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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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 Section13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Common Stock, $0.01 par value, outstanding was ~~49,660,699~~58,404,734 shares, as of ~~November 2, 2017.~~October 31, 2019.


	Three Months Ended					Nine Months Ended					Three Months Ended				Nine Months Ended
	September 30,		October 1,			September 30,		October 1,			September 28,		September 29,		September 28,		September 29,
	2017		2016			2017		2016			2019		2018		2019		2018
	(unaudited)					(unaudited)					(unaudited)				(unaudited)
Net sales	$	126,876	$	129,807		$	376,981	$	349,046		$	197,823	$	199,084	$	570,130	$	508,606
Cost of sales		87,128		88,721			260,941		240,507			127,828		126,086		365,925		330,888

Gross profit		39,748		41,086			116,040		108,539			69,995		72,998		204,205		177,718

Selling, general and administrative expenses		24,950		22,533			72,385		63,209			44,564		44,055		132,604		105,293
Fair value adjustment to contingent consideration		—		(3,000	)		—		(3,000	)
Gains on sales of assets under APA												—		—		—		(2,551	)
Income from operations												25,431		28,943		71,601		74,976

Income from operations		14,798		21,553			43,655		48,330
Interest expense, net		5,514		5,495			14,992		14,935			6,452		11,741		19,922		19,393
Debt extinguishment costs		—		—			—		3,431			—		296		—		3,375

Income before income taxes		9,284		16,058			28,663		29,964			18,979		16,906		51,679		52,208

Income tax expense		2,992		5,262			9,117		10,339			3,873		3,335		11,271		8,749

Net income	$	6,292	$	10,796		$	19,546	$	19,625		$	15,106	$	13,571	$	40,408	$	43,459

Net income per common share:
Basic	$	0.13	$	0.22		$	0.40	$	0.40		$	0.26	$	0.26	$	0.69	$	0.86

Diluted	$	0.12	$	0.21		$	0.38	$	0.39		$	0.26	$	0.26	$	0.68	$	0.83

Weighted average shares outstanding:
Basic		49,629		48,941			49,455		48,782			58,433		51,682		58,320		50,619

Diluted		51,809		50,672			51,670		50,528			59,142		53,068		59,192		52,378

Comprehensive income	$	6,292	$	10,796		$	19,546	$	19,625

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

	September 28,			December 29,
	2019			2018
ASSETS
Current assets:
Cash and cash equivalents	$	81,803		$	52,650
Accounts receivable, net		77,375			80,717
Inventories		47,566			44,666
Contract assets, net		12,735			6,757
Prepaid expenses		4,279			2,863
Other current assets		10,312			7,908
Total current assets		234,070			195,561

Property, plant and equipment, net		122,354			115,707
Operating lease right-of-use asset, net		26,899			—
Intangible assets, net		259,859			271,818
Goodwill		277,600			277,827
Other assets, net		1,012			1,240

Total assets	$	921,794		$	862,153

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	61,249		$	68,557
Current portion of long-term debt		—			163
Current portion of operating lease liability		4,551			—
Total current liabilities		65,800			68,720

Long-term debt, less current portion		367,917			366,614
Operating lease liability, less current portion		24,639			—
Deferred income taxes		22,991			22,758
Other liabilities		14,815			18,517

Total liabilities		496,162			476,609

Shareholders' equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; NaN outstanding		—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 61,712 and 60,729 shares issued and 58,354 and 58,082 shares outstanding at September 28, 2019 and December 29, 2018, respectively		617			607
Additional paid-in-capital		413,700			409,661
Accumulated other comprehensive loss		(1,884	)		(3,065	)
Retained earnings (accumulated deficit)		31,508			(8,900	)
Shareholders' equity		443,941			398,303
Less: Treasury stock at cost		(18,309	)		(12,759	)
Total shareholders' equity		425,632			385,544

Total liabilities and shareholders' equity	$	921,794		$	862,153

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

	Nine Months Ended
	September 28,			September 29,
	2019			2018
	(unaudited)
Cash flows from operating activities:
Net income	$	40,408		$	43,459
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		13,854			9,724
Amortization		11,959			6,126
Amortization of operating lease right-of-use asset		3,637			—
Provision for allowance for doubtful accounts		1,659			1,017
Stock-based compensation, including special employee grant		3,246			2,543
Amortization and write-offs of deferred financing costs and debt discount		1,303			7,086
Debt extinguishment costs		—			3,375
Gains on sales of assets		(3	)		(2,611	)
Change in operating assets and liabilities (net of effects of acquisition):
Accounts receivable		(2,682	)		(27,598	)
Inventories		(2,900	)		(1,723	)
Contract assets, net, prepaid expenses, other current and other assets		(7,720	)		(4,448	)
Change in operating lease liability		1,421			-
Accounts payable, accrued and other liabilities		(9,910	)		27,602

Net cash provided by operating activities		54,272			64,552

Cash flows from investing activities:
Purchases of property, plant and equipment		(20,252	)		(21,740	)
Business acquisition		—			(355,213	)
Proceeds from sales of assets		43			5,866

Net cash used in investing activities		(20,209	)		(371,087	)

Cash flows from financing activities:
Proceeds from issuance of senior notes		—			315,000
Proceeds from issuance of common stock		—			152,653
Payments of long-term debt		(163	)		(152,220	)
Payments of financing costs		—			(12,066	)
Purchases of treasury stock under Board of Director approved plan		(5,550	)		-
Purchases of treasury stock relating to tax withholdings on employee equity awards		(505	)		(637	)
Proceeds from exercise of stock options		1,262			1,928
Proceeds from issuance of common stock under employee
stock purchase plan (ESPP)		46			18
Other		—			(11	)

Net cash provided by (used in) financing activities		(4,910	)		304,665

Net increase (decrease) in cash and cash equivalents		29,153			(1,870	)
Cash and cash equivalents at beginning of period		52,650			34,029
Cash and cash equivalents at end of period	$	81,803		$	32,159

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

										Accumulated			Retained
							Additional			Other			Earnings/
	Common stock						Paid-in			Comprehensive			(Accumulated			Treasury
	Shares			Amount			Capital			Loss			Deficit)			Stock			Total
THREE MONTHS ENDED SEPTEMBER 29, 2018
Balance at June 30, 2018		50,705,766		$	533		$	254,399		$	(384	)	$	(32,945	)	$	(12,759	)	$	208,844
Stock-based compensation		—			—			832			—			—			—			832
Exercise of stock options		183,808			2			365			—			—			—			367
Common stock issued under ESPP		385			—			8			—			—			—			8
Issuances under Equity Offering		7,000,000			70			152,583			—			—			—			152,653
Issuances under Employee Grant		24,590			—			513			—			—			—			513
Net income		—			—			—			—			13,571			—			13,571
Other comprehensive loss, net of $151 tax benefit		—			—			—			(440	)		—			—			(440	)
Balance at September 29, 2018		57,914,549		$	605		$	408,700		$	(824	)	$	(19,374	)	$	(12,759	)	$	376,348

NINE MONTHS ENDED SEPTEMBER 29, 2018
Balance at December 30, 2017		49,805,338		$	525		$	252,275		$	—		$	(64,716	)	$	(12,759	)	$	175,325
Cumulative effect of change in accounting principle, net of tax effect of $647		—			—			—			—			1,883			—			1,883
Balance at December 30, 2017
- as adjusted		49,805,338			525			252,275			—			(62,833	)		(12,759	)		177,208
Vesting of restricted stock		151,174			—			—			—			—			—			—
Grants of restricted stock		—			1			(1	)		—			—			—			—
Purchases of treasury stock		(32,439	)		—			—			—			—			(637	)		(637	)
Retirement of treasury stock		—			(1	)		(636	)		—			—			637			—
Stock-based compensation		—			—			2,030			—			—			—			2,030
Exercise of stock options		964,780			10			1,918			—			—			—			1,928
Common stock issued under ESPP		1,106			—			18			—			—			—			18
Issuances under Equity Offering		7,000,000			70			152,583			—			—			—			152,653
Issuances under Employee Grant		24,590			—			513			—			—			—			513
Net income		—			—			—			—			43,459			—			43,459
Other comprehensive loss, net of $283 tax benefit		—			—			—			(824	)		—			—			(824	)
Balance at September 29, 2018		57,914,549		$	605		$	408,700		$	(824	)	$	(19,374	)	$	(12,759	)	$	376,348

THREE MONTHS ENDED SEPTEMBER 28, 2019
Balance at June 29, 2019		58,535,669		$	615		$	412,295		$	(2,178	)	$	16,402		$	(12,759	)	$	414,375
Purchases of treasury stock		(393,819	)		—			—			—			—			(5,550	)		(5,550	)
Stock-based compensation		—			—			970			—			—			—			970
Exercise of stock options		210,931			2			420			—			—			—			422
Common stock issued under ESPP		1,022			—			15			—			—			—			15
Net income		—			—			—			—			15,106			—			15,106
Other comprehensive income, net of $102 tax expense		—			—			—			294			—			—			294
Balance at September 28, 2019		58,353,803		$	617		$	413,700		$	(1,884	)	$	31,508		$	(18,309	)	$	425,632

NINE MONTHS ENDED SEPTEMBER 28, 2019
Balance at December 29, 2018		58,081,540		$	607		$	409,661		$	(3,065	)	$	(8,900	)	$	(12,759	)	$	385,544
Vesting of restricted stock		164,226			—			—			—			—			—			—
Grants of restricted stock		—			5			(5	)		—			—			—			—
Purchases of treasury stock		(428,059	)		—			—			—			—			(6,055	)		(6,055	)
Retirement of treasury stock		—			—			(505	)		—			—			505			—
Stock-based compensation		—			—			3,246			—			—			—			3,246
Exercise of stock options		532,931			5			1,257			—			—			—			1,262
Common stock issued under ESPP		3,165			—			46			—			—			—			46
Net income		—			—			—			—			40,408			—			40,408
Other comprehensive income, net of $406 tax expense		—			—			—			1,181			—			—			1,181
Balance at September 28, 2019		58,353,803		$	617		$	413,700		$	(1,884	)	$	31,508		$	(18,309	)	$	425,632

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

The accompanying unaudited condensed consolidated financial statements include the accounts of PGT Innovations, Inc. and its direct and indirect wholly-owned ~~subsidiary,~~subsidiaries, including, PGT Industries, Inc., ~~and its wholly-owned subsidiaries~~ CGI Window and Door Holdings, Inc. (“CGI”), ~~which includes its wholly-owned subsidiary,~~ CGI Commercial, Inc. (“CGIC”), ~~and~~ WinDoor, Incorporated, Coyote Acquisition Co. and WWS Acquisition LLC (formerly known as GEF WW Parent LLC) (collectively, the “Company”), after elimination of intercompany accounts and transactions.

PGT Innovations, Inc. (“PGTI”, “we,” or the “Company”), formerly named PGT, Inc., manufactures and supplies premium windows and doors. Our highly engineered and technically advanced products can withstand some of the toughest weather conditions on earth and unify indoor/outdoor living spaces. We are also the nation’s largest manufacturer of impact-resistant windows and doors. Our family of brands include CGI®, PGT® Custom Windows & Doors, WinDoor®, Western Window Systems®, CGI Commercial® and Eze-Breeze®. Products are sold through an authorized dealer and distributor network.

The majority of our sales are to customers in the state of Florida, but we sell products to customers in many states. We also have sales in the Caribbean, Canada, and in South and Central America. With the acquisition of Western Window Systems (“WWS”), we have an increased level of sales in the western United States. See Note 6 for a discussion of this acquisition.

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 (NASDAQ), and began trading on the NYSE under its existing ticker symbol of “PGTI”. We have 4 manufacturing operations in Florida, and 1 in Arizona. Our manufacturing facilities in Florida include 1 in North Venice, 2 in the greater Miami area, and 1 in Orlando. Our Arizona operations are in Phoenix. Additionally, we have 2 glass tempering and laminating plants and 1 insulation glass plant, all located in North Venice.

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

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form10-Q and do not include all of the information and footnotes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments ~~(consisting~~(consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period is not necessarily indicative of the results that may be expected for the remainder of the current year or for any future periods. Each of ~~our~~the Company’s fiscal quarters ended September ~~30, 2017,~~28, 2019, and ~~October 1, 2016,~~September 29, 2018, consisted of 13 weeks.

The condensed consolidated balance sheet as of December ~~31, 2016,~~29, 2018, is derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of December ~~31, 2016,~~29, 2018, and the unaudited condensed consolidated financial statements as of and for the periods ended September ~~30, 2017,~~28, 2019, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December ~~31, 2016,~~29, 2018, included in the Company’s most recent Annual Report on Form10-K. Except for the adoption of the guidance relating to ~~the accounting for stock-based compensation expense~~leases discussed below, the accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in the Company’s Annual Report onForm 10-K.

~~In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2016-09,~~ ~~“Compensation - Stock Compensation, Improvements to Employee Share-Based payment Accounting (Topic 718)”. This update is intended to provide simplification~~The preparation of ~~the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification~~financial statements in ~~the statement of cash flows. We adopted this update effective for our fiscal year beginning January 1, 2017. Impacts of the adoption of ASU2016-09~~ ~~are as follows:~~

~~The effects on the Company’s consolidated balance sheet as of December 31, 2016, relating to the adoption of ASU2016-09~~ ~~is as follows (in thousands):~~

~~In July 2015, the FASB issued ASUNo. 2015-11,~~ “Inventory (Topic 330) – Simplifying the Measurement of Inventory”. This guidance changed the subsequent measurement of inventory, excluding inventory accounted for under LIFO or the retail inventory method, to be at lower of cost and net realizable value. Topic 330, Inventory, previously required an entity to measure inventoryliabilities at the lower of cost or market. Market could have been replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Under this ASU, an entity measures inventory within its scope at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU~~2015-11~~ ~~was effective for us as of January 1, 2017. We prospectively adopted ASU2015-11~~ ~~effective on January 1, 2017. The adoption of ASU2015-11~~ ~~had no impact on our financial statements.~~

~~In addition to the pronouncements issued during 2017, ASU2016-02,~~ ~~“Leases (Topic 842), and ASU2014-09,~~ ~~“Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form10-K~~ ~~for the year ended December 31, 2016.~~

~~In August 2017, the FASB issued ASU2017-12,~~ ~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The amendments under ASU2017-12~~ refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the facedate of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Beginning in 2019, we concluded that we have 2 reportable segments: the Southeast segment, and the Western segment. The Southeast reporting segment, which is also an operating segment, is composed of our sales in Florida, the core market of our legacy business, as well as Alabama, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and the Caribbean. The Western reporting segment, also an operating segment, is composed of sales in the ~~footnotes. It also makes certain targeted improvements to simplify~~remainder of the ~~application~~United States, along with Canada and Mexico. While both of ~~hedge accounting guidance. ASU2017-12~~ ~~becomes effective for us in the first quarter of 2019. We do not expect the adoption of this guidance to~~our operating segments have ~~a significant effect on the Company’s consolidated financial statements.~~

~~In February 2017, the FASB issued ASU2017-05,~~ ~~“Other Income—Gain~~products, distribution methods and ~~Losses from the Derecognition of Nonfinancial Assets.” ASU2017-05~~ ~~clarifies the scope of Subtopic610-20,~~ ~~Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic610-20,~~ ~~which was issued in May 2014 as a part of ASU2014-09,~~ ~~provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts withnon-customers.~~ ~~This update is effective at the same time as the amendments in ASU2014-09,~~ therefore, for our fiscal year beginning after December 15, 2017, and may be applied either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU2017-04,~~ ~~“Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU2017-04~~ simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU2017-01,~~ ~~“Business Combinations (Topic 805) – Clarifying the Definition~~customers of a ~~Business.” ASU2017-01~~ affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendmentssimilar nature, we determined to not aggregate them due to the differences in their geographic markets. Therefore, our operating segments are ~~intended to help companies and other organizations evaluate whether transactions should be accounted~~our reportable segments. See Note 17 for ~~as acquisitions (or disposals) of assets or businesses. ASU2017-01~~ provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We will apply the provisions of this guidance once it becomes effective.segment disclosures.

In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)”~~. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU2016-02~~, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASU 2016-02 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”; ASU 2018-10, “Codification Improvements to Topic 842, Leases”; and ASU 2018-11, “Targeted Improvements”. The new standard requires a lessee to recognize a right-of-use asset and lease liability on ~~their~~the balance ~~sheets,~~sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and ~~leaves lessor~~classification of expense recognition in the income statement.

The new standard was effective for us on December 30, 2018 (the first day of our 2019 fiscal year), with early adoption permitted. We adopted the new standard on this date, using the required modified retrospective transition approach, applying the new standard to all leases existing on the effective date. Consequently, financial information was not updated, and the disclosures required under the new standard will not be provided for dates and periods prior to December 30, 2018. As of the date of adoption, all of our leases were operating leases, and we have no financing leases as of September 28, 2019.

The new standard provided a number of optional practical expedients in transition. We elected the “package of practical expedients”, which permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification and direct costs, and implemented internal controls and additional lease accounting ~~largely unchanged.~~and tracking procedures to enable the preparation of financial information on adoption. We did not elect the use-of-hindsight practical expedient, or the practical expedient pertaining to land easements as it was not applicable to us.

The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualified, primarily for leases that are month-to-month leases. This means, for those leases, we did not recognize right-of-use assets or lease liabilities. We also elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets.

This standard had a material effect on our consolidated balance sheet relating to the recognition of an operating lease right-of-use asset and operating lease liability for our real estate leases and related to new disclosures about our leasing activities. On adoption, we recognized an operating lease right-of-use asset of $30.5 million, and an operating lease liability of $32.3 million, based on the present value of the remaining minimum rental payments under prior leasing standards for existing operating leases. Calculation of the present value of the remaining minimum rental payments required the use of judgment relating to the selection of the discount rate applied to future lease payments. We used a weighted-average interest rate of 6.2%, which was based on a current trade rate for our 2018 Senior Notes due 2026. See Note 10 for additional information relating to our leases.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liability, and operating lease liability, less current portion, on our consolidated balance sheets. Should we engage in any finance leases in the future, finance leases would be included in property and equipment, other current liabilities, and other liabilities on our consolidated balance sheets.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, ~~beginning after December 15, 2018,~~ and interim periods within those fiscal ~~years. Early adoption is permitted for all entities. ASU2016-02~~ requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

~~Approaching Adoption of ASU2014-09,~~ ~~“Revenue from Contracts with Customers”~~

~~In May 2014, the FASB issued ASU2014-09,~~ ~~“Revenue from Contracts with Customers”. ASU2014-09~~ replaces the existing accounting standards for revenue recognition with a single comprehensive five-step model. The core principle is to recognize revenue upon the transfer of goods or services to customers at an amount that reflects the consideration expected to be received. The FASB also issued ASU~~2015-14,~~ ~~“Deferral of Effective Date”. ASU2015-14~~ ~~deferred the effective date for the new guidance until the annual reporting period~~years, beginning after December 15, ~~2017, and interim periods within those annual periods.~~2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is ~~permitted, but~~permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company does not ~~before~~believe that the ~~original~~adoption of this guidance will have a significant impact on its fair value disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2018-19 clarifies the codification and corrects unintended application of the guidance. ASU’s 2016-13 and 2018-19 are effective ~~date (periods~~for us for our fiscal year beginning after December 15, ~~2016).~~2019. We do not believe that the adoption of this guidance will have a significant impact on our consolidated financial statements.

In the ordinary course of business, we extend credit to qualified dealers and distributors, generally on a non-collateralized basis. The ~~standard permits~~Company maintains an allowance for doubtful accounts which is based on management’s assessments of the ~~use of either the full-retrospective (restating all years presented~~amount which may become uncollectible in the ~~Company’s financial statements), or modified-retrospective (recording the impact~~future and is determined through consideration of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU~~2016-08,~~ “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU~~2016-10,~~ ~~“Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies~~our write-off history, specific identification of ~~a performance obligation~~uncollectible accounts based in part on the customer’s past due balance (based on contractual terms), and ~~addresses revenue recognition associated with~~consideration of prevailing economic and industry conditions. Uncollectible accounts are written off after repeated attempts to collect from the ~~licensing~~customer have been unsuccessful. As of ~~intellectual property, ASU2016-12,~~ ~~“Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements~~September 28, 2019, and ~~Practical Expedients”, which clarifies assessment of collectability criterion,non-cash~~ ~~consideration~~December 29, 2018, the allowance for doubtful accounts was $3.7 million and ~~other technical corrections, and ASU2016-20,~~ ~~“Technical Corrections and Improvements to Topic 606,~~ $2.8 million, respectively.

Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.Recognition Accounting Policy

The Company ~~completed its preliminary assessment of the impact of its upcoming adoption of ASU2014-09~~ on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU~~2014-09,~~ ~~to one based on the transfer of control of the product to the customer. Under ASU2014-09,~~ revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is not required in order for transfer of control of the product to the customer to have occurred.

~~ASU2014-09~~ states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that, of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed~~to-date.~~ ~~ASU2014-09~~ further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

~~The Company is a manufacturer of fully-customized~~primarily manufactures fully customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The ~~Company’s initial assessment is that its goods have no alternative use, as that term is defined in ASU2014-09,~~ and that control of the product passes to the customer no later than completion of the manufacturing of each or all of the products in an order, but before delivery of the products to the customer. Additionally, the Company has an enforceable right to payment at the time an order is received and accepted at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its customers.

~~Based on this initial assessment,~~ Due to the ~~Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion~~customized build-to-order nature of the ~~manufacturing process, from~~Company’s products, the Company’s assessment is that the substantial portion of its ~~current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products~~finished goods and certain unused glass components have no alternative use, and that control of these products and components passes to the ~~recognition~~customer over time during the manufacturing of the products in an order, or upon our receipt of certain pre-cut glass components from our supplier attributed to specific customer orders.

Based on these factors, the Company recognizes a substantial portion of revenue ~~should begin. However, because~~over time during the manufacturing process once customization begins, and for certain unused glass components on hand, at the end of a reporting period. Revenue on work-in-process at the end of a reporting period is recognized in proportion to costs incurred to total estimated cost of the product being manufactured. Except for the Western segment’s volume products, discussed in the section titled Disaggregation of Revenue from Contracts with Customers below, revenue ~~will~~recognized at a point in time is immaterial.

As discussed in Note 1, beginning in 2019, we determined that we have 2 reportable segments: our Southeast business unit and our Western business unit. See Note 17 for more information. The following tables provide information about our net sales by product category and by market for the three and nine months ended September 28, 2019, by segment, and for the three and nine months ended September 29, 2018 (dollars in millions):

The Company’s Western segment includes both custom and volume products. This segment’s volume products are not made-to-order and are of standardized sizes and design specifications. Therefore, the Company’s assessment is that the Western segment’s volume products have alternative uses, and that control of these products passes to the customer at a point in time, which is typically when the product has been delivered to the customer. For the three and nine months ended September 28, 2019, the Western segment’s net sales of its volume products were $13.8 million and $40.6 million, respectively. For the post-acquisition period from the August 13, 2018 acquisition date to September 29, 2018, the Western segment’s net sales of its volume products were $9.8 million.

Contract assets represent sales recognized ~~on at least all products~~in excess of billings related to finished goods not yet shipped and certain unused glass components not yet placed into the production process for which ~~manufacturing has been completed,~~revenue is recognized over time as noted above. Contract liabilities relate to customer deposits at the ~~Company believes that upon adoption~~end of ~~ASU2014-09,~~ ~~inventories on its~~reporting periods. At September 28, 2019, and December 29, 2018, those contract liabilities totaled $7.6 million and $8.3 million, respectively, of which $6.1 million and $7.8 million, respectively, are classified within accrued liabilities, and $1.5 million and $0.5 million, respectively, are classified within contract assets, net, in the accompanying condensed consolidated balance sheets at September 28, 2019, and December 29, 2018.

Because of the short-term nature of our performance obligations, as discussed below, substantially all of our performance obligations are satisfied within the quarter following the end of a reporting period. As such, substantially all of the contract liabilities at December 29, 2018 were satisfied in the first quarter of 2019, and contract assets at December 29, 2018 were transferred to accounts receivable in the first quarter of 2019. Contract liabilities at September 28, 2019 represents cash received during the three-month period ended September 28, 2019, excluding amounts recognized as revenue during that period. Contract assets at September 28, 2019 represents revenue recognized during the three-month period ended September 28, 2019, excluding amounts transferred to accounts receivable during that period.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue as the performance obligation is satisfied. Our contracts with our customers generally represent an approved purchase order, which is typically accounted for as a single performance obligation. In situations when our contract includes distinct goods that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods. We allocate the contract’s transaction price to each distinct performance obligation based on the estimated relative standalone selling price of each distinct good. Observable standalone sales are used to determine the standalone selling price.

Performance obligations are satisfied over time, generally for our custom products, and as of a point in time for our standard products. Performance obligations are supported by contracts with customers, and we have elected not to disclose our unsatisfied performance obligations as of September 28, 2019 under the short-term contract exemption as we expect such performance obligations will ~~no longer include finished goods.~~ be satisfied within the quarter following the end of a reporting period.

Policies Regarding Shipping and Handling Costs and Commissions on Contract Assets

The Company ~~also believes that it will~~has made a policy election to continue to recognize ~~revenue at an earlier point than prior to the adoption of ASU2014-09,~~ but that such effect may not materially affect its consolidated statements of operations post-adoption due to the fact that such effects will exist at both the beginning and end of fiscal periods after the initial transition.

~~ASU2014-09~~ ~~also requires entities, primarily in the manufacturing segment, to make policy elections relating to~~ shipping and handling ~~charges. Entities may elect to treat shipping and handling~~costs as a ~~separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat~~fulfillment activity. Treating shipping and handling as a fulfillment activity ~~which will require~~requires estimated shipping and handling costs for undelivered products and certain glass components on which we have recognized revenue and created a contract asset, to be accrued ~~in order~~ to match this cost with the ~~revenue previously~~ recognized ~~over time. The Company currently recognizes~~revenue. This policy is unchanged from the Company’s policy for recognizing shipping and handling costs ~~as a fulfillment activity, and has preliminarily determined~~prior to ~~continue to treat such costs as a fulfillment activity.~~the adoption of the new revenue guidance.

The Company ~~expects~~utilizes the practical expedient which permits expensing of costs to ~~continue~~obtain a contract when the expected amortization period is one year or less, which typically results in expensing commissions paid to ~~evaluate~~employees. We expense sales commissions paid to employees as sales are recognized, including sales from the ~~impact~~creation of ~~the adoption of ASU2014-09~~ ~~on its consolidated financial statements, and will provide updates and additional information~~contract assets, as the ~~effective date of adoption approaches.~~expected amortization period is less than one year.

Most of our manufactured products are sold with warranties. Warranty periods, which vary by product components, generally range from 1 to 10 years; however, the warranty period for a limited number of specifically identified components in certain applications is a lifetime. The majority of the products sold have warranties on components which range from 1 to 3 years. The ~~reserve~~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 September ~~30, 2017,~~28, 2019, we recorded warranty expense at a rate of approximately ~~2.04%~~1.8% of sales, which ~~decreased from~~was nearly equal to the rate in the ~~second quarter of 2017 of 2.22%. During the~~ three months ended ~~October 1, 2016,~~September 29, 2018 of 1.7% of sales. During the nine months ended September 28, 2019, we recorded warranty expense at a rate of approximately ~~2.21%~~1.7% of sales, which was equal to the rate in the nine months ended September 28, 2018 of 1.7% of sales.

The following table ~~summarizes:~~summarizes current period charges, adjustments to previous estimates, if necessary, as well as settlements, which represent actual costs incurred during the period for the three and nine months ended September ~~30, 2017,~~28, 2019, and ~~October 1, 2016.~~September 29, 2018. The reserve is determined through specific identification and assessing Company history. Expected future obligations are discounted to a current value using a risk-free rate for obligations with similar maturities.

Inventories consist principally of raw materials purchased for the manufacture of our products. We have limited finished goods inventory since ~~all~~the substantial majority of our products are custom,made-to-order and ~~usually ship~~the revenue on these products, as well as the related cost, has been fully recognized upon ~~completion.~~completion of the manufacturing process. Finished goods inventory andwork-in-progress costs include direct materials, direct labor, and overhead. All inventories are stated at the lower of cost~~(first-in,~~ (first-in, first-out method) or net realizable value. Inventories consisted of the following:

For the three months ended September ~~30, 2017,~~28, 2019, there were ~~90,159 options exercised at a weighted average exercise price of $1.99 per share. For the nine months ended September 30, 2017, there were 341,069~~210,931 options exercised at a weighted average exercise price of $2.00 per share. For the nine months ended September 28, 2019, there were 532,931 options exercised at a weighted average exercise price of $2.37 per share.

On ~~March 4, 2017,~~February 14, 2019, we granted ~~251,474~~258,628 restricted stock awards to certain executives andnon-executive employees of the ~~Company.~~Company under the 2019 Long-Term Incentive Plan (LTIP). The restrictions on these stock awards lapse over time based solely on continued service. However, the quantity of restricted shares granted on half of these shares, or ~~125,737~~129,314 shares, is fixed, whereas the quantity granted on the remaining half, or ~~125,737~~129,314 shares, is subject to Company-specific performance criteria. The restricted stock awards have a fair value on date of grant of ~~$10.20~~$17.76 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. Those restricted shares whose quantity is fixed vest in equal amounts over a three-year period on the first, second and third anniversary dates of the grant. Those restricted shares whose quantity is subject to Company performance criteria vest in equal amounts on the second and third anniversary dates of the ~~grant.~~grant, if they are earned.

The performance criteria, as defined in the share awards, provides for a graded awarding of shares based on the percentage by which the Company meets earnings before interest and taxes, as defined, in our ~~2017~~2019 business plan. The performance percentages, ranging from less than 80% to greater than 120%, provide for the awarding of shares ranging from no0 shares to 150% of the ~~original amount~~target number of shares.

On ~~May 19, 2017,~~March 1, 2019, we granted ~~34,699~~an additional 33,663 restricted stock awards to certain executives and non-executive employees of the Company under last year’s 2018 LTIP, because the Company achieved more than 120% of the target level of our 2018 LTIP performance metric, bringing the total number of performance shares issued to each participant of the 2018 LTIP remaining with the Company on March 1, 2019 to 150% of the target number of performance shares granted to each participant.

On May 22, 2019, we granted a total of 37,000 restricted stock awards to the ~~seven~~8 non-management members of the board of directors of the Company relating to their annual compensation for service on the board. The restricted stock awards have a fair value on date of grant of ~~$11.60~~$15.35 per share based on the closing New York Stock Exchange market price of the common stock on the day prior to the day the awards were granted. The restrictions on these stock awards lapse based solely on continued service on the first anniversary date of the grant.

We record stock compensation expense over an equity award’s vesting period based on the award’s fair value at the date of grant. ~~Effective on January 1, 2017, we adopted the provisions of ASU2016-09,~~ pursuant to which we elected to change our method of accounting for forfeitures, from one of estimating forfeitures, to recognizing forfeitures on an actual basis in the period they occur. For more information, see Note 1 under “Recently Adopted Accounting Pronouncements”. We recorded compensation expense for ~~stock based~~stock-based awards of ~~$0.5~~ $1.0 million for the three months ended September ~~30, 2017,~~28, 2019, and ~~$0.4~~ $1.3 million for the three months ended ~~October 1, 2016.~~September 29, 2018. We recorded compensation expense for ~~stock based~~stock-based awards of ~~$1.6~~$3.2 million for the nine months ended September ~~30, 2017,~~28, 2019, and ~~$1.6~~ $2.5 million for the nine months ended ~~October 1, 2016.~~September 29, 2018. As of September ~~30, 2017, and October 1, 2016,~~28, 2019, there was ~~$2.4~~$6.1 million ~~and $1.9 million, respectively,~~ of total unrecognized compensation cost related ~~primarily~~entirely to restricted share awards. These costs are expected to be recognized in earnings on an accelerated basis over the weighted average remaining vesting period of ~~1.5~~1.9 years at September ~~30, 2017.~~28, 2019.

On August 13, 2018 (the “closing date”), we completed the acquisition of Western Window Systems (“WWS”), which became a wholly-owned subsidiary of PGT Innovations, Inc. The fair value of consideration transferred in the acquisition was $354.6 million. The acquisition was financed with proceeds of $315.0 million from the issuance of the 2018 Senior Notes due 2026, and with $39.6 million in cash on hand. See Note 9 for a discussion of the 2018 Senior Notes due 2026.

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

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

The WWS Acquisition included its then-existing subsidiary, WWS Blocker LLC (Blocker). Blocker was a single-purpose U.S. tax blocker which held an 18.06% ownership percentage of the combined ownership of WWS, and for which that portion of the fair value of assets acquired and liabilities assumed in the WWS Acquisition was not eligible for a step-up in basis. As a result, we recorded a net deferred tax liability of $5.2 million in the WWS Acquisition, primarily relating to the fair value of the acquired identifiable indefinite-lived and amortizable intangible assets. Subsequent to the acquisition, Blocker was merged out of existence.

We incurred acquisition costs totaling $4.4 million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the WWS Acquisition, which includes $0.7 million in additional costs in the first quarter of 2019, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the nine months ended September 28, 2019. We began incurring these costs in the second quarter of 2018.

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, has been determined to be $169.5 million, of which we estimate $139.4 million is expected to be deductible for tax purposes. Goodwill represents the increased value of the combined entity through additional sales channel opportunities as well as penetration of a new geographic market with enhanced opportunities for cross-selling of our multiple brands in all markets.

The purchase agreement relating to the WWS Acquisition (PA) has a post-closing working capital calculation whereby we were required to prepare, and which we delivered to the sellers, a final statement of purchase price, including our calculation of actual net working capital as of the closing date. The calculation resulted in a net decrease in purchase price of $0.6 million.

Net sales and net income included in the consolidated condensed statements of comprehensive income for the three and nine months ended September 29, 2018, from WWS from the August 13, 2018 acquisition date was $18.7 million and $2.3 million, respectively.

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

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

~~Weighted~~There were 86 thousand anti-dilutive securities excluded from the calculation of weighted average shares outstanding for the three months ended September 28, 2019, and NaN for the three months ended September 29, 2018. There were 90 thousand anti-dilutive securities excluded from the calculation of weighted average shares outstanding for the nine months ended September ~~30, 2017,~~28, 2019, and NaN for the ~~three and~~ nine months ended ~~October 1, 2016, excludes underlying options of 20 thousand because their effects were anti-dilutive. There were no anti-dilutive securities outstanding for the three months ended~~ September ~~30, 2017.~~29, 2018.

The table below presents the calculation of EPS and a reconciliation of weighted average common shares used in the calculation of basic and diluted EPS for our Company:

~~Effective on January 1, 2017, we adopted ASU2016-09.~~ ~~ASU2016-09~~ changes the accounting for excess tax benefits by requiring that they be treated as discrete items of income tax expense in the period they occur. For the three and nine months ended September 30, 2017, income tax expense has been reduced by $347 thousand and $1.1 million, respectively, relating to excess tax benefits on the exercise of stock options and the lapse of restrictions on stock awards. ASU~~2016-09~~ also changed the treasury stock method of calculating diluted shares outstanding to exclude the presumption that common stock equivalents can be reduced by repurchasing shares using excess tax benefits. For the three and nine months ended September 30, 2017, diluted shares outstanding includes 724 thousand and 724 thousand shares, respectively, that prior to the adoption of ASU~~2016-09~~ would have been presumed to be bought-back, and therefore not outstanding, using the proceeds of excess tax benefits. For the three and nine months ended October 1, 2016, diluted shares outstanding would have increased by 826 thousand and 827 thousand shares, respectively, if we had adopted ASU~~2016-09~~ ~~at the beginning of our 2016 fiscal year.~~

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

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

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

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

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

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

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

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

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

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

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

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

   Nine Months Ended
   October 1, 2016
(in thousands, except per share amounts)
Pro Forma Results

Net sales
   $ 351,507


Net income
   $ 18,280


Net income per common share:

Basic
   $ 0.37


Diluted
   $ 0.36

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

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

~~In July 2017,~~Estimated amortization of our amortizable intangible assets for future years is as follows:

On August 10, 2018, we ~~purchased an enterprise-wide software license~~completed the issuance of $315.0 million aggregate principal amount of 6.75% senior notes (“2018 Senior Notes due 2026”), issued at 100% of their principal amount. The 2018 Senior Notes due 2026 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 2018 Senior Notes due 2026 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 2018 Senior Notes due 2026 were offered under Rule 144A of the Securities Act, and in transactions outside the United States under Regulation S of the Securities Act, and have not been, and will not be, registered under the Securities Act.

The 2018 Senior Notes due 2026 mature on August 10, 2026. Interest on the 2018 Senior Notes due 2026 is payable semi-annually, in arrears, beginning on February 16, 2019, with interest accruing at a rate of 6.75% per annum from August 10, 2018. We incurred financing costs relating to ~~office productivity software. We estimated~~bank fees and professional services costs relating to the ~~then fair value~~offering and issuance of ~~this software license to be $590 thousand, our purchase price. The software license~~the 2018 Senior Notes due 2026 totaling $10.4 million, which is being amortized under the effective interest method. See “Deferred Financing Costs” below. As of September 28, 2019, the face value of debt outstanding under the 2018 Senior Notes due 2026 was $315.0 million, and accrued interest totaled $3.5 million.

The indenture for the 2018 Senior Notes due 2026 gives us the option to redeem some or all of the 2018 Senior Notes due 2026 at the redemption prices and on the terms specified in the indenture governing the 2018 Senior Notes due 2026. The indenture governing the 2018 Senior Notes due 2026 does not require us to make any mandatory redemptions or sinking fund payments. However, upon the occurrence of a ~~straight-line basis over its estimated useful life, which we have determined~~change of control, as defined in the indenture, the Company is required to ~~be two years.~~

~~NOTE 8. LONG-TERM DEBT~~The indenture for the 2018 Senior Notes due 2026 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 athe 2016 Credit Agreement ~~(“2016 Credit Agreement”),~~due 2022, among us, the lending institutions identified in the 2016 Credit Agreement due 2022, and ~~Deutsche~~SunTrust Bank, ~~AG New York Branch,~~ as Administrative Agent and Collateral Agent. The 2016 Credit Agreement due 2022 establishes new senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility maturing in ~~six years~~February 2022 that ~~will amortize~~amortizes on a basis of 1% annually during ~~the~~its six-year term, and a $40.0 million revolving credit facility maturing in ~~five years~~February 2021 that includes a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement due 2022 are subject to exceptions, guaranteed by substantially all of our wholly-owned direct and

indirect subsidiaries that are restricted subsidiaries and secured by substantially all of our assets as well as our direct and indirect restricted subsidiaries’ assets.

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

In connection with the Second Amendment, certain existing lenders changed their positions in or exited the 2016 Credit Agreement due 2022, which resulted in the write-offs of portions of the deferred financing costs and original issue discount allocated to these lenders. Additionally, at the time of the issuance of the 2018 Senior Notes due 2026, certain existing lenders reduced their positions in the revolving credit portion of the 2016 Credit Agreement due 2022, which resulted in the write-offs of the deferred financing costs allocated to these lenders. As such, write-offs totaling $3.4 million is classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the nine months ended September ~~30, 2017,~~29, 2018.

Regarding the first amendment as described above, as there were ~~$0.2 million~~no changes in lender positions, this action did not result in any modifications or extinguishments of ~~letters of credit outstanding and $39.8 million available on the revolver.~~debt. Therefore, there was no charge for debt extinguishment costs in 2017.

Interest on all loans under the 2016 Credit Agreement due 2022 is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Prior to amending the 2016 Credit Agreement due 2022 on ~~February 17, 2017,~~March 16, 2018, as described ~~below,~~above, borrowings under the term loans and the revolving credit facility accrued interest at a rate equal to, at our option, LIBOR (with a floor of 100 basis points in respect of the term loan), or a base rate (with a floor of 200 basis points in respect of the term loan) plus an applicable margin. The applicable margin was ~~575~~475 basis points in the case of LIBOR and ~~475~~375 basis points in the case of the base rate. The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement due 2022 was 5.69% as of September 28, 2019, and was 5.84% at December 29, 2018.

We ~~will~~also pay quarterly fees on the unused portion of the revolving credit facility equal to 50 basis points per annum as well as a quarterly letter of credit fee at 575 basis points per annum plus a 12.5 basis point facing fee per annum on the face amount of any outstanding letters of credit. ~~The weighted averageall-in~~ ~~interest rate for borrowings~~As of September 28, 2019, there were $2.1 million in letters of credit outstanding and $37.9 million available under the ~~term-loan portion of the 2016 Credit agreement was 6.02% as of September 30, 2017, and was 5.75% at December 31, 2016.~~

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

The 2016 Credit Agreement due 2022 contains a springing financial covenant that would apply if we draw in excess of twenty percent (20%) of the revolving facility ~~which requires~~commitment (excluding $7.5 million of undrawn letters of credit and letters of credit and draws thereunder that are cash collateralized at 105% of the stated amount thereof from such availability test). To the extent in effect, the springing financial covenant would prohibit us ~~to maintain~~from exceeding a maximum ~~total~~first lien net leverage ratio (based on the ratio of total first lien (less unrestricted cash) debt ~~for borrowed money~~ to ~~trailing EBITDA, each~~EBITDA) as ~~defined in the 2016 Credit Agreement), and will be tested quarterly based on~~of the last ~~four~~day of each applicable fiscal ~~quarters and~~quarter. To the extent the springing financial covenant is ~~set at levels~~in effect, the first lien net leverage ratio cannot exceed 4.00:1.00 as ~~described in~~of the ~~2016 Credit Agreement. As~~last day of the fiscal quarter ending on September ~~30, 2017, no such~~28, 2019. We were not required to test ~~is required as~~our first lien net leverage ratio for the quarter ending September 28, 2019 because we ~~have~~did not ~~exceeded~~exceed 20% of our revolving capacity. ~~We believe that our total net leverage ratio during the third quarter of 2017 was in compliance with the 2016 Credit Agreement, and that we are in compliance with all covenants.~~

The 2016 Credit Agreement due 2022 also contains a number of affirmative and restrictive covenants, including limitations on the incurrence of additional debt, liens on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, entry into restrictive agreements, prepayments of certain debt and transactions with ~~affiliates.~~affiliates, in each case, subject to exceptions and qualifications. The 2016 Credit Agreement due 2022 also contains customary events of default. Upon the occurrence of an event of default, the amounts outstanding under the 2016 Credit Agreement due 2022 may be accelerated and may become immediately due and payable. As

On September 18, 2018, we completed an underwritten, public offering of ~~September 30, 2017,~~7,000,000 shares of our common stock, at a public offering price of $23.00 per share (the “2018 Equity Issuance”). The offering resulted in gross proceeds to the Company of $161.0 million. Net of an underwriting fee of $1.15 per share, net cash proceeds to the Company approximated $153.0 million. Contemporaneously with the 2018 Equity Issuance, we ~~were~~prepaid $152.0 million in ~~compliance with all affirmative and restrictive covenants.~~

~~In connection with entering into~~borrowings outstanding under the term loan portion of the 2016 Credit Agreement ~~on February 16, 2016,~~due 2022. On December 19, 2018, we terminated our prior credit agreement, dated as of September 22, 2014, among PGT Industries, Inc., as the borrower, the Company, as guarantor, the lenders from time to time party thereto and Deutsche Bank, as administrative agent and collateral agent (“2014 Credit Agreement”). Along with cash on hand, proceeds from the term loan facilityvoluntarily prepaid an additional $8.0 million in borrowings under the 2016 Credit Agreement ~~were used to repay amounts outstanding under the 2014 Credit Agreement, acquire WinDoor, and pay certain fees and expenses.~~

due 2022. As of September ~~30, 2017,~~28, 2019, the ~~face value~~principal amount of debt outstanding under the 2016 Credit Agreement due 2022 was ~~$244.0~~ $64.0 million, and accrued interest was ~~$0.4~~ $0.5 million. ~~During~~

See Note 18, Subsequent Events, for a discussion of a third amendment to the ~~third quarter~~2016 Credit Agreement due 2022, which we entered into effective on October 31, 2019.

The activity relating to third-party fees and costs, lender fees and discount for the nine months ended September 28, 2019, are as follows. All debt-related fees, costs and original issue discount are classified as a reduction of ~~2017, we made voluntary~~the carrying value of long-term debt:

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September 28, 2019, is as follows:

As a result of prepayments ~~of outstanding borrowings under the term-loan portion~~ of the 2016 Credit Agreement due 2022 totaling ~~$20.0~~ $204.0 million ~~composed~~since its inception in February 2016, we have no future scheduled repayments until the maturity of ~~a payment~~the facility on February 21, 2022. The contractual future maturities of ~~$8.0 million made on~~long-term debt outstanding, including the remaining balance of the financing arrangement described as other debt, as of September ~~29, 2017, and of $12.0 million made on July 7, 2017.~~28, 2019, are as follows (at face value):

In July 2017, we entered into atwo-year financing arrangement for the purchase of an enterprise-wide software license relating to office productivity software. This financing arrangement requires 24 monthly payments of $26 thousand each. We estimated the value of this financing arrangement to be $590 thousand, using an imputed annual interest rate of 6.00%, which ~~approximates~~approximated our then borrowing rate under the 2016 Credit Agreement due 2022, a Level 3 input. At September ~~30, 2017,~~28, 2019, this agreement had been fully repaid. At December 29, 2018, there was ~~$529~~$163 thousand, outstanding under this financing arrangement.

We lease certain of our manufacturing facilities under operating leases. We also lease production equipment, vehicles, computer equipment, storage units and office equipment under operating leases. Our leases have remaining lease terms of 1 year to 9 years, 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 ~~activity~~lease expense relating to ~~third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are as follows. As a result~~these leases is not significant.

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

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

As a result of the voluntary prepayments totaling $20.0 million we made during the third quarter of 2017, we have no future scheduled repayments under the 2016 Credit Agreement until the maturity of the facility on February 21, 2022. The contractual future maturities of long-term debt outstanding, including the financing arrangement described as other debt, as of September 30, 2017,28, 2019, are as follows ~~(at face value)~~(in thousands):

Other information relating to leases for the three and nine months ended September 28, 2019, are as follows (in thousands, except years and percentages):

Future minimum lease payments under non-cancellable leases were as follows at September 28, 2019, and December 29, 2018 (in thousands):

As of September 28, 2019, we had no additional operating or finance leases that have not yet commenced. Our operating leases expire at various times through 2027. Lease expense prior to the adoption of ASU 2016-02 would have been $2.3 million for the three months ended, and $6.6 million for the nine months ended September 28, 2019 and was $1.9 million for the three months ended, and $4.9 million for the nine months ended September 29, 2018. Lease expense was $6.4 million for the year ended December 29, 2018.

Our Company is a party to various legal proceedings in the ordinary course of business. Although the ultimate disposition of those proceedings cannot be predicted with certainty, management believes the outcome of any claim that is pending or threatened, either individually or in the aggregate, will not have a ~~materially~~material adverse effect on our operations, financial position or cash flows.

~~Income~~Our income tax expense was ~~$3.0~~$3.9 million for the three months ended September ~~30, 2017,~~28, 2019, compared with ~~$5.3~~$3.3 million for the three months ended ~~October 1, 2016.~~September 29, 2018. Our effective tax rate for the three months ended September ~~30, 2017,~~28, 2019, was ~~32.2%~~20.4%, and was ~~32.8%~~19.7% for the three months ended ~~October 1, 2016. Income~~September 29, 2018. Our income tax expense was ~~$9.1~~ $11.3 million for the nine months ended September ~~30, 2017,~~28, 2019, compared with ~~$10.3~~ $8.7 million for the nine months ended ~~October 1, 2016.~~September 29, 2018. Our effective tax rate for the nine months ended September ~~30, 2017,~~28, 2019, was ~~31.8%~~21.8%, and was ~~34.5%~~16.8% for the nine months ended ~~October 1, 2016.~~September 29, 2018.

Income tax expense in the three ~~and nine~~ months ended September ~~30, 2017,~~28, 2019, and September 29, 2018, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards, treated as a discrete item of income tax, ~~upon our adoption of ASU2016-09~~ ~~effective on January 1, 2017,~~ totaling ~~$347~~$665 thousand and ~~$1.1~~$1.0 million, ~~respectively.~~respectively. Excluding this discrete item, ~~of income~~as well as other minor tax ~~expense,~~credit adjustments recorded in the 2019 third quarter, the effective tax rates for the three months ended September 28, 2019, and September 29, 2018, would have been 24.8% and 25.5%, respectively. Income tax expense in the nine months ended September ~~30, 2017,~~28, 2019, and September 29, 2018, includes excess tax benefits totaling $1.7 million and $4.6 million, respectively. Excluding this discrete item, as well as other minor tax credit adjustments recorded in the 2019 third quarter, the effective tax rates for the nine months ended September 28, 2019, and September 29, 2018, would have been ~~36.0%~~25.3% and ~~35.8%~~25.6%, respectively.

The effective tax rates in all periods, excluding the effect of the discrete item discussed above in the 2017 periods, were lower than our combined statutory federal and state tax rate of 38.8% primarily as theAs a result of the ~~estimated impact of~~Tax Cuts and Jobs Act, enacted effective on December 22, 2017, our Federal corporate income tax rate has been reduced from 35%, to 21%. This reduction in rate has lowered our overall effective tax rate. Additionally, the section 199 domestic manufacturing deduction ~~partially offset by~~was repealed. As such, our estimated annual effective tax rate, excluding the ~~50% deductibility-disallowance~~discrete items discussed above, approximates our current combined statutory federal and state rate of ~~meals and entertainment expenses.~~25.6%.

At September 30, 2017, an accrued federal income tax payable of $6.6 million was classified within accrued liabilities in the accompanying condensed consolidated balance sheet. At December 31, 2016, a federal income tax receivable of $2.6 million was classified within other current assets in the accompanying condensed consolidated balance sheet. During the ~~three or~~ nine months ended September ~~30, 2017,~~28, 2019, we ~~did not make a payment~~made payments of estimated federal and state income taxes ~~nor did we receive any~~totaling $10.8 million. We received 0 refunds of federal or state income ~~taxes. Pursuant~~taxes in the first nine months of 2019. During the nine months ended September 29, 2018, we made payments of estimated federal and state income taxes totaling $17.2 million, including an estimated Federal income tax payment totaling $9.0 million relating to the 2017 tax ~~relief from the~~year. The Internal Revenue Service provided tax relief

relating to taxpayers in certain designated areas of Florida impacted by Hurricane Irma in September 2017, which ~~includes~~included all counties in Florida in which we ~~operate,~~operate. As a result, the deadline for remitting our required 2017 third quarter estimated payment for corporate income taxes ~~as well as the deadline for filing our 2016 fiscal year corporate income tax return, has been~~was extended to January 31, 2018.

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 aninstrument-by-instrument basis as they are acquired or incurred.

During the three or nine months ended September ~~30, 2017,~~28, 2019, or ~~October 1, 2016,~~September 29, 2018, we did ~~not~~0t 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.

Our financial instruments include cash and cash equivalents, accounts and notes receivable, and accounts payable, ~~and~~ accrued liabilities and other debt, whose carrying amounts approximate their fair values due to their short-term nature. Our financial instruments also include borrowings under our 2016 Credit Agreement due 2022, as well as the 2018 Senior Notes due 2026, both classified as long-term debt. The fair value of ~~our long-term debt~~borrowings under the 2016 Credit Agreement due 2022 is based on debt with similar terms and characteristics and was approximately ~~$248.5~~$64.1 million as of September ~~30, 2017,~~28, 2019, compared to a principal outstanding value of ~~$244.0~~$64.0 million, and ~~$264.6~~fair value of $63.2 million as of December ~~31, 2016,~~29, 2018, compared to a principal outstanding value of ~~$264.0~~$64.0 million. The fair value of the 2018 Senior Notes due 2026 is also based on debt with similar terms and characteristics and was approximately $340.2 million as of September 28, 2019, compared to a principal outstanding value of $315.0 million, and the fair value was approximately $311.9 million as of December 29, 2018, compared to a principal outstanding value of $315.0 million. Fair values were determined based on observed trading prices of our debt between domestic financial ~~institutions.~~

The following are measured in the 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):

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

The following discussion of our financial condition and results of operations should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the year ended December ~~31, 2016,~~29, 2018, included in our most recent Annual Report on Form10-K as ~~well as our reports~~filed with the Securities and Exchange Commission on ~~Forms10-Q~~ ~~and8-K~~ ~~and other publicly available information.~~February 27, 2019. All amounts herein are unaudited.

Except for historical information contained herein, the matters set forth in this Quarterly Report on Form10-Q are forward-looking statements. These statements are based on management’s current expectations and plans, which involve risks and uncertainties. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as ~~“may,~~“expected,” ~~“will,~~“excited,”~~“believe,~~ “guidance,” “believe,” “expect,” ~~“forecast,~~“may,” ~~“guidance,~~“outlook,” “forecast,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” “plan” and similar terminology. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the filing date of this Quarterly Report and which involve risks and uncertainties that may cause our actual results to differ materially from those set forth in the ~~forward looking~~forward-looking statements. Those risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to:

Any forward-looking statements made by us or on our behalf, including our full-year guidance range for 2019, speak only as of the date they are made and, except as may be required by law, we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances.

~~We recorded~~With our acquisition of Western Windows Systems (“WWS”) in August 2018, we believe we have positioned PGT Innovations as a national leader in the premium window and door space. The addition of Western Window Systems’ footprint supports the component of our strategic vision focused on expanding outside of Florida with niche products that we expect to maintain and strengthen our margin profile. The WWS acquisition also helped us achieve more geographic and product diversity.

Although we achieved sales growth in our Western segment in the third quarter of ~~$126.9 million, down 2.3 percent~~2019 compared to the third quarter of ~~2016. Sales were $377.0 million for~~2018, our 2019 third quarter results reflect an expected decrease of sales into both the ~~nine-month period ended September 30, 2017, up 8.0 percent~~repair and remodel market, and to a lesser extent our new construction market, of our legacy business, after as compared to the ~~same period last year.~~record-setting growth we experienced in 2018, which was driven by increased customer awareness of the benefits of our impact resistant products and increased repair and remodeling activity after two major hurricanes in 2017. Sales in the 2019 third quarter were also negatively affected by the disruptions to many of our customers’ businesses caused by Hurricane Dorian in late August 2019, which resulted in a decrease in customer orders and shipments for us.

~~Our~~Gross margin decreased 1.3 percentage points, to 35.4% in this year’s third quarter, compared to 36.7% in the third quarter of ~~2017 started strong as~~2018, primarily due to the unfavorable effects of shifts in the mix of products sold, the decrease in sales volume in ~~July~~our legacy business, and ~~August~~decreases in our product prices due to certain promotions during the quarter. These negative factors were ~~up over 5 percent~~partially offset by the inclusion of the gross profits of our WWS for the entire third quarter in 2019, compared to only the post-acquisition period in the third quarter of 2018. The unfavorable impact of the challenging factors affecting our gross profit in the 2019 third quarter was partially offset by the benefits we experienced from our ability to leverage fixed costs.

Net income per diluted share of $0.26, which was flat compared to last year’s third quarter, was impacted by a higher level of weighted-average outstanding shares as a result of our issuance of an additional 7,000,000 shares of our Company’s common stock (“Equity Issuance”) in September 2018. Despite the decline in our legacy sales into the repair and remodel and new construction markets, as compared to the record year ~~which benefitted operational performance. During this period,~~ we ~~were regularly recording order weeks~~experienced in 2018, we believe we will continue to benefit from the strength of ~~between $10~~our brands, and ~~$11 million,~~are implementing advertising, marketing and ~~daily order volumes remained steady during the early part of September.~~

~~On September 10th, Hurricane Irma (Irma), a Category 4 storm with sustained130-mph~~ ~~winds, made landfall~~sales initiatives that we believe will drive sales in the ~~Florida Keys, one of our primary markets. Impacts from this400-mile-wide~~ ~~storm were felt over the entire state of Florida, which represents 90 percent of our consolidated sales.~~

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

We estimate that Irma caused a negative sales impact of approximately $13 million to our 2017 third quarter. Irma also caused an added $1.1 million in operating costs, which included $345 thousand classified within cost of sales, and $746 thousand classified within selling, general and administrative expenses. We expect some portion of those sales to be recovered in the 2017 fourth quarter ~~with the remainder falling into 2018, as some~~ of our customers are still working through their post-Irma recovery efforts. For the month of October 2017, sales finished up 5 percent compared to October 2016, which has driven solid operational performance.2019 and in 2020.

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

~~For the full year 2017, the Company expects to finish within the previous guidance range for consolidated sales of $490 to $500 million.~~- 30 -

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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER ~~30, 2017~~28, 2019 AND ~~OCTOBER 1, 2016~~

~~The following table represents total sales by product category for the three months ended September 30, 2017, and October 1, 2016 (in millions):~~SEPTEMBER 29, 2018

~~Total net~~Net sales ~~during the third quarter of 2017 were $126.9 million, a decrease of $2.9 million, or 2.3%, from $129.8 million in total net~~

Net sales for the third quarter of ~~2016. Our primary market is~~2019 were $197.8 million, a $1.3 million, or 0.6%, decrease in sales, from $199.1 million in the ~~State~~third quarter of ~~Florida, from which we derive approximately 90%~~the prior year. Net sales of our ~~sales. On September 10, 2017, Hurricane Irma made landfall~~Southeast segment were $158.3 million in the ~~Florida Keys and moved north over~~third quarter of 2019, compared with $177.0 million in the ~~entire state, affecting all areas~~2018 third quarter, a decrease of ~~Florida. Irma caused disruption to our ability to manufacture and distribute our products, and required us to shut-down and cease operations for a period of up to six days at certain~~$18.7 million. Net sales of our ~~locations. Irma also affected our customers’ ability to accept deliveries~~Western segment were $39.5 million in the third quarter of 2019, compared with $22.1 million in the third quarter of 2018, an increase of $17.4 million. Sales of our ~~products. We estimate that lost~~Western segment are composed of the sales ~~directly attributable to~~of WWS, which were $35.9 million in the ~~disruption caused by Irma for~~third quarter of 2019, compared with $18.7 million in the third quarter of 2018 from the date of the acquisition, and sales of our legacy business into the west, which were $3.5 million in the three months ended September ~~30, 2017, totaled approximately $13 million.~~28, 2019, and $3.4 million in the three months ended September 29, 2018.

~~Net sales of impact-resistant window and door products were $108.8~~ The $1.3 million ~~for the third quarter of 2017, a~~ decrease ~~of $1.4 million, or 1.3%, from $110.2 million~~ in net sales for the third quarter of ~~2016. Included~~2019 of was driven by the $18.7 million decline in sales of our ~~impact-resistant window~~Southeast segment, which includes a $15.7 million decrease in sales into the repair and ~~door products were $77.2 million~~remodel market of ~~aluminum impact sales, a decrease of $4.3 million, or 5.3%, and $31.6 million of vinyl impact sales, an~~our legacy business, partially offset by the net increase ~~of $2.9 million, or 10.2%.~~

~~Net~~in sales of~~non-impact~~ ~~window and door products were $18.1~~ $17.2 million from inclusion of our WWS business for an entire quarter in 2019, compared to only the post-acquisition period in 2018. Sales in the 2019 third quarter were also negatively affected by the disruptions to many of ~~2017, a decrease of $1.5 million, or 7.7%, from $19.6 million~~our customers caused by Hurricane Dorian in ~~net sales~~late August 2019, which resulted in decreased orders and shipments for ~~the third quarter of 2016.~~us.

Gross profit was ~~$39.7~~ $70.0 million in the third quarter of ~~2017,~~2019, a decrease of ~~$1.3~~ $3.0 million, or ~~3.3%~~4.1%, from ~~$41.1~~ $73.0 million in the third quarter of ~~2016.~~2018. The gross margin percentage was ~~31.3%~~35.4% in the third quarter of ~~2017,~~2019, compared to ~~31.7%~~36.7% in the prior year third quarter, a decrease of ~~0.4%~~1.3%. Adjusting for costs relating to Hurricane Irma, and transition costs associated with WinDoor leadership and the glass supply-chain, which combined totaled $1.0 million in the 2017 three-month period, and product line termination costs totaling $0.8 million in the 2016 three-month period, the grossGross margin ~~percentage was 32.1%~~decreased in the third quarter of ~~2017, compared~~2019 due primarily to ~~32.3%~~the unfavorable effects of a change in the ~~prior year third quarter, a decrease~~mix of ~~0.2%. Improvements in scrap rates and efficiencies, which benefitted~~products sold, lower gross margin on lower volume, and decreases in our product prices due to certain promotions in the quarter. These decreases were partially offset by ~~0.5% during~~ the inclusion of the gross profits of WWS for the entire third quarter of 2017, and a price increase, which benefitted gross margin by 0.7%, were more than offset by decreases of 0.6% due to the impact of higher depreciation on higher capital spending in recent years, 0.7% due to higher aluminum prices2019, as compared to ~~last year’s~~only the post-acquisition period in the 2018 third ~~quarter, and 0.1% due to the combined effects of lower sales volume and mix of sales.~~

Selling, general and administrative (“SG&A”) expenses were ~~$25.0~~ $44.6 million in the third quarter of ~~2017,~~2019, an increase of ~~approximately $2.4~~ $0.5 million, ~~or 10.7%,~~ from ~~$22.5~~ $44.1 million in the third quarter of ~~2016. As a percentage of sales, these costs increased to 19.7%, an increase of 2.3%, from 17.4% from the third quarter of 2016. Selling, general and administrative expenses increased~~2018. SG&A in the third quarter of ~~2017,~~2019 was 22.5% of net sales, compared to 22.1% of net sales in the third quarter of 2018. The increase in SG&A is primarily the result of the inclusion of the SG&A expenses of WWS for the entire third quarter of 2019, compared with only the post-acquisition-period in 2018, which resulted in an increase in SG&A totaling $6.1 million, including an increase of $1.2 million in amortization of the amortizable intangible asset acquired in the acquisition. Excluding the increase in SG&A from the inclusion of WWS, SG&A decreased $5.6 million in the third quarter of 2019, compared to the third quarter of ~~last year, due to higher distribution~~2018. The decrease in SG&A was primarily driven by a decrease of personnel-related costs, ~~due to disruptions caused by Irma. Selling, general~~ and ~~administrative expenses during the three months ended September 30, 2017, also increased due to our community outreach activities which we undertook to assist those affected by Irma locally.~~

~~We record warranty~~a decrease of acquisition costs ~~as a selling expense within selling, general and administrative expenses. During the three months ended September 30, 2017, we recorded warranty expense at a rate~~ of ~~2.04% of sales, which decreased when compared~~$2.8 million relating to the ~~rate~~WWS acquisition included in the ~~second~~third quarter of ~~2017 of 2.22%. During the three months ended October 1, 2016, we recorded warranty expense at a rate of 2.21% of sales. We believe the decrease~~2018. These decreases were partially offset by an increase in ~~warranty expense as a percentage of sales was the result of our workforce becoming more seasoned through experience~~marketing costs, including higher promotional costs, and training. We expect that, as our team members continue to gain in experience, and are exposed to improved training initiatives we have implemented, combined with the use of our new thermal plastic spacer system, an innovative technology for the production of insulated glass, warranty expense, as a percentage of sales, will further decline.

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

Interest expense was ~~$5.5~~ $6.5 million in the third quarter of ~~2017, representing no change~~2019, a decrease of $5.3 million, or 45.0%, from ~~$5.5~~ $11.7 million in the third quarter of ~~2016.~~2018. Interest expense ~~decreased due to a decrease~~ in ~~the average level of outstanding debt during~~ the third quarter of ~~2017,~~2018 included $5.3 million in accelerated amortization of lenders fees and discount relating to the prepayment of $152.0 million in borrowings under the term loan portion of the 2016 Credit Agreement we made on September 18, 2018. There were no prepayments of term loan borrowings during 2019. Excluding the decrease in interest expense from the $5.3 million of accelerated amortization of lenders fees and discount included in the third quarter of 2018, interest expense was flat in the third quarter of 2019, compared to the third quarter of ~~2016, as the result of a total of $20 million in voluntary prepayments made during the third quarter of 2017, offset by~~2018. There was an increase in interest expense due to ~~accelerated amortization~~the issuance of ~~lenders fees~~the 2018 Senior Notes due 2026, composed of $315.0 million aggregate principal amount of 6.75% unsecured senior notes due 2026, which carries a higher per-annum interest rate and ~~discount~~has a higher principal amount outstanding than borrowings under the term loan portion of ~~$1.0 million, which is included~~the 2016 Credit Agreement due 2022. This increase in interest expense was offset by the effect on interest expense from the prepayment of $152.0 million in borrowings under the 2016 Credit Agreement due 2022 from the proceeds of the Equity Issuance in September 2018.

Debt extinguishment costs were $296 thousand in the third quarter of 2018. At the time of the issuance of the 2018 Senior Notes, certain existing lenders reduced their positions in the revolving credit portion of the 2016 Credit Agreement, which resulted in the write-offs of the deferred financing costs allocated to these lenders. As such, write-offs totaling $296 thousand is classified as debt

extinguishment costs in the accompanying condensed consolidated ~~comprehensive income~~statement of operations for the three months ended September ~~30, 2017.~~29, 2018.

Income from operations was $25.4 million in the third quarter of 2019, a decrease of $3.5 million, from $28.9 million in the third quarter of 2018. Income from operations in the third quarter of 2019 includes $22.7 million from our Southeast segment and $2.7 million from our Western segment, compared to $26.3 million and $2.6 million from our Southeast and Western segments, respectively, in the third quarter of 2018, all after allocation of corporate operating costs in both periods. The decrease in income from operations in the third quarter of 2019 compared to the third quarter of 2018 is primarily a result of ~~recent increases~~the previously discussed decrease in ~~LIBOR, the weighted averageall-in~~ ~~interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement was 6.02% as of September 30, 2017.~~gross profits and related gross margin effects.

Our income tax expense was ~~$3.0~~ $3.9 million for the third quarter of ~~2017,~~2019, compared with ~~$5.3~~ $3.3 million for the third quarter of ~~2016.~~2018. Our effective tax rate for the ~~third quarter of 2017~~three months ended September 28, 2019, was ~~32.2%~~20.4%, and was ~~32.8%~~19.7% for the ~~third quarter of 2016.~~ three months ended September 29, 2018.

Income tax expense in the ~~third quarter of 2017 is net of~~three months ended September 28, 2019, and September 29, 2018, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards, treated as ~~discrete items of income tax upon our adoption of ASU2016-09~~ ~~effective on January 1, 2017, totaling $347 thousand. Excluding this~~a discrete item of income tax, ~~expense,~~totaling $665 thousand and $1.0 million, respectively. Excluding this discrete item, as well as other minor tax credit adjustments recorded in the 2019 third quarter, the effective tax ~~rate~~rates for the ~~third quarter of 2017~~three months ended September 28, 2019, and September 29, 2018, would have been ~~36.0%.~~24.8% and 25.5%, respectively.

The effective tax rates in all periods, excluding the effect of the discrete item relating to the treatment of excess tax benefits as discussed above, were lower than our combined statutory federal and state tax rate of 38.8% primarily as theAs a result of the ~~estimated impact of~~Tax Cuts and Jobs Act, enacted effective on December 22, 2017, our Federal corporate income tax rate has been reduced from 35%, to 21%. This reduction in rate has lowered our overall effective tax rate. Additionally, the section 199 domestic manufacturing deduction ~~partially offset by~~was repealed. As such, our estimated annual effective tax rate, excluding the ~~50% deductibility-disallowance~~discrete items discussed above, approximates our current combined statutory federal and state rate of ~~meals and entertainment expenses.~~

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER ~~30, 2017~~28, 2019 AND ~~OCTOBER 1, 2016~~

~~The following table represents total sales by product category for the nine months ended September 30, 2017, and October 1, 2016 (in millions):~~SEPTEMBER 29, 2018

~~Total net~~Net sales ~~during the first nine months of 2017 were $377.0 million, an increase of over $27.9 million, or 8.0%, from $349.0 million in total net~~

Net sales for the first nine months of ~~2016. Our primary market is~~2019 were $570.1 million, a $61.5 million, or 12.1%, increase in sales, from $508.6 million in the ~~State~~first nine months of ~~Florida, from which we derive approximately 90%~~the prior year. Net sales of our ~~sales. On September 10, 2017, Hurricane Irma made landfall~~Southeast segment were $456.4 million in the ~~Florida Keys and moved north over~~first nine months of 2019, compared with $480.0 million in the ~~entire state, affecting all areas~~first nine months of ~~Florida. Irma caused disruption to our ability to manufacture and distribute our products, and required us to shut-down and cease operations for~~2018, a ~~period~~decrease of ~~up to six days at certain~~$23.6 million. Net sales of our ~~locations. Irma also affected our customers’ ability to accept deliveries~~Western segment were $113.7 million in the first nine months of 2019, compared with $28.6 million in the first nine months of 2018, an increase of $85.1 million. Sales of our ~~products. We estimate that lost~~Western segment are composed of sales ~~directly attributable to~~of WWS, which were $105.0 million in the ~~disruptions caused by Irma for~~first nine months of 2019, compared with $18.7 million in the ~~three months ended,~~third quarter of 2018 from the date of the acquisition, and ~~therefore~~sales of our legacy business into the western U.S., which were $8.6 million in the nine months ended September ~~30, 2017, totaled approximately $13 million.~~

~~Net sales of impact-resistant window~~28, 2019, and ~~door products were $320.2~~ $9.9 million ~~for~~in the ~~first~~ nine months ~~of 2017, an~~ended September 29, 2018.

The increase ~~of $29.1 million, or 10.0%, from $291.1 million~~ in net sales for the first nine months of ~~2016. Included~~2019 of $61.5 million was driven by the net increase in sales of $86.3 million from WWS, partially offset by the $23.6 million decline in sales of our ~~impact-resistant window~~Southeast segment, which includes a $26.0 million decrease in sales into the repair and ~~door products were $227.3 million~~remodel market of ~~aluminum impact sales, an increase of $13.6 million, or 6.4%, and $93.0 million of vinyl impact sales, an increase of $15.5 million, or 20.0%.~~

~~Net sales ofnon-impact~~ ~~window and door products were $56.8 million for~~our legacy business. Sales in the first nine months of ~~2017, an~~2019 were also negatively affected by the disruptions to many of our customers’ operations caused by Hurricane Dorian in late August 2019, which resulted in a decrease ~~of $1.1 million, or 2.0%, from $57.9 million~~ in ~~net sales~~orders and shipments for ~~the first nine months of 2016.~~us.

Gross profit was ~~$116.0~~ $204.2 million in the first nine months of ~~2017,~~2019, an increase of ~~$7.5~~ $26.5 million, or ~~6.9%~~14.9%, from ~~$108.5~~ $177.7 million in the first nine months of ~~2016.~~2018. The gross margin percentage was ~~30.8%~~35.8% in the first nine months of ~~2017,~~2019, compared to 31.1% in the prior year first nine months, a decrease of 0.3%. Adjusting for costs relating to Hurricane Irma, transition costs associated with WinDoor leadership and the glass supply-chain, and costs relating to the~~start-up~~ of our Thermal Plastic Spacer system line totaling $1.5 million in the 2017 nine-month period, and product line termination costs totaling $0.8 million in the 2016 nine-month period, the gross margin percentage was 31.2% in the first nine-months of 2017, compared to 31.3% in the prior year first nine-months, a decrease of 0.1%. Gross margin34.9% in the first nine months of ~~2017 was negatively impacted by higher material costs,~~2018, an increase of 0.9%. Gross margin improved in the first nine months of 2019 due primarily ~~related~~ to ~~aluminum costs, which lowered~~the addition of WWS. Increases in gross margin due to benefits from price increases in the first quarter of 2019, and operating efficiencies in the first nine months of 2019 compared to the same period last year, were offset by ~~0.7%, and by higher depreciation on higher capital spending~~the unfavorable effects of a change in ~~recent years, which lowered~~the mix of products sold, lower gross margin ~~by 0.6%. These decreases were partially offset by a benefit of 0.4% from improvements in scrap rates~~on lower volume, and ~~efficiencies, a benefit of 0.5% from an improved mix of sales, to higher margin products in our repair and modeling markets, and a benefit of 0.3% due to a price increase.~~

Selling, general and administrative (“SG&A”) expenses were ~~$72.4~~ $132.6 million in the first nine months of ~~2017,~~2019, an increase of ~~$9.2~~ $27.3 million, ~~or 14.5%,~~ from ~~$63.2~~ $105.3 million in the first nine months of ~~2016. As a percentage of sales, these costs increased to 19.2%, an increase of 1.1%, from 18.1% from~~2018. SG&A in the first nine months of ~~2016.~~2019 was 23.3% of net sales, compared to 20.7% of net sales in the first nine months of 2018. The increase in ~~selling, general and administrative expenses was~~SG&A is primarily ~~related to $3.1 million in higher accrued incentive costs as a~~the result of the ~~improved performance, $0.7~~ inclusion of the SG&A expenses of WWS for the entire first nine months of 2019, compared with only the post-acquisition-period in 2018, which resulted in an increase in SG&A totaling $31.1 million, including an increase of ~~costs related to management reorganization actions, $0.9~~ $5.9 million in amortization of ~~costs from our attendance at and participation~~the amortizable intangible asset acquired in the ~~National Association~~WWS acquisition. Excluding the increase in SG&A from the inclusion of Home Builders’ International Builders Show in Orlando, Florida in January 2017, higher distribution costs on the higher level of sales, and added delivery costs due to disruptions caused by Irma, and $0.7 million in higher costs directly related to Irma. Selling, general and administrative expenses during the nine months ended September 30, 2017, also increased due to our community outreach activities which we undertook to assist those affected by Irma locally.

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

~~Interest expense was $15.0~~ WWS, SG&A decreased $3.8 million in the first nine months of 2017, an increase of $0.1 million, from $14.9 million in the first nine months of 2016. During 2016, concurrent with the acquisition of WinDoor in the middle of the first quarter of 2016, we refinanced our then existing credit agreement into the 2016 Credit Agreement, a $270 million senior secured credit facility, which increased our outstanding debt balance to $270 million, up from $197.5 million at the time of the refinancing. The increase in interest expense was due primarily to the increase in outstanding debt under the new credit facility and resulting increase in average outstanding debt balance during the first nine months of 2017,2019, compared to the first nine months of ~~2016, but~~2018. The decrease in SG&A was ~~partially offset~~primarily driven by a decrease inof personnel-related costs, and a decrease of acquisition costs of $3.8 million relating to the ~~average level of outstanding debt as the result of a total of $20 million~~WWS acquisition included in ~~voluntary prepayments made during~~ the third quarter of ~~2017. Interest expense~~2018. These decreases were partially offset by an increase in legacy business selling and distribution costs in the first nine months of 2019 compared to 2018. There was also an increase in SG&A relating to an unusually high level of bad debt expense recorded in the second quarter of 2019, and an increase in marketing costs, including higher promotional costs. The remaining increase is related to a higher level of overall spending on SG&A related costs, including higher legal and other professional fees.

On September 22, 2017, ~~also benefitted from~~we entered into the ~~February 17, 2017 repricing~~APA with Cardinal for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors. Substantially all of the ~~2016 Credit Agreement,~~remaining machinery and equipment was transferred to Cardinal during the second quarter of 2018, which ~~resulted in~~had a~~one-percentage~~ ~~point reduction in~~ net book value of $3.2 million and fair value of $5.8 million. We recognized gains on disposals for the ~~interest rate under~~difference totaling $2.6 million during the term loan portion of the facility. This benefit was offset by the accelerated amortization of lenders fees and discount of $1.0 million relating to the third quarter 2017 voluntary prepayments of term loan borrowings, which is included in interest expensenine months ended September 29, 2018, classified as a separate line item in the accompanying condensed consolidated statements of operations for the nine months ended September ~~30, 2017.~~29, 2018.

~~As a result of recent increases in LIBOR, the weighted averageall-in~~ ~~interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement~~

~~Debt extinguishment costs were $3.4~~ $19.9 million in the first nine months of ~~2016. These costs related~~2019, an increase of $0.5 million, or 2.7%, from $19.4 million in the first nine months of 2018. Interest expense in the first nine months of 2018 included $5.3 million in accelerated amortization of lenders fees and discount relating to the~~write-off~~ prepayment of ~~deferred financing costs and debt discount~~$152.0 million in ~~connection with entering into~~borrowings under the term loan portion of the 2016 Credit Agreement ~~effective~~we made on ~~February 16,~~September 18, 2018. There were no prepayments of term loan borrowings during 2019. Excluding the decrease in interest expense from the $5.3 million in accelerated amortization of lenders fees and discount included in the first nine months of 2018, interest expense increased $5.8 million in the first nine months of 2019, compared to the first nine months of 2018. The increase in interest expense is due primarily to the issuance of the 2018 Senior Notes due 2026, composed of $315.0 million aggregate principal amount of 6.75% unsecured senior notes due 2026. The 2018 Senior Notes due 2026 carry a higher per-annum interest rate and have a higher principal amount outstanding than borrowings under the term loan portion of the 2016 ~~which resulted~~Credit Agreement due 2022. This increase in interest expense was partially offset by the effect of the prepayment of $152.0 million in borrowings under the 2016 Credit Agreement due 2022 from the proceeds of the Equity Issuance in September 2018.

Debt extinguishment costs were $3.4 million in the first nine months of 2018. In connection with the Second Amendment, certain ~~then~~ existing lenders ~~exiting~~modified their positions in or exited the ~~facility, and certain continuing lenders being considered debt extinguishments in the refinancing. This~~2016 Credit Agreement, which resulted in the write-offs of portions of the deferred financing costs and original issue discount allocated to these lenders. Additionally, at the time of the issuance of the 2018 Senior Notes, certain existing lenders reduced their positions in the revolving credit portion of the 2016 Credit Agreement, which resulted in the write-offs of the deferred financing costs allocated to these lenders. As such, write-offs totaling $3.4 million is classified as debt extinguishment costs in the accompanying condensed consolidated statement of operations for the nine months ended September 29, 2018, including $296 thousand during the three months ended September 29, 2018.

Income from operations was $71.6 million in the first nine months of 2019, a decrease of $3.4 million, from $75.0 million in the first nine months of 2018. Income from operations in the first nine months of 2019 includes $61.1 million from our Southeast segment and $10.5 million from our Western segment, compared to $71.4 million and $3.6 million from our Southeast and Western segments, respectively, in the first nine months of 2018, all after allocation of corporate operating costs in both periods. The decrease in income from operations in the first nine months of 2019 compared to the first nine months of 2018 is a result of the increase in SG&A, including higher amortization, substantially offset by a higher amount of gross profit in the first nine months of 2019 compared to the same period of last year. Income from operations also includes the gains on sales of assets under the APA with Cardinal of $2.6 million in the nine months ended September 29, 2018.

Our income tax expense was ~~$9.1~~ $11.3 million for the first nine months of ~~2017,~~2019, compared with ~~$10.3~~ $8.7 million for the first nine months of ~~2016.~~2018. Our effective tax rate for the ~~first~~ nine months ~~of 2017~~ended September 28, 2019, was ~~31.8%~~21.8%, and was ~~34.5%~~16.8% for the ~~first~~ nine months ~~of 2016.~~ ended September 29, 2018.

Income tax expense in the ~~first~~ nine months ~~of 2017 is net of~~ended September 28, 2019, and September 29, 2018, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards, treated as ~~discrete items of income tax upon our adoption of ASU2016-09~~ ~~effective on January 1, 2017, totaling $1.1 million. Excluding this~~a discrete item of income tax, ~~expense,~~totaling $1.7 million and $4.6 million, respectively. Excluding this discrete item, as well as other minor tax credit adjustments recorded in the 2019 third quarter, the effective tax ~~rate~~rates for the ~~first~~ nine months ~~of 2017~~ended September 28, 2019, and September 29, 2018, would have been ~~35.8%.~~25.3% and 25.6%, respectively.

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

Operating activities. Cash provided by operating activities during the first nine months of ~~2017~~2019 was ~~$34.7~~ $54.3 million, compared to ~~$33.2~~ cash provided of $64.6 million in the first nine months of ~~2016.~~2018. The ~~reduction~~decrease in cash provided by operating activities for the first nine months of ~~2017,~~2019, as compared to the first nine months of ~~2016,~~2018, of $10.3 million, was due to the factors set forth in the table below.

Direct cash flows from operations for the first nine months of ~~2017~~2019 and ~~2016~~2018 are as follows:

Days sales outstanding (DSO), which we calculate as accounts receivable divided by quarterly average daily sales, was 42 daysat September ~~30, 2017,~~28, 2019, compared to 3639 days at ~~October 1, 2016. Our DSO’s to begin the month of~~ September 2017, were 36 days, but were negatively impacted by Irma, which caused disruptions to our customers’ invoice-payment activities, resulting in an increase in our accounts receivable balance as of September 30, 2017. DSO’s were also affected by certain larger customer projects for CGI and WinDoor, which have longer payment terms.29, 2018.

Inventory on hand as of September ~~30, 2017,~~28, 2019, was ~~$39.1~~ $47.6 million, compared to ~~$30.5~~ $44.7 million at December ~~31, 2016,~~29, 2018, an increase of ~~$8.6~~ $2.9 million. ~~The increase in inventory was due to the seasonal inventorybuild-up~~ due to the summer continuation of the repair and remodeling season, but also due to delivery disruptions caused by Irma, which affected our customers’ ability to accept deliveries of our products, which required us to return finished products to our warehouses until such time as our customers were able to accept deliveries.

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

Investing activities.Cash used in investing activities was ~~$9.6~~ $20.2 million for the first nine months of ~~2017,~~2019, compared to cash used in investing activities of ~~$114.6~~ $371.1 million for the first nine months of ~~2016. We used $101.3 million of cash~~2018, a decrease in ~~the first nine months of 2016 to acquire businesses. Excluding~~ cash used ~~to acquire businesses, there~~in investing activities of $350.9 million. There was a decrease in cash used in investing activities due to a decrease in capital expenditures of ~~$3.6~~ $1.5 million, which went from ~~$13.3~~ $21.7 million in the first nine month of 2018, to $20.2 million in the first nine months of ~~2016, to $9.7~~ 2019. Proceeds from disposals of assets in the first nine months of 2019 was less than $0.1 million, compared with $5.9 million in the first nine months of ~~2017.~~2018, which was almost entirely composed of cash received from the sales of assets under the Cardinal APA. Finally, in the third quarter of 2018, we used $355.2 million in cash to acquire WWS.

Financing activities.Cash used in financing activities was ~~$19.6~~ $4.9 million in the first nine months of ~~2017,~~2019, compared to cash provided by financing activities of ~~$49.8~~ $304.7 million in the first nine months of ~~2016,~~2018, a decrease in cash provided of ~~$69.4~~ $309.6 million. WeIn the third quarter of 2018, we issued the 2018 Senior Notes, which provided proceeds of $315.0 million. Also in the third quarter of 2018, we issued Company common stock in the 2018 Equity Issuance, which provided net proceeds of $152.7 million. Using primarily the proceeds from the 2018 Equity Issuance, we made repayments of long-term debt of ~~$20.1~~ nearly $152.2 million in the first nine months of ~~2017, including a total of $20.0 million in voluntary prepayments of outstanding borrowing under the term loan facility of the 2016 Credit Agreement,~~2018, compared ~~to cash used for~~with repayments of long-term debt ~~in the first nine months~~ of ~~2016 of $203.5 million. Cash used for payments of long-term debt of $203.5~~ $0.2 million in the first nine months of ~~2016 was~~2019.During the ~~result~~three months ended September 28, 2019, we made repurchases of ~~the February 2016 refinancing and contemporaneouspay-down~~ ~~of $197.5 million~~393,819 shares of our ~~then existing credit facility. Subsequent to~~common stock totaling $5.5 million under a repurchase program authorized by our Board of Directors. See the refinancing, $2.0 million had been repaid as scheduled debt repayments through the end of the third quarter of 2016. In addition, we made a voluntary prepayment of $4.0 million on September 30, 2016.

~~The February 2016 refinancing resulted in $261.0 million in net proceeds from the issuance of long-term debt. In addition, there~~section below titled Share Repurchase Program for additional information regarding this program. There were payments of financing costs totaling $12.1 million in the first nine months of ~~$7.2 million~~2018, related to the ~~refinancing.~~Second Amendment. Taxes paid relating to common stock withheld from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards were ~~$0.2~~ $0.5 million in the first nine months of ~~2017,~~2019, versus ~~$0.1~~ $0.6 million in the first nine months of ~~2016, an increase~~2018, a decrease in cash used of ~~$0.1~~ $0.1 million. ~~There was a decrease of $2.7 million in cash used to purchase treasury shares.~~ Proceeds from the exercises of stock options were ~~approximately equal~~$1.3 million in the first nine months of ~~2017, versus~~2019, compared to $1.9 million in the first nine months of ~~2016. Also, there was~~2018, a ~~$1.6~~ decrease in proceeds of $0.6 million.

During the nine months ended September 28, 2019, we made payments of estimated federal and state income taxes of $10.8 million. We received no refunds of federal or state income taxes in the first nine months of 2019. During the nine months ended September 29, 2018, we made payments of estimated federal and state income taxes totaling $17.2 million, ~~decrease~~including an estimated Federal income tax payment totaling $9.0 million relating to ~~excess~~the 2017 tax ~~benefits due~~year. The Internal Revenue Service provided tax relief relating to taxpayers in certain designated areas of Florida impacted by Hurricane Irma in September 2017, which included all counties in Florida in which we operate. As a result, the deadline for remitting our ~~adoption of ASU2016-09,~~ ~~which no longer requires excess tax benefits~~required 2017 third quarter estimated payment for corporate income taxes was extended to ~~be presented as a financing activity.~~January 31, 2018.

On September 18, 2018, we completed an underwritten, public offering of 7,000,000 shares of our common stock, at a public offering price of $23.00 per share. Pursuant to the offering, we granted the underwriters an option for a 30-day period to purchase up to an additional 1,050,000 shares of common stock. The 30-day option period expired with no additional shares issued.

The offering resulted in gross proceeds to the Company of $161.0 million. Net of an underwriting fee of $1.15 per share, net cash proceeds to the Company approximated $153.0 million. We used $152.0 million of these proceeds to prepay borrowings outstanding under the term loan portion of the 2016 Credit Agreement. The remainder of the proceeds were used for working capital or general corporate purposes, including payment of offering expenses of approximately $447 thousand, classified as a reduction of additional paid-in capital.

On August 10, 2018, we completed the issuance of $315.0 million aggregate principal amount of 6.75% senior notes (“2018 Senior Notes Due 2026”), issued at 100% of their principal amount. The 2018 Senior Notes due 2026 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 2018 Senior Notes due 2026 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 2018 Senior Notes due 2026 were offered under Rule 144A of the Securities Act, and in transactions outside the United States under Regulation S of the Securities Act, and have not been, and will not be, registered under the Securities Act.

The 2018 Senior Notes due 2026 mature on August 10, 2026. Interest on the 2018 Senior Notes due 2026 is payable semi-annually, in arrears, beginning on February 16, 2019, with interest accruing at a rate of 6.75% per annum from August 10, 2018. We incurred financing costs relating to bank fees and professional services costs relating to the offering and issuance of the 2018 Senior Notes due 2026 totaling $10.4 million, which is being amortized under the effective interest method. See “Deferred Financing Costs” below. As of September 28, 2019, the face value of debt outstanding under the 2018 Senior Notes due 2026 was $315.0 million, and accrued interest totaled $3.5 million.

The indenture for the 2018 Senior Notes due 2026 gives us the option to redeem some or all of the 2018 Senior Notes due 2026 at the redemption prices and on the terms specified in the indenture governing the 2018 Senior Notes due 2026. The indenture governing the 2018 Senior Notes due 2026 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.

The indenture for the 2018 Senior Notes due 2026 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 due 2022, among us, the lending institutions identified in the 2016 Credit Agreement due 2022, and ~~Deutsche~~SunTrust Bank, ~~AG New York Branch,~~ as Administrative Agent and Collateral Agent. The 2016 Credit Agreement due 2022 establishes new senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility maturing in ~~six years~~February 2022 that ~~will amortize~~amortizes on a basis of 1% annually during ~~the~~its six-year term, and a $40.0 million revolving credit facility maturing in ~~five years~~February 2021 that includes a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement due 2022 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 the Second Amendment, which, among other things, decreases the applicable interest rate margins for the Initial Term Loans (as defined in the 2016 Credit Agreement due 2022) from (i) 3.75% to 2.50%, in the case of the Base Rate Loans (as defined in the 2016 Credit Agreement due 2022), and (ii) 4.75% to 3.50%, in the case of the Eurodollar Loans (as defined in the 2016 Credit Agreement due 2022). On February 17, 2017, we entered into the first amendment to our 2016 Credit Agreement due 2022, which also resulted in decreases in the applicable margins, but which, unlike the Second Amendment, did not include any changes in lender positions.

Regarding the first amendment to the 2016 Credit Agreement due 2022, as described above, as there were ~~$0.2 million~~no changes in lender positions, this action did not result in any modifications or extinguishments of ~~letters of credit outstanding and $39.8 million available on the revolver.~~debt. Therefore, there was no charge for debt extinguishment costs in 2017.

We also pay quarterly fees on the unused portion of the revolving credit facility equal to 50 basis points per annum as well as a quarterly letter of credit fee at 575 basis points per annum plus a 12.5 basis point facing fee per annum on the face amount of any outstanding letters of credit. ~~The weighted averageall-in~~ ~~interest rate for borrowings~~As of September 28, 2019, there were $2.1 million in letters of credit outstanding and $37.9 million available under the ~~term-loan portion of the 2016 Credit Agreement was 6.02% as of September 30, 2017, and was 5.75% at December 31, 2016.~~

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

The 2016 Credit Agreement due 2022 contains a springing financial covenant that would apply if we draw in excess of twenty percent (20%) of the revolving facility ~~which requires~~commitment (excluding $7.5 million of undrawn letters of credit and letters of credit and draws thereunder that are cash collateralized at 105% of the stated amount thereof from such availability test). To the extent in effect, the springing financial covenant would prohibit us ~~to maintain~~from exceeding a maximum ~~total~~first lien net leverage ratio (based on the ratio of total first lien (less unrestricted cash) debt ~~for borrowed money~~ to ~~EBITDA, each~~EBITDA) as ~~defined in the 2016 Credit Agreement), and is tested quarterly based on~~of the last ~~four~~day of each applicable fiscal ~~quarters and~~quarter. To the extent the springing financial covenant is ~~set at levels~~in effect, the first lien net leverage ratio cannot exceed 4.00:1.00 as ~~described in~~of the ~~2016 Credit Agreement. As~~last day of the fiscal quarter ending on September ~~30, 2017, no~~28, 2019. We were not required to test ~~is required as~~our first lien net leverage ratio for the quarter ending September 28, 2019 because we ~~have~~did not ~~exceeded~~exceed 20% of our revolving capacity. ~~During 2017, the maximum permitted total net leverage ratio as stated in the 2016 Credit agreement is 4.25:1.~~ We believe that our total net leverage ratio during ~~2017~~the third quarter of 2019 has been, and during the remainder of 2019 will continue to be, in compliance with the 2016 Credit Agreement due 2022, and that we are in compliance with all covenants.

On September 18, 2018, contemporaneously with the 2018 Equity Issuance, we prepaid $152.0 million in borrowings outstanding under the term loan portion of the 2016 Credit Agreement due 2022. On December 19, 2018, we voluntarily prepaid an additional $8.0 million in borrowings under the 2016 Credit Agreement due 2022. As of September ~~30, 2017, we were in compliance with all affirmative and restrictive covenants.~~

~~As of September 30, 2017,~~28, 2019, the ~~face value~~principal amount of debt outstanding under the 2016 Credit Agreement due 2022 was ~~$244.0~~ $64.0 million, and accrued interest was ~~$0.4~~ $0.5 million. ~~During~~

On October 31, 2019, we entered into an amendment of our 2016 Credit Agreement due 2022 (“Third Amendment”). The Third Amendment provides for, among other things, (i) a new three-year Term A loan in the ~~third quarter~~aggregate principal amount of ~~2017, we made voluntary prepayments of outstanding borrowings~~$64.0 million (the “Initial Term A Loan”), which refinances in full our existing Term B term loan facility under ~~the term-loan portion of~~ the 2016 Credit Agreement, ~~totaling $20.0~~and has no regularly scheduled amortization, and (ii) a new five-year revolving credit facility due 2024 in an aggregate principal amount of up to $80.0 million ~~composed~~(the “New Revolving Facility”), which replaces our existing $40.0 million revolving credit facility under the 2016 Credit Agreement, and includes a swing-line facility and letter of credit facility. Our obligations under the 2016 Credit Agreement continue to be secured by substantially all of our assets, as well as our direct and indirect subsidiaries’ assets.

Pursuant to the Third Amendment, interest on all loans under the 2016 Credit Agreement is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. The Third Amendment decreases the applicable interest rate margins for the Initial Term Loan A from (i) 2.50% to a ~~payment~~spread of ~~$8.0~~1.00% to 1.75% based on our first lien net leverage ratio, in the case of the Base Rate Loans (with a floor of 100 basis points), and (ii) 3.50% to a spread ranging from 2.00% to 2.75% based on our first lien leverage ratio, in the case of the Eurodollar Loans (with a floor of zero basis points).

Also, in connection with the Third Amendment, we will pay quarterly fees on the unused portion of the revolving credit facility equal to a percentage spread (ranging from 0.25% to 0.35%) based on our first lien net leverage ratio. The Third Amendment also modifies the springing financial covenant under the 2016 Credit Agreement to provide that such financial covenant will not be tested until the Initial Term A Loan is paid in full. We estimate that fees and costs relating to the Third Amendment will be approximately $0.8 million, ~~made on September 29, 2017,~~which we expect can be deferred and amortized.

In connection with the Third Amendment, certain existing lenders modified their positions in or exited the 2016 Credit Agreement. We expect that deferred financing costs and original issue discount allocated to these lenders of ~~$12.0~~approximately $1.5 million ~~made on July 7, 2017.~~

The ~~activity~~activities relating to third-party fees and costs, lender fees and discount for the three months ended September 30, 2017, are set forth in the table below. As a result of the voluntary prepayments of debt discussed above, we accelerated the amortization of lenders fees and discount relating to the term-loan portion of the 2016 Credit Agreement of $1.0 million, which is included in interest expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September ~~30, 2017.~~ 28, 2019, are as follows.All debt-related fees, costs and original issue discount are classified as a reduction of the carrying value of long-term debt:

Estimated amortization expense relating to third-party fees and costs, lender fees and discount for the years indicated as of September ~~30, 2017,~~28, 2019, is as follows:

As a result of prepayments of the ~~voluntary prepayments~~2016 Credit Agreement due 2022 totaling ~~$20.0~~ $204.0 million ~~we made during the third quarter of 2017,~~since its inception in February 2016, we have no future scheduled repayments ~~under the 2016 Credit Agreement~~ until the maturity of the facility on February 21, 2022. The contractual future maturities of long-term debt outstanding, including the remaining balance of the financing arrangement described as other debt, as of September ~~30, 2017,~~28, 2019, are as follows (at face value):

Capital Expenditures.Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. For the first nine months of ~~2017,~~2019, capital expenditures were ~~$9.7~~$20.2 million, compared to ~~$13.3~~ $21.7 million for the first nine months of ~~2016.~~2018. In ~~2017,~~2019, including the capital expenditures of WWS, we expect to spend approximately~~$12-$15~~ $32 to $38 million on capital expenditures. Our capital expenditure program is geared towards making investments in capital assets targeted at increasing both gross sales and margins, but also includes capital expenditures ~~primarily including machinery~~for maintenance capital.

Aluminum Forward Contracts. We enter into aluminum forward contracts to hedge the fluctuations in the purchase price of aluminum extrusions we use in production. At September 28, 2019, the fair value of our aluminum forward contracts was in a net liabilityposition of $2.5 million. We had 36 outstanding forward contracts for the purchase of 34.5 million pounds of aluminum through December 2019, at an average price of $0.87 per pound, which excludes the Midwest premium, with maturity dates of between one month and ~~equipment,~~fifteen months.We assessed the risk of non-performance of the Company to these contracts and ~~distribution equipment such~~determined it was insignificant and, therefore, did not record any adjustment to fair value as ~~tractors~~of September 28, 2019.

We assess the effectiveness of our aluminum forward contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our aluminum forward contracts is reported as a component of accumulated other comprehensive loss and ~~trailers.~~is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of losses, net, recognized in the “accumulated other comprehensive loss” line item in the accompanying condensed consolidated balance sheet as of September 28, 2019, that we expect will be reclassified to earnings within the next twelve months, will be approximately $2.4 million.

Share Repurchase Program. On ~~October 28, 2015, the~~May 22, 2019, our Board of Directors authorized and approved a share repurchase program of up to ~~$20~~$30 million. ~~Repurchases are~~The repurchases may be made in open market or ~~privately negotiated~~private transactions ~~subject~~from time to time. Repurchases of shares may be made under a Rule 10b5-1 plan, which would permit repurchases when we might otherwise be precluded from doing so under applicable laws. We base repurchase decisions, including the timing of repurchases, on factors such as our stock price, general economic and market conditions, ~~applicable legal requirements,~~the potential impact on our ~~2016 Credit Agreement,~~capital structure, the expected return on competing uses of capital such as strategic acquisitions and capital investments, and other ~~relevant factors.~~corporate considerations, as determined by our management. The repurchase program may be suspended or discontinued at any time. We do not intend to repurchase any shares from directors, officers, or other affiliates. The program does not obligate us to acquire any specific number of shares. The timing, manner, price and amount of repurchases will be determined at ~~the Company’s~~our discretion,

~~subject to the approval of its Board of Directors,~~ and the program may be suspended, terminated or modified at any time for any reason. No repurchases were made under the program during the period from the inception of the program on May 22, 2019, through

the end of the second quarter of 2019. During the ~~first nine~~three months ~~of 2017,~~ended September 28, 2019, we made no repurchases of 393,819 shares of our common stock ~~under this program. In~~at a total cost of $5.5 million. During the ~~future,~~remainder of 2019, we may continue to make opportunistic repurchases of our common stock as we see ~~fit, subject to the approval~~fit.

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

~~The APA provides for the transfer of the assets from~~October 27, 2019, Scott Gates notified the Company to Cardinal in two phases, with the first date being on or about November 1, 2017, and the second date being on or about March 1, 2018. Under the APA, the cash purchase price of $28 million is to be paid by Cardinal to the Company in three separate payments of $3 million at the time of the first transfer of the assets to Cardinal, $10 million on January 15, 2018, and $15 million at the time of the second transfer of assets to Cardinal.

~~The SA provides~~ that ~~the Company~~he will ~~purchase, and Cardinal will supply, all~~resign his position as President of the Company’s ~~requirements~~Western Business Unit and its Western Window Systems business, effective January 31, 2020. Following his resignation, Mr. Gates plans to establish a social entrepreneurship organization that will provide jobs, skills training and career paths for ~~certain glass components used~~those in ~~PGT-branded doors through the end of 2024. The terms of the manufacture by Cardinal~~prison and ~~purchase by the Company of such glass components as to purchase orders, forecasts of purchases, pricing, invoicing, delivery and payment terms and other terms, are all as described in the SA.~~

There have been no significant changes to the “Disclosures of Contractual Obligations and Commercial Commitments” table in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form10-K for the year ended December ~~31, 2016.~~29, 2018.

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 Form10-K ~~annual report~~ for the year ended December ~~31, 2016. There~~29, 2018. Except for the adoption of the guidance relating to leases pursuant to ASU 2016-02, discussed below, there have been no changes to our critical accounting policies during the first nine months of ~~2017.~~

~~In addition to the pronouncements issued during 2017, ASU2016-02,~~ ~~“Leases”, and ASU2014-09,~~ ~~“Revenue from Contracts with Customers”, presented below, see Note 3 to the consolidated financial statements included in our recently filed Annual Report on Form10-K~~ ~~for the year ended December 31, 2016.~~Fair Value Measurement Disclosures

In August ~~2017,~~2018, the FASB issued ASU~~2017-12,~~ ~~“Derivatives and Hedging~~ 2018-13, “Fair Value Measurement (Topic ~~815): Targeted Improvements~~820) - Disclosure Framework—Changes to ~~Accounting~~the Disclosure Requirements for ~~Hedging Activities.”~~Fair Value Measurement”. The ~~amendments under ASU2017-12~~ ~~refine and expand hedge accounting~~new guidance modifies disclosure requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvementsrelated to ~~simplify the application of hedge accounting guidance. ASU2017-12~~ ~~becomes effective for us in the first quarter of 2019. We are currently assessing the impact the adoption of this ASU will have on our consolidated financial statements.~~

~~In February 2017, the FASB issued ASU2017-05,~~ ~~“Other Income - Gain and Losses from the Derecognition of Nonfinancial Assets.” ASU2017-05~~ ~~clarifies the scope of Subtopic610-20,~~ ~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, and adds guidance for partial sales of nonfinancial assets. Subtopic610-20,~~ ~~which was issued in May 2014 as a part of ASU2014-09,~~ ~~provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts withnon-customers.~~ ~~This update is effective at the same time as the amendments in ASU2014-09,~~ therefore, for our fiscal year beginning after December 15, 2017, and may apply them either under a full- or modified-retrospective basis. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU2017-04,~~ ~~“Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU2017-04~~ simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. The amendment also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update is effective for our fiscal year beginning after December 15, 2019, and shall be adopted prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not expect the adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued ASU2017-01,~~ ~~“Business Combinations (Topic 805) – Clarifying the Definition of a Business.” ASU2017-01~~ affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU~~2017-01~~ provides a more robust framework to use in determining when a set of assets and activities is a business. It also provides more consistency in applying the guidance, reduces the costs of application, and makes the definition of a business more operable. This update is effective for our fiscal year beginning after December 15, 2017, including interim periods therein. We do not expect adoption of this guidance to have a significant effect on the Company’s consolidated financial statements.

~~In February 2016, the FASB issued ASU2016-02,~~ ~~“Leases (Topic 842)”. This guidance supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU2016-02~~ ~~requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged.~~fair value measurement. The amendments in this ASU are effective for fiscal years, ~~beginning after December 15, 2018,~~ and interim periods within those fiscal ~~years. Early adoption is permitted for all entities. ASU2016-02~~ requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company is continuing to evaluate the impact of this new standard on its consolidated financial statements.

~~Approaching Adoption of ASU2014-09,~~ ~~��Revenue from Contracts with Customers”~~

supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2018-19 clarifies the codification and corrects unintended application of the guidance. ASU’s 2016-13 and 2018-19 are effective ~~date (periods~~for us for our fiscal year beginning after December 15, ~~2016). The standard permits the use of either the full-retrospective (restating all years presented in the Company’s financial~~

statements), or modified-retrospective (recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption) transition methods. Since its issuance, the FASB has also amended several aspects of the new guidance, including; ASU~~2016-08,~~ “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; which clarifies the Topic 606 guidance on principal versus agent considerations, ASU~~2016-10,~~ “Revenue from Contracts with Customers (Topic 606) – Identifying Performance Obligations and Licensing”, which clarifies identification of a performance obligation and addresses revenue recognition associated with the licensing of intellectual property, ASU~~2016-12,~~ ~~“Revenue from Contracts with Customers (Topic 606), Narrow Scope Improvements and Practical Expedients”, which clarifies assessment of collectability criterion,non-cash~~ ~~consideration and other technical corrections, and ASU2016-20,~~ “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”, which is the result of the FASB Board decision to issue a separate Update for technical corrections and improvements. The Company currently plans to adopt the provisions of this new accounting standard at the beginning of fiscal year 2018, using the modified-retrospective method.

~~The Company completed its preliminary assessment of the impact of its upcoming adoption of ASU2014-09~~ on its consolidated financial statements. The Company recognizes revenue currently under existing generally accepted accounting principles, which is a model based on the transfer of the risks and rewards of ownership. Predominantly, for the Company, this has been at the point in time that possession of goods has transferred to the customer upon delivery. The model for recognizing revenue will change under ASU~~2014-09,~~ ~~to one based on the transfer of control of the product to the customer. Under ASU2014-09,~~ ~~revenue is recognized when an entity satisfies its obligation by transferring control of the goods or services to the customer, and transfer of possession of the product is~~2019. We do not ~~required in order for transfer of control of the product to the customer to have occurred.~~

~~ASU2014-09~~ states that if any one of three defined criteria is met, it is likely that an entity will be required to recognize revenue over time, where previously the entity has recognized revenue at the point in time which possession of the goods or services pass to the customer. Pursuant to our preliminary assessment, we believe that of these three criteria, the Company meets the criteria which states that revenue is recognized over time if an entity’s performance (i.e. creation of a good or service for the customer) does not create an asset with an alternative use to the entity, and the entity has an enforceable right to payment for performance completed~~to-date.~~ ~~ASU2014-09~~ further states that, when evaluating whether or not the goods or services have an alternative use, an entity should consider the level of customization of the goods or services. A high level of customization is a strong indicator that the goods or services do not have an alternative use and, therefore, revenue would be recognized over time as an entity performs.

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

Based on this initial assessment, the Company believes that it will be required to change its method of recognizing revenue, to one of potentially recognizing revenue as products are manufactured, but no later than completion of the manufacturing process, from its current method of recognizing revenue upon delivery of the product to the customer. The Company is continuing to evaluate its manufacturing processes in order to assess at what point the products have no alternative use and the recognition of revenue should begin. However, because revenue will have been recognized on at least all products for which manufacturing has been completed, the Company believes that upon adoption of ASU~~2014-09,~~ ~~inventories on its consolidated balance sheets will no longer include finished goods. The Company also believes that it will recognize revenue at an earlier point than prior to~~ the adoption of ~~ASU2014-09,~~ ~~but that such effect may not materially affect its~~this guidance will have a significant impact on our consolidated ~~statements~~financial statements.

We utilize derivative financial instruments to hedge price movements in aluminum materials used in our manufacturing process. As of ~~operations post-adoption due to~~September 28, 2019, we are covered for approximately 81% of our anticipated needs through December 2019 at an average price of $0.95 per pound, and for approximately 50% of our anticipated needs in 2020 at an average price of $0.83 per pound. These calculations are based only on the ~~fact that such effects will exist at both~~LME price of aluminum and excludes an estimate for the ~~beginning and end~~Midwest premium.

Regarding our aluminum hedging instruments for the purchase of ~~fiscal periods after the initial transition.~~

~~ASU2014-09~~ ~~also requires entities, primarily~~aluminum as of September 28, 2019, a 10% decrease in the ~~manufacturing segment, to make policy elections relating to shipping~~price of aluminum per pound would decrease the fair value of our forward contracts of aluminum by an estimated $2.8 million. This calculation utilizes our actual commitment of 34.5 million pounds under contract (to be settled throughout December 2020) and ~~handling charges. Entities may elect to treat shipping~~the market price of aluminum as of September 28, 2019. This calculation is based only on the LME price of aluminum and handling as a separate performance activity, and recognize revenue from shipping and handling as performance occurs. Conversely, entities may also elect to treat shipping and handling as a fulfillment activity, which will require shipping and handling costsexcludes an estimate for ~~undelivered products to be accrued in order to match this cost with~~ the revenue previously recognized over time. The Company currently recognizes shipping and handling costs as a fulfillment activity, and has preliminarily determined to continue to treat such costs as a fulfillment activity.Midwest premium.

~~The Company expects to continue to evaluate the impact of the adoption of ASU2014-09~~ ~~on its consolidated financial statements, and will provide updates and additional information as the effective date of adoption approaches.~~

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 Form10-Q, of ~~$244.0~~ $64.0 million, a 100 ~~basis point~~basis-point increase in interest rate would result in approximately ~~$2.4~~$0.6 million of additional interest costs annually.

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

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

Our chief executive officer and chief financial officer, with the assistance of management, evaluated the design, operation and effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act) as of the end of the period covered by this report (“Evaluation Date”). Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective for the purposes of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

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.

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.

~~In addition~~Our operations are subject to ~~the other information set forth~~a number of risks. When considering an investment in ~~this report,~~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 ~~discussed~~set forth in Part 1, “Item 1A. Risk Factors” of our Annual Report on Form10-K ~~annual report~~ for the year ended December ~~31, 2016, which could materially affect~~29, 2018. If any of the events described in the risk factors actually occur, our business, financial condition or ~~future results.~~

~~Additional risk and uncertainties not currently known to us or that we currently deem to~~operating results, as well as the market price of our securities, could be ~~immaterial, may also~~ materially adversely ~~affect our business, financial condition, and/or operating results.~~affected.

~~None during~~On May 22, 2019, our Board of Directors authorized and approved a share repurchase program of up to $30 million. The repurchases may be made in open market or private transactions from time to time. Repurchases of shares may be made under a Rule 10b5-1 plan, which would permit repurchases when the ~~quarter.~~Company might otherwise be precluded from doing so under applicable laws. The Company bases repurchase decisions, including the timing of repurchases, on factors such as the Company’s stock price, general economic and market conditions, the potential impact on the Company’s capital structure, the expected return on competing uses of capital such as strategic acquisitions and capital investments, and other corporate considerations, as determined by management. The repurchase program may be suspended or discontinued at any time.

The following table presents information regarding the total number of shares repurchased, average price paid per share, the number of shares repurchased under the program, and maximum approximate dollar value of shares that may yet be purchased under the plan, by month for the three-month period ended September 28, 2019:

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.


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


		Page
		~~Number~~
~~Part I. Financial Information~~				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		3	4
			Condensed Consolidated Balance Sheets		4	5
			Condensed Consolidated Statements of Cash Flows		5	6
			Condensed Consolidated Statements of Shareholders’ Equity	7
			Notes to Condensed Consolidated Financial Statements		6	8
		Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19	29
		Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32	42
		Item 4.	Controls and Procedures		32	42
~~Part II. Other Information~~
Part II.		~~Item 1. Legal Proceedings~~Other Information			33	43
		Item ~~1A. Risk Factors~~1.	Legal Proceedings		33	43
		Item 1A.	Risk Factors	43
		Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33	44
		Item 3.	Defaults Upon Senior Securities		33	44
		Item 4.	Mine Safety Disclosure		33	44
		Item 5.	Other Information		33	44
		Item 6.	Exhibits	45
	34


	September 30,			December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	44,727		$	39,210
Accounts receivable, net		55,949			41,646
Inventories		39,131			30,511
Prepaid expenses		2,959			2,645
Other current assets		6,329			8,365

Total current assets		149,095			122,377
Property, plant and equipment, net		84,469			84,209
Trade name and other intangible assets, net		116,702			120,930
Goodwill		108,060			108,060
Other assets, net		1,272			1,072

Total assets	$	459,598		$	436,648

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	40,338		$	22,803
Current portion of long-term debt		290			—

Total current liabilities		40,628			22,803
Long-term debt, less current portion		231,177			247,873
Deferred income taxes		31,838			31,838
Other liabilities		1,466			1,282

Total liabilities		305,109			303,796

Shareholders’ equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; none outstanding		—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 52,376 and 51,887 shares issued and 49,660 and 49,176 shares outstanding at September 30, 2017 and December 31, 2016, respectively		524			519
Additionalpaid-in-capital		251,733			249,647
Accumulated deficit		(85,009	)		(104,555	)

Shareholders’ equity		167,248			145,611
Less: Treasury stock at cost		(12,759	)		(12,759	)

Total shareholders’ equity		154,489			132,852

Total liabilities and shareholders’ equity	$	459,598		$	436,648


	Nine Months Ended
	September 30,			October 1,
	2017			2016
	(unaudited)
Cash flows from operating activities:
Net income	$	19,546		$	19,625
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		9,502			6,983
Amortization		4,818			4,501
Provision for (recovery on) allowance for doubtful accounts		249			(76	)
Stock-based compensation		1,568			1,552
Amortization andwrite-off of deferred financing costs and debt discount		3,065			6,108
Deferred income taxes		—			633
Excess tax benefits on stock-based compensation		—			(1,630	)
Fair value adjustment to contingent consideration		—			(3,000	)
Gain on disposal of assets		(59	)		(6	)
Change in operating assets and liabilities (net of the effect of the acquisition):
Accounts receivable		(15,644	)		(16,115	)
Inventories		(8,620	)		(464	)
Prepaid expenses, other current and other assets		(261	)		2,626
Accounts payable, accrued and other liabilities		20,506			12,456

Net cash provided by operating activities		34,670			33,193

Cash flows from investing activities:
Purchases of property, plant and equipment		(9,650	)		(13,287	)
Business acquisition		—			(101,338	)
Proceeds from sale of equipment		59			6

Net cash used in investing activities		(9,591	)		(114,619	)

Cash flows from financing activities:
Payments of long-term debt		(20,062	)		(203,525	)
Proceeds from issuance of long-term debt		—			261,030
Payments of financing costs		—			(7,178	)
Purchases of treasury stock		—			(2,722	)
Taxes paid relating to shares withheld on employee equity awards		(181	)		(54	)
Proceeds from exercise of stock options		681			652
Proceeds from issuance of common stock under employee stock purchase plan		23			27
Excess tax benefits on stock-based compensation		—			1,630
Other		(23	)		(23	)

Net cash (used in) provided by financing activities		(19,562	)		49,837

Net increase (decrease) in cash and cash equivalents		5,517			(31,589	)
Cash and cash equivalents at beginning of period		39,210			61,493

Cash and cash equivalents at end of period	$	44,727		$	29,904

Non-cash activity:
Financed purchase of software license	$	590		$	—

Property, plant and equipment additions in accounts payable	$	343		$	1,181

Contingent consideration reversed out of accrued liabilities	$	—		$	3,000

Portion of USI purchase price held back in escrow	$	—		$	100


	Previously Reported			After Adoption
Deferred income taxes	$	32,171		$	31,838

Total liabilities	$	304,129		$	303,796

Additionalpaid-in-capital	$	249,469		$	249,647

Accumulated deficit	$	(104,710	)	$	(104,555	)

Shareholders’ equity	$	145,278		$	145,611

Total shareholders’ equity	$	132,519		$	132,852

	Segments
Three Months Ended September 28, 2019	Southeast		Western		Total
Product category:
Impact-resistant window and door products	$	129.5	$	1.6	$	131.1
Non-impact window and door products		28.8		37.9		66.7

Total net sales	$	158.3	$	39.5	$	197.8

Market:
New construction	$	59.7	$	35.9	$	95.6
Repair and remodel		98.6		3.6		102.2

Total net sales	$	158.3	$	39.5	$	197.8


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

					September 28,		December 29,
	September 30, 2017		December 31, 2016		2019		2018
	(in thousands)				(in thousands)
Raw materials	$	29,591	$	24,946	$	43,290	$	42,036
Work-in-progress		3,543		2,521		3,850		2,278
Finished goods		5,997		3,044		426		352

	$	39,131	$	30,511	$	47,566	$	44,666

	Initial Allocation			Adjustments to Allocation			Final Allocation
Accounts and notes receivable	$	7,555		$	(217	)	$	7,338
Inventories		12,580			—			12,580
Contract assets, net		890			—			890
Prepaid expenses and other assets		1,190			—			1,190
Property and equipment		16,416			(447	)		15,969
Intangible assets		167,000			—			167,000
Goodwill		164,379			5,162			169,541
Accounts payable		(5,622	)		—			(5,622	)
Accrued and other liabilities		(9,175	)		53			(9,122	)
Deferred income taxes		—			(5,180	)		(5,180	)
Purchase price	$	355,213		$	(629	)	$	354,584

Consideration:
Cash	$	355,213		$	(629	)	$	354,584
Total fair value of consideration	$	355,213		$	(629	)	$	354,584

	Valuation		Useful Life
	Amount		(in years)
(in thousands)
Trade name	$	73,000	indefinite
Customer relationships		94,000	10

Other intangible assets, net	$	167,000


	Final Allocation
Accounts and notes receivable	$	3,882
Inventories		6,778
Prepaid expenses		246
Property and equipment		5,029
Intangible assets		47,100
Goodwill		41,856
Accounts payable and accrued liabilities		(2,320	)

Purchase price	$	102,571

Consideration:
Cash	$	99,571
Earn-out contingency		3,000

Total fair value of consideration	$	102,571


	Nine Months Ended
	October 1, 2016
(in thousands, except per share amounts)
Pro Forma Results
Net sales	$	351,507

Net income	$	18,280

Net income per common share:
Basic	$	0.37

Diluted	$	0.36


							Initial								Initial
	September 30,			December 31,			Useful Life		September 28,			December 29,			Useful Life
	2017			2016			(in years)		2019			2018			(in years)
	(in thousands)								(in thousands)
Goodwill	$	108,060		$	108,060			indefinite	$	277,600		$	277,827		indefinite

Trade names and other intangible assets:
Other intangible assets:
Trade names	$	75,841		$	75,841			indefinite	$	148,841		$	148,841		indefinite

Customer relationships		106,647			106,647			3-10		200,647			200,647		3-10
Developed technology		3,000			3,000			9-10		3,000			3,000		9-10
Non-compete agreement		1,668			1,668			2-5		1,668			1,668		2-5
Software license		590			—			2		590			590		2
Less: Accumulated amortization		(71,044	)		(66,226	)				(94,887	)		(82,928	)

Subtotal		40,861			45,089					111,018			122,977

Other intangible assets, net	$	116,702		$	120,930				$	259,859		$	271,818

Goodwill at December 29, 2018									$	277,827
Decrease related to change in liabilities assumed in acquisition of WWS										(53	)
Decrease from change in deferred tax liability in acquisition of WWS										(174	)

Goodwill at September 28, 2019									$	277,600

(in thousands)	Total
Remainder of 2019	$	3,871
2020		15,859
2021		15,374
2022		14,515
2023		12,354
Thereafter		49,045

Total	$	111,018

(in thousands)	Total
At beginning of year	$	12,361
Less: Amortization expense relating to 2016 Credit Agreement		(552	)
Less: Amortization expense relating to 2018 Senior Notes		(751	)

At end of period	$	11,058


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

Total	$	13,037

	Three Months Ended		Nine Months Ended
	September 28,		September 28,
	2019		2019

Operating lease cost	$	1,546	$	4,506
Variable lease cost		714		2,046
Total lease cost	$	2,260	$	6,552

	Fair Value Measurements
	Assets (Liabilities)
				Quoted		Significant
				Prices in		Other			Significant
				Active		Observable			Unobservable
	September 28,			Markets		Inputs			Inputs
	2019			(Level 1)		(Level 2)			(Level 3)
Description
Aluminum forward contracts, net	$	(2,531	)	$	-	$	(2,531	)	$	-

	$	(2,531	)	$	-	$	(2,531	)	$	-

	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
	September 28,			September 29,				September 28,			September 29,
	2019			2018				2019			2018

Aluminum contracts	$	(1,136	)	$	(649	)	Cost of sales	$	(1,532	)	$	(58	)

	Derivatives in Cash Flow Hedging Relationships
	Amount of Gain or (Loss) Recognized in OCI(L) on Derivatives						Location of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI(L) into Income
	Nine Months Ended							Nine Months Ended
	September 28,			September 29,				September 28,			September 29,
	2019			2018				2019			2018

Aluminum contracts	$	(2,083	)	$	(1,122	)	Cost of sales	$	(3,670	)	$	(15	)

	Aluminum
Three months ended September 28, 2019	Forward
(in thousands)	Contracts
Balance at June 29, 2019	$	(2,178	)
Change in fair value of derivatives		(1,136	)
Amounts reclassified from other comprehensive loss		1,532
Tax effect		(102	)
Net current-period other comprehensive income		294
Balance at September 28, 2019	$	(1,884	)


	Aluminum
Nine months ended September 28, 2019	Forward
(in thousands)	Contracts
Balance at December 29, 2018	$	(3,065	)
Change in fair value of derivatives		(2,083	)
Amounts reclassified from other comprehensive loss		3,670
Tax effect		(406	)
Net current-period other comprehensive income		1,181
Balance at September 28, 2019	$	(1,884	)


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

Total net sales	$	126.9		100.0	%	$	129.8		100.0	%		(2.3	)%

	Three Months Ended
	September 28, 2019		September 29, 2018
	Net Sales		Net Sales
(in millions)
Total net sales	$	197.8	$	199.1

							Direct Operating Cash Flows
	Direct Operating Cash Flows						Nine Months Ended
	Nine Months Ended						September 28,			September 29,
(in millions)	September 30, 2017			October 1, 2016			2019			2018
Collections from customers	$	373.4		$	341.5		$	574.6		$	490.7
Other collections of cash		3.9			3.9			6.4			5.2
Disbursements to vendors		(230.2	)		(208.2	)		(356.0	)		(308.8	)
Personnel related disbursements		(99.1	)		(93.9	)		(136.5	)		(114.5	)
Income taxes refunded, net		—			1.3
Income taxes paid, net								(10.8	)		(17.2	)
Debt service payments		(13.3	)		(11.4	)		(23.3	)		(9.8	)
Cash received from Cardinal under supply agreement								-			19.0
Other cash activity, net								(0.1	)		-

Cash from operations	$	34.7		$	33.2		$	54.3		$	64.6

		Purchases of Equity Securities
Period	Beginning and Ending Dates	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(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 millions)

July 2019	June 30 to July 27		-	-			-	$	30.00

August 2019	July 28 to August 24		358,719	$	14.0815		358,719	$	24.95

September 2019	August 25 to September 28		35,100	$	13.9818		35,100	$	24.46

			393,819	$	14.0726		393,819



10.1* 10.1		~~First Amendment to Supply~~Employment Agreement ~~dated July 1, 2017, by~~between Sherri Baker and ~~between~~ PGT ~~Industries, Inc. and ENERGI Fenestration Solutions USA,~~Innovations, Inc., ~~which amends that certain Supply Agreement,~~ dated April 28, 2014, by and between PGT Industries, Inc. and Royal Group, Inc., which such Supply Agreement subsequently was assigned to ENERGI Fenestration Solutions USA, Inc., in connection with ENERGI Fenestration Solutions USA, Inc.’s purchase of the window and door division of Royal Group, Inc.

~~10.2~~		~~Supply Agreement dated as of September 22, 2017, by and between PGT Industries, Inc. and Cardinal LG Company~~March 26, 2019 (incorporated herein by reference to Exhibit 10.1 to Current Report on Form 8-K ~~dated September 22, 2017,~~ filed with the Securities and Exchange Commission on ~~September 22, 2017,~~March 26, 2019, Registration ~~No.~~Number 001-37971)

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

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*
101.INS	Inline XBRL Instance Document
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101.SCH	Inline XBRL Taxonomy Extension Schema

101.CAL*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF*
101.DEF	Inline XBRL Taxonomy Definition Linkbase

101.LAB*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

101.PRE*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase

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


		PGT INNOVATIONS, INC.
		(Registrant)


Date: November ~~2, 2017~~7, 2019		/s/ ~~Bradley West~~Sherri Baker
		~~Bradley West~~Sherri Baker
		Senior Vice President and Chief Financial Officer

Large accelerated filer☑

Accelerated filer☐

Non-accelerated filer☐

~~☐ (Do not check if a smaller reporting company)~~

Smaller reporting company☐

Emerging growth company