☑ 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 ~~59,918,550~~58,721,849 shares, as of April 30, ~~2022.~~2023.

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


	PGT Innovations, Inc. Shareholders' Equity																				PGT Innovations, Inc. Shareholders' Equity
										Accumulated																				Accumulated
							Additional			Other																	Additional			Other
	Common stock						Paid-in			Comprehensive		Retained			Treasury						Common stock						Paid-in			Comprehensive		Retained			Treasury
	Shares			Amount			Capital			Income (Loss)		Earnings			Stock			Total			Shares			Amount			Capital			Income		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
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	)		—		—			—			—
Stock withheld in lieu of taxes																						(84,492	)		—			—			—		—			(1,663	)		(1,663	)
Retirement of stock withheld in lieu of taxes																						—			(1	)		(1,335	)		—		(327	)		1,663			—
Stock-based compensation																						—			—			2,205			—		—			—			2,205
Net income attributable to the Company																						—			—			—			—		23,169			—			23,169
Increase in value of RNCI																						—			—			—			—		(2,136	)		—			(2,136	)
Other comprehensive income, net of taxes 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
THREE MONTHS ENDED APRIL 1, 2023
Balance at December 31, 2022																						59,911,556		$	639		$	442,116		$	223	$	204,891		$	(19,854	)	$	628,015
Vesting of restricted stock		147,106			—			—			—		—			—			—			388,232			—			—			—		—			—			—
Grants of restricted stock		—			3			(3	)		—		—			—			—			—			6			(6	)		—		—			—			—
Forfeitures of restricted stock		—			(1	)		1			—		—			—			—			—			(1	)		1			—		—			—			—
Purchases of treasury stock		(42,414	)		—			—			—		—			(1,005	)		(1,005	)		(1,173,520	)		—			—			—		—			(25,895	)		(25,895	)
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 withheld in lieu of taxes																						(116,570	)		—			—			—		—			(2,594	)		(2,594	)
Retirement of stock withheld in lieu of taxes																						—			(1	)		(1,772	)		—		(821	)		2,594			—
Stock-based compensation		—			—			2,205			—		—			—			2,205			—			—			2,207			—		—			—			2,207
Net income attributable to the Company		—			—			—			—		23,169			—			23,169			—			—			—			—		33,590			—			33,590
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
Increase in value of RNCI																						—			—			—			—		(1,177	)		—			(1,177	)
Other comprehensive income, net of taxes of $45																						—			—			—			127		—			—			127
Balance at April 1, 2023																						59,009,698		$	643		$	442,546		$	350	$	236,483		$	(45,749	)	$	634,273

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

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

About PGT Innovations, Inc.

PGT Innovations, Inc. (“~~PGTI,”~~PGTI”, “we,” or the “Company”), formerly named PGT, Inc., is a leading manufacturer of impact-resistant aluminum and vinyl-framed windows and doors and offers a broad range of fully customizable window and door ~~products.~~products, as well as fully custom overhead garage doors. The majority of our sales are to customers in the state of Florida; however, we also sell products in many other states, .the Caribbean, Canada, and in South and Central America. Our acquisition of Eco Enterprises (“("Eco ~~Acquisition”~~Acquisition") in February 2021 expands our range of product offerings in our major market of southeast Florida. We also have sales of products that are designed to unify indoor and outdoor living spaces, through our Western Windows Systems’ (“WWS”) division, and most of its sales are in the western United States. Our ~~acquisition~~acquisitions of Anlin Windows and Doors ("Anlin") in October 2021 ~~expands~~and Martin Door Holdings, Inc. ("Martin") in October 2022 expanded our presence in the west. The acquisition of Martin, which produces residential and commercial garage doors, expands the Company into building products adjacent to its portfolio of window and door brands. Products are sold primarily through an authorized dealer and distributor network. ~~However, with our acquisition of NewSouth Window Solutions in February 2020, we also~~We began ~~to sell~~selling window and door products in the direct-to-consumer channel, ~~through~~ a “factory-direct” sales ~~model.~~model, through our acquisition of NewSouth Windows Solutions ("NewSouth") in February 2020.

We were incorporated in the state of Delaware on December 16, 2003, as JLL Window Holdings, Inc.~~, with primary operations in North Venice, Florida.~~ On February 15, 2006, our Company was renamed PGT, Inc. On December 14, 2016, we announced that we changed our name to PGT Innovations, Inc. and, effective on December 28, 2016, the listing of our common stock was transferred to the New York Stock Exchange (“NYSE”) from the NASDAQ Global Market, and began trading on the NYSE under its existing ticker symbol of “PGTI”. ~~As of April 2, 2022, we had major manufacturing operations in Florida,~~

We are headquartered in North Venice, ~~Tampa, and in the greater Miami area. We also~~Florida, where we have manufacturing operations, ~~in Phoenix, Arizona and Clovis, California. Additionally, we have~~as well as 2two glass tempering and laminating plants 1 ~~in North Venice, Florida~~ and 1one insulated glass plant. We also have Florida-based manufacturing operations in ~~Medley,~~Ft. Myers, Tampa, and the greater Miami area. Outside of Florida, we have manufacturing operations in Arizona, California and, more recently, Utah, with the acquisition of Martin.1 ~~insulation glass plant located in North Venice, Florida.~~

All references to PGTI or our Company apply to the consolidated financial statements of PGT Innovations, Inc. unless otherwise noted.

~~COVID-19 Pandemic~~

During March 2020, a global pandemic (the “Pandemic”) was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The Pandemic has resulted in a significant number of infections, hospitalizations and deaths around the world, including in the United States, and in several of our key markets.

The extent to which the continuing circumstances around the Pandemic could affect our future business, operations and financial results will depend upon numerous factors that we are not able to accurately predict. As such, we continue to be unable to accurately predict the impact the Pandemic and the challenges it has created for the U.S. and global economies. The impact to our customers’ and suppliers’ businesses and other factors identified in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission on March 1, 2022. We will continue to evaluate the nature and extent of any changes relating to the Pandemic and any impact those changes may have to our business, consolidated results of operations, and financial condition.

Basis of Presentation

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnotes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. Our condensed consolidated financial statements are unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the remainder of the current year or for any future periods. The Company’s fiscal ~~first~~ three months ended April ~~2, 2022,~~1, 2023 and April ~~3, 2021~~2, 2022 consisted of 13 weeks.

The condensed consolidated balance sheet as of ~~January 1,~~December 31, 2022, is derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of ~~January 1,~~December 31, 2022, and the unaudited condensed consolidated financial statements as of and for the periods ended April ~~2, 2022~~1, 2023, and April ~~3, 2021,~~2, 2022, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended ~~January 1,~~December 31, 2022, included in the Company’s most recent Annual Report on Form 10-K. The accounting policies used in the preparation of these unaudited condensed

~~- 8 -~~

consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

We have 2two reportable segments: the Southeast segment and the Western segment. The Southeast reporting segment, which is also an operating segment, is composed of sales from our facilities in Florida. The Western reporting segment, also an operating segment, is composed of sales from our facilities in Arizona, Utah and California. See Note 1615 for segment disclosures.

~~Recently Adopted Accounting Pronouncements~~

~~Business Combinations~~ - ~~Contracts Assets and Liabilities~~8 -

On October 28, 2021, the FASB issued ASU 2021-08, which amends ASC 805-20 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. This standard was ~~effective~~ ~~beginning~~ ~~January 1, 2022~~. ~~Early~~ ~~adoption was permitted and was adopted by the Company in the period beginning January 3, 2021. The adoption of this standard did~~ no~~t have any impact on our consolidated financial statements.~~

~~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, 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 have not elected adoption of this optional guidance and do not intend to elect this guidance before the sunset date of December 31, 2022, as there is no material impact on our consolidated financial statements.

NOTE 3. WARRANTY

Most of our manufactured products are sold with warranties. Warranty periods, which vary by product components, generally range from 1 to 10 years; however, the warranty period for a limited number of specifically identified components in certain applications is a lifetime. The majority of the products sold have warranties on components which range from 1 to 3 years. The amount charged to expense for warranties is based on management’s assessment of the cost per service call and the number of service calls expected to be incurred to satisfy warranty obligations on the current net sales.

During the three months ended April ~~2, 2022,~~1, 2023, we recorded warranty expense at a rate of approximately ~~2.6~~1.9% of sales, which was ~~level with~~slightly lower than the rate during the three months ended April ~~3, 2021~~2, 2022 of 2.6% of sales. ~~Our~~The decrease in the warranty expense rate in the three months ended April ~~2, 2022~~1, 2023 is a result of ~~an increase in the use~~servicing a higher number of warranty claims with internal team members, as opposed to higher-cost contract labor ~~to respond to warranty claims~~in the first half of 2022 due to a ~~currently~~then tight labor market, whereas in the three months ended April 3, 2021, the wind-down of the commercial business of NewSouth in the first quarter of 2021 resulted in warranty costs higher than those we would incur in the normal course of business.market.

The following table summarizes current period charges, adjustments to previous estimates, as well as settlements, which represent actual costs incurred during the period for the three months ended April ~~2, 2022~~1, 2023 and April ~~3, 2021.~~2, 2022. The reserve is determined through ~~specific identification and~~ assessing our claims history. Of the accrued warranty reserve of $~~16.3~~15.5 million at April ~~2, 2022,~~1, 2023, $~~13.8~~12.2 million is classified within accrued expenses as current liabilities on the condensed consolidated balance sheet at April ~~2, 2022,~~1, 2023, with the remainder classified within other liabilities as non-current liabilities. Of the accrued warranty reserve of $~~13.5~~15.4 million at ~~January 1,~~December 31, 2022, $~~11.8~~12.4 million is classified within accrued expenses as current liabilities on the condensed consolidated balance sheet at ~~January 1,~~December 31, 2022, with the remainder classified within other liabilities as non-current liabilities.


	Beginning		Charged							End of		Beginning		Charged							End of
Accrued Warranty	of Period		to Expense		Adjustments		Settlements			Period		of Period		to Expense		Adjustments		Settlements			Period
(in thousands)
Three months ended April 1, 2023												$	15,388	$	7,239	$	922	$	(8,006	)	$	15,543

Three months ended April 2, 2022	$	13,504	$	9,148	$	750	$	(7,081	)	$	16,321	$	13,504	$	9,148	$	750	$	(7,081	)	$	16,321

Three months ended April 3, 2021	$	8,001	$	6,966	$	389	$	(5,713	)	$	9,643

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NOTE 5. STOCK BASED-COMPENSATION

Stock-Based Compensation Expense

We record stock compensation expense over an equity award’s vesting period based on the award’s fair value at the date of grant. We recorded compensation expense for stock-based awards of $2.2 million for the three months ended April ~~2, 2022,~~1, 2023 and $~~1.8~~2.2 million for the three months ended April ~~3, 2021.~~2, 2022. As of April ~~2, 2022,~~1, 2023, there was $~~13.0~~18.0 million in total unrecognized compensation cost related entirely to restricted share ~~awards.~~awards, including time-vesting and those with performance conditions. These costs are expected to be recognized in earnings on an accelerated basis over the weighted average remaining vesting period of 1.9 years at April ~~2, 2022.~~1, 2023.

Of the $2.2 million and $~~1.8~~2.2 million in stock-based compensation expense in the three months ended April ~~2, 2022~~1, 2023 and April ~~3, 2021,~~2, 2022, respectively, $1.9 million and $~~1.5~~1.9 million, respectively, are classified within selling, general and administrative expense in the accompanying condensed consolidated statements of operations, with the remainders classified within cost of sales.

~~New~~ Issuance

On February ~~14, 2022,~~15, 2023, we issued ~~468,518~~524,114 shares of restricted stock to certain executive and non-executive employees of the Company, under the Company’s ~~2022~~2023 long-term incentive plan (“~~2022~~2023 LTIP”). Half of the shares awarded under the ~~2022~~2023 LTIP, or ~~234,259~~262,057 shares, isare subject to adjustment based on the performance of the Company for the ~~2022~~2023 fiscal year. A portion of the ~~234,259~~262,057 performance shares issued under the ~~2022~~2023 LTIP are also subject to a total shareholder return ("TSR") component, which will not be finalized until the third anniversary of the February ~~14, 2022~~15, 2023 grant date. Specifically, 37.5% of the one-half of the restricted stock awarded in the ~~2022~~2023 LTIP are performance restricted shares which will not be earned unless certain financial performance metrics are met by the Company for the ~~2022~~2023 fiscal year. The performance criteria, as defined in the share awards, provide for a graded awarding of shares based on the percentage by which the Company meets earnings before interest, taxes, depreciation and amortization ("EBITDA") as defined in our ~~2022~~2023 business plan. The percentages, ranging from less than 80% to greater than 120% of the target amount of that EBITDA metric, provide for the awarding of shares ranging from 0% to 200% of the target amount of shares with respect to 37.5% of ~~half of~~ the ~~234,259~~262,057 performance shares, or ~~87,849~~98,273 shares. The remaining 62.5% of the ~~one-half of the restricted stock awarded in the 2022 LTIP,~~262,057 performance shares, or ~~146,410~~163,784 shares, are subject to the same EBITDA metric, but are also subject to a TSR component which stratifies the performance of the Company's common stock price compared to a defined peer group of companies over the three-year period subsequent to February ~~14, 2022,~~15, 2023, such that if the Company's TSR falls at the 75th percentile or higher compared to the peer group, grantees will receive an additional 25% of performance shares. If the Company's TSR falls at the 25th percentile or lower compared to the peer group, grantees will forfeit 25% of performance shares. If the Company's TSR falls within the 75th and 25th percentiles, there will be no additional adjustment and grantees will receive their performance shares as per the EBITDA metric previously discussed. The final award is also affected by forfeitures upon the termination of a grantee’s employment with the Company. The remaining ~~234,259~~262,057 shares from the ~~2022~~2023 LTIP are not subject to adjustment based on any performance or other criteria, but rather, vest in three equal installments on each of the first, second and third anniversaries of the grant date, assuming the grantee is employed by the Company on those vesting dates.

The grant date fair value of the ~~2022~~2023 LTIP was $~~18.27~~22.64 per share for those shares not subject to adjustment based on any performance or other criteria except the passage of time, and the 37.5% of shares subject only to the EBITDA criteria of Company performance. For the 62.5% of performance shares subject to both the EBITDA criteria of Company performance and the TSR component, the grant date fair value was $~~20.79~~26.08 per share as determined by a third-party valuation specialist engaged by the Company, which used Monte Carlo simulation techniques to determine the fair value of such shares, which we consider to be a Level 3 input. As such, the weighted-average fair value of the ~~234,259~~262,057 shares subject to the performance of the Company for the ~~2022~~2023 fiscal year, including those shares subject to the TSR, is $~~19.84~~24.79 per share.

NOTE 6. ACQUISITIONS

MARTIN DOORS

On October 14, 2022, we completed the acquisition of the Martin Doors brand. The acquisition was done by WWS Acquisition, LLC, a Missouri limited liability company, indirectly wholly-owned by PGT Innovations, Inc., which acquired all of the shares of stock of Martin Door Holdings, Inc., a Utah corporation, headquartered in Salt Lake City, Utah, a custom manufacturer of overhead garage doors and hardware serving the Western U.S. (the "Martin Acquisition"), pursuant to that certain Share Purchase Agreement dated as of October 14, 2022 (the “Martin Purchase Agreement”). The fair value of consideration transferred in the Martin Acquisition was $188.5 million, composed entirely of cash, including $185.0 million for purchase price and $3.5 million in working capital adjustments, of which $2.8 million was estimated and paid at closing, and approximately $0.7 million was paid in the first quarter of 2023 upon finalization of the net working capital calculation.

The cash portion of the Martin Acquisition was financed with borrowings under the revolving credit facility ("New Revolving Credit Facility") established under fifth amendment ("Fifth Amendment") to the 2016 Credit Agreement ("2016 Credit Agreement due 2027") of $98.4 million, with the remaining $90.1 million, which includes the approximately $0.7 million final net working capital adjustment paid in the first quarter of 2023, funded with cash on hand. Generally, cash on hand for the Martin Acquisition was provided by cash generated through operations.

Purchase Price Allocation

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


	Initial Allocation			Adjustments to Allocation			Preliminary Allocation
Accounts receivable	$	6,653		$	(141	)	$	6,512
Inventories		9,543			(364	)		9,179
Contract assets, net		5,242			—			5,242
Prepaid expenses and other assets		90			—			90
Property and equipment		11,422			—			11,422
Operating lease right-of-use asset		12,259			—			12,259
Intangible assets		91,900			—			91,900
Total assets acquired		137,109			(505	)		136,604
Accounts payable		(2,482	)		—			(2,482	)
Accrued and other liabilities		(1,270	)		283			(987	)
Deferred tax liabilities		(23,604	)		—			(23,604	)
Operating lease liability		(12,259	)		—			(12,259	)
Total liabilities assumed		(39,615	)		283			(39,332	)
Net assets acquired		97,494			(222	)		97,272
Goodwill		90,300			966			91,266
Fair value of consideration transferred	$	187,794		$	744		$	188,538

Consideration:
Cash	$	187,794		$	744		$	188,538
Fair value of consideration transferred	$	187,794		$	744		$	188,538

The fair value of certain working capital related items, including Martin’s accounts receivable, prepaid expenses and other assets, and accounts payable and accrued and other liabilities, approximated their book values at the date of the Martin 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. The substantial majority of inventories at the acquisition date was comprised 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 valuation firm. During the first quarter of 2023, we made immaterial adjustments to our purchase allocation relating to accounts receivable, inventories and accrual and other liabilities.

We incurred acquisition costs totaling $4.8 million relating to legal expenses, representations and warranties insurance, diligence, accounting and other services in the Martin Acquisition in the year ended December 31, 2022.

Because the Martin Acquisition was an acquisition of stock, Martin's assets and liabilities retain their tax bases at the time of the acquisition. Therefore, none of the identifiable intangible assets or goodwill acquired in the Martin Acquisition are deductible for tax purposes. As of April 1, 2023, goodwill is estimated to be $91.3 million. Martin's goodwill is included as part of the Western reporting

- 12 -

unit. We believe Martin's 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, as well as being a key component of our strategy to expand into adjacent building material products, other than windows and doors.

Pro forma results of operations, as well as net sales and income attributable to the Martin Acquisition are not presented as it did not have a material impact on our results of operations.

Valuation of Identified Intangible Assets

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


			Initial
	Preliminary		Useful Life
	Valuation		(in years)
(in thousands)
Trade name	$	24,000	indefinite
Customer relationships		52,700	15
Customer-related backlog (amortized in 2022)		400	<1
Developed technology		14,600	3 - 14
Non-compete-related intangible		200	5

Intangible assets	$	91,900

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~~121.7 million, composed of $~~114.2~~115.0 million in cash, including $113.5 million for purchase price and $~~0.7~~1.5 million in ~~estimated~~ working capital ~~adjustment,~~adjustments, including $0.8 million paid during the three months ended October 1, 2022, 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~~provided for the potential for an earn-out contingency ~~payment~~payments 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 2021 fiscal 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.~~Acquisition. 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~~The first contingent consideration payment was agreed to be $2.7 million, which exceeded its estimated fair value by $0.3 million. This excess is classified as selling, general and ~~buyer,~~administrative expenses in our 2022 fiscal year ended December 31, 2022. The payment was made during the second quarter of 2022 after both parties agreed to extend the deadline for the first payment ~~of contingent consideration, which was~~past the March 31, 2022 asdue date stated in the Anlin Purchase ~~Agreement while both parties continued to negotiate the amount~~Agreement.

As of the ~~first contingent consideration payment, which was agreed to be $2.5~~ ~~million, which we paid in April 2022. During the first quarter~~end of 2022, we updated our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA to $9.5 million, which was ~~estimated to be $5.1~~ ~~million.~~the maximum potential payout for fiscal year 2022 under the Anlin Purchase Agreement, which we paid-out in the first quarter of 2023. As such, we recognized an expense of approximately $~~1.0~~5.1 million, representing the difference between ~~the actual and~~this updated 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,~~estimated in our purchase price allocation, classified as selling, general and administrative expenses in the ~~accompanying condensed consolidated statement of operations for the three months~~year ended ~~April 2,~~December 31, 2022. ~~We will continue to update our estimate of the fair value of the~~

Having paid all contingent consideration ~~relating to 2022~~in the Anlin ~~EBITDA each reporting period, as required by ASC 805,~~Acquisition, which combined totaled $12.1 million 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,~~which exceeds 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 offair value on contingent consideration ~~are finalized.~~

~~As discussed above,~~established in the purchase allocation, we ~~made changes to~~believe that our tax basis in the ~~initial estimated fair values~~goodwill 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~~is equal 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~~book basis 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~~9.6 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 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 $7.0~~ ~~million, goodwill of $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-month period ended April 2, 2022 totaled $2.4~~ ~~million. CRi’s effect on consolidated net income was immaterial in the three-month period ended April 2, 2022.~~

~~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, after favorable adjustments totaling $5.6~~ million relating to working capital and customer 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.~~

~~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 estimated to be $28.5~~ ~~million, resulting in total fair value of the Eco business in the acquisition, including the~~

~~- 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.~~

~~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

Final
Allocation

Accounts receivable

$
5,031

$
(241
)

$
4,790

Inventories

7,728

(684
)

7,044

Contract assets, net

4,312

(123
)

4,189

Prepaid expenses and other assets

1,706

(759
)

947

Property and equipment

24,009

(191
)

23,818

Operating lease right-of-use asset

27,864

(1,049
)

26,815

Intangible assets

72,700

1,600

74,300

Goodwill

30,051

(4,467
)

25,584

Total assets acquired

173,401

(5,914
)

167,487

Accounts payable

(6,809
)

(116
)

(6,925
)
Accrued and other liabilities, including customer deposits

(4,215
)

(604
)

(4,819
)
Operating lease liability

(27,864
)

1,049

(26,815
)
Total liabilities assumed

(38,888
)

329

(38,559
)
Net assets acquired

134,513

(5,585
)

128,928

Redeemable non-controlling interest

(34,084
)

5,620

(28,464
)
Fair value of consideration transferred

$
100,429

$
35

$
100,464

Consideration:

Cash

$
94,321

$
35

$
94,356

PGTI common stock

6,108

—

6,108

Fair value of consideration transferred

$
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 three months of 2021, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three months ended 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 $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.~~

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.

- 1613 -

~~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 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

April 3,

2021

(unaudited)

Net sales

$
279,044

Net income attributable to PGTI stockholders:

$
12,542

Net income per common share attributable to PGTI stockholders:

Basic

$
0.21

Diluted

$
0.21

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

NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and intangible assets are as follows:


							Initial							Initial
	April 2,			January 2,			Useful Life	April 1,			December 31,			Useful Life
	2022			2021			(in years)	2023			2022			(in years)
	(in thousands)							(in thousands)
Goodwill	$	370,366		$	364,598		indefinite	$	461,381		$	460,415		indefinite

Other intangible assets:
Trade names (indefinite-lived)	$	208,441		$	212,141		indefinite	$	225,018		$	225,018		indefinite

Customer relationships and customer-related assets		286,947			289,047		<1-15		340,047			340,047		<1-15
Trade name (amortizable)		22,200			22,200		15		22,200			22,200		15
Developed technology		5,900			5,900		6-10		20,500			20,500		3-14
Non-compete agreement		3,338			3,338		2-5		3,538			3,538		2-5
Software license		590			590		2		590			590		2
Less: Accumulated amortization		(146,734	)		(138,691	)			(171,634	)		(164,841	)

Subtotal		172,241			182,384				215,241			222,034

Other intangible assets, net	$	380,682		$	394,525			$	440,259		$	447,052

Goodwill at January 1, 2022	$	364,598
Increase in contingent consideration in our Anlin Acquisition		789
Decrease in trade name in our Anlin Acquisition		3,700
Net decrease in customer-related assets in our Anlin Acquisition		2,100
Net decrease in other allocation changes in our Anlin Acquisition		(821	)
Goodwill at December 31, 2022								$	460,415
Increase relating to Martin Acquisition net working capital payment									744
Net other measurement period changes in Martin Acquisition									222

Goodwill at April 2, 2022	$	370,366
Goodwill at April 1, 2023								$	461,381

Trade names (indefinite-lived) at January 1, 2022	$	212,141
Decrease in value of trade name in our Anlin Acquisition		(3,700	)

Trade names (indefinite-lived) at April 2, 2022	$	208,441

~~- 18 -~~

Estimated amortization of our amortizable intangible assets for future years is as follows:


(in thousands)	Total		Total
Remainder of 2022	$	16,844
2023		20,520
Remainder of 2023			$	19,514
2024		20,474		25,971
2025		20,299		25,640
2026		16,906		21,241
2027				20,987
Thereafter		77,198		101,888

Total	$	172,241	$	215,241

Amortization expense relating to amortizable intangible assets for the three months ended April 1, 2023 and April 2, 2022, was $6.8 million and ~~April 3, 2021, was~~ $8.0 million, ~~and $4.7~~ ~~million,~~ respectively. ~~See Note 6 for discussion of the amortization of the customer-related backlog asset of $2.2~~ ~~million during the three-month period ended April 2, 2022.~~

We perform our annual goodwill and indefinite-lived intangible asset impairment testing on the first day of our fiscal fourth quarter of each year, and at interim periods if needed based on occurrence of triggering events. During the three months ended April ~~2, 2022,~~1, 2023, we did not identify any events which we believe would trigger the need for tests for impairments of our indefinite-lived intangibles assets. As of April ~~2, 2022~~1, 2023 and ~~January 1,~~December 31, 2022, the carrying value of our Southeast reporting unit goodwill is $~~226.8~~228.3 million and $~~226.8~~228.3 million, respectively. As of April ~~2, 2022~~1, 2023 and ~~January 1,~~December 31, 2022, the carrying value of our Western reporting unit goodwill is $~~143.6~~233.1 million and $~~137.8~~232.1 million, respectively. ~~Goodwill of our Southeast reporting unit includes the goodwill relating to Eco. Goodwill of our Western reporting unit includes the goodwill relating to both Anlin and CRi.~~

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 $8.7 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 $1.5 million of other costs, all of which are being amortized under the effective interest method. ~~See “Deferred Financing Costs” below.~~

million of 2018 Senior Notes due 2026, including the related fees, costs, and the prepayment call premium of $21.5 million, representing 5.063% of the $425.0 million face value then outstanding, prepay the outstanding term loan borrowings under the then existing 2016 Credit Agreement of $~~54.0~~60.0 million and the related fees and costs, and finance the Anlin Acquisition in the fourth quarter of 2021. See Note 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, 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.

On February 16, 2016, we entered into the 2016 Credit Agreement. From 2016 to 2022, we entered into various amendments to the 2016 Credit Agreement, ~~due 2024, among us,~~including the ~~lending institutions identified~~amendment in October 2022, as described below.

On October 13, 2022, the Company entered into the Fifth Amendment of the 2016 Credit Agreement due ~~2024, and Truist Financial Corporation (formerly known as SunTrust Bank), as Administrative Agent and Collateral Agent.~~2027. The ~~2016 Credit Agreement due 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~~% 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 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 2024 (the “Second Amendment”).~~ ~~The Second~~Fifth Amendment ~~among other things, decreased the applicable interest rate margins for the Initial Term Loans (as defined in the 2016 Credit Agreement due 2024) from (i)~~ ~~3.75% to~~ ~~2.50%, in the case of the Base Rate Loans (as defined in the 2016 Credit Agreement due 2024), and (ii)~~ ~~4.75% to~~ ~~3.50%, in the case of the Eurodollar Loans (as defined in the 2016 Credit Agreement due 2024).~~ On February 17, 2017, we entered into the first amendment to our 2016 Credit Agreement due 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 2024 (“Third Amendment”). The Third Amendment provided~~provides 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,~~New Revolving Credit Facility, which ~~refinanced in full our existing Term B term loan facility under the 2016 Credit Agreement, and had no regularly scheduled amortization, and (ii)~~is a new five-year revolving credit facility in an aggregate principal amount of ~~up to~~$250.0 million. The New Revolving Credit Facility refinances and replaces the previously existing $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~~due 2027. The Company’s obligations under the 2016 Credit Agreement due 2027 continue to be secured by substantially all of ~~our assets, as well as our~~its and its 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~~Contemporaneously with the Fifth Amendment, the Company drew down $160.0 million of ~~our~~funds available under the New Revolving Credit Facility. Proceeds totaling $61.6 million from the $160.0 million drawdown were used to repay then existing term loan borrowings under the 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~~totaling $60.0 million, ~~(the "Incremental Term A Loan"),~~plus accrued interest and fees totaling $1.6 million. As discussed below, the remaining $98.4 million of proceeds ~~from which~~ were used to fund the ~~Anlin~~cash portion of the Martin Acquisition. The ~~Fourth Amendment does not change~~Company has made net repayments of the $160.0 million of initial borrowings under the New Revolving Credit Facility totaling $81.0 million through April 1, 2023.

Interest on borrowings under the New Revolving Credit Facility is payable either quarterly or at the expiration of any ~~terms relating~~Secured Overnight Financing Rate ("SOFR") interest period applicable thereto. Borrowings under the New Revolving Credit Facility accrue interest at a rate equal to, at our option, a base rate (with a floor of 100 basis points) plus a percentage spread (ranging from 0.75% to 1.75%) based on our first lien net leverage ratio or SOFR (with a floor of 0 basis points) plus a percentage spread (ranging from 1.75% to 2.75%) based on our first lien net leverage ratio. After giving effect to the ~~Revolving Facility, under which~~Fifth Amendment, we pay a quarterly ~~fees~~commitment fee on the unused portion of the ~~revolving credit facility~~New Revolving Credit Facility equal to a percentage spread (ranging from 0.25% to 0.35%) based on our first lien net leverage ratio. The Fifth Amendment also modifies the application of the financial covenant under the 2016 Credit Agreement such that testing will occur on a quarterly basis, and requires we maintain a first lien net leverage ratio of not more than 4.00 to 1.00. We were in compliance with this covenant as of April 1, 2023.

The 2016 Credit Agreement due 2027 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) sell or otherwise dispose of assets; (iv) enter into transactions with affiliates; (v) create or incur liens; (vi) 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; (viii) make investments and (ix) designate the Company’s subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications.

As of April ~~2, 2022, there~~1, 2023, borrowings outstanding under the $250.0 million New Revolving Credit Facility totaled $79.0 million, and accrued interest was $244 thousand. There were $~~5.7~~8.5 million in letters of credit ~~outstanding and~~outstanding. Availability under the New Revolving Credit Facility at April 1, 2023 totaled $~~74.3~~162.5 ~~million available under the Revolving Facility.~~

million. The weighted average all-in interest rate for borrowings under the ~~term-loan portion~~existing revolving credit facility of the 2016 Credit Agreement due ~~2024~~2027 was ~~2.46% as of April 2, 2022, and was~~ ~~2.10~~6.47% at ~~January~~April 1, 2023, and 6.07% at December 31, 2022.

~~- 20 -~~The Martin Acquisition was financed in part with the $250.0 million available under the New Revolving Credit Facility provided by the Fifth Amendment of our 2016 Credit Agreement due 2027, under which we drew $160.0 million on October 14, 2022, the proceeds of which were used to pay $98.4 million of the $187.8 million total fair value of consideration transferred at closing, and $61.6 million to prepay our $60.0 million existing term loans under the Fourth Amendment of our 2016 Credit Agreement due 2027, plus $1.6 million in fees, costs and accrued interest. The remainder of the total fair value of consideration transferred at closing, totaling $89.4 million was funded with cash on hand previously generated through operations. We also paid buyer fees and costs relating to the Martin Acquisition totaling $4.8 million in the year ended December 31, 2022, classified as selling, general and administrative expenses for the year ended December 31, 2022.

~~The activity~~Activity relating to deferred financing costs, ~~composed of third-party fees and costs, and lender fees, for the three months ended April 2, 2022, are as follows. All deferred financing costs are~~which is classified as a reduction of the carrying value of long-term ~~debt:~~debt, for the three months ended April 1, 2023, is as follows:


(in thousands)	Total			Total
At beginning of year	$	9,345		$	9,218
Less: Amortization expense		(304	)		(326	)
At end of period	$	9,041		$	8,892

Estimated amortization expense relating to deferred financing costs for the years indicated as of April ~~2, 2022,~~1, 2023, is as follows:


(in thousands)	Total		Total
Remainder of 2022	$	929
2023		1,282
Remainder of 2023			$	994
2024		1,282		1,366
2025		1,083		1,442
2026		1,114		1,466
2027				1,440
Thereafter		3,351		2,184

Total	$	9,041	$	8,892

~~We have no schedule payments of outstanding debt until the contractual maturity of the 2016 Credit Agreement in October 2024.~~ ~~Our~~The contractual future maturities of long-term debt outstanding, as of April 1, 2023, are as follows (at face value):


(in thousands)
Remainder of 2022	$	0
2023		0
Remainder of 2023			$	—
2024		60,000		—
2025		0		—
2026		0		—
2027				79,000
Thereafter		575,000		575,000

Total	$	635,000	$	654,000

~~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 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 months ended April 2, 2022 and April 3, 2021, are as follows (in thousands):~~

Three Months Ended

April 2,

April 3,

2022

2021

Operating lease cost
$
4,839

$
2,879

Short-term lease cost

2,305

2,200

Total lease cost
$
7,144

$
5,079

~~- 21 -~~

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

Three Months Ended

April 2,

April 3,

2022

2021

Supplemental cash flows information

Cash paid for amounts included in the
  measurement of lease liabilities:

Operating cash flows relating to
  operating leases
$
(4,529
)

$
(2,764
)

Right-of-use assets obtained in exchange
  for lease obligations:

Operating leases
$
1,324

$
29,490

Weighted average remaining lease term in years

Operating leases

6.57

7.23

Weighted average discount rate

Operating leases

5.5
%

5.6
%

~~Future maturities under operating leases were as follows at April 2, 2022 and January 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

~~As of April 2, 2022, we had~~ ~~no additional operating or finance leases that have not yet commenced~~. ~~Our operating leases expire at various times through 2032.~~ ~~Lease expense was $7.1~~ ~~million for the three months ended April 2, 2022 and was $5.1~~ ~~million for the three months ended April 3, 2021. Of the $7.1~~ ~~million for the three months ended April 2, 2022, $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 $5.1~~ ~~million for the three months ended April 3, 2021, $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.~~

NOTE ~~12.~~11. INCOME TAXES

The income tax provision for interim periods is comprised of tax on ordinary income provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. We estimate the annual effective tax rate quarterly based on the forecasted annual pre-tax results of our operations. The tax effects of items that are unrelated to current year ordinary income are recognized entirely as discrete items in the period identified, including share-based compensation, changes in tax laws and adjustments to the actual liability determined upon filing tax returns.

We had anincome tax expense of $11.2 million for the three months ended April 1, 2023, compared with income tax expense of $7.8 million for the three months ended April 2, ~~2022, compared with income tax expense of $3.9~~ ~~million for the three months ended April 3, 2021.~~2022. Our effective tax rate for the three months ended April ~~2, 2022,~~1, 2023, was ~~an expense rate of~~ ~~24.7~~24.6%, ~~and was an expense rate of~~compared with ~~23.6~~24.7% for the three months ended April ~~3, 2021.~~2, 2022. Our income tax expense for the ~~three-month periods~~three months ended April 1, 2023, and April 2, 2022, ~~and April 3, 2021,~~ includes income tax expenses of $~~505~~654 thousand and $~~305~~505 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco.

Income tax expense in the three months ended April ~~2, 2022 and April 3, 2021 include~~1, 2023 includes discrete items of income tax benefit relating to excess tax benefits from the lapses of restrictions on stock awards, which totaled $~~136~~438 ~~thousand~~thousand. The income tax benefit in the three months ended April 2, 2022 ~~and~~included discrete items of income tax benefit relating to excess tax benefits from the lapses of restrictions on stock awards totaling $95136 ~~thousand in~~thousand. Excluding discrete items of income tax, the effective tax rates for the three months ended April ~~3, 2021. The effect of these discrete items on our effective tax rates for these periods was not significant.~~

~~In September 2021, the state of Florida announced that the corporate~~1, 2023 and April 2, 2022, would have been an 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 adjusted our annual effective tax rate for 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 stateexpense rate of ~~25.7~~25.6% ~~from our estimate in 2021 of~~and ~~24.2~~25.1%. , respectively.

During the first three months of ~~2022 or 2021,~~2023, we made payments of estimated taxes totaling $16.4 million, which included $8.8 million in Federal estimated income taxes with the remainder to various states, primarily Florida. We were 0not required to make any payments of estimated federal or state income ~~taxes.~~taxes during the first three months of 2022. We had accrued federal and state income taxes payable of $11.2 million and $16.4 million at April 1, 2023, and December 31, 2022, respectively.

NOTE ~~13.~~12. FAIR VALUE

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

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

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

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

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

During the three months ended April ~~2, 2022~~1, 2023 or April ~~3, 2021,~~2, 2022, we did 0not make any transfers between Level 2 and Level 3 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts and notes receivable, and accounts payable and accrued liabilities, whose carrying amounts approximate their fair values due to their short-term nature. Our financial instruments also include borrowings under ~~our~~the 2016 Credit Agreement due 2027, as well as the 2021 Senior Notes due 2029, all classified as long-term debt. The fair value of borrowings under the 2016 Credit Agreement due ~~2024~~2027 approximated its carrying value due to its variable-rate nature, and ~~was~~were approximately $~~60.0~~79.0 million and $76.4 million as of April 2,1, 2023, and December 31, 2022, ~~and January 1, 2022, compared to a principal outstanding value of $60.0~~ ~~million at those dates,~~ respectively. The fair value of the 2021 Senior Notes due 2029 is based on debt with similar terms and characteristics and was approximately $~~531.2~~518.2 million as of April ~~2, 2022,~~1, 2023, compared to a principal outstanding value of $575.0 million, and the fair value was approximately $~~578.2~~480.8 million as of ~~January 1,~~December 31, 2022, compared to a principal outstanding value of $575.0 million.

~~- 23 -~~

Items Measured at Fair Value

The following are measured in the condensed consolidated financial statements at fair value on a recurring basis and are categorized in the table below based upon the lowest level of significant input to the valuation (in thousands):


	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
			Markets		Inputs		Inputs				Markets		Inputs		Inputs
April 2, 2022	Total		(Level 1)		(Level 2)		(Level 3)
April 1, 2023									Total		(Level 1)		(Level 2)		(Level 3)
Description
Aluminum contracts	$	9,058	$	—	$	9,058	$	—	$	212	$	—	$	212	$	—
MTP contracts		4,383		—		4,383		—		260		—		260		—

	$	13,441	$	—	$	13,441	$	—	$	472	$	—	$	472	$	—

Fair Value Measurements

Assets (Liabilities)

Quoted

Significant

Prices in

Other

Significant

Active

Observable

Unobservable

Markets

Inputs

Inputs

January 1, 2022
Total

(Level 1)

(Level 2)

(Level 3)

Description

Aluminum contracts
$
4,829

$
—

$
4,829

$
—

MTP contracts

4,599

—

4,599

—

$
9,428

$
—

$
9,428

$
—

- 19 -


	Fair Value Measurements
	Assets (Liabilities)
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
December 31, 2022	Total		(Level 1)		(Level 2)		(Level 3)
Description
Aluminum contracts	$	—	$	—	$	—	$	—
MTP contracts		300		—		300		—
	$	300	$	—	$	300	$	—

See Note 1413 for a description of the methods and assumptions used in the determination of the fair values of our aluminum forward and Midwest Transaction Premium (“MTP”) contracts, as well as the basis for classifying these assets and liabilities as Level 2.

NOTE ~~14.~~13. 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. In early 2020, we began entering into forward contracts~~production, and 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.

~~- 24 -~~

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 April ~~2, 2022,~~1, 2023, the fair value of our aluminum forward contracts was in an asset position of $~~9.1~~0.2 million. We had 2313 outstanding forward contracts for the purchase of ~~36.3~~5.6 million pounds of aluminum through December ~~2022,~~2023, at an average price of $~~1.32~~1.07 per pound, which excludes the Midwest premium, with maturity dates of between two ~~months~~and ~~ten~~nine months. At April ~~2, 2022,~~1, 2023, the fair value of our MTP contracts was in an asset position of $~~4.4~~0.3 million. We had 71 outstanding MTP ~~contracts~~contract to hedge the Platt US MW Transaction price per pound for the delivery of ~~17.0~~6.3 million pounds of aluminum through December ~~2022,~~2023, at an average price of $~~0.12~~0.21 per pound, with a maturity ~~dates~~date of ~~between~~ ~~two months~~ ~~and~~ ~~ten~~nine 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 April ~~2, 2022.~~1, 2023.

- 20 -

expect the amount of ~~income, net, recognized in the “accumulated~~accumulated other comprehensive income ~~(loss)” line item~~of approximately $0.5 million in the accompanying condensed consolidated balance sheet as of April ~~2, 2022, that we expect will~~1, 2023, to be reclassified to earnings within the next twelve ~~months, is approximately $13.4~~ ~~million.~~months.

The fair values of our aluminum hedges and MTP contracts are classified in the accompanying condensed consolidated balance sheets at April ~~2, 2022~~1, 2023 and ~~January 1,~~December 31, 2022, as follows (in thousands):

Derivative Assets

Derivative Liabilities

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

Derivative instruments:

Aluminum contracts

Other current assets

$
10,184

Accrued liabilities

$
(1,126
)
MTP contracts

Other current assets

4,383

Accrued liabilities

—

Aluminum contracts

Other assets

—

Other liabilities

—

MTP contracts

Other assets

—

Other liabilities

—

Total derivative instruments

Total derivative assets

$
14,567

Total derivative liabilities

$
(1,126
)

Derivative Assets

Derivative Liabilities

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

Derivative instruments:

Aluminum contracts

Other current assets

$
4,829

Accrued liabilities

$
—

MTP contracts

Other current assets

4,599

Accrued liabilities

—

Aluminum contracts

Other assets

—

Other liabilities

—

MTP contracts

Other assets

—

Other liabilities

—

Total derivative instruments

Total derivative assets

$
9,428

Total derivative liabilities

$
—

Derivative Assets

Derivative Liabilities

April 1, 2023

Derivatives designated as hedging

instruments under Subtopic 815-20:

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivative instruments:

Aluminum contracts

Other current assets

212

Accrued liabilities

—

MTP contracts

Other current assets

260

Accrued liabilities

—

Aluminum contracts

Other assets

—

Other liabilities

—

MTP contracts

Other assets

—

Other liabilities

—

Total derivative instruments

Total derivative assets

472

Total derivative liabilities

—

Derivative Assets

Derivative Liabilities

December 31, 2022

Derivatives designated as hedging

instruments under Subtopic 815-20:

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivative instruments:

Aluminum contracts

Other current assets

—

Accrued liabilities

—

MTP contracts

Other current assets

300

Accrued liabilities

—

Aluminum contracts

Other assets

—

Other liabilities

—

MTP contracts

Other assets

—

Other liabilities

—

Total derivative instruments

Total derivative assets

300

Total derivative liabilities

—

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 $~~10.0~~0.4 million as of April ~~2, 2022,~~1, 2023, and was an accumulated other comprehensive income of $~~7.0~~0.2 million at ~~January 1,~~December 31, 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.

The following represents the gains (losses) on derivative financial instruments, and their classifications within the accompanying condensed consolidated financial statements, for the three months ended April ~~2, 2022~~1, 2023 and April ~~3, 2021~~2, 2022 (in thousands):

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

Three Months Ended

Three Months Ended

April 2,

April 3,

April 2,

April 3,

2022

2021

2022

2021

Aluminum contracts

$
5,607

$
4,083

Cost of sales

$
1,378

$
1,388

MTP contracts

$
468

$
4,205

Cost of sales

$
684

$
387

We classify cash flows related to derivative instruments as operating activities in the condensed consolidated statements of cash flows.

- 21 -

NOTE ~~15.~~14. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table shows the components of accumulated other comprehensive income for the three months ended April ~~2, 2022~~1, 2023 and April ~~3, 2021~~2, 2022 (in thousands):

Three months ended April 2, 2022

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at January 1, 2022

$
3,610

$
3,396

$
7,006

Change in fair value of derivatives

5,607

468

6,075

Amounts reclassified from other comprehensive income

(1,378
)

(684
)

(2,062
)
Tax effect

(1,055
)

25

(1,030
)
Net current-period other comprehensive income

3,174

(191
)

2,983

Balance at April 2, 2022

$
6,784

$
3,205

$
9,989



Three months ended April 1, 2023	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at December 31, 2022	$	—		$	223		$	223
Increase in fair value of derivatives		212			100			312
Amounts reclassified from accumulated other comprehensive income		—			(140	)		(140	)
Tax effect		(55	)		10			(45	)
Net current-period other comprehensive income (loss)		157			(30	)		127
Balance at April 1, 2023	$	157		$	193		$	350

Three months ended April 3, 2021

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at January 2, 2021

$
2,403

$
317

$
2,720

Change in fair value of derivatives

4,083

4,205

8,288

Amounts reclassified from other comprehensive income

(1,388
)

(387
)

(1,775
)
Tax effect

(670
)

(948
)

(1,618
)
Net current-period other comprehensive income

2,025

2,870

4,895

Balance at April 3, 2021

$
4,428

$
3,187

$
7,615



Three months ended April 2, 2022	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at January 1, 2022	$	3,610		$	3,396		$	7,006
Increase in fair value of derivatives		5,607			468			6,075
Amounts reclassified from other comprehensive income		(1,378	)		(684	)		(2,062	)
Tax effect		(1,055	)		25			(1,030	)
Net current-period other comprehensive income (loss)		3,174			(191	)		2,983
Balance at April 2, 2022	$	6,784		$	3,205		$	9,989

NOTE ~~16.~~15. SEGMENTS

We have 2two reportable segments: the Southeast segment and the Western segment.

The Southeast reporting segment, which is also an operating segment, is composed of sales from our facilities in Florida. The Western reporting segment, also an operating segment, is composed of sales from our facilities in Arizona, Utah and California.

Centralized financial and operational oversight, including resource allocation and assessment of performance on an income from operations basis, is performed by our CEO, whom we have determined to be our chief operating decision maker (“CODM”), with oversight by the Board of Directors. ~~Total asset information by segment is not included herein as asset information by segment is not presented to or reviewed by the CODM.~~

The following table represents summary financial data attributable to our operating segments for the ~~three-month periods~~three months ended April ~~2, 2022,~~1, 2023, and April ~~3, 2021. Results of the Southeast segment for the three-month period ended April~~ 2, ~~2022 includes the results of Eco for the entire three-month period, whereas for the three-month period ended April 3, 2021 for only its post-acquisition period from February 1, 2021.~~2022. Results of the Western segment for the ~~three-month period~~three months ended April 1, 2023 include the results of Martin, acquired October 14, 2022, whereas such results are not included for the three month ended April 2, ~~2022 includes the results of CRi, acquired May 1, 2021, and Anlin, acquired October 25, 2021, whereas there were no results from either CRi or Anlin in the three-month period ended April 3, 2021.~~

2022. Corporate overhead has been allocated to each segment using an allocation method we believe is reasonable (in thousands):


	Three Months Ended				Three Months Ended
	April 2,		April 3,		April 1,		April 2,
	2022		2021		2023		2022
Net sales:
Southeast segment	$	271,767	$	233,638	$	282,045	$	271,767
Western segment		86,895		37,454		94,784		86,895

Total net sales	$	358,662	$	271,092	$	376,829	$	358,662

Income from operations:
Southeast segment	$	25,556	$	18,743	$	40,521	$	25,556
Western segment		13,155		5,453		12,797		13,155

Total income from operations		38,711		24,196		53,318		38,711

Interest expense, net		7,080		7,457		7,656		7,080

Total income before income taxes	$	31,631	$	16,739	$	45,662	$	31,631

Depreciation expense for the ~~three-month periods~~three months ended April 1, 2023 and April 2, 2022, ~~and April 3, 2021,~~ was $~~6.9~~6.8 million and $~~5.8~~6.9 million for our Southeast segment, respectively, and $~~1.6~~2.1 million and $~~0.9~~1.6 million for our Western segment, respectively. Amortization expense for the ~~three-month periods~~three months ended April 1, 2023 and April 2, 2022, ~~and April 3, 2021,~~was $~~2.7~~2.0 million, and $~~2.4~~2.7 million for our Southeast segment, respectively, and $~~5.3~~4.8 million and $~~2.3~~5.3 million for our Western segment, respectively.

Total assets of our Southeast segment as of April ~~2, 2022~~1, 2023 and ~~January 1,~~December 31, 2022 were $~~936.5~~907.4 million and $~~911.3~~909.6 million, respectively. Total assets of our Western segment as of April ~~2, 2022~~1, 2023 and ~~January 1,~~December 31, 2022 were $~~562.6~~717.0 million and $~~549.3~~730.6 million, respectively.

- 2723 -

NOTE ~~17.~~16. REEDEMABLE NON-CONTROLLING INTEREST

On February 1, 2021, we completed an acquisition of a 75% ownership stake in Eco. The seller of Eco obtained the remaining equity interest in the newly formed company, Eco Enterprises. The seller’s redeemable non-controlling interest ("RNCI") 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 in the third year following the acquisition date. If the Company does not exercise its right to call by the third anniversary, the agreement provides the seller with a put right which can be exercised during the 15-day period following the third anniversary. Upon exercise of the put or call right, the purchase price is calculated based on a 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. The redeemable non-controlling interest is accreted to the future redemption value using the effective interest method up to the date on 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. 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 $~~58.3~~39.1 million, which we accreted to $~~39.7~~36.7 million as of April ~~2, 2022.~~1, 2023.

The following table presents the changes in the Company’s redeemable non-controlling interest for the ~~period presented:~~three months ended April 1, 2023, and April 2, 2022:


	Three Months Ended
	April 1,		April 2,
(in thousands)	2023		2022
Balance at beginning of period	$	34,721	$	36,863
Net income attributable to redeemable non-controlling interest		837		657
Change in value of redeemable non-controlling interest		1,177		2,136
Balance at end of period	$	36,735	$	39,656

NOTE 17. SHAREHOLDERS' EQUITY

Shareholder Rights Plan

Three Months Ended

April 2,

April 3,

(in thousands)
2022

2021

Balance at beginning of period
$
36,863

$
—

Redeemable non-controlling interest in Eco at initially estimated fair value

—

34,084

Net income attributable to redeemable non-controlling interest

657

411

Change in value of redeemable non-controlling interest

2,136

—

Balance at end of period
$
39,656

$
34,495

On March 30, 2023, we announced that our Board of Directors had unanimously approved the adoption of a limited-duration shareholder rights plan (the “Rights Plan”) which includes the declaration of a dividend distribution of one right (each, a “Right”) for each outstanding share of the Company’s common stock to stockholders of record as of the close of business on April 10, 2023. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share, of the Company at an exercise price of $90.00, subject to adjustment. The complete terms of the Rights are set forth in a Rights Agreement, dated as of March 30, 2023, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (the "Rights Agreement"). The Rights expire on the earliest of (1) March 30, 2024, unless such date is extended, or (2) the redemption or exchange of the Rights as described above.

The Board adopted the Rights Plan in response to a likely accumulation of the Company's shares by a strategic investor. The intent of the Rights Plan is to reduce the likelihood that any entity, person or group gains control of the Company through open market accumulation of the Company's shares without paying all other shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that it believes are in the best interests of its other shareholders. Under the Rights Plan, the rights will become exercisable if an entity, person or group acquires beneficial ownership of 10% or more of the Company's outstanding common stock in a transaction not approved by the Board. In the event that the Rights become exercisable due to the triggering ownership threshold being crossed, each Right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose Rights will become void and will not be exercisable) to purchase, at the then-current exercise price, additional shares of common stock having a then-current market value of twice the exercise price of the Right.

- 2824 -

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 1,~~December 31, 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 ~~January 1,~~December 31, 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. Examples of forward-looking statements include, among others, statements we make regarding our acquisitions of Anlin Windows & Doors ("Anlin"), and Martin Door Holdings, Inc. ("Martin"); pricing actions benefiting margins; effects of Hurricane Ian and other economic headwinds such as increasing interest rates and rising inflation; improvement of our operations and business integration; and our net sales guidance.

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, including the impact of the 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, vinyl, and ~~vinyl,~~steel, including, price increases due to the implementation of tariffs and other trade-related restrictions, Pandemic-related supply chain 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 acquisition of Eco ~~Acquisition,~~Enterprises, LLC ("Eco"), 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,~~our acquisitions of Martin and ~~our Eco Acquisition;~~Anlin;

•

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

•

increases in 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 obligations from such customers;

•

the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our ~~acquisition~~acquisitions of ~~Anlin,~~Martin and ~~from our Eco Acquisition~~Anlin 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;~~acquisition of Eco;

•

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;

- 25 -

•

risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by ~~“hackers”~~"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;

•

in addition to our ~~acquisition~~acquisitions of ~~Anlin,~~Martin and ~~our Eco Acquisition,~~Anlin, 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~~when we ~~acquire~~acquired it; and

•

the other risks and uncertainties discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended ~~January 1,~~December 31, 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 first quarter of ~~2022,~~2023, we ~~experienced growth~~grew at both our Southeast and Western segments, as the momentum of growth we experienced ~~over~~ last year ~~continued into 2022. Of~~continues in 2023. Despite macro-economic headwinds including higher interest rates and inflation, our total net sales for the first quarter of ~~2022 of $358.7~~2023 was $376.8 million, which increased ~~32.3%~~5.1% compared to $358.7 million in the first quarter of ~~2021, from $271.1 million~~2022. Sales growth at our Southeast segment was entirely organic, while sales growth at our Western segment was impacted by our Martin acquisition in ~~the 2021 first quarter, included growth both organically, and from acquisitions in 2021.~~October 2022. Our Southeast segment's net sales were $282.0 million in the first quarter of 2023, compared to $271.8 million in the first quarter of 2022, ~~compared to $233.6 million in the first quarter of 2021,~~ an increase of ~~$38.2~~$10.2 million, or ~~16.3%~~3.8%. ~~This growth was largely organic, but for the sales of Eco being included for the entire~~Our Southeast segment benefitted from a solid repair and remodel channel. Additionally, we believe first quarter sales growth benefitted from heightened hurricane awareness as a result of ~~2022, versus only the post-acquisition period~~Hurricane Ian, which made landfall 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~~Southwest Florida in the first quarter of 2022, compared to $37.5 million in the first quarter of 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 growth we had in the first quarter of 2022 reflects the strength of our portfolio of brands across our entire geographic footprint.September 2022.

~~Our gross profit increased~~We also believe that Hurricane Ian has spurred homeowners to $134.6 million in the first quarter of 2022, producing a gross margin of 37.5%, compared to $94.0 million in the 2021 first quarter, and a gross margin of 34.7%, an improvement in gross margin of 280 basis points from the first quarter of 2021 to the first quarter of 2022. We were able to produce this operational improvement despite headwinds of inflationary pressure being felt on material and labor costs, as well as supply-chain challenges we have experienced in 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 industry. During the 2022 first quarter, we have been focused on improving our manufacturing processes in order to reduce lead-times to meet the continued growing demand. Recent investments in our team to help them achieve higher talent levels have also helped generate improved operational efficiencies across our entire portfolio of brands, which we believe will continue to benefit our gross margin through the balance of 2022.

~~One of the biggest events that occurred recently was the passage~~advantage of Florida House Bill 7071, signed into law in ~~early~~ May 2022. This bill provides two-year tax relief to Florida residences, available through June 2024, who ~~chose~~choose to "harden" their homes against the damaging effects of storms ~~through~~by investing in impact-resistant windows, doors, and other product categories. We're excited about this great benefit for Florida ~~home owners~~homeowners 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 Company's portfolio of Florida impact-resistant brands. We believe our Florida operations is benefitting from this home-hardening legislation, the main highlight of which includes a sales tax exemption for Floridians that harden their homes against natural disasters using impact-resistant products like those sold by the Company.

Our Western segment's net sales were $94.8 million in the first quarter of 2023, compared to $86.9 million in the first quarter of 2022, an increase of $7.9 million, or 9.1%. While sales for the first quarter of 2023 of our Western segment includes acquisition growth from Martin, our existing business produced solid results when compared to the first quarter of last year, despite softness in the new construction channel in the first quarter of 2023, compared to the first quarter of 2022.

Our gross profit increased to $149.2 million in the first quarter of 2023, producing a gross margin of 39.6%, compared to $134.6 million in the 2022 first quarter, and a gross margin of 37.5%, an improvement in gross margin of 210 basis points from the first quarter of 2022 to the first quarter of 2023. Cash from operations during the first three months of 2023 was $23.9 million, compared to $17.3 million in the first three months of 2022, an increase in cash from operations of $6.6 million, or 38.1%. Our first quarter 2023 improvements in operating results and cash from operations were driven by continued solid performance from our operating teams, prior year's pricing impacts offsetting material and wage inflation, and cost containment measures amid the continuing macro-environment uncertainty. Additionally, during the first quarter of 2023, we maintained our focus on delivery, quality and lead time performance, which contributed to higher margins.

- 3026 -

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~~three months ended April ~~2, 2022~~1, 2023 and April ~~3, 2021~~2, 2022 are composed of 13 weeks (in thousands, except percentages):


	Three Months Ended
	April 2,				April 3,				Three Months Ended
	2022				2021				April 1, 2023				April 2, 2022
	(unaudited)								(unaudited)
Net sales	$	358,662		100.0 %	$	271,092		100.0 %	$	376,829		100.0 %	$	358,662		100.0 %
Cost of sales		224,069		62.5 %		177,130		65.3 %		227,598		60.4 %		224,069		62.5 %

Gross profit		134,593		37.5 %		93,962		34.7 %		149,231		39.6 %		134,593		37.5 %

Selling, general and administrative expenses		95,882		26.7 %		69,766		25.7 %		95,913		25.5 %		95,882		26.7 %

Income from operations		38,711		10.8 %		24,196		8.9 %		53,318		14.1 %		38,711		10.8 %

Interest expense, net		7,080		2.0 %		7,457		2.8 %		7,656		2.0 %		7,080		2.0 %

Income before income taxes		31,631		8.8 %		16,739		6.2 %		45,662		12.1 %		31,631		8.8 %

Income tax expense		7,805		2.2 %		3,944		1.5 %		11,235		3.0 %		7,805		2.2 %

Net income		23,826		6.6 %		12,795		4.7 %		34,427		9.1 %		23,826		6.6 %

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

Less: Net income attributable to redeemable RNCI										(837	)	(0.2)%		(657	)	(0.2)%
Net income attributable to the Company		23,169		6.5 %		12,384		4.6 %		33,590		8.9 %		23,169		6.5 %

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

Increase in redemption value of RNCI										(1,177	)	(0.3)%		(2,136	)	(0.6)%
Net income attributable to common shareholders	$	21,033		5.9 %	$	12,384		4.6 %	$	32,413		8.6 %	$	21,033		5.9 %

~~- 31 -~~

RESULTS OF OPERATIONS FOR THE ~~THREE~~ MONTHS ENDED APRIL ~~2, 2022~~1, 2023 AND APRIL ~~3, 2021~~2, 2022

The three-month periods ended April 1, 2023 and April 2, 2022 ~~and April 3, 2021~~ are each composed of 13 ~~weeks each.~~weeks.

Net sales

Three Months Ended

April 2, 2022

April 3, 2021

Net Sales

% of sales

Net Sales

% of sales

% change
By segment:

Southeast segment

$
271.8

75.8%

$
233.6

86.2%

16.3%
Western segment

86.9

24.2%

37.5

13.8%

132.0%

Total net sales

$
358.7

100.0%

$
271.1

100.0%

32.3%


	Three Months Ended
	April 1, 2023			April 2, 2022
	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	282.0	74.8%	$	271.8	75.8%	3.8%
Western segment		94.8	25.2%		86.9	24.2%	9.1%

Total net sales	$	376.8	100.0%	$	358.7	100.0%	5.1%

Net sales for the first quarter of ~~2022~~2023 were ~~$358.7~~$376.8 million, an ~~$87.6~~$18.1 million, or ~~32.3%~~5.1%, increase in sales, from ~~$271.1~~$358.7 million in the first quarter of the prior year.

During the first quarter of ~~2022,~~2023, we experienced solid growth ~~at both our Southeast and Western segments,~~ as the momentum of growth we experienced over last year continued ~~into 2022. Of our total net sales for~~in 2023. Additionally, we continue to make strategic marketing investments which are paying dividends through customer awareness during the ~~first quarter of 2022 of $358.7 million, which increased 32.3% compared to the first quarter of 2021, from $271.1 million in the 2021 first quarter, included growth both organically,~~repair and ~~from acquisitions in 2021.~~remodeling season. Our Southeast segment's net sales were $282.0 million in the first quarter of 2023, compared to $271.8 million in the first quarter of 2022, ~~compared to $233.6~~an increase of $10.2 million, or 3.8%. Our Southeast segment benefitted from a solid repair and remodel channel. Additionally, we believe we have benefitted from heightened hurricane awareness following Hurricane Ian, a category 5 storm that made landfall in Southwest Florida in September 2022.

Our Western segment's net sales were $94.8 million in the first quarter of 2021, 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 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 were2023, compared to $86.9 million in the first quarter of 2022, ~~compared to $37.5 million in the first quarter of 2021,~~ an increase of ~~$49.4 million. Sales~~$7.9 million, or 9.1%. While sales for the first quarter of ~~2022~~2023 of our Western segment includes acquisition growth from ~~Anlin and CRi, but still grew organically by 39.1%~~Martin, our existing business produced solid results when compared to the first quarter of last ~~year's first quarter. We believe~~year, despite softness in the ~~organic growth we had~~new construction channel in the first quarter of ~~2022 reflects~~2023 compare the ~~strength~~first quarter of ~~our portfolio of brands across our entire geographic footprint.~~2022.

Gross profit and gross margin

Gross profit was $149.2 million in the first quarter of 2023, an increase of $14.6 million, or 10.9%, from $134.6 million in the first quarter of ~~2022, an increase of $40.6 million, or 43.2%, from $94.0 million~~2022. Our gross margin was 39.6% in the first quarter of ~~2021. Our gross margin was 37.5% in the first quarter of 2022,~~2023, compared to ~~34.7%~~37.5% in the prior year first ~~quarter. The increases~~quarter, an increase of 2.1%. Our first quarter 2023 improvements in gross profit and gross margin ~~include~~we believe were driven by continued solid performance from our operating teams, prior year's pricing impacts offsetting material and wage inflation, and cost containment measures amid 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 first quarter of 2022, we continued to invest in our labor talent which helped generate operational efficiencies across all our businesses in response to increasing demand and believe these actions will continue to benefit our gross margin as we try to offset the impacts of rising costs for materials and labor, and will continue to grow our company with high-quality talent.continuing macro-environment uncertainty.

- 27 -

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were $95.9 million in the first quarter of ~~2022, an increase of $26.1 million, from $69.8~~2023, compared to $95.9 million in the first quarter of ~~2021.~~2022. SG&A in the first quarter of ~~2022~~2023 was ~~26.7%~~25.5% of net sales, compared to ~~25.7%~~26.7% of net sales in the first quarter of ~~2021. The increase in~~2022. SG&A in the first quarter of ~~2022,~~2023, although flat when compared to last year's first quarter, ~~is partially due to~~was impacted by the inclusion of SG&A from our ~~2021~~ acquisition of ~~Anlin,~~Martin in the fourth quarter of 2022, which added ~~$9.2~~$3.3 million of SG&A in the ~~2022~~2023 first quarter and included ~~$2.8~~$1.7 million of non-cash amortization expense relating to its intangible assets. ~~However,~~SG&A in the ~~year-over-year increase~~first quarter of 2023 also includes $0.9 million of executive severance costs and $0.7 million of acquisition costs relating to the Anlin Acquisition which we incurred in the first quarter of 2023. These incremental costs were partially offset by a gain from an insurance recovery relating to the wind-down of the commercial business of our NewSouth acquisition of $2.9 million. Excluding these net incremental costs from the first quarter of 2023, SG&A ~~was also driven by increasing distribution~~expenses decreased slightly when compared to the first quarter of 2022 and ~~variable overhead costs~~improved as a percentage of sales due to the ~~increase~~leverage of higher sales in ~~sales. Increasing fuel costs and~~ the ~~inflationary conditions we have experienced over~~first quarter of 2023 when compared to the ~~last few quarters have also impacted SG&A year-over-year.~~first quarter of 2022.

Income from operations

Income from operations was $53.3 million in the first quarter of 2023, an increase of $14.6 million, or 37.7%, from $38.7 million in the first quarter of ~~2022, an increase of $14.5 million, from $24.2 million in the first quarter of 2021.~~2022. Income from operations in the first quarter of ~~2022~~2023 includes ~~$25.6~~$40.5 million from our Southeast segment and ~~nearly $13.2~~$12.8 million from our Western segment, compared to ~~$18.7~~$25.6 million and ~~$5.5~~$13.2 million from our Southeast and Western segments, respectively, in the first quarter of ~~2021,~~2022, all after allocation of corporate operating costs in both periods. Income from operations in the first quarter of 2023, was impacted by $0.9 million of executive severance costs and $0.7 million of acquisition costs relating to the Anlin Acquisition which we incurred in the first quarter of 2023. These incremental costs were partially offset by a gain from an insurance recovery relating to the wind-down of the commercial business of our NewSouth acquisition of $2.9 million.

The increase in income from operations was related to the benefit from ~~the leverage from~~ higher sales in the first quarter of ~~2022~~2023 compared to last year’s first quarter, as well as ~~the benefits of the~~ continued ~~efficiency improvements at both~~solid performance from our ~~Southeast~~operating teams, prior year's pricing impacts offsetting material and ~~Western segments, more than offsetting the rising costs for materials in aluminum~~wage inflation, and ~~glass, including the increasing costs of distribution being passed onto us by our vendors, and~~cost containment measures amid the continuing ~~costs~~macro-environment uncertainty. Additionally, during the first quarter of ~~attracting, training~~2023, we maintained our focus on delivery, quality and ~~retaining an experienced labor force.~~lead time performance, which contributed to higher margins.

~~- 32 -~~

Interest expense, net

Interest expense was $7.7 million in the first quarter of 2023, an increase of $0.6 million, or 8.1%, from $7.1 million in the first quarter of ~~2022, a decrease of $0.4 million, or 5.1%, from $7.5 million~~2022. The increase in the first quarter of 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 in 2021 primarily resulted in a slightly lower level of interest expense in the first quarter of ~~2022~~2023, compared to the first quarter of ~~2021.~~2022 is primarily the result of a higher level of borrowings under the revolving facility of our current 2016 Credit Facility due 2027 during the first quarter of 2023, compared to the term loan borrowings under our then existing 2016 Credit Facility due 2024 during the first quarter of 2022, as well as a higher interest rate under the revolving facility during the first quarter of 2023, compared to the term loan facility during the first quarter of 2022.

Income tax expense

We had anincome tax expense of $11.2 million for the three months ended April 1, 2023, compared with income tax expense of $7.8 million for the three months ended April 2, ~~2022, compared with income tax expense of $3.9 million for the three months ended April 3, 2021.~~2022. Our effective tax rate for the three months ended April ~~2, 2022,~~1, 2023, was ~~an expense rate of~~24.6%, compared with 24.7%~~, and was an expense rate of 23.6%~~ for the three months ended April ~~3, 2021.~~2, 2022. Our income tax expense for the ~~three-month periods~~three months ended April 1, 2023, and April 2, 2022, ~~and April 3, 2021,~~ includes ~~$505~~income tax expenses of $654 thousand and ~~$305~~$505 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco.

Income tax expense in the three months ended April ~~2, 2022 and April 3, 2021 include~~1, 2023 includes discrete items of income tax benefit relating to excess tax benefits from the lapses of restrictions on stock awards, which totaled ~~$136 thousand~~$438 thousand. The income tax benefit in the three months ended April 2, 2022 ~~and $95 thousand in~~included discrete items of income tax benefit relating to excess tax benefits from the lapses of restrictions on stock awards totaling $136 thousand. Excluding discrete items of income tax, the effective tax rates for the three months ended April ~~3, 2021. The effect of these discrete items on our effective tax rates for these periods was not significant.~~

~~In September 2021, the state of Florida announced that the corporate~~1, 2023 and April 2, 2022, would have been an 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 adjusted our annual effective tax rate for 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 stateexpense rate of ~~25.7% from our estimate in 2021 of 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.~~25.6% and 25.1%, respectively.

Net income attributable to redeemable non-controlling interest

Net income attributable to redeemable non-controlling interest for the three months ended April ~~2, 2022,~~1, 2023, was ~~$0.7~~$0.8 million, compared to ~~$0.4~~$0.7 million for the three months ended April ~~3, 2021,~~2, 2022, 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.

Change in redemption value of redeemable non-controlling interest

The change in the redemption value of the redeemable non-controlling interest for the three-month period ended April ~~2, 2022,~~1, 2023, was ~~$2.1~~an increase of $1.2 million, compared to ~~no adjustment~~an increase of $2.1 million in the three months ended April ~~3, 2021.~~2, 2022. See Note 1716 in Part I, Item 1, for a further discussion of the change in the redemption value of the redeemable non-controlling interest.

~~- 33 -~~

LIQUIDITY AND CAPITAL RESOURCES

- 28 -

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 three months of ~~2022~~2023 and ~~2021:~~2022:

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
)


	Components of Cash Flows
	Three Months Ended
	April 1,			April 2,
(in millions)	2023			2022
Cash provided by operating activities	$	23.9		$	17.3
Cash used in investing activities		(12.0	)		(8.2	)
Cash used in financing activities		(30.2	)		(1.7	)

(Decrease) Increase in cash and cash equivalents	$	(18.3	)	$	7.4

Operating activities. Cash provided by operating activities during the first three months of ~~2022~~2023 was ~~$17.3~~$23.9 million, compared to cash ~~used~~provided in operating activities of ~~$1.4~~$17.3 million in the first three months of ~~2021.~~2022. The increase in cash provided by operating activities for the first three months of ~~2022,~~2023, as compared to the first three months of ~~2021, of $18.7~~2022, was $6.6 million, and was due to the factors set forth in the table below.

Direct cash flows from operations for the first three months of ~~2022~~2023 and ~~2021~~2022 are as ~~follows:~~follows. Certain prior year amounts have been reclassified to conform with the current year presentation:

Direct Operating
Cash Flows

Three Months Ended

April 2,

April 3,

(in millions)

2022

2021

Collections from customers

$
332.9

$
245.0

Other collections of cash

4.5

3.9

Disbursements to vendors

(165.0
)

(163.2
)
Personnel related disbursements

(141.7
)

(74.4
)
Debt service payments

(13.5
)

(12.8
)
Other cash activity, net

0.1

0.1

Cash provided by (used in) operations

$
17.3

$
(1.4
)


	Direct Operating Cash Flows
	Three Months Ended
	April 1,			April 2,
(in millions)	2023			2022
Collections from customers	$	372.2		$	332.9
Other collections of cash		8.7			4.5
Disbursements to vendors		(218.6	)		(218.0	)
Personnel related disbursements		(120.6	)		(88.7	)
Income taxes paid, net of refunds		(16.4	)		-
Debt service payments		(1.3	)		(13.5	)
Other cash activity, net		(0.1	)		0.1

Cash provided by operations	$	23.9		$	17.3

Inventory as of April ~~2, 2022,~~1, 2023, was ~~$97.4~~$114.9 million, compared to ~~$91.4~~$112.7 million at ~~January 1,~~December 31, 2022, an increase of ~~$6.0~~$2.2 million. ~~Inventory at April 2, 2022 includes $8.7 million relating to our investment in 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, which requires us to relieve inventory and recognize revenue over time, we have a low amount of work-in-process ~~inventory.~~and finished goods inventories. As ~~a result of these factors, our inventories are not excessive, and~~such, we believe the value of ~~such~~our inventories will be realized through sales.

Investing activities. Cash used in investing activities was $12.0 million for the first three months of 2023, compared to cash used in investing activities of $8.2 million for the first three months of 2022, ~~compared to cash used in investing activities of $100.8 million for the first three months of 2021, a decrease~~an increase in cash used in investing activities of ~~$92.6~~$3.8 million. There was no cash used relating to ~~acquire businesses~~acquisitions in the first three months of ~~2022. Cash~~2023 relating to the finalization of the Martin Acquisition working capital adjustment, resulting in a final payment to sellers of $0.7 million, compared to no cash used relating to ~~acquire businesses~~acquisitions in the first three months of ~~2021 totaled $94.3 million, related to our acquisition of Eco.~~2022. There was an increase in cash used in capital expenditures of ~~$1.7~~$3.6 million which went from ~~$6.5 million in the first three months of 2021, to~~ $8.2 million in the first three months of ~~2022.~~2022, to $11.8 million in the first three months of 2023. Proceeds from the sales of assets was $0.6 million in the first three months of 2023, compared with less than $0.1 million in ~~both~~ the first three months of ~~2022 and 2021.~~2022.

Financing activities. Cash used in financing activities was $30.2 million in the first three months of 2023, compared to cash used in financing activities of $1.7 million in the first three months of 2022, ~~compared to~~an increase in cash ~~provided~~used in financing activities of ~~$60.9 million in~~$28.5 million.

- 29 -

As further discussed below under Share Repurchase Program, during the first three months of ~~2021,~~2023, we made repurchases of 1,173,520 shares of our common stock at a ~~change in cash provided~~total cost of $25.9 million, which includes $25.6 million relating to ~~cash used in financing activities totaling $62.6 million.~~ transactions costs, including broker commissions, and $256 thousand relating to the 1% excise tax imposed on corporate stock buy-backs by the Inflation Reduction Act of 2022.

In the first three months of ~~2021,~~2023, we ~~issued the $60.0 million~~made payments of ~~Second Additional Senior Notes, with a~~

~~- 34 -~~

~~premium of $3.3 million, which provided proceeds totaling $63.3 million. The proceeds of $63.3 million from the issuance of the Second Additional Senior Notes were used~~contingent consideration relating to ~~partially fund~~ our acquisition of ~~Eco.~~Anlin totaling $9.5 million, representing the second payment we were required to make under the Anlin purchase agreement based on their 2022 EBITDA, as defined in the agreement. Because these contingent payments were not required to be made within a reasonably short period of time after the effective date of the acquisition, we classified the portion of these payments representing the fair value of the second payment, which was $4.3 million, as a financing activity, with the difference classified within operating activities.

~~We paid financing costs totaling $1.4 million in~~During the first three months of ~~2021, including financing costs relating to bank fees and professional services costs relating to~~2023, we had net borrowings under the ~~offering and issuance~~New Revolving Credit Facility of ~~the Second Additional Senior Notes.~~ $2.6 million, which included gross borrowings of $15.0 million, partially offset by gross repayments totaling $12.4 million.

Taxes paid relating to common stock withheld from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards were $2.6 million in the first three months of 2023, versus $1.7 million in the first three months of 2022, ~~versus $1.0 million in the first three months of 2021,~~ an increase in cash used of ~~$0.7~~$0.9 million.

Capital Resources and Debt Covenant

2021 Senior Notes due 2029

As of April ~~2, 2022,~~1, 2023, the face value of debt outstanding under the 2021 Senior Notes due 2029 was $575.0 million, and accrued interest ~~began accruing on September 24, 2021.~~was $12.6 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, including the related fees, costs, and the prepayment call premium of $21.5 million, representing 5.063% of the $425.0 million face value then outstanding, prepay the outstanding term loan borrowings under the then existing 2016 Credit Agreement of ~~$54.0~~$60.0 million and the related fees and costs, and finance the Anlin Acquisition in the fourth quarter of 2021. See Note 6, Acquisitions, for a discussion of the Anlin Acquisition.

- 30 -

2016 Credit Agreement due ~~2024~~2027

On October 13, 2022, the Company entered into the Fifth Amendment of the 2016 Credit Agreement due ~~2024, and Truist Financial Corporation (formerly known as SunTrust Bank), as Administrative Agent and Collateral Agent.~~2027. The 2016 Credit Agreement due 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% 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 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 March 16, 2018, we entered into an amendment of our 2016 Credit Agreement due 2024 (the “Second Amendment”). The Second~~Fifth Amendment ~~among other things, decreased the applicable interest rate margins~~provides for the ~~Initial Term Loans (as defined in the 2016~~New Revolving Credit Agreement due 2024) from (i) 3.75% to 2.50%, in the case of the Base Rate Loans (as defined in the 2016 Credit Agreement due 2024), and (ii) 4.75% to 3.50%, in the case of the Eurodollar Loans (as defined in the 2016 Credit Agreement due 2024). On February 17, 2017, we entered into the first amendment to our 2016 Credit Agreement due 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 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)Facility, a new five-year revolving credit facility in an aggregate principal amount of ~~up to~~$250.0 million. The New Revolving Credit Facility refinances and replaces the previously existing $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~~due 2027. The Company’s obligations under the 2016 Credit Agreement due 2027 continue to be secured by substantially all of ~~our assets, as well as our~~its and its 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~~Contemporaneously with the Fifth Amendment, the Company drew down $160.0 million of ~~our~~funds available under the New Revolving Credit Facility. Proceeds totaling $61.6 million from the $160.0 million drawdown were used to repay then existing term loan borrowings under the 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~~totaling $60.0 million, ~~(the "Incremental Term A Loan"),~~plus accrued interest and fees totaling $1.6 million. As discussed below, the remaining $98.4 million of proceeds ~~from which~~ were used to fund the ~~Anlin~~cash portion of the Martin Acquisition. The ~~Fourth Amendment does not change~~Company has made net repayments of the $160.0 million of initial borrowings under the New Revolving Credit Facility totaling $81.0 million through April 1, 2023.

As of April ~~2, 2022, there~~1, 2023, borrowings outstanding under the $250.0 million New Revolving Credit Facility totaled $79.0 million, and accrued interest was $244 thousand. There were ~~$5.7~~$8.5 million in letters of credit ~~outstanding and $74.3 million available~~outstanding. Availability under the New Revolving ~~Facility.~~

Credit Facility at April 1, 2023 totaled $162.5 million. The weighted average all-in interest rate for borrowings under the ~~term-loan portion~~existing revolving credit facility of the 2016 Credit Agreement due ~~2024~~2027 was ~~2.46%~~6.47% at April 1, 2023, and 6.07% at December 31, 2022.

The Martin Acquisition was financed in part with the $250.0 million available under the New Revolving Credit Facility provided by the Fifth Amendment of our 2016 Credit Agreement due 2027, under which we drew $160.0 million on October 14, 2022, the proceeds of which were used to pay $98.4 million of the $187.8 million total fair value of consideration transferred at closing, and $61.6 million to prepay our $60.0 million existing term loans under the Fourth Amendment of our 2016 Credit Agreement due 2027, plus $1.6 million in fees, costs and accrued interest. The remainder of the total fair value of consideration transferred at closing, totaling $89.4 million was funded with cash on hand previously generated through operations. We also paid buyer fees and costs relating to the Martin Acquisition totaling $4.8 million in the year ended December 31, 2022, classified as ~~of April 2, 2022,~~selling, general and ~~was 2.10% at January 1,~~administrative expenses for the year ended December 31, 2022.

Deferred Financing Costs


(in thousands)	Total			Total
At beginning of year	$	9,345		$	9,218
Less: Amortization expense		(304	)		(326	)
At end of period	$	9,041		$	8,892

- 31 -

Estimated amortization expense relating to deferred financing costs for the years indicated as of April ~~2, 2022,~~1, 2023, is as follows:


(in thousands)	Total		Total
Remainder of 2022	$	929
2023		1,282
Remainder of 2023			$	994
2024		1,282		1,366
2025		1,083		1,442
2026		1,114		1,466
2027				1,440
Thereafter		3,351		2,184

Total	$	9,041	$	8,892

~~We have no schedule payments of outstanding debt until the contractual maturity of the 2016 Credit Agreement in October 2024. Our~~The contractual future maturities of long-term debt outstanding, as of April 1, 2023, are as follows (at face value):


(in thousands)
Remainder of 2022	$	—
2023		—
Remainder of 2023			$	—
2024		60,000		—
2025		—		—
2026		—		—
2027				79,000
Thereafter		575,000		575,000

Total	$	635,000	$	654,000

2023 Share Repurchase Program. On February 7, 2023, the Company announced that its Board of Directors approved a new, share repurchase program which authorizes the Company to purchase up to $250.0 million of its common stock. This program permits the Company to purchase shares of its common stock from time to time through open-market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. During the three months ended April 1, 2023, we repurchased a total of 1,173,520 shares under this program at a total cost of $25.9 million, which includes $25.6 million relating to transactions costs, including broker commissions, and $256 thousand relating to the 1% excise tax imposed on corporate stock buy-backs by the Inflation Reduction Act of 2022. Subsequent to April 1, 2023, we have purchased an additional 462,222 shares under this program at a total cost of $11.9 million, including the 1% excise tax imposed on corporate stock buy-backs by the Inflation Reduction Act of 2022. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program had an initial term of 3 years, through February 3, 2026, and may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.

Shareholder Rights Plan. On March 30, 2023, we announced that our Board of Directors had unanimously approved the adoption of a limited-duration shareholder rights plan (the “Rights Plan”) which includes the declaration of a dividend distribution of one right (each, a “Right”) for each outstanding share of the Company’s common stock to stockholders of record as of the close of business on April 10, 2023). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share, of the Company at an exercise price of $90.00, subject to adjustment. The complete terms of the Rights are set forth in a Rights Agreement, dated as of March 30, 2023, between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (the "Rights Agreement"). The Rights expire on the earliest of (1) March 30, 2024, unless such date is extended, or (2) the redemption or exchange of the Rights as described above.

- 3632 -

Capital Expenditures. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. For the first three months of ~~2022,~~2023, capital expenditures were ~~$8.2~~$11.8 million, compared to ~~$6.5~~$8.2 million for the first three months of ~~2021.~~2022. 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.~~maintenance.

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~~We also enter 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 April ~~2, 2022,~~1, 2023, the fair value of our aluminum forward contracts was in an assetposition of ~~$9.1~~$0.2 million. We had 2313 outstanding forward contracts for the purchase of ~~36.3~~5.6 million pounds of aluminum through December ~~2022,~~2023, at an average price of ~~$1.32~~$1.07 per pound, which excludes the Midwest premium, with maturity dates of between two ~~months~~ and ~~ten~~nine 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 April 2, 2022.~~

At April ~~2, 2022,~~1, 2023, the fair value of our MTP contracts was in an assetposition of ~~$4.4~~$0.3 million. We had 71 outstanding MTP ~~contracts~~contract to hedge the Platt US MW Transaction price per pound for the delivery of ~~17.0~~6.3 million pounds of aluminum through December ~~2022,~~2023, at an average price of ~~$0.12~~$0.21 per pound, with a maturity ~~dates~~date of ~~between two months and ten~~nine 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 ~~value~~values as of April ~~2, 2022.~~1, 2023.

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~~We expect the amount of ~~income (loss), net, recognized in the “accumulated~~accumulated other comprehensive income ~~(loss)” line item~~of approximately $0.5 million in the accompanying condensed consolidated balance sheet as of April ~~2, 2022, that we expect will~~1, 2023, to be reclassified to earnings within the next twelve ~~months, will be approximately $13.4 million.~~months.

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 1,~~December 31, 2022. There have been no changes to our critical accounting policies during the first three months of ~~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 have not elected adoption of this optional guidance and do not intend to elect this guidance before the sunset date of December 31, 2022, as there is no material impact on our consolidated financial statements.2023.

- 3733 -

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”). AsHowever, as of April ~~2, 2022,~~1, 2023, we ~~are covered for approximately 77% of our anticipated~~had minimal aluminum ~~needs~~or MTP coverage for the remainder of ~~2022 at an average price~~2023, and no coverage for either beyond the end of $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 April 2, 2022, we are covered for approximately 36% of our anticipated MTP costs for the remainder of 2022 at an average price of $0.12 per pound. As2023. Accordingly, as of the date of this report, we ~~had~~are substantially not ~~added any further coverage since April 2, 2022.~~hedged for the substantial portions of our aluminum or delivery needs, and our price for aluminum and MTP costs will follow the changes in aluminum prices as set by the LME, as well as the MTP delivery component as set by the Platts MW US Transaction price per pound assessment. However, we may add more coverage for our anticipated aluminum needs ~~in 2022 and/or~~during the rest of 2023 and beyond, as we deem necessary.

Regarding our aluminum hedging instruments for the purchase of aluminum, as of April 2, 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 $5.7 million. This calculation utilizes our actual commitment of 36.3 million pounds under contract (to be settled through December 2022) and the market price of aluminum as of April 2, 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 April 2, 2022, a 10% decrease in the Platts MW US Transaction price per pound would decrease the fair value of our MTP contracts an estimated $0.6 million. This calculation utilizes our actual commitment of 17.0 million pounds under contract (to be settled through December 2022) and the then current Platts MW US Transaction price per pound as of April 2, 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~~$89.0 million, a 100 basis-point increase in interest rate would result in approximately ~~$0.6~~$0.9 million of additional interest costs annually.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

A control system, however, no matter how well conceived and operated, can at best provide reasonable, not absolute, assurance that the objectives of the control system are met. Additionally, a control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, within our Company have been detected, and due to these inherent limitations, misstatements due to error or fraud may occur and not be detected.

Our chief executive officer and 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 the year ended ~~January 1,~~December 31, 2022 we acquired ~~Eco and Anlin.~~Martin. We are currently integrating ~~Eco and Anlin~~Martin into our operations, compliance programs and internal control processes. As such ~~Eco and Anlin were~~Martin was not included in our assessment of internal control over financial reporting as of ~~January 1,~~December 31, 2022. We will include ~~Eco and Anlin~~Martin into our assessment of internal controls as of December ~~31, 2022,~~30, 2023, the end of our ~~2022~~2023 fiscal year. ~~Eco Enterprises and Anlin Industries were~~Martin Doors was included in the ~~2021~~2022 consolidated financial statements of the Company and constituted ~~22.0%~~14.0% of total assets as of ~~January 1,~~December 31, 2022 and ~~9.2%~~0.6% of revenues for the fiscal year then ended.

- 3834 -

PART II — OTHER INFORMATION

ITEM 1. LEGAL ~~PROCEEDINGS~~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~~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 1,~~December 31, 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~~PROCEEDS.

Recent sales of unregistered securities; use of proceeds from registered securities. None ~~during~~

Purchases of equity securities by the ~~quarter cover~~issuer and affiliated purchasers.

On February 7, 2023, the Company announced that its Board of Directors approved a new, share repurchase program which authorizes the Company to purchase up to $250.0 million of its common stock. This program permits the Company to purchase shares of its common stock from time to time through open-market purchases, in privately negotiated transactions, or by ~~this report.~~other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase program had an initial term of 3 years, through February 3, 2026, and may be suspended or discontinued at any time, and does not obligate the company to acquire any amount of common stock.


		Purchases of Equity Securities
Period	Beginning and Ending Dates	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share (in $)	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs at End of Period (in $M)

January 2023	January 1 to January 28	—	—	—	$250.00

February 2023	January 29 to February 25	—	—	—	$250.00

March 2023	February 26 to April 1	1,173,520	$21.8471	1,173,520	$224.36

		1,173,520	$21.8471	1,173,520

- 3935 -

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. ~~EXHIBITS~~EXHIBITS.


3.1	Certificate of Designation of Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2023)

4.1	Rights Agreement, dated as of March 30, 2023, between PGT Innovations, Inc., a Delaware corporation, and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2023)

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

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

*Filed herewith.

**Furnished herewith.

- 4036 -

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: May ~~12, 2022~~11, 2023	By: /s/ ~~John Kunz~~Craig Henderson
	Name: ~~John Kunz~~Craig Henderson
	Title: ~~Senior~~Interim Chief Financial Officer and Vice President ~~and Chief Financial Officer~~of Corporate Finance

- 4137 -


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	2925
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3834
	Item 4.	Controls and Procedures	3834

Part II.	Other Information		3935
	Item 1.	Legal Proceedings	3935
	Item 1A.	Risk Factors	3935
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3935
	Item 3.	Defaults Upon Senior Securities	36
	Item 4.	Mine Safety Disclosures	36
	Item 5.	Other Information	36
	Item 6.	Exhibits	4036
		Signature	4137


	April 2,			January 1,			April 1,			December 31,
	2022			2022			2023			2022
ASSETS
Current assets:
Cash and cash equivalents	$	103,631		$	96,146		$	48,314		$	66,548
Accounts receivable, net		179,167			141,221			159,522			160,107
Inventories		97,399			91,440			114,881			112,672
Contract assets, net		51,193			55,239			50,314			47,919
Prepaid expenses		11,236			8,727			14,400			11,763
Other current assets		28,515			28,985			14,535			16,532
Total current assets		471,141			421,758			401,966			415,541

Property, plant and equipment, net		186,030			185,266			210,950			208,354
Operating lease right-of-use asset, net		88,812			91,162			103,452			104,121
Intangible assets, net		380,682			394,525			440,259			447,052
Goodwill		370,366			364,598			461,381			460,415
Other assets, net		2,087			3,301			6,410			4,766

Total assets	$	1,499,118		$	1,460,610		$	1,624,418		$	1,640,249

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	137,414		$	122,681		$	142,754		$	168,961
Current portion of operating lease liability		13,676			13,180			16,827			16,393
Total current liabilities		151,090			135,861			159,581			185,354

Long-term debt, net		625,959			625,655			645,108			642,134
Operating lease liability, less current portion		81,473			83,903			94,175			95,159
Deferred income taxes		38,519			37,489			47,452			47,407
Other liabilities		8,766			11,742			7,094			7,459

Total liabilities		905,807			894,650			953,410			977,513

Commitments and contingencies		—			—

Redeemable non-controlling interest		39,656			36,863			36,735			34,721

Shareholders' equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; 0 shares outstanding		—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 63,883 and 63,516 shares issued and 59,901 and 58,696 shares outstanding at April 2, 2022 and January 1, 2022, respectively		639			635
Additional paid-in-capital		434,212			433,347
Preferred stock; par value $.01 per share; 10,000 shares authorized; no shares outstanding								—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 64,339 and 63,940 shares issued and 59,010 and 59,912 shares outstanding at April 1, 2023 and December 31, 2022, respectively								643			639
Additional paid-in capital								442,546			442,116
Accumulated other comprehensive income		9,989			7,006			350			223
Retained earnings		127,104			106,398			236,483			204,891
Treasury stock at cost		(18,289	)		(18,289	)
Treasury stock at cost (3,934 shares and 2,760 shares at April 1, 2023 and December 31, 2022, respectively)								(45,749	)		(19,854	)
Total shareholders' equity		553,655			529,097			634,273			628,015

Total liabilities, redeemable non-controlling interest and shareholders' equity	$	1,499,118		$	1,460,610		$	1,624,418		$	1,640,249


	Three Months Ended						Three Months Ended
	April 2,			April 3,			April 1,			April 2,
	2022			2021			2023			2022
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income	$	23,826		$	12,795		$	34,427		$	23,826
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
provided by operating activities:
Depreciation		8,470			6,697			8,890			8,470
Amortization		8,043			4,749			6,793			8,043
Provision for allowance for doubtful accounts		1,408			2,411
Stock-based compensation		2,205			1,750
Amortization of deferred financing costs, debt discount and premium		304			230
Loss on sales of assets		747			67
Change in operating assets and liabilities (net of effects of acquisition):
Provision for credit losses								1,724			1,408
Stock-based compensation expense								2,207			2,205
Amortization of deferred financing costs								326			304
(Gain) loss on sales of assets								(204	)		747
Change in operating assets and liabilities:
Accounts receivable		(39,357	)		(24,980	)		(3,179	)		(39,357	)
Inventories		(6,286	)		(4,307	)		(2,573	)		(6,286	)
Contract assets, net, prepaid expenses, other current and other assets		10,669			(20,898	)		2,148			10,669
Accounts payable, accrued and other liabilities		7,291			20,039			(26,641	)		7,291

Net cash provided by (used in) operating activities		17,320			(1,447	)
Net cash provided by operating activities								23,918			17,320

Cash flows from investing activities:
Purchases of property, plant and equipment		(8,180	)		(6,512	)		(11,785	)		(8,180	)
Investment in and acquisition of business		—			(94,321	)
Business combinations								(744	)		—
Proceeds from sales of assets		8			7			566			8

Net cash used in investing activities		(8,172	)		(100,826	)		(11,963	)		(8,172	)

Cash flows from financing activities:
Proceeds from issuance of senior notes		—			63,300
Payments of financing costs		—			(1,363	)
Purchases of common stock relating to tax withholdings on employee equity awards		(1,663	)		(1,005	)
Payment of fair value of contingent consideration in Anlin Acquisition								(4,348	)		—
Proceeds of amounts drawn from revolving credit facility								15,000			—
Payments of borrowing under revolving credit facility								(12,352	)		—
Purchases of treasury stock under share repurchase program								(25,895	)		—
Income taxes paid from stock withheld relating to vesting of equity awards								(2,594	)		(1,663	)

Net cash (used in) provided by financing activities		(1,663	)		60,932
Net cash used in financing activities								(30,189	)		(1,663	)

Net increase (decrease) in cash and cash equivalents		7,485			(41,341	)
Net (decrease) increase in cash and cash equivalents								(18,234	)		7,485
Cash and cash equivalents at beginning of period		96,146			100,320			66,548			96,146
Cash and cash equivalents at end of period	$	103,631		$	58,979		$	48,314		$	103,631

Non-cash activity:
Issuance of common stock in Eco Acquisition	$	—		$	6,108
Establish right-of-use asset	$	1,324		$	29,490
Establish operating lease liability	$	(1,324	)	$	(29,490	)
Additions to right-of-use asset							$	3,991		$	1,324
Additions to operating lease liability							$	(3,991	)	$	(1,324	)
Property, plant and equipment additions in accounts payable	$	127		$	1,022		$	62		$	127


								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


	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


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

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


	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
	Three Months Ended					Three Months Ended
	April 2,		April 3,			April 2,		April 3,
	2022		2021			2022		2021

Aluminum contracts	$	5,607	$	4,083	Cost of sales	$	1,378	$	1,388

MTP contracts	$	468	$	4,205	Cost of sales	$	684	$	387


	Three Months Ended
	April 2, 2022			April 3, 2021
	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	271.8	75.8%	$	233.6	86.2%	16.3%
Western segment		86.9	24.2%		37.5	13.8%	132.0%

Total net sales	$	358.7	100.0%	$	271.1	100.0%	32.3%