million in the third quarter of 2020, an increase of $10.9 million, or 32.0%. Sales of our Western segment are composed of the sales of WWS, including sales from our CRi Acquisition, which totaled $4.1 million in the 2021 third quarter.

~~The $62.4 million increase in net sales for the third quarter of 2021 was primarily driven by organic~~2022, we experienced growth ~~and the effects of the recovery from the Pandemic,~~ at both our Southeast and Western segments, ~~and~~as the ~~inclusion in~~momentum of growth we experienced over last year continued into 2022. Of our total net sales for the ~~third~~first quarter of 2022 of $358.7 million, which increased 32.3% compared to the first quarter of 2021, offrom $271.1 million in the 2021 first quarter, included growth both organically, and from acquisitions in 2021. Our Southeast segment's net sales were $271.8 million in the first quarter of ~~our acquisition of Eco. Net sales of our Southeast segment for~~2022, compared to $233.6 million in the ~~third~~first quarter of 2021, ~~excluding~~an increase of $38.2 million, or 16.3%. This growth was largely organic, but for the sales of Eco being included for the entire first quarter of ~~$24.7~~2022, versus only the post-acquisition period in the first quarter of 2021 from February 1, 2021. Excluding Eco, our Southeast segment grew organically by 13.8%. Our Western segment's net sales were $86.9 million ~~increased $26.8 million, or 13.2% as~~in the first quarter of 2022, compared to $37.5 million in the ~~third~~first quarter of ~~2020.~~2021, an increase of $49.4 million. Sales for the first quarter of 2022 of our Western segment includes acquisition growth from Anlin and CRi, but still grew organically by 39.1% compared to last year's first quarter. We believe the organic ~~increase~~growth we had in ~~sales~~the first quarter of 2022 reflects the strength of our ~~Southeast segment is due to a resumption~~portfolio of ~~demand for~~brands across our products in both the new construction and repair and remodel markets that approached the pre-Pandemic strength that existed in early 2020. Our NewSouth direct-to-consumer brand also experienced solid organic growth in the 2021 third quarter, compared to last year’s third quarter. Our Western segment experienced strong growth in the third quarter of 2021, compared to the 2020 second quarter, which we believe continued to see a strengthening housing market in the western United States that began in late 2020, but also as the effects of the Pandemic, which appeared to be more pronounced in the West, lessened in the 2021 second quarter compared to last year. Sales of our Western segment include the increase from our CRi Acquisition, which totaled $4.1 million in the 2021 third quarter.entire geographic footprint.

Gross profit and gross margin

Gross profit was ~~$104.2~~$134.6 million in the ~~third~~first quarter of ~~2021,~~2022, an increase of ~~$17.3~~$40.6 million, or ~~19.9%~~43.2%, from ~~$86.9~~$94.0 million in the ~~third~~first quarter of ~~2020.~~2021. Our gross margin was ~~34.7%~~37.5% in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~36.5%~~34.7% in the prior year ~~third~~first quarter. The increases in gross profit and gross margin include the effects of price increase actions we took actions to offset the impacts of labor and material cost headwinds we have experienced for several quarters. During the ~~third~~first quarter of ~~2021,~~2022, we continued to invest in our labor talent which helped generate operational efficiencies across all our businesses in response to increasing demand and ~~a resulting increase in~~believe these actions will continue to benefit our backlog of orders, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in gross margin ~~in the 2021 third quarter~~ as compared to the third quarter of 2020. Gross margin was also negatively impacted by inflationary conditions on materials, labor and material delivery costs, which continued into the third quarter of 2021 from the 2021 second quarter. Earlier this year, we ~~announced price increases to attempt~~try to offset ~~these inflationary conditions, which we expect will begin to offset these cost~~the impacts ~~during our 2021 second half. We also implemented a 3% surcharge on all existing orders in Florida which took effect in November 2021 to immediately address these~~of rising ~~operating~~ costs ~~which we believe began benefiting gross margin in the late third quarter of 2021~~for materials and labor, and will continue to ~~benefit gross margin as we move through the completion of~~grow our 2021 fiscal year. Additionally, we announced another 6% to 12% price increase for new orders beginning November 1, 2021, that we anticipate our results in the beginning of 2022. Gross margin in the third quarter of 2021 benefited from improved operating efficiencies in our Western segment, and the addition of and accretion from our acquisitions of Eco and CRi.company with high-quality talent.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were ~~$78.6~~$95.9 million in the ~~third~~first quarter of ~~2021,~~2022, an increase of ~~$21.9~~$26.1 million, from ~~$56.7~~$69.8 million in the ~~third~~first quarter of ~~2020.~~2021. SG&A in the ~~third~~first quarter of ~~2021~~2022 was ~~26.2%~~26.7% of net sales, compared to ~~23.8%~~25.7% of net sales in the ~~third~~first quarter of ~~2020.~~2021. The increase in SG&A in the first quarter of 2022, compared to last year's first quarter is partially due to the inclusion of SG&A from our ~~second quarter~~ 2021 acquisition of ~~Eco,~~Anlin, which ~~totaled $6.5 million. Excluding the~~added $9.2 million of SG&A ~~of $6.5 million, and sales of Eco of $24.7 million, SG&A as a percentage of sales would be 26.2%.~~

~~- 36 -~~

Additionally, there were increases compared to the third quarter of 2020 in several other categories, including Anlin Acquisition costs, which totaled $1.0 million, higher pandemic-response and inefficiency costs in the ~~third~~2022 first quarter, and included $2.8 million of ~~2021 compared~~non-cash amortization expense relating to its intangible assets. However, the ~~third quarter of 2020~~year-over-year increase in SG&A was also driven by increasing distribution and variable overhead costs due to the ~~2021 Delta variant resurgence, depreciation, stock-based compensation, as well as additional costs from investing~~increase in ~~our strategic selling and marketing initiatives, as well as higher distribution costs on increased sales levels.~~

~~Restructuring~~sales. Increasing fuel costs and ~~charges~~

~~In April 2020,~~ the Company’s management approved a plan to consolidate its manufacturing operations in Florida, which included exiting our manufacturing facility in Orlando, Florida, where our WinDoor and Eze-Breeze products were assembled and relocateinflationary conditions we have experienced over the manufacturing of those products to our Venice and Tampa, Florida plants, respectively. We ceased production at the Orlando facility during June 2020. As a result of this consolidation, we recorded restructuring costs and charges totaling $0.3 million in the three months ended October 3, 2020.last few quarters have also impacted SG&A year-over-year.

Income from operations

Income from operations was ~~$25.6~~$38.7 million in the ~~third~~first quarter of ~~2021, a decrease~~2022, an increase of ~~$4.4~~$14.5 million, from ~~$30.0~~$24.2 million in the ~~third~~first quarter of ~~2020.~~2021. Income from operations in the ~~third~~first quarter of ~~2021~~2022 includes ~~$20.7~~$25.6 million from our Southeast segment and nearly ~~$4.9~~$13.2 million from our Western segment, compared to ~~$25.7~~$18.7 million and ~~$4.5~~$5.5 million from our Southeast and Western segments, respectively, in the ~~third~~first quarter of ~~2020,~~2021, all after allocation of corporate operating costs in both ~~periods, but also included a restructuring costs and charges adjustment of $0.3 million relating to our Florida plant consolidation taken in the 2020 third quarter relating to our Southeast segment.~~periods.

The ~~decrease~~increase in income from operations was related to the benefit from the leverage from higher sales in the ~~third~~first quarter of ~~2021~~2022 compared to last year’s ~~third~~first quarter, as well as the benefits of the continued efficiency improvements at both our Southeast and Western ~~segment, being~~segments, more than ~~offset by~~offsetting the rising costs for materials in ~~both~~ aluminum and glass, including the increasing costs of distribution being passed onto us by our vendors, and the continuing costs of attracting, training and retaining an experienced labor force.

In the third quarter of 2021 compared to last year’s third quarter, we experienced efficiency improvements at our Western segment which benefitted income from operations in the third quarter of 2021 compared to the third quarter of 2020. However, during the first half of 2021, in response to increasing demand and a resulting increase in our backlog of orders, especially in the southeast, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in operating income in the third quarter of 2021 as compared to the third quarter of 2020, especially in the southeast. Operating income was also negatively impacted by inflationary conditions on materials, labor and material delivery costs, which continued to be prevalent in the third quarter of 2021. Earlier this year, we announced price increases to attempt to offset these inflationary conditions, which we expect will begin to offset these cost impacts later in 2021. We also implemented a 3% surcharge on all existing orders in Florida which took effect in November 2021 to immediately address these rising operating costs which we believe began benefiting operating income in the late third quarter of 2021, and will continue to benefit operating income as we move through the completion of our 2021 fiscal year. Additionally, we announced another 6% to 12% price increase for new orders beginning November 1, 2021, that we anticipate impacting our results in the beginning of 2022. Income from operations in the first nine months of 2021 also includes the operating profits of our February 1, 2021, Eco acquisition, and May 2, 2021 CRi acquisition.- 32 -

~~Income from operations in the third quarter of 2021 also includes the operating profits of both our Eco and CRi acquisitions.~~

Interest expense, net

Interest expense was ~~$7.7~~$7.1 million in the ~~third~~first quarter of ~~2021, an increase~~2022, a decrease of ~~$0.7~~$0.4 million, or ~~10.5%~~5.1%, from ~~$7.0~~$7.5 million in the ~~third~~first quarter of 2020. Interest expense in the third quarter of 2021 includes an increase in interest expense due to the issuance of the Second Additional Senior Notes totaling $60.0 million effective on January 25, 2021, which we used to finance a portion of the purchase price for our investment in Eco. This increase was partially offset by a decrease in interest costs relating to the amortization of the $3.3 million premium we received on the Second Additional Senior Notes.

~~While the~~2021. The redemption of the lower amount of $425.0 million of higher rate 6.75% 2018 Senior Notes due 2026, with the higher amount of $575.0 million of lower rate 4.375% 2021 Senior Notes due 2029 ~~will be expected to impact~~in 2021 primarily resulted in a slightly lower level of interest expense in ~~future periods,~~ the ~~lateness of such actions in the 2021 third quarter did not have a significant impact on interest expense, net, in the third~~first quarter of ~~2021 compares~~2022 compared to the ~~third~~first quarter of ~~2020.~~

~~Debt Extinguishment Costs~~

~~Debt extinguishment costs totaled $25.5 million in the three months ended October 2,~~ 2021. On September 24, 2021, we completed the issuance of $575.0 million aggregate principal amount of 4.375% 2021 Senior Notes due 2029, issued at 100% of their principal amount. Proceeds from the 2021 Senior Notes due 2029 were used, in part, to redeem in full the $425.0 million of 2018 Senior Notes due 2026, including the related fees, costs and prepayment call premium discussed further below, prepay the outstanding term loan

~~- 37 -~~

borrowings under the 2016 Credit Agreement of $54.0 million and the related fees and costs, and finance the Anlin Acquisition. See Note 18, Subsequent Event, for a discussion of the Anlin Acquisition. Redemption in-full of the $425.0 million of 2018 Senior Notes due 2026, including accrued and unpaid interest through September 27, 2021, also included a pre-payment call premium of 105.063% of face value, which totaled $21.5 million and is classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the three months ended October 2, 2021. The remainder of debt extinguishment costs of $4.0 million is composed of $9.4 million of unamortized third-party deferred costs and lender fees relating to the 2021 Senior Notes due 2026, including the First and Second Add-On Notes, offset by $5.4 million of unamortized premiums we received from the First and Second Add-On Notes.

Income tax expense

We had an income tax ~~benefit~~expense of ~~$2.4~~$7.8 million for the three months ended ~~October~~April 2, ~~2021,~~2022, compared with an income tax expense of ~~$5.7~~$3.9 million for the three months ended ~~October~~April 3, ~~2020.~~2021. Our effective tax rate for the three months ended ~~October~~April 2, ~~2021,~~2022, was ~~a benefit~~an expense rate of ~~31.9%~~24.7%, and was an expense rate of ~~24.7%~~23.6% for the three months ended ~~October~~April 3, ~~2020.~~2021. Our income tax expense for the ~~three months~~three-month periods ended ~~October~~April 2, 2022, and April 3, 2021, includes ~~$449~~$505 thousand and $305 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco.

~~- 38 -~~

Income tax expense in the three months ended ~~October~~April 2, ~~2021~~2022 and ~~October~~April 3, ~~2020~~2021 include discrete items of income tax benefit relating to excess tax benefits from the ~~exercises of stock options and~~ lapses of restrictions on stock awards, which totaled ~~$14~~$136 thousand in the three months ended ~~October~~April 2, ~~2021,~~2022, and ~~zero~~$95 thousand in the three months ended ~~October~~April 3, ~~2020. Other~~2021. The effect of these discrete items included in both periods include true-ups of research and development tax credit estimates to actual tax credits claimed, and other tax return filing related true-ups. Excluding discrete items of income tax, theon our effective tax rates for ~~the three months ended October 2, 2021, and October 3, 2020, would have been an income tax benefit rate of 30.8% and an income tax expense rate of 24.7%, respectively.~~these periods was not significant.

In September 2021, the state of Florida announced that the corporate income tax rate for the 2021 tax year was being lowered from its then current level of 4.458% to 3.535%. However, for 2022, Florida's corporate income tax rate returned to its statutory level before the passage of the Tax Cuts and Jobs Act, which is 5.5%. As such, we ~~have~~ adjusted our annual effective tax rate for ~~2021~~2022 to include this increase in rate in Florida, where a substantial portion of our business is apportioned, to an estimated combined statutory federal and state rate of ~~24.2%~~25.7% from ~~its previous~~our estimate in 2021 of ~~24.7%~~24.2%. During the first three months of 2022 or 2021, we were not required to make any payments of estimated federal or state income taxes.

Net income attributable to redeemable non-controlling interest

Net income attributable to redeemable non-controlling interest for the three months ended ~~October~~April 2, ~~2021,~~2022, was $0.7 million, compared to $0.4 million for the three months ended April 3, 2021, and represents the share of the net income of Eco for the period, attributable to the 25% interest of Eco not acquired by the Company. ~~There was no redeemable non-controlling interest in the third quarter of 2020.~~

~~RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 2, 2021 AND OCTOBER 3, 2020~~

The nine-month period ended October 2, 2021 is composed of 39 weeks, whereas the nine-month period ended October 3, 2020 was composed of 40 weeks. We do not believe that this difference significantly affects comparability of the following results of operations.

~~Net sales~~

Nine Months Ended

October 2, 2021

October 3, 2020

Net Sales

% of sales

Net Sales

% of sales

% change
By segment:

Southeast segment

$
731.2

85.3%

$
560.2

84.7%

30.5%
Western segment

125.8

14.7%

100.8

15.3%

24.8%

Total net sales

$
857.0

100.0%

$
661.0

100.0%

29.7%

~~Net sales for the first nine months of 2021 were $857.0 million, a $196.0 million, or 29.7%, increase~~Change in ~~sales, from $661.0 million in the first nine month of the prior year.~~

Net sales of our Southeast segment were $731.2 million in the first nine months of 2021, compared with $560.2 million in the 2020 first nine months, an increase of $171.0 million, or 30.5%. Southeast segment sales in the first nine month of 2021 includes $64.3 million from our acquisition of Eco. Net sales of our Western segment were $125.8 million in the first nine months of 2021, compared with $100.8 million in the first nine months of 2020, an increase of $25.0 million, or 24.8%. Sales of our Western segment are composed of the sales of WWS, including sales from our CRi Acquisition, which totaled $7.2 million in the 2021 first nine months.

The $196.0 million increase in net sales for the first nine of 2021 was primarily driven by organic growth, and the effects of the recovery from the Pandemic, at both our Southeast and Western segments, and the inclusion in the first nine months of 2021 of the net sales of our acquisition of Eco. Net sales of our Southeast segment for the first nine of 2021, excluding the sales of Eco of $64.3 million, increased $106.7 million, or 19.0% as compared to the first nine months of 2020. We believe the organic increase in sales of our Southeast segment is due to a resumption of demand for our products in both the new construction and repair and remodel markets that approached the pre-Pandemic strength that existed in early 2020. Our NewSouth direct-to-consumer brand also experienced solid organic growth in the 2021 first nine months, compared to last year’s first nine months. Our Western segment experienced strong growth in the first nine months of 2021, compared to the 2020 first nine months, which we believe continued to see a strengthening housing market in the western United States that began in late 2020, but also as the effects of the Pandemic, which appeared to be more pronounced in the West, lessened in 2021 compared to last year. Sales of our Western segment include the increase from our CRi Acquisition, which totaled $7.2 million in the five-month post-acquisition period in 2021.

~~Gross profit and gross margin~~

Gross profit was $295.2 million in the first nine months of 2021, an increase of $52.6 million, or 21.7%, from $242.5 million in the first nine months of 2020. Our gross margin was 34.4% in the first nine month of 2021, compared to 36.7% in the prior year first nine months. During the second quarter of 2021, in response to increasing demand and a resulting increase in our backlog of orders, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain

~~- 39 -~~

experience in their new roles. These incremental investments resulted in a reduction in gross margin in the first nine months of 2021 as compared to the first nine months of 2020. Gross margin was also negatively impacted by inflationary conditions on materials, labor and material delivery costs, which continued to be prevalent in the first nine months of 2021. Earlier this year, we announced price increases to attempt to offset these inflationary conditions, which we expect will begin to offset these cost impacts later during our 2021 second half. We also implemented a 3% surcharge on all existing orders in Florida which took effect in November 2021 to immediately address these rising operating costs which we believe began benefiting gross margin in the late third quarter of 2021 and will continue to benefit gross margin as we move through the completion of our 2021 fiscal year. Additionally, we announced another 6% to 12% price increase for new orders beginning November 1, 2021, that we anticipate our results in the beginning of 2022. Gross margin in the first nine months of 2021 benefited from improved operating efficiencies in our Western segment, and the addition of and accretion from our acquisitions of Eco and CRi.

~~Selling, general and administrative expenses~~

SG&A expenses were $224.1 million in the first nine months of 2021, an increase of $59.3 million, from $164.8 million in the first nine months of 2020. SG&A in the first nine months of 2021 was 26.1% of net sales, compared to 24.9% of net sales in the first nine months of 2020. The increase in SG&A is partially due to the inclusion of SG&A from our acquisition of Eco in the 2021 first nine months, which totaled $15.8 million. Excluding the SG&A of $15.8 million of ECO SG&A in the first nine months of 2021, and sales of Eco of $64.3 million, SG&A as a percentage of sales would be 26.3%.

Additionally, there were increases compared to the third quarter of 2020 in several other categories, including Anlin Acquisition costs, which totaled $1.0 million, additional pandemic-response and inefficiency costs in the third quarter of 2021 due to the 2021 Delta variant resurgence, depreciation, stock-based compensation, as well as additional costs from investing in our strategic selling and marketing initiatives, as well as higher distribution costs on increased sales levels.

~~Impairment of trade name~~

There was an impairment of our WWS trade name of $8.0 million in the nine months ended October 3, 2020. Following an increase in net sales of 14.3% in the first quarter of 2020, compared to the first quarter of 2019, net sales at our WWS reporting unit decreased 19.3% in the second quarter of 2020 compared to the 2019 second quarter. As a result of this decrease in net sales, as well as continued deterioration in macro-economic conditions in our core western markets relating to the Pandemic, we determined to complete an interim impairment test of our WWS trade name as of October 3, 2020, which included decreases in modeling assumptions for net sales of our WWS reporting unit for our 2020 and 2021 fiscal years. Based on our revised modeling, we concluded that the fairredemption value of ~~our WWS trade name was less than its carrying value, which resulted in an impairment of our WWS trade name of $8.0 million in the first nine months of 2020.~~

~~Restructuring costs and charges~~

In April 2020, the Company’s management approved a plan to consolidate its manufacturing operations in Florida, which included exiting our manufacturing facility in Orlando, Florida, where our WinDoor and Eze-Breeze products were assembled and relocate the manufacturing of those products to our Venice and Tampa, Florida plants, respectively. We ceased production at the Orlando facility during June 2020. As a result of this consolidation, we recorded restructuring costs and charges totaling $4.2 million in the first nine months ended October 3, 2020.

~~Income from operations~~

Income from operations was $71.1 million in the first nine months of 2021, an increase of $5.6 million, from $65.5 million in the first nine months of 2020. Income from operations in the first nine months of 2021 includes $55.0 million from our Southeast segment and $16.1 million from our Western segment, compared to $70.3 million and $7.4 million from our Southeast and Western segments, respectively, in the first nine months of 2020, all after allocation of corporate operating costs in both periods, but also included an impairment charge of $8.0 million relating to our WWS trade name of our Western segment, and restructuring costs and charges of $4.2 million relating to our Florida plant consolidation actions taken in the 2020 first nine months relating to our Southeast segment. The increase in income from operations was also related to leverage from higher sales in the first nine months of 2021 compared to last year’s first nine months, as well as continued efficiency improvements at our Western segment. However, during the second quarter of 2021, in response to increasing demand and a resulting increase in our backlog of orders, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in operating income in the first nine months of 2021 as compared to the first nine months of 2020. Operating income was also negatively impacted by inflationary conditions on materials, labor and material delivery costs, which continued to be prevalent in the first nine months of 2021. Earlier this year, we announced price increases to attempt to offset these inflationary conditions, which we expect will begin to offset these cost impacts later in our 2021 second half. We also implemented a 3% surcharge on all existing orders in Florida which took effect in November 2021 to immediately address these rising operating costs which we believe began benefiting operating income in the late third quarter of 2021, and will continue to benefit operating income as we move through the completion of our 2021 fiscal year. Additionally, we announced another 6% to 12% price increase for new orders beginning November 1, 2021, that we anticipate impacting our results in the beginning of 2022. Income from

~~- 40 -~~

~~operations in the first nine months of 2021 also includes the operating profits of our February 1, 2021, Eco acquisition, and May 2, 2021 CRi acquisition.~~

~~Interest expense, net~~

Interest expense was $23.0 million in the first nine months of 2021, an increase of $2.0 million, or 9.5%, from $21.0 million in the first nine months of 2020. Interest expense in the first nine months of 2021 includes an increase in interest expense due to the issuance of the Second Additional Senior Notes totaling $60.0 million effective on January 25, 2021, which we used to finance a portion of the purchase price for our investment in Eco. This increase was partially offset by a decrease in interest costs relating to the amortization of the $3.3 million premium we received on the Second Additional Senior Notes.

While the redemption of the $425.0 million of 6.75% 2018 Senior Notes due 2026, with the $575.0 million of 4.375% 2021 Senior Notes due 2029 will be expect to impact interest expense in future periods, the lateness of such actions in the 2021 third quarter did not have a significant impact on interest expense, net, in the third quarter of 2021 compares to the third quarter of 2020.

~~Debt Extinguishment Costs~~

Debt extinguishment costs totaled $25.5 million in the nine months ended October 2, 2021. On September 24, 2021, we completed the issuance of $575.0 million aggregate principal amount of 4.375% 2021 Senior Notes due 2029, issued at 100% of their principal amount. Proceeds from the 2021 Senior Notes due 2029 were used, in part, to redeem in full the $425.0 million of 2018 Senior Notes due 2026, including the related fees, costs and prepayment call premium discussed further below, prepay the outstanding term loan borrowings under the 2016 Credit Agreement of $54.0 million and the related fees and costs, and finance the Anlin Acquisition. See Note 18, Subsequent Event, for a discussion of the Anlin Acquisition. Redemption in-full of the $425.0 million of 2018 Senior Notes due 2026, including accrued and unpaid interest through September 27, 2021, also included a pre-payment call premium of 105.063% of face value, which totaled $21.5 million and is classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the nine months ended October 2, 2021. The remainder of debt extinguishment costs of $4.0 million is composed of $9.4 million of unamortized third-party deferred costs and lender fees relating to the 2021 Senior Notes due 2026, including the First and Second Add-On Notes, offset by $5.4 million of unamortized premiums we received from the First and Second Add-On Notes.

~~Income tax expense~~

Our income tax expense was $4.3 million for the nine months ended October 2, 2021, compared with income tax expense of $9.4 million for the nine months ended October 3, 2020. Our effective tax rate for the nine months ended October 2, 2021, was an expense rate of 18.8%, and was an expense rate of 21.0% for the nine months ended October 3, 2020. Our income tax expense for the nine months ended October 2, 2021 includes $1.2 million relating to our 75% share of the pre-tax earnings of Eco.

Income tax expense in the nine months ended October 2, 2021 and October 3, 2020 include discrete items of income tax benefit relating to excess tax benefits from the exercises of stock options and lapses of restrictions on stock awards, which totaled $714 thousand in the nine months ended October 2, 2021, and $737 thousand in the nine months ended October 3, 2020. The nine-month period ended October 3, 2020 also included the benefit of a refund from the state of Florida relating to excess taxes received by the state caused by the Tax Cuts and Jobs Act of 2017, which totaled $553 thousand, net of its Federal tax effect. Other discrete items included in both periods include true-ups of research and development tax credit estimates to actual tax credits claimed, and other tax return filing related true-ups. Excluding discrete items of income tax, the effective tax rates for the nine months ended October 2, 2021, and October 3, 2020, would have been income tax expense rates of 21.9% and 24.6%, respectively.

In September 2021, the state of Florida announced that the corporate income tax rate for the 2021 tax year was being lowered from its current level of 4.458% to 3.535%. As such, we have adjusted our annual effective tax rate for 2021 to include an estimated combined statutory federal and state rate of 24.2% from its previous estimate of 24.7%.

~~Net income attributable to~~ redeemable non-controlling interest

~~Net income attributable to~~The change in the redemption value of the redeemable non-controlling interest for the ~~nine~~three-month period ended April 2, 2022, was $2.1 million, compared to no adjustment in the three months ended ~~October 2, 2021, was $1.7 million and represents the share~~April 3, 2021. See Note 17 in Part I, Item 1, for a further discussion of the ~~net income~~change in the redemption value of ~~Eco for~~ the ~~period, attributable to the 25% interest of Eco not acquired by the Company. There was no~~ redeemable non-controlling ~~interest in the first nine months of 2020.~~interest.

- 4133 -

LIQUIDITY AND CAPITAL RESOURCES

Consolidated Cash Flows

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, but there can be no assurance that will be the case in future periods. Our primary capital requirements are to fund working capital needs, meet required debt service payments on our credit facilities and fund capital expenditures.

The following table summarizes our cash flow results for the first ~~nine~~three months of ~~2021~~2022 and ~~2020:~~2021:

Components of Cash Flows

Nine Months Ended

October 2,

October 3,

(in millions)

2021

2020

Cash provided by operating activities

$
19.8

$
65.4

Cash used in investing activities

(132.0
)

(105.1
)
Cash provided by financing activities

126.6

41.8

Increase in cash and cash equivalents

$
14.4

$
2.1


	Components of Cash Flows
	Three Months Ended
	April 2,			April 3,
(in millions)	2022			2021
Cash provided by (used in) operating activities	$	17.3		$	(1.4	)
Cash used in investing activities		(8.2	)		(100.8	)
Cash (used in) provided by financing activities		(1.7	)		60.9

Increase (decrease) in cash and cash equivalents	$	7.4		$	(41.3	)

Operating activities. Cash provided by operating activities during the first ~~nine~~three months of ~~2021~~2022 was ~~$19.8~~$17.3 million, compared to cash ~~provided~~used in operating activities of ~~$65.4~~$1.4 million in the first ~~nine~~three months of ~~2020.~~2021. The ~~decrease~~increase in cash provided by operating activities for the first ~~nine~~three months of ~~2021,~~2022, as compared to the first ~~nine~~three months of ~~2020,~~2021, of ~~$45.6~~$18.7 million, was due to the factors set forth in the table below.

Direct cash flows from operations for the first ~~nine~~three months of ~~2021~~2022 and ~~2020~~2021 are as follows:


	Direct Operating Cash Flows						Direct Operating Cash Flows
	Nine Months Ended						Three Months Ended
	October 2,			October 3,			April 2,			April 3,
(in millions)	2021			2020			2022			2021
Collections from customers	$	806.8		$	651.7		$	332.9		$	245.0
Other collections of cash		9.5			3.7			4.5			3.9
Disbursements to vendors		(537.9	)		(410.6	)		(165.0	)		(163.2	)
Personnel related disbursements		(213.9	)		(151.2	)		(141.7	)		(74.4	)
Income taxes paid, net		(12.4	)		(3.3	)
Debt service payments		(32.4	)		(24.8	)		(13.5	)		(12.8	)
Other cash activity, net		0.1			(0.1	)		0.1			0.1
Cash from operations	$	19.8		$	65.4

Cash provided by (used in) operations							$	17.3		$	(1.4	)

Inventory as of ~~October~~April 2, ~~2021,~~2022, was ~~$79.2~~$97.4 million, compared to ~~$60.3~~$91.4 million at January ~~2, 2021,~~1, 2022, an increase of ~~$18.9~~$6.0 million. Inventory at ~~October~~April 2, ~~2021~~2022 includes ~~$7.3~~$8.7 million relating to our investment in ~~Eco.~~

During the first nine months of 2021 we made payments of estimated taxes totaling $12.4 million, which included $8.3 million in Federal estimated income taxes with the remainder to various states, primarily Florida. During the three months ended October 3, 2020, we made payments of estimated Federal and state income taxes totaling $4.0 million. We made no payments of estimated Federal or state income taxes prior to the third quarter of 2020, as the deadlines for such payments to the United States government, and the majority of states in which we have nexus, which followed the payment deadline extension of the CARES Act, had been deferred until July 15, 2020. However, we received a refund from the state of Florida relating to excess taxes received by the state caused by the Tax Cuts and Jobs Act of 2017, which was $700 thousand, before Federal effect.Anlin.

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 a significant portion of our products are made-to-order, we have a low amount of 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 ~~$132.0~~$8.2 million for the first ~~nine~~three months of ~~2021,~~2022, compared to cash used in investing activities of ~~$105.1~~$100.8 million for the first ~~nine~~three months of ~~2020, an increase~~2021, a decrease in cash used in investing activities of ~~$26.9~~$92.6 million.

~~- 42 -~~

There was no cash used to acquire businesses in the first three months of 2022. Cash used to acquire businesses in the first ~~nine~~three months of 2021 totaled ~~$106.5~~$94.3 million, ~~which included $94.4 million~~related to ~~invest in Eco, and $12.1 million to acquire CRi, compared with cash used in the first nine months~~our acquisition of ~~2020 to acquire NewSouth of $90.4 million.~~Eco. There was ~~also~~ an increase in cash used in ~~investing activities due to an increase in~~ capital expenditures of ~~$10.3~~$1.7 million, which went from ~~$15.4~~$6.5 million in the first ~~nine~~three months of ~~2020,~~2021, to ~~$25.7~~$8.2 million in the first ~~nine~~three months of ~~2021.~~2022. Proceeds from the sales of assets was less than ~~$0.2~~$0.1 million in both the first ~~nine~~three months of ~~2021, compared to $0.7 million in the first nine months of 2020, a decrease in cash provided of $0.5 million.~~

~~- 43 -~~

~~In early 2020, management made the decision to decrease spending on a majority of capital projects as part of its cash preservation strategy due to the uncertainty around the Pandemic~~2022 and its potential impact to the Company’s liquidity. By the end of 2020, the Company’s management had begun funding certain previously deferred capital projects in view of the increased order entry, sales, cash position and overall liquidity the Company experienced, and has continued to return capital spending to near pre-Pandemic levels.2021.

Financing activities. Cash ~~provided~~used in financing activities was ~~$126.6~~$1.7 million in the first ~~nine~~three months of ~~2021,~~2022, compared to cash provided in financing activities of ~~$41.8~~$60.9 million in the first ~~nine~~three months of ~~2020, an increase~~2021, a change in cash provided ~~of $84.8~~to cash used in financing activities totaling $62.6 million. In the first ~~nine~~three months of 2021, we issued ~~$575.0 million in 4.375% 2021 Senior Notes due 2029, as well as~~ the $60.0 million of Second Additional Senior Notes, ~~including~~with a

- 34 -

premium of $3.3 million, ~~with the Second Additional Notes,~~ which provided proceeds ~~from issuances of senior notes in the nine months ended October 2, 2021~~ totaling ~~$638.3~~$63.3 million. Proceeds from the 2021 Senior Notes due 2029 were used, in part, to redeem in full the $425.0 million of 2018 Senior Notes due 2026, plus a pre-payment call premium of 105.063% of face value, which totaled $21.5 million, classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the three and nine months ended October 2, 2021. We also prepaid the outstanding term loan borrowings under the 2016 Credit Agreement of $54.0 million. ProceedsThe proceeds of $63.3 million from the issuance of the ~~$60.0 million in~~ Second Additional Senior Notes, including a premium of $3.3 million, were used to partially fund our acquisition of Eco. In the first nine months of 2020, we issued the First Additional Senior Notes, which provided proceeds of $53.2 million, including a premium of $3.2 million. Proceeds from the issuance of the First Additional Senior Notes were used to partially fund our acquisition of ~~NewSouth.~~Eco.

We paid financing costs totaling ~~$10.4~~$1.4 million in the first ~~nine~~three months of 2021, including financing costs relating to bank fees and professional services costs relating to the offering and issuance of the 2021 Senior Notes due 2026 totaling $8.6 million, which included a 1.25% lender spread on the total principal value of the 2021 Senior Notes due 2029, or $7.2 million, and $1.4 million of other costs. We also paid $0.4 million in financing costs relating to the Fourth Amendment of the 2016 Credit Agreement. We also paid $1.4 million in the first nine months of 2021 related to the issuance of the Second ~~Additional Senior Notes, compared to $1.3 million in the first nine month of 2020, related to the issuance of the First~~ Additional Senior Notes. Taxes paid relating to common stock withheld from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards were ~~$1.2~~$1.7 million in the first ~~nine~~three months of ~~2021,~~2022, versus ~~$0.8~~$1.0 million in the first ~~nine~~three months of ~~2020,~~2021, an increase in cash used of ~~$0.4~~$0.7 million. Proceeds from the exercises of stock options for the first nine months of 2021 was $0.1 million, compared to proceeds of $0.5 million in the first nine months of 2020, a decrease in cash provided from the exercise of stock options of $0.4 million. There were proceeds from stock issued under our 2019 Employee Stock Purchase Plan of $0.2 million during the first nine months of 2021, compared to $0.1 million during the first nine months of 2020.

Capital Resources and Debt Covenant

2021 Senior Notes due 2029

The 2021 Senior Notes due 2029 mature on October 1, 2029. Interest on the 2021 Senior Notes due 2029 is payable semi-annually, in arrears, beginning on April 1, 2022, with interest accruing at a rate of 4.375% per annum from September 24, 2021. We incurred financing costs relating to bank fees and professional services costs relating to the offering and issuance of the 2021 Senior Notes due ~~2026~~2029 totaling ~~$8.6~~$8.7 million, which included a 1.25% lender spread on the total principal value of the 2021 Senior Notes due 2029, or $7.2 million, and ~~$1.4~~$1.5 million of other costs, all of which are being amortized under the effective interest method. ~~See “Deferred Financing Costs” below.~~

~~- 44 -~~

As of ~~October~~April 2, ~~2021,~~2022, the face value of debt outstanding under the ~~2018~~2021 Senior Notes due ~~2026~~2029 was $575.0 million, and interest began accruing on September 24, 2021. Proceeds from the 2021 Senior Notes due 2029 were used, in part, to redeem in full the $425.0 million of 2018 Senior Notes due 2026, including the related fees, costs and the prepayment call premium ~~discussed further below,~~of $21.5 million, representing 5.063% of the $425.0 million face value then outstanding, prepay the outstanding term loan borrowings under the 2016 Credit Agreement of $54.0 million and the related fees and costs, and finance the Anlin Acquisition ~~subsequent to~~in the ~~end of the third~~fourth quarter of 2021. See Note ~~18, Subsequent Event,~~6, Acquisitions, for a discussion of the Anlin Acquisition.

~~2018 Senior Notes due 2026~~

On August 10, 2018, we completed the issuance of $315.0 million aggregate principal amount of 6.75% senior notes (“2018 Senior Notes due 2026”), issued at 100% of their principal amount. The 2018 Senior Notes due 2026 were jointly and severally and fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s existing and future restricted subsidiaries, other than any restricted subsidiary of the Company that does not guarantee the existing senior secured credit facilities or any permitted refinancing thereof. The 2018 Senior Notes due 2026 were senior unsecured obligations of the Company and the guarantors, respectively, and ranked pari passu in right of payment with all existing and future senior debt and senior to all existing and future subordinated debt of the Company and the guarantors. The 2018 Senior Notes due 2026 were offered under Rule 144A of the Securities Act, and in transactions outside the United States under Regulation S of the Securities Act, and were not registered under the Securities Act.

On January 24, 2020, we completed an add-on issuance of $50.0 million aggregate principal amount of 6.75% 2018 Senior Notes due 2026, or the First Additional Senior Notes, issued at 106.375% of their principal amount, resulting in a premium to us of $3.2 million. The First Additional Senior Notes were part of the same issuance of, and rank equally and form a single series with, the 2018 Senior Notes due 2026. Proceeds from the First Additional Senior Notes, including premium, were used, together with cash on hand, to pay the $90.4 million purchase price in the NewSouth Acquisition.

On January 25, 2021, we completed a second add-on issuance of $60.0 million aggregate principal amount of 6.75% 2018 Senior Notes due 2026, or the Second Additional Senior Notes, issued at 105.5% of their principal amount, resulting in a premium to us of $3.3 million. The Second Additional Notes were part of the same issuance of, and rank equally and form a single series with, the 2018 Senior Notes due 2026. Proceeds from the Second Additional Senior Notes, including premium, were used, together with $31.1 million in cash on hand, to pay the $94.4 million cash portion of the $100.5 million purchase price in the ECO Acquisition. The common stock portion of the purchase consideration was represented by the issuance of 357,797 shares of PGT Innovations, Inc. common stock on February 1, 2021, with a then-current value of $21.34 per share, which we discounted by an estimate of 20% for lack of marketability, as the common stock is are legally restricted from being sold by the recipient for a three-year period from February 1, 2021.

The 2018 Senior Notes due 2026 were to mature on August 10, 2026. However, effective on September 27, 2021, using proceeds from the issuance of the $575.0 million 2021 Senior Notes due 2029, discussed above, we redeemed in-full the $425.0 million of 2018 Senior Notes due 2026, including accrued and unpaid interest through September 27, 2021, which totaled $4.5 million, and a pre-payment call premium of 105.063% of face value, which totaled $21.5 million and are classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the three and nine months ended October 2, 2021.

2016 Credit Agreement due 2024

~~- 45 -~~

annually during its six-year term, and a $40.0 million revolving credit facility originally maturing in February 2021 that ~~includes~~included a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement due ~~2022 were,~~2024 are, subject to exceptions, guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries that are restricted subsidiaries and secured by substantially all of our assets as well as our direct and indirect restricted subsidiaries’ assets.

- 35 -

On October 25, 2021, we entered into an amendment of our 2016 Credit Agreement ("Fourth Amendment"). The Fourth Amendment provides for, ~~amount~~among other things, a three-year Term A loan in the aggregate maximum available amount of $60.0 million (the "Incremental Term A Loan"), proceeds from which were used to fund the Anlin Acquisition. ~~See Note 18, Subsequent Event, for further discussion of the Anlin Acquisition.~~ The Fourth Amendment dodoes not change any terms relating to the Revolving Facility, under which we pay quarterly fees on the unused portion of the revolving credit facility equal to a percentage spread (ranging from 0.25% to 0.35%) based on our first lien net leverage ratio. As of ~~October~~April 2, ~~2021,~~2022, there were ~~$5.3~~$5.7 million in letters of credit outstanding and ~~$74.7~~$74.3 million available under the Revolving Facility.

The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement due 2024 was 2.46% as of April 2, 2022, and was 2.10% at January 1, 2022.

Deferred Financing Costs

The activity relating to deferred financing costs, composed of third-party fees and costs, and lender fees, ~~discount and premiums~~ for the ~~first nine~~three months ended ~~October~~April 2, ~~2021,~~2022, are as follows. All ~~debt-related fees,~~deferred financing costs ~~discount and premiums~~ are classified as a reduction of the carrying value of long-term debt:


(in thousands)	Total
At beginning of year	$	9,345
Less: Amortization expense		(304	)
At end of period	$	9,041


(in thousands)	Total		Total
Remainder of 2021	$	262
2022		1,075
Remainder of 2022			$	929
2023		1,120		1,282
2024		1,148		1,282
2025		1,121		1,083
2026				1,114
Thereafter		4,609		3,351

Total	$	9,335	$	9,041

~~- 46 -~~


(in thousands)
Remainder of 2021	$	—
2022		—
Remainder of 2022			$	—
2023		—		—
2024		—		60,000
2025		—		—
Thereafter (2029)		575,000
2026				—
Thereafter				575,000

Total	$	575,000	$	635,000

~~Acquisition of CRi SoCal, Inc.~~ On May 2, 2021, pursuant to an asset purchase agreement dated April 9, 2021, we acquired substantially all of the assets and assumed certain liabilities of CRi SoCal, Inc., a California corporation doing business in California as Combined Resources (the “CRi Acquisition”). CRi is engaged in the sales, distribution and installation of window and door products, and related design services, to homebuilders in the residential new construction market from its leased facility in Rancho Santa Margarita, California. Until its acquisition by the Company, CRi was a customer of the Company’s western business unit.

The fair value of consideration transferred in the acquisition of CRi totaled $12.5 million, and included $12.1 million in cash, funded from cash on hand, and $0.4 million of accounts receivable owed by CRi to the Company’s western business unit relating to sales prior to the acquisition, which are considered settled as a result of the acquisition. The preliminary estimated fair value of assets acquired and liabilities assumed totaled $17.6 million and $5.1 million, respectively, which included offsetting operating lease right of use assets and operating lease liabilities totaling $2.6 million. The estimated fair value of assets acquired also included current assets totaling $4.1 million, primarily accounts receivable, identifiable intangible assets totaling $6.4 million, goodwill of $4.3 million, and a small amount of property and equipment. Liabilities assumed included the aforementioned operating lease liability, as well as a total of $2.5 million in trade accounts payable and customer deposits. We believe goodwill in the acquisition relates to the expansion of our footprint in an existing market, in a way that we believe will enhances our long-term profitability in that market of our Western business.- 36 -

~~Acquisition of 75% Stake in Eco Windows Systems.~~ On February 1, 2021, we completed the acquisition of a 75% ownership stake in Eco Windows Systems and its related companies, Eco Glass Production, LLC, and Unity Windows, LLC (together “Eco”), Florida limited liability companies, for fair value consideration of $100.5 million, including $94.4 million in cash, which was after adjustments in our favor totaling $5.6 million relating to working capital and customer deposits. These adjustments were agreed to and settled in the second quarter of 2021. The fair value of consideration also included PGT Innovations, Inc. common stock with a then fair value estimated to be $6.1 million. The cash portion of the purchase price was financed by a Second Additional Senior Notes composed of an add-on issuance on January 25, 2021 of $60.0 million aggregate principal amount of 6.75% senior notes to the 2018 Senior Notes due 2026 on January 25, 2021, issued at 105.5% of their principal amount, resulting in a premium to us of $3.3 million, together with cash on hand of $31.1 million.

The common stock portion of the purchase price was represented by the issuance of 357,797 shares of PGT Innovations, Inc. common stock on February 1, 2021, with a closing price value of $21.34 per share on that date, or approximately $7.6 million based on that price. However, the seller of Eco, who is also the holder of the 25% redeemable non-controlling interest in Eco Enterprises, is restricted from selling these shares for a three-year period from the date of the acquisition. As such, we estimated that there was an approximately 20% discount for the lack of marketability of the shares. The fair value of the redeemable non-controlling interest in the acquisition has been preliminarily estimated to be $28.5 million, resulting in total fair value of the Eco business in the acquisition, including the redeemable non-controlling interest, of $128.9 million. The fair value of the redeemable non-controlling interest has been calculated as 25% of the initial estimated fair value of the entity at the acquisition date, less a discount for seller’s lack of control in the new entity, estimated to be 5%, and a discount for the seller’s lack of marketability of the minority stake, estimated to be 10%. See Part I, Item.1, Note 17 for more information regarding the redeemable non-controlling interest. Eco is a manufacturer and installer of aluminum, impact-resistant windows and doors, serving the South Florida region since 2009. Eco is headquartered in Medley, Florida, near Miami, Florida, and has three manufacturing locations in the region.

Capital Expenditures. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. For the first ~~nine~~three months of ~~2021,~~2022, capital expenditures were ~~$25.7~~$8.2 million, compared to ~~$15.4~~$6.5 million for the first ~~nine~~three months of 2020. In early 2020, management made the decision to decrease spending on a majority of capital projects as part of its cash preservation strategy due to the uncertainty around the Pandemic and its potential impact to the Company’s liquidity. By the end of 2020, the Company’s management had begun funding certain previously deferred capital projects in view of the increased order entry, sales, cash position and overall liquidity the Company experienced, and has continued to return capital spending to near pre-Pandemic levels. The Company’s management will continue to evaluate the level of capital expenditures the Company may incur for the remainder of 2021 and thereafter, but we expect to continue to fund previously deferred capital projects, which may continue to result in a higher level of capital spending in 2021 as compared to 2020. However, we may return to a more conservative approach to managing capital expenditures going forward based on our evaluation of future economic conditions and the performance of our

~~- 47 -~~

~~businesses and operations, including any further impact of the Pandemic and the economic uncertainty it has caused on our sales, cash position and overall liquidity.~~2021. Our capital expenditure program is directed towards making investments in capital assets that we believe will increase both gross sales and margins, but also includes capital expenditures for maintenance capital.

Aluminum Forward and Midwest Transaction Premium Contracts. We enter into aluminum forward contracts to hedge the fluctuations in the purchase price of aluminum extrusions we use in production. Beginning late in the first half of 2021, we began entering into forward contracts to hedge the fluctuations in the price of the delivery component of our aluminum extrusion purchases, known as the Midwest Transaction Premium (MTP).

At ~~October~~April 2, ~~2021,~~2022, the fair value of our aluminum forward contracts was in an asset position of ~~$8.2~~$9.1 million. We had 2223 outstanding forward contracts for the purchase of ~~27.2~~36.3 million pounds of aluminum through December 2022, at an average price of ~~$0.99~~$1.32 per pound, which excludes the Midwest premium, with maturity dates of between ~~one month~~two months and ~~fifteen~~ten months. We assessed the risk of non-performance of the Company to these contracts and determined it was immaterial and, therefore, did not record any adjustment to fair value as of ~~October~~April 2, ~~2021.~~2022.

At ~~October~~April 2, ~~2021,~~2022, the fair value of our MTP contracts was in an asset position of ~~$6.8~~$4.4 million. We had 187 outstanding MTP contracts to hedge the Platt US MW Transaction price per pound for the delivery of ~~35.0~~17.0 million pounds of aluminum through December 2022, at an average price of $0.12 per pound, with maturity dates of between ~~one month~~two months and ~~fifteen~~ten months. We assessed the risk of non-performance of the Company to these contracts and determined it was immaterial and, therefore, did not record any adjustment to fair value as of ~~October~~April 2, ~~2021.~~2022.

We assess the effectiveness of our aluminum forward contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our aluminum forward contracts is reported as a component of accumulated other comprehensive income (loss) and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of income (loss), net, recognized in the “accumulated other comprehensive income (loss)” line item in the accompanying condensed consolidated balance sheet as of ~~October~~April 2, ~~2021,~~2022, that we expect will be reclassified to earnings within the next twelve months, will be approximately ~~$13.2~~$13.4 million.

~~Contractual Obligations~~. Except for the issuance of the Second Additional Senior Notes, as described in Part I., Item 1., Note 9, and the addition of $47.8 million in operating lease liabilities in the nine months ended October 2, 2021, as described in Part I., Item 1., Note 10, including the $26.8 million in operating lease liabilities we are consolidating as a result of our investment in Eco, and $2.6 million related to the CRi Acquisition in the second quarter of 2021, described in Part I., Item 1., Note 6, 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 January 2, 2021.

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 condensed consolidated financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the condensed consolidated financial statements and the possibility that future events may be significantly different from our expectations. We identified our significant accounting policies in our Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022. There have been no changes to our critical accounting policies during the first ~~nine~~three months of ~~2021.~~2022.

Recently Issued Accounting Pronouncements. Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and in March 2021, a subsequent amendment to the initial guidance, ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance generally can be applied from March 12, 2020 through December 31, 2022. We ~~are currently assessing~~have not elected adoption of this optional guidance and do not intend to elect this guidance before the ~~impacts~~sunset date of ~~the practical expedients provided in Topic 848 and which, if any, we will adopt.~~

~~Subsequent Event.~~ On October 25, 2021, Western Window Holding LLC (“Buyer”), a Delaware limited liability company and indirect wholly owned subsidiary of the Company, completed its previously announced acquisition (the “Anlin Acquisition”) of substantially all of the assets, properties and rights owned, used or held for use in the business,December 31, 2022, as operated by Anlin Industries, a California corporation (“Seller”), of manufacturing vinyl windows and doors for the replacement market and the new construction market, and all activities conducted in connection therewith, other than certain expressly excluded assets, pursuant to that certain

~~- 48 -~~

~~Asset Purchase Agreement ("APA") dated as of September 1, 2021 (the “Purchase Agreement”), by and among the Company, as guarantor, Buyer and Seller.~~there is no material impact on our consolidated financial statements.

The Anlin Acquisition was financed with net proceeds remaining from the issuance of the $575.0 million 4.375% 2021 Senior Notes due 2029, after redemption of the $425.0 million 6.75% 2018 Senior Notes due 2026, along with its $21.5 million call premium paid, repayment of$54.0 million term loan, and payments of other acquisition-related costs, and proceeds of $60.0 million provided by the Term A Loan under the Fourth Amendment of our 2016 Credit Agreement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We utilize derivative financial instruments to hedge price movements in aluminum materials used in our manufacturing process and to hedge the delivery component of our aluminum needs, known as the Midwest Transaction Premium (“MTP”). As of ~~October~~April 2, ~~2021,~~2022, we are covered for approximately ~~67%~~77% of our anticipated aluminum needs ~~during~~for the remainder of ~~2021 at an average price of $0.85 per pound, and for approximately 27% of our anticipated aluminum needs in~~ 2022 at an average price of ~~$1.07~~$1.32 per pound. These calculations are based only on the LME price of aluminum and excludes an estimate for the MTP, which we hedge separately. As of ~~October~~April 2, ~~2021,~~2022, we are covered for approximately ~~79%~~36% of our anticipated MTP costs for the remainder of ~~2021 at an average price of $0.12 per pound, and for approximately 33% of our anticipated MTP costs in~~ 2022 at an average price of $0.12 per pound. ~~Subsequent to October~~As of the date of this report, we had not added any further coverage since April 2, ~~2021,~~2022. However, we ~~added~~may add more coverage for our anticipated aluminum needs in 2022 ~~which increases our coverage of our estimated aluminum needs in 2022 to approximately 32% at an average price of $1.09 per pound.~~and/or 2023, as we deem necessary.

Regarding our aluminum hedging instruments for the purchase of aluminum, as of ~~October~~April 2, ~~2021,~~2022, a 10% decrease in the price of aluminum per pound would decrease the fair value of our forward contracts of aluminum by an estimated ~~$3.5~~$5.7 million. This calculation utilizes our actual commitment of ~~27.2~~36.3 million pounds under contract (to be settled ~~throughout~~through December 2022) and the market price of aluminum as of ~~October~~April 2, ~~2021.~~2022. This calculation is based only on the LME price of aluminum and excludes an estimate for the MTP. Regarding our MTP contracts for hedging of the delivery component of our aluminum needs, as of ~~October~~April 2, ~~2021,~~2022, a 10% decrease in the Platts MW US Transaction price per pound would decrease the fair value of our MTP contracts an estimated ~~$1.1~~$0.6 million. This calculation utilizes our actual commitment of ~~35.0~~17.0 million pounds under contract (to be settled ~~throughout~~through December 2022) and the then current Platts MW US Transaction price per pound as of ~~October~~April 2, ~~2021.~~2022.

We experience changes in interest expense when market interest rates change. Changes in our debt could also increase these risks. Based on debt outstanding with a variable rate as of the date of filing of this Quarterly Report on Form 10-Q of $60.0 million, a 100 basis-point increase in interest rate would result in approximately $0.6 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.

~~- 49 -~~

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 ~~interim~~ 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 ~~interim~~ 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 ~~interim~~ 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. However, during ~~our first quarter of 2021,~~the year ended January 1, 2022, we acquired ~~Eco. During our second quarter of 2021, we acquired CRi. We have elected to exclude both~~ Eco and ~~CRi from~~Anlin. We are currently integrating Eco and Anlin into our operations, compliance programs and internal control processes. As such Eco and Anlin were not included in our assessment of ~~effectiveness of our~~ internal ~~controls~~control over financial reporting as of January 1, 2022. We will include Eco and Anlin into our assessment of internal controls as of December 31, 2022, the end of our 2022 fiscal year. Eco Enterprises and Anlin Industries were included in the 2021 consolidated financial statements of the Company and constituted 22.0% of total assets as of January 1, 2022 and 9.2% of revenues for the fiscal year ~~but will include Eco and CRi in our assessment for our 2022 fiscal year.~~then ended.

- 5038 -

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

Our operations are subject to a number of risks. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, including the risk factors set forth in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended January ~~2, 2021.~~1, 2022. If any of the events described in the risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None during the quarter cover by this report.

- 5139 -

ITEM 6. EXHIBITS


31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*	Certification of ~~Interim~~ 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 ~~Interim~~ 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	Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF	Inline XBRL Taxonomy Definition Linkbase

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*Filed herewith.

**Furnished herewith.

- 5240 -

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~~May 12, ~~2021~~2022	By: /s/ ~~Brad West~~John Kunz
	Name: ~~Brad West~~John Kunz
	Title: ~~Interim~~Senior Vice President and Chief Financial Officer ~~and Senior Vice President~~ ~~of Corporate Development and Treasurer~~

- 5341 -


State of Incorporation		IRS Employer Identification No.
Delaware		020-0634715


Large accelerated filer ☑	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company☐	Emerging growth company☐


			Page
			Number
Part I.	Financial Information		3
	Item 1.	Condensed Consolidated Financial Statements (unaudited):	3
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Cash Flows	6
		Condensed Consolidated Statements of Shareholders’ Equity	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3329
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4938
	Item 4.	Controls and Procedures	4938

Part II.	Other Information		5139
	Item 1.	Legal Proceedings	5139
	Item 1A.	Risk Factors	5139
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5139
	Item 6.	Exhibits	5240
		Signature	41


	Three Months Ended					Nine Months Ended
	October 2,			October 3,		October 2,			October 3,
	2021			2020		2021			2020
	(unaudited)					(unaudited)
Net income (loss)	$	(5,140	)	$	17,322	$	18,368		$	35,121

Other comprehensive income (loss) before tax:
Change in fair value of derivatives		6,549			1,563		23,910			(2,120	)
Reclassification to earnings		(6,696	)		532		(12,604	)		2,737

Other comprehensive income (loss) before tax		(147	)		2,095		11,306			617

Income tax expense (benefit) related to other comprehensive income		(37	)		524		2,806			154

Other comprehensive income (loss), net of tax		(110	)		1,571		8,500			463

Comprehensive income (loss)		(5,250	)		18,893		26,868			35,584

Less: Comprehensive income attributable to redeemable non-controlling interest		(677	)		—		(1,656	)		—

Comprehensive income (loss) attributable to the Company	$	(5,927	)	$	18,893	$	25,212		$	35,584


	Three Months Ended
	April 2,			April 3,
	2022			2021
	(unaudited)
Net income	$	23,826		$	12,795

Other comprehensive income (loss) before tax:
Change in fair value of derivatives		6,075			8,288
Reclassification to earnings		(2,062	)		(1,775	)

Other comprehensive income before tax		4,013			6,513

Income tax expense related to other comprehensive income		1,030			1,618

Other comprehensive income, net of tax		2,983			4,895

Comprehensive income		26,809			17,690

Less: Comprehensive income attributable to redeemable non-controlling interest		(657	)		(411	)

Comprehensive income attributable to the Company	$	26,152		$	17,279


										Accumulated
							Additional			Other
	Common stock						Paid-in			Comprehensive			Retained			Treasury
	Shares			Amount			Capital			Income (Loss)			Earnings			Stock			Total
THREE MONTHS ENDED OCTOBER 3, 2020
Balance at July 4, 2020		58,962,776		$	626		$	417,452		$	(1,346	)	$	52,587		$	(18,309	)	$	451,010
Forfeitures of restricted stock		—			(1	)		1			—			—			—			—
Stock-based compensation		—			—			1,451			—			—			—			1,451
Net income		—			—			—			—			17,322			—			17,322
Other comprehensive income, less taxes of $524		—			—			—			1,571			—			—			1,571
Balance at October 3, 2020		58,962,776		$	625		$	418,904		$	225		$	69,909		$	(18,309	)	$	471,354

NINE MONTHS ENDED OCTOBER 3, 2020
Balance at December 28, 2019		58,504,734		$	619		$	414,688		$	(238	)	$	34,788		$	(18,309	)	$	431,548
Vesting of restricted stock		219,977			—			—			—			—			—			—
Grants of restricted stock		—			6			(6	)		—			—			—			—
Forfeitures of restricted stock		—			(2	)		2			—			—			—			—
Purchases of treasury stock		(51,479	)		—			—			—			—			(815	)		(815	)
Retirement of treasury stock		—			(1	)		(814	)		—			—			815			—
Stock-based compensation		—			—			4,369			—			—			—			4,369
Exercise of stock options		274,353			3			546			—			—			—			549
Common stock issued under ESPP		15,191			—			119			—			—			—			119
Net income attributable to the Company		—			—			—			—			35,121			—			35,121
Other comprehensive income, less taxes of $154		—			—			—			463			—			—			463
Balance at October 3, 2020		58,962,776		$	625		$	418,904		$	225		$	69,909		$	(18,309	)	$	471,354

THREE MONTHS ENDED OCTOBER 2, 2021
Balance at July 3, 2021		59,587,128		$	632		$	429,268		$	11,330		$	98,681		$	(18,289	)	$	521,622
Vesting of restricted stock		32,258			—			—			—			—			—			—
Grants of restricted stock		—			4			(4	)		—			—			—			—
Purchases of treasury stock		(7,852	)		—			—			—			—			(154	)		(154	)
Retirement of treasury stock		—			(1	)		(125	)		—			(28	)		154			—
Stock-based compensation		—			—			2,254			—			—			—			2,254
Common stock issued under ESPP		853			—			14			—			—			—			14
Net income attributable to the Company		—			—			—			—			(5,817	)		—			(5,817	)
Change in redemption value of redeemable non-controlling interest		—			—			—			—			(965	)		—			(965	)
Other comprehensive loss, less taxes of $37		—			—			—			(110	)		—			—			(110	)
Balance at October 2, 2021		59,612,387		$	635		$	431,407		$	11,220		$	91,871		$	(18,289	)	$	516,844

NINE MONTHS ENDED OCTOBER 2, 2021
Balance at January 2, 2021		58,998,711		$	625		$	420,202		$	2,720		$	79,896		$	(18,309	)	$	485,134
Vesting of restricted stock		221,724			—			—			—			—			—			—
Grants of restricted stock		—			7			(7	)		—			—			—			—
Forfeitures of restricted stock		—			(1	)		1			—			—			—			—
Issuance of treasury stock		4,600			—			—			—			(20	)		20			—
Purchases of treasury stock		(50,266	)		—			—			—			—			(1,159	)		(1,159	)
Retirement of treasury stock		—			(1	)		(969	)		—			(189	)		1,159			—
Stock-based compensation		—			—			5,748			—			—			—			5,748
Exercise of stock options		67,797			1			137			—			—			—			138
Common stock issued under ESPP		12,024			—			191			—			—			—			191
Issuance in acquisition of Eco		357,797			4			6,104			—			—			—			6,108
Net income attributable to the Company		—			—			—			—			16,712			—			16,712
Change in redemption value of redeemable non-controlling interest		—			—			—			—			(4,528	)		—			(4,528	)
Other comprehensive income, less taxes of $2,806		—			—			—			8,500			—			—			8,500
Balance at October 2, 2021		59,612,387		$	635		$	431,407		$	11,220		$	91,871		$	(18,289	)	$	516,844


	PGT Innovations, Inc. Shareholders' Equity
										Accumulated
							Additional			Other
	Common stock						Paid-in			Comprehensive		Retained			Treasury
	Shares			Amount			Capital			Income (Loss)		Earnings			Stock			Total
THREE MONTHS ENDED APRIL 3, 2021
Balance at January 2, 2021		58,998,711		$	625		$	420,202		$	2,720	$	79,896		$	(18,309	)	$	485,134
Vesting of restricted stock		147,106			—			—			—		—			—			—
Grants of restricted stock		—			3			(3	)		—		—			—			—
Forfeitures of restricted stock		—			(1	)		1			—		—			—			—
Purchases of treasury stock		(42,414	)		—			—			—		—			(1,005	)		(1,005	)
Retirement of treasury stock		—						(844	)		—		(161	)		1,005			—
Stock-based compensation		—			—			1,750			—		—			—			1,750
Issuance in acquisition of Eco		357,797			4			6,104			—		—			—			6,108
Net income attributable to the Company		—			—			—			—		12,384			—			12,384
Change in redemption value of redeemable non-controlling interest		—			—			—			—		—			—			—
Other comprehensive income, net of tax expense of $1,618		—			—			—			4,895		—			—			4,895
Balance at April 3, 2021		59,461,200			631			427,210			7,615		92,119			(18,309	)		509,266

THREE MONTHS ENDED APRIL 2, 2022
Balance at January 1, 2022		59,696,117		$	635		$	433,347		$	7,006	$	106,398		$	(18,289	)	$	529,097
Vesting of restricted stock		288,962			—			—			—		—			—			—
Grants of restricted stock		—			5			(5	)		—		—			—			—
Purchases of treasury stock		(84,492	)		—			—			—		—			(1,663	)		(1,663	)
Retirement of treasury stock		—			(1	)		(1,335	)		—		(327	)		1,663			—
Stock-based compensation		—			—			2,205			—		—			—			2,205
Net income attributable to the Company		—			—			—			—		23,169			—			23,169
Change in redemption value of redeemable non-controlling interest		—			—			—			—		(2,136	)		—			(2,136	)
Other comprehensive income, net of tax expense of $1,030		—			—			—			2,983		—			—			2,983
Balance at April 2, 2022		59,900,587		$	639		$	434,212		$	9,989	$	127,104		$	(18,289	)	$	553,655


	Beginning		Acquisition-		Charged								End of
Accrued Warranty	of Period		Related		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended October 2, 2021	$	9,459	$	347	$	5,706	$	(531	)	$	(5,505	)	$	9,476

Three months ended October 3, 2020	$	7,267	$	918	$	4,049	$	(3	)	$	(4,519	)	$	7,712

Nine months ended October 2, 2021	$	8,001	$	536	$	18,015	$	(890	)	$	(16,186	)	$	9,476

Nine months ended October 3, 2020	$	6,244	$	2,510	$	11,503	$	30		$	(12,575	)	$	7,712


	Final Allocation
Accounts receivable	$	8,434
Inventories		2,936
Contract assets, net		4,413
Prepaid expenses and other assets		1,756
Property and equipment		7,433
Operating lease right-of-use asset		10,578
Intangible assets		27,370
Goodwill		52,094
Accounts payable		(6,621	)
Accrued and other liabilities		(7,447	)
Operating lease liability		(10,578	)
Purchase price	$	90,368

Consideration:
Cash	$	90,368
Total fair value of consideration	$	90,368


			Initial
	Final		Useful Life
	Valuation		(in years)
(in thousands)
Trade name	$	22,200	15
Non-compete agreements		1,670	5
Developed technology		2,600	6
Customer-related intangible		900	<1

Intangible assets, net	$	27,370


	Fair Value Measurements								Fair Value Measurements
	Assets (Liabilities)								Assets (Liabilities)
			Quoted		Significant						Quoted		Significant
			Prices in		Other		Significant				Prices in		Other		Significant
			Active		Observable		Unobservable				Active		Observable		Unobservable
	October 2,		Markets		Inputs		Inputs				Markets		Inputs		Inputs
		2021	(Level 1)		(Level 2)		(Level 3)
April 2, 2022									Total		(Level 1)		(Level 2)		(Level 3)
Description
Aluminum contracts	$	8,151	$	—	$	8,151	$	—	$	9,058	$	—	$	9,058	$	—
MTP contracts		6,766		—		6,766		—		4,383		—		4,383		—
	$	14,917	$	—	$	14,917	$	—
									$	13,441	$	—	$	13,441	$	—


Three months ended October 2, 2021	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at July 3, 2021	$	6,191		$	5,139		$	11,330
Change in fair value of derivatives		4,194			2,355			6,549
Amounts reclassified from accumulated other comprehensive income		(4,271	)		(2,425	)		(6,696	)
Tax effect		20			17			37
Net current-period other comprehensive loss		(57	)		(53	)		(110	)
Balance at October 2, 2021	$	6,134		$	5,086		$	11,220


Nine months ended October 2, 2021	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at January 2, 2021	$	2,403		$	317		$	2,720
Change in fair value of derivatives		13,385			10,525			23,910
Amounts reclassified from accumulated other comprehensive income		(8,423	)		(4,181	)		(12,604	)
Tax effect		(1,231	)		(1,575	)		(2,806	)
Net current-period other comprehensive income		3,731			4,769			8,500
Balance at October 2, 2021	$	6,134		$	5,086		$	11,220


	October 2,		January 2,		April 2,		January 1,
	2021		2021		2022		2022
	(in thousands)				(in thousands)
Raw materials	$	70,585	$	55,916	$	93,221	$	87,164
Work-in-progress		7,160		4,058		3,312		3,248
Finished goods		1,504		343		866		1,028

Inventories	$	79,249	$	60,317	$	97,399	$	91,440