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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Common Stock, $0.01 par value, outstanding was ~~59,587,128~~59,946,690 shares, as of July ~~31, 2021.~~30, 2022.

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

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

										Accumulated
							Additional			Other												PGT Innovations, Inc. Shareholders' Equity
	Common stock						Paid-in			Comprehensive			Retained			Treasury															Accumulated
	Shares			Amount			Capital			Income (Loss)			Earnings			Stock			Total									Additional			Other
THREE MONTHS ENDED JULY 4, 2020
Balance at April 4, 2020		58,918,623		$	626		$	416,064		$	(3,688	)	$	50,388		$	(18,309	)	$	445,081
Vesting of restricted stock		44,153			—			—			—			—			—			—
Stock-based compensation		—			—			1,388			—			—			—			1,388
Net income		—			—			—			—			2,199			—			2,199
Other comprehensive income, net of taxes of $781		—			—			—			2,342			—			—			2,342
Balance at July 4, 2020		58,962,776		$	626		$	417,452		$	(1,346	)	$	52,587		$	(18,309	)	$	451,010
																						Common stock						Paid-in			Comprehensive			Retained			Treasury
SIX MONTHS ENDED JULY 4, 2020
Balance at December 28, 2019		58,504,734		$	619		$	414,688		$	(238	)	$	34,788		$	(18,309	)	$	431,548
Vesting of restricted stock		219,977			—			—			—			—			—			—
Grants of restricted stock		—			6			(6	)		—			—			—			—
Forfeitures of restricted stock		—			(1	)		1			—			—			—			—
Purchases of treasury stock		(51,479	)		—			—			—			—			(815	)		(815	)
Retirement of treasury stock		—			(1	)		(814	)		—			—			815			—
Stock-based compensation		—			—			2,918			—			—			—			2,918
Exercise of stock options		274,353			3			546			—			—			—			549
Common stock issued under ESPP		15,191			—			119			—			—			—			119
Net income attributable to the Company		—			—			—			—			17,799			—			17,799
Other comprehensive loss, net of tax benefit of $370		—			—			—			(1,108	)		—			—			(1,108	)
Balance at July 4, 2020		58,962,776		$	626		$	417,452		$	(1,346	)	$	52,587		$	(18,309	)	$	451,010
																						Shares			Amount			Capital			Income (Loss)			Earnings			Stock			Total
THREE MONTHS ENDED JULY 3, 2021
Balance at April 3, 2021		59,461,200		$	631		$	427,210		$	7,615		$	92,119		$	(18,309	)	$	509,266			59,461,200		$	631		$	427,210		$	7,615		$	92,119		$	(18,309	)	$	509,266
Vesting of restricted stock		42,360			—			—			—			—			—			—			42,360			—			—			—			—			—			—
Issuance of treasury stock		4,600			—			—			—			(20	)		20			—			4,600			—			—			—			(20	)		20			—
Stock-based compensation		—			—			1,744			—			—			—			1,744			—			—			1,744			—			—			—			1,744
Exercise of stock options		67,797			1			137			—			—			—			138			67,797			1			137			—			—			—			138
Common stock issued under ESPP		11,171			—			177			—			—			—			177			11,171			—			177			—			—			—			177
Net income attributable to the Company		—			—			—			—			10,145			—			10,145			—			—			—			—			10,145			—			10,145
Change in redemption value of redeemable non-controlling interest		—			—			—			—			(3,563	)		—			(3,563	)
Other comprehensive income, net of taxes of $1,225		—			—			—			3,715			—			—			3,715
Increase in value of RNCI																							—			—			—			—			(3,563	)		—			(3,563	)
Other comprehensive income, net of taxes of $1,225																							—			—			—			3,715			—			—			3,715
Balance at July 3, 2021		59,587,128		$	632		$	429,268		$	11,330		$	98,681		$	(18,289	)	$	521,622			59,587,128		$	632		$	429,268		$	11,330		$	98,681		$	(18,289	)	$	521,622

SIX MONTHS ENDED JULY 3, 2021
Balance at January 2, 2021		58,998,711		$	625		$	420,202		$	2,720		$	79,896		$	(18,309	)	$	485,134			58,998,711		$	625		$	420,202		$	2,720		$	79,896		$	(18,309	)	$	485,134
Vesting of restricted stock		189,466			—			—			—			—			—			—			189,466			—			—			—			—			—			—
Grants of restricted stock		—			3			(3	)		—			—			—			—			—			3			(3	)		—			—			—			—
Forfeitures of restricted stock		—			(1	)		1			—			—			—			—			—			(1	)		1			—			—			—			—
Issuance of treasury stock		4,600			—			—			—			(20	)		20			—
Purchases of treasury stock		(42,414	)		—			—			—			—			(1,005	)		(1,005	)		(42,414	)		—			—			—			—			(1,005	)		(1,005	)
Retirement of treasury stock		—						(844	)		—			(161	)		1,005			—			—			—			(844	)		—			(161	)		1,005			—
Issuance of treasury stock																							4,600			—			—			—			(20	)		20			—
Stock-based compensation		—			—			3,494			—			—			—			3,494			—			—			3,494			—			—			—			3,494
Exercise of stock options		67,797			1			137			—			—			—			138			67,797			1			137			—			—			—			138
Common stock issued under ESPP		11,171			—			177			—			—			—			177			11,171			—			177			—			—			—			177
Issuance in acquisition of Eco		357,797			4			6,104			—			—			—			6,108			357,797			4			6,104			—			—			—			6,108
Net income attributable to the Company		—			—			—			—			22,529			—			22,529			—			—			—			—			22,529			—			22,529
Change in redemption value of redeemable non-controlling interest		—			—			—			—			(3,563	)		—			(3,563	)
Other comprehensive income, net of taxes of $2,843		—			—			—			8,610			—			—			8,610
Increase in value of RNCI																							—			—			—			—			(3,563	)		—			(3,563	)
Other comprehensive income, net of taxes of $2,843																							—			—			—			8,610			—			—			8,610
Balance at July 3, 2021		59,587,128		$	632		$	429,268		$	11,330		$	98,681		$	(18,289	)	$	521,622			59,587,128			632			429,268			11,330			98,681			(18,289	)		521,622
THREE MONTHS ENDED JULY 2, 2022
Balance at April 2, 2022																							59,900,587		$	639		$	434,212		$	9,989		$	127,104		$	(18,289	)	$	553,655
Vesting of restricted stock																							28,140			—			—			—			—			—			—
Grants of restricted stock																							—			1			(1	)		—			—			—			—
Forfeitures of restricted stock																							—			(1	)		1			—			—			—			—
Stock-based compensation																							—			—			2,704			—			—			—			2,704
Common stock issued under ESPP																							17,964			—			291			—			—			—			291
Net income attributable to the Company																							—			—			—			—			36,161			—			36,161
Decrease in value of RNCI																							—			—			—			—			351			—			351
Other comprehensive loss, net of tax benefit of $4,270																							—			—			—			(12,357	)		—			—			(12,357	)
Balance at July 2, 2022																							59,946,691		$	639		$	437,207		$	(2,368	)	$	163,616		$	(18,289	)	$	580,805
SIX MONTHS ENDED JULY 2, 2022
Balance at January 1, 2022																							59,696,117		$	635		$	433,347		$	7,006		$	106,398		$	(18,289	)	$	529,097
Vesting of restricted stock																							317,102			—			—			—			—			—			—
Grants of restricted stock																							—			6			(6	)		—			—			—			—
Forfeitures of restricted stock																							—			(1	)		1			—			—			—			—
Purchases of treasury stock																							(84,492	)		—			—			—			—			(1,663	)		(1,663	)
Retirement of treasury stock																							—			(1	)		(1,335	)		—			(327	)		1,663			—
Stock-based compensation																							—			—			4,909			—			—			—			4,909
Common stock issued under ESPP																							17,964			—			291			—			—			—			291
Net income attributable to the Company																							—			—			—			—			59,330			—			59,330
Increase in value of RNCI																							—			—			—			—			(1,785	)		—			(1,785	)
Other comprehensive loss, net of tax benefit of $3,240																							—			—			—			(9,374	)		—			—			(9,374	)
Balance at July 2, 2022																							59,946,691		$	639		$	437,207		$	(2,368	)	$	163,616		$	(18,289	)	$	580,805

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

We record stock compensation expense over an equity award’s vesting period based on the award’s fair value at the date of grant. We recorded compensation expense for stock-based awards of $2.7 million for the three months ended July 2, 2022 and $1.7million for the three months ended July 3, ~~2021, and~~ ~~$1.4~~ ~~million for the three months ended July 4, 2020.~~2021. We recorded compensation expense for stock-based awards of $4.9 million for the six months ended July 2, 2022 and $3.5million for the six months ended July 3, ~~2021, and~~ ~~$2.9~~ ~~million for the six months ended July 4, 2020.~~2021. As of July ~~3, 2021,~~2, 2022, there was $~~$10.3~~15.4 million in total unrecognized compensation cost related 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 ~~1.7~~ 1.9 years at July ~~3, 2021.~~2, 2022.

Of the $~~$1.7~~ 2.7million and $~~$1.4~~ 1.7million in stock-based compensation expense in the three months ended July 2, 2022 and July 3, 2021, ~~and July 4, 2020,~~ respectively, $~~$1.5~~ 2.3million and $~~$1.2~~ 1.5million, respectively, are classified within selling, general and administrative expense in the accompanying condensed consolidated statements of operations, with the remainders classified within cost of sales. Of the $~~$3.5~~ 4.9million and $~~$2.9~~ 3.5million in stock-based compensation expense in the six months ended July 2, 2022 and July 3, 2021, ~~and July 4, 2020,~~ respectively, $~~$3.0~~ 4.2million and $~~$2.6~~ 3.0million, respectively, are classified within selling, general and administrative expense in the accompanying condensed consolidated statements of operations, with the remainders classified within cost of sales.

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

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

NOTE 6. ACQUISITIONS

ANLIN WINDOWS & DOORS

On October 25, 2021, we completed the acquisition of Anlin Windows & Doors. The acquisition was done by Western Window Holding LLC, a Delaware limited liability company, indirectly wholly-owned by PGT Innovations, Inc., which acquired substantially all of the assets, properties and rights owned, used or held for use in the business, as operated by Anlin Industries, a California corporation, of manufacturing vinyl windows and doors for the replacement market and the new construction market, and all activities conducted in connection therewith (the "Anlin Acquisition"), pursuant to that certain Asset Purchase Agreement dated as of September 1, 2021 (the “Anlin Purchase Agreement”), by and among the Company, and Anlin Industries. The fair value of consideration transferred in the Anlin Acquisition was $121.7 million, composed of $115.0 million in cash, including $113.5 million for purchase price and $1.5 million in working capital adjustments, including $0.8 million paid during the three months ended July 2, 2022, and fair value of contingent consideration of $6.7 million, discussed in greater detail below.

The cash portion of the Anlin Acquisition of $115.0 million was financed with borrowings under the fourth amendment of our 2016 Credit Agreement due 2024 of $60.0 million, which resulted in net proceeds after fees of $59.4 million, with the remaining $55.6 million from cash on hand. Cash on hand for the Anlin Acquisition was ultimately provided by the issuance of $575.0 million of 4.375% senior notes due 2029 and related transactions, further explained in Note 9, Long-Term Debt, as well as cash generated through operations.

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


	Initial Allocation			Adjustments to Allocation			Preliminary Allocation
Accounts receivable	$	10,803		$	—		$	10,803
Inventories		7,633			(327	)		7,306
Contract assets, net		7,027			—			7,027
Prepaid expenses and other assets		1,626			(954	)		672
Property and equipment		22,800			1,509			24,309
Operating lease right-of-use asset		3,450			14			3,464
Intangible assets		77,800			(5,800	)		72,000
Total assets acquired		131,139			(5,558	)		125,581
Accounts payable		(5,175	)		593			(4,582	)
Accrued and other liabilities		(7,993	)		—			(7,993	)
Operating lease liability		(3,450	)		(14	)		(3,464	)
Total liabilities assumed		(16,618	)		579			(16,039	)
Net assets acquired		114,521			(4,979	)		109,542
Goodwill		5,596			6,554			12,150
Fair value of consideration transferred	$	120,117		$	1,575		$	121,692

Consideration:
Cash	$	114,196		$	786		$	114,982
Contingent consideration		5,921			789			6,710
Fair value of consideration transferred	$	120,117		$	1,575		$	121,692

The fair value of certain working capital related items, including Anlin’s accounts receivable, prepaid expenses and other assets, and accounts payable and accrued liabilities, approximated their book values at the date of the Anlin Acquisition. The fair value of inventory was estimated by major category, at net realizable value, which we believe approximates the price a market participant could achieve in a current sale. Inventories at the acquisition date was primarily composed of raw materials. Further review during the first quarter of 2022 resulted in an adjustment to decrease the estimated net realizable value of inventory. The fair value of property and equipment and remaining useful lives were estimated by management, with the assistance of a third-party valuation firm, using the cost approach. During the first quarter of 2022, additional value was assigned to acquired property and equipment, primarily due to an increase in the estimate of the fair value of acquired land.

- 14 -

Valuations of the intangible assets were done using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs, with the assistance of a third-party valuation firm. During the first quarter of 2022, we made several adjustments to the estimated fair value of the initial valuation of certain intangible assets, given the preliminary nature of several of the valuation inputs. Additionally, we determined that a portion of the customer relationship asset we acquired related to Anlin's backlog, which had an estimated useful life of less than three months, resulting in its estimated fair value of $2.2 million becoming fully amortized in the first quarter of 2022, discussed below, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the six-month period ended July 2, 2022.

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

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

The first contingent consideration payment was agreed to be $2.7 million, which exceeded its estimated fair value by $0.3 million. This excess is classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the six months ended July 2, 2022. The payment was made during the second quarter of 2022 after both parties agreed to extended the deadline for the first payment past the March 31, 2022 due date stated in the Anlin Purchase Agreement.

During the second quarter of 2022, we updated our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA, which was estimated to be $8.8 million. As such, we recognized an expense of approximately $4.5 million, representing the difference between the actual and estimated fair value of the contingent consideration relating to the 2022 Anlin EBITDA, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the six months ended July 2, 2022. We will continue to update our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA each reporting period, as required by ASC 805, and record any adjustments within operating income until finalized by March 31, 2023.

For tax purposes, contingent consideration does not become part of tax goodwill until paid. As such, the amount of goodwill deductible for tax purposes will not be finalized until the outcome of both earn-out contingency payments are known. As discussed, as of July 2, 2022, the initial estimated fair value of the contingent consideration in the preliminary allocation relating to the remaining payment was $4.3 million, and goodwill according to the current allocation of consideration is $12.2 million. As such, as of July 2, 2022, the amount of goodwill estimated to be tax deductible is the difference of $7.9 million. Anlin's goodwill is included as part of the Western reporting. We believe Anlin's goodwill relates to the expansion of our footprint in a key, strategic market we have identified as a geographic area of growth for our Company. Our estimate of the amount of tax deductible goodwill may change as the amounts of the payments of contingent consideration are finalized.

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

The Anlin Purchase Agreement has a post-closing working capital calculation we were required to prepare, and delivered to sellers during the second quarter of 2022. This resulted in an additional payment of consideration to the seller of $0.8 million, made during the second quarter of 2022.

- 15 -

Valuation of Identified Intangible Assets

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


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

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

Pro Forma Financial Information

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include Anlin's actual results for the entire period. The following unaudited pro forma financial information has been prepared by adjusting our historical results to include the results of Anlin adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the refinancing of the 2018 Senior Notes due 2026 and the third amendment of the 2016 Credit Agreement due 2024 into the 2021 Senior Notes due 2029 (the "2021 Senior Notes") and the fourth amendment of the 2016 Credit Agreement due 2024. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.


	Three Months Ended		Six Months Ended
Pro Forma Results (unaudited)	July 3, 2021		July 3, 2021
(in thousands, except per share amounts)	(unaudited)
Net sales	$	314,270	$	609,782

Net income attributable to common shareholders	$	8,992	$	21,737

Net income per common share attributable to common shareholders:
Basic	$	0.15	$	0.37
Diluted	$	0.15	$	0.36

Net sales of Anlin included in the condensed consolidated statement of operations for the three and six months ended July 2, 2022, was $38.8 million and $71.2 million, respectively. The net income of Anlin in the condensed consolidated statement of operations for the three and six months ended July 2, 2022, was $7.3 million and $10.2 million, respectively.

CRI SOCAL, INC.

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

The fair value of consideration transferred in the acquisition of CRi totaled ~~$12.5~~$12.5 million, and included ~~$12.1~~$12.1 million in cash, funded from cash on hand, and ~~$0.4~~$0.4 million ofin accounts receivable owed by CRi to the Company’s western business unit relating to sales prior to the acquisition, which are considered settled as a result of the acquisition. The ~~purchase price is subject to change through a net working capital adjustment, currently being finalized. The~~ preliminary estimated fair value of assets acquired and liabilities assumed totaled ~~$17.7~~$17.6 million and ~~$5.2~~$5.1 million, respectively, which included offsetting operating lease right of use assets and operating lease liabilities totaling ~~$2.7~~$2.6 million. The estimated fair value of assets acquired also included current assets totaling ~~$4.1~~$4.1 million, primarily accounts receivable, identifiable intangible assets totaling ~~$6.4~~$7.0 million, goodwill of ~~$4.3~~$3.7 million, all of which we believe is tax deductible, and a small amount of property and equipment. Liabilities assumed included the aforementioned operating lease liability, as well as a total of ~~$2.5~~$2.5 million in trade accounts payable and customer deposits. Valuations of the intangible assets have been estimated using income and royalty relief approaches based on projections, which we consider to be Level 3 inputs, with the assistance of a third-party valuation firm. We believe goodwill in the acquisition relates to the expansion of our footprint in an existing market, in a way that we believe will enhance our long-term profitability in that market of our Western business.

Sales and net income from CRi included in the three and six months ended July ~~3, 2021 totaled~~ ~~$3.1~~ ~~million. CRi’s effect on consolidated net income~~2, 2022 was ~~immaterial in the two-month, post-acquisition period from May 2, 2021 to July 3, 2021.~~immaterial.

~~- 13 -~~

~~Valuation of Identified Intangible Assets in the CRi Acquisition~~- 16 -

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

Initial

Preliminary

Useful Life

Valuation

(in years)
(in thousands)

Trade name

$
800

indefinite
Customer relationships

5,600

10

Intangible assets, net

$
6,400

ECO WINDOW SYSTEMS

On February 1, 2021, we completed the acquisition of a ~~75%~~75% ownership stake in Eco Enterprises and its related companies, Eco Windows Systems, LLC, Eco Glass Production, LLC, and Unity Windows, LLC (together “Eco”)~~, for fair value consideration of~~ ~~$100.5~~ ~~million, including~~ ~~$94.4~~ ~~million in cash, which was after adjustments in our favor totaling~~ ~~$5.6~~ million relating to working capital and customer deposits. These adjustments were agreed to and settled in the second quarter of 2021. The fair value of consideration also included PGT Innovations, Inc. common stock with a then estimated fair value of ~~$6.1~~ ~~million. The cash portion of the purchase price was financed by a second add-on issuance of~~ ~~$60.0~~ ~~million aggregate principal amount of 6.75% senior notes to the 2018 Senior Notes due 2026 on January 25, 2021 (the “Second Additional Senor Notes”), issued at~~ ~~105.5%~~ ~~of their principal amount, resulting in a premium to us of~~ ~~$3.3~~ ~~million, together with cash on hand of~~ ~~$31.1~~ ~~million. See Note 9 for a discussion of the Second Additional Senior Notes.~~

~~The common stock portion of the purchase price was represented by the issuance of~~ ~~357,797~~ ~~shares of PGT Innovations, Inc. common stock on February 1, 2021, with a closing price value of~~ ~~$21.34~~ ~~per share on that date, or approximately~~ ~~$7.6~~ ~~million based on that price. However, the seller of Eco, who is also the holder of the~~ ~~25%~~ ~~redeemable non-controlling interest in Eco Enterprises, is restricted from selling these shares for a~~ ~~three-year~~ ~~period from the date of the acquisition. As such, we estimated that there was an approximately~~ ~~20%~~ ~~discount for the lack of marketability of the shares. The fair value of the redeemable non-controlling interest in the acquisition has been preliminarily estimated to be~~ ~~$28.5~~ ~~million, resulting in total fair value of the Eco business in the acquisition, including the redeemable non-controlling interest, of~~ ~~$128.9~~ ~~million. The fair value of the redeemable non-controlling interest has been calculated as~~ ~~25%~~ ~~of the initial estimated fair value of the entity at the acquisition date, less a discount for seller’s lack of control in the new entity, estimated to be~~ 5%~~, and a discount for the seller’s lack of marketability of the minority stake, estimated to be~~ ~~10%~~. ~~See Note 17 for more information regarding the redeemable non-controlling interest.~~ Eco is a manufacturer and installer of aluminum, impact-resistant windows and doors, serving the South Florida region since 2009. Eco is headquartered in Medley, Florida, near Miami, Florida, and has 3 manufacturing locations in the region, including a glass processing facility.

The fair value consideration for Eco was $102.0 million, including $94.4 million in cash, after favorable adjustments totaling $5.6 million relating to working capital and customer deposits which were agreed to and settled in the second quarter of 2021, and estimated contingent consideration of $1.5 million recorded in the second quarter of 2022, which was required by the purchase agreement. The fair value of consideration also included PGT Innovations, Inc. common stock with a then estimated fair value of $6.1 million. The cash portion of the purchase price was financed by a second add-on issuance of $60.0 million aggregate principal amount of 6.75% senior notes to the 2018 Senior Notes due 2026 on January 25, 2021 (the “Additional Senior Notes”), issued at 105.5% of their principal amount, resulting in a premium to us of $3.3 million, together with cash on hand of $31.1 million.

The common stock portion of the purchase price was represented by the issuance of 357,797 shares of PGT Innovations, Inc. common stock on February 1, 2021, with a closing price value of $21.34 per share on that date, or approximately $7.6 million based on that price. However, the seller of Eco, who is also the holder of the 25% redeemable non-controlling interest in Eco Enterprises, is restricted from selling these shares for a three-year period from the date of the acquisition. As such, we estimated that there was an approximately 20% discount for the lack of marketability of the shares. The fair value of the redeemable non-controlling interest in the acquisition has been estimated to be $28.5 million, resulting in total fair value of the Eco business in the acquisition, including the redeemable non-controlling interest, of $130.4 million. The fair value of the redeemable non-controlling interest has been calculated as 25% of the initial estimated fair value of the entity at the acquisition date, less a discount for seller’s lack of control in the new entity, estimated to be 5%, and a discount for the seller’s lack of marketability of the minority stake, estimated to be 10%. See Note 17 for more information regarding the redeemable non-controlling interest.

~~- 14 -~~

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


	Initial Allocation			Adjustments to Allocation			Preliminary Allocation			Initial Allocation			Adjustments to Allocation			Final Allocation
Accounts receivable	$	5,031		$	(330	)	$	4,701		$	5,031		$	(241	)	$	4,790
Inventories		7,728			(865	)		6,863			7,728			(684	)		7,044
Contract assets, net		4,312			1,492			5,804			4,312			(123	)		4,189
Prepaid expenses and other assets		1,706			(582	)		1,124			1,706			(759	)		947
Property and equipment		24,009			(191	)		23,818			24,009			(191	)		23,818
Operating lease right-of-use asset		27,864			—			27,864			27,864			(1,049	)		26,815
Intangible assets		72,700			(1,000	)		71,700			72,700			1,600			74,300
Goodwill		30,051			(3,838	)		26,213
Total assets acquired		173,401			(5,314	)		168,087			143,350			(1,447	)		141,903
Accounts payable		(6,809	)		—			(6,809	)		(6,809	)		(116	)		(6,925	)
Accrued and other liabilities, including customer deposits		(4,215	)		(271	)		(4,486	)		(4,215	)		(604	)		(4,819	)
Operating lease liability		(27,864	)		—			(27,864	)		(27,864	)		1,049			(26,815	)
Total liabilities assumed		(38,888	)		(271	)		(39,159	)		(38,888	)		329			(38,559	)
Net assets acquired		134,513			(5,585	)		128,928			104,462			(1,118	)		103,344
Redeemable non-controlling interest		(34,084	)		5,620			(28,464	)		(34,084	)		5,620			(28,464	)
Net assets acquired, net of redeemable non-controlling interest											70,378			4,502			74,880
Goodwill											30,051			(2,967	)		27,084
Fair value of consideration transferred	$	100,429		$	35		$	100,464		$	100,429		$	1,535		$	101,964

Consideration:
Cash	$	94,321		$	35		$	94,356		$	94,321		$	35		$	94,356
PGTI common stock		6,108			—			6,108			6,108			—			6,108
Contingent consideration											—			1,500			1,500
Fair value of consideration transferred	$	100,429		$	35		$	100,464		$	100,429		$	1,535		$	101,964

- 17 -

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

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

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, has currently been estimated to be $~~$26.2~~ 27.1million, classified as part of the Southeast reporting unit goodwill, which we expect the portion of goodwill relating to our ~~75%~~75% investment to be deductible for tax purposes. In addition, we are currently evaluating the historical book and tax bases of assets and liabilities relating to the redeemable non-controlling interest, which may not be eligible for a step-up in basis, for any deferred tax assets and liabilities that may need to be recorded in the Eco Acquisition.

As of July 3, 2021, the purchase price allocation is still preliminary, including the estimated discount relating to the fair value of PGTI common stock transferred, and the discounts for seller’s lack of control and marketability of seller’s minority share, and its finalization may result in changes to the preliminary estimate of goodwill. We believe goodwill represents the strengthening of our supply chain for glass through faster glass production, as well as diversification and expansion of product offerings in the high-growth commercial market, and an expansion of our dealer network with minimal overlap with our existing deal network.

~~- 15 -~~

Valuation of Identified Intangible Assets in the Eco Acquisition

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

Initial

Initial

Adjustment to

Preliminary

Useful Life

Valuation

Valuation

Valuation

(in years)
(in thousands)

Trade name

$
36,000

$
(1,000
)

$
35,000

indefinite
Customer relationships

36,700

—

36,700

5 - 15

Intangible assets, net

$
72,700

$
(1,000
)

$
71,700


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

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

~~Pro Forma Financial Information~~

The following unaudited pro forma financial information assumes the Eco Acquisition had occurred at the beginning of the earliest period presented that does not include Eco’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of Eco adjusted for the following: amortization expense related to the estimated intangible assets arising from the acquisition; interest expense to reflect the Second Additional Senior Notes; net income attributable to redeemable non-controlling interest; and, change in redemption value of redeemable non-controlling interest. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.

Three Months Ended

Six Months Ended

July 4,

July 3,

July 4,

2020

2021

2020

(unaudited)

Net sales

$
215,476

$
564,544

$
446,829

Net income attributable to common shareholders

$
302

$
15,561

$
15,599

Net income per common share attributable to common shareholders:

Basic

$
0.01

$
0.26

$
0.27

Diluted

$
0.01

$
0.26

$
0.26

Net sales of Eco included in the condensed consolidated statement of operations for the three and six months ended July 3, 2021, was $24.1 million and $39.5 million, respectively, after eliminations of intercompany sales. The net income of Eco in the condensed consolidated statement of operations for the three and six months ended July 3, 2021, was $2.3 million and $3.9 million, respectively, including the portions attributable to the redeemable non-controlling interest of $0.6 million and $1.0 million, respectively.

~~NEWSOUTH WINDOW SOLUTIONS~~

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

~~- 16 -~~

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

Final
Allocation

Accounts receivable

$
8,434

Inventories

2,936

Contract assets, net

4,413

Prepaid expenses and other assets

1,756

Property and equipment

7,433

Operating lease right-of-use asset

10,578

Intangible assets

27,370

Goodwill

52,094

Accounts payable

(6,621
)
Accrued and other liabilities

(7,447
)
Operating lease liability

(10,578
)
Purchase price

$
90,368

Consideration:

Cash

$
90,368

Total fair value of consideration

$
90,368

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

~~We incurred acquisition costs totaling~~ ~~$2.4~~ ~~million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the NewSouth Acquisition,~~ ~~which includes $0.9 million in 2020, and $1.5 million in 2019. Of the expenses in 2020, $0.5 million were incurred in the first quarter of 2020, with the remainder in the second quarter of 2020, and~~ ~~classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three and six months ended July 4, 2020.~~

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

~~Valuation of Identified Intangible Assets~~- 18 -

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

Initial

Final

Useful Life

Valuation

(in years)
(in thousands)

Trade name

$
22,200

15
Non-compete agreements

1,670

5
Developed technology

2,600

6
Customer-related intangible

900

<1

Intangible assets, net

$
27,370

~~- 17 -~~

~~Pro Forma Financial Information~~

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

Six Months Ended

July 4,

2020

(unaudited)

Net sales

430,739

Net income

18,029

Net income per common share:

Basic

$
0.31

Diluted

$
0.30

NOTE 7. NET INCOME PER COMMON SHARE

Basic earnings per share (“EPS”) available to PGT Innovations, Inc. common stockholders is computed using the two-class method by dividing net income attributable to common shareholders, after deducting the redemption adjustment related to the redeemable noncontrolling interest, by the average number of common shares outstanding during the period. Diluted EPS available to PGT Innovations, Inc. common stockholders is computed using the two-class method by dividing net income attributable to common shareholders, after deducting the redemption adjustment related to the redeemable noncontrolling interest, by the average number of common shares outstanding, including the dilutive effect of common stock equivalents computed using the treasury stock method and the average share price during the period.

There were 0 anti-dilutive securities excluded from the calculation of weighted average shares outstanding for the ~~three~~three- or ~~six months~~six-month periods ended July 2, 2022, or July 3, ~~2021, and there were~~ 2021.

~~628~~ ~~thousand and~~ ~~586~~ ~~thousand for the three and six months ended July 4, 2020, respectively.~~

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~~EPS::


	Three Months Ended					Six Months Ended					Three Months Ended						Six Months Ended
	July 3,			July 4,		July 3,			July 4,		July 2,			July 3,			July 2,			July 3,
	2021			2020		2021			2020		2022			2021			2022			2021
	(in thousands, except per share amounts)										(in thousands, except per share amounts)
Net income	$	10,713		$	2,199	$	23,508		$	17,799	$	36,465		$	10,713		$	60,291		$	23,508
Less: Net income attributable to redeemable non-controlling interest		(568	)		—		(979	)		—
Less: Net income attributable to RNCI												(304	)		(568	)		(961	)		(979	)
Net income attributable to the Company		10,145			2,199		22,529			17,799		36,161			10,145			59,330			22,529
Change in redemption value of redeemable non-controlling interest		(3,563	)		0		(3,563	)		0
Decrease (increase) in redemption value of RNCI												351			(3,563	)		(1,785	)		(3,563	)
Net income attributable to common shareholders	$	6,582		$	2,199	$	18,966		$	17,799	$	36,512		$	6,582		$	57,545		$	18,966

Weighted-average common shares - Basic		59,551			58,943		59,418			58,806
Weighted-average number of common shares outstanding - Basic												59,928			59,551			59,880			59,418
Add: Dilutive shares from equity plans		500			197		559			341		329			500			361			559
Weighted-average common shares - Diluted		60,051			59,140		59,977			59,147

Weighted-average number of common shares outstanding - Diluted												60,257			60,051			60,241			59,977

Net income per common share attributable to common shareholders:
Basic	$	0.11		$	0.04	$	0.32		$	0.30	$	0.61		$	0.11		$	0.96		$	0.32
Diluted	$	0.11		$	0.04	$	0.32		$	0.30	$	0.61		$	0.11		$	0.96		$	0.32

Amortization expense relating to amortizable intangible assets for the three months ended July 2, 2022 and July 3, 2021, ~~and July 4, 2020,~~ was $~~$5.1~~ 5.9million and $~~$4.7~~ 5.1million, respectively. Amortization expense relating to amortizable intangible assets for the six months ended July 2, 2022 and July 3, 2021, ~~and July 4, 2020,~~ was $~~$9.9~~ 13.9million and $~~$9.4~~ 9.9million, respectively. See Note 6 for discussion of the amortization of the customer-related backlog asset of $2.2 million during the six-month period ended July 2, 2022.

We perform our annual goodwill and indefinite-lived intangible asset impairment testing on the first day of our fiscal fourth quarter of each year, and at interim periods if needed based on occurrence of triggering events. During the six months ended July ~~3, 2021,~~2, 2022, we did not identify any events which we believe would trigger the need for tests for impairments of our indefinite-lived intangibles assets. As of July ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, the carrying value of our Southeast reporting unit goodwill is $~~$227.5~~ 228.3million and $226.8~~$201.3~~ million, respectively. As of July ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, the carrying value of our Western reporting unit goodwill is $~~$132.7~~ 144.4million and $~~$128.4~~ 137.8million, respectively. Goodwill of our Southeast reporting unit includes the goodwill relating to Eco. Goodwill of our Western reporting unit includes the goodwill relating to both Anlin and CRi.

~~- 22 -~~

NOTE 10. LEASES

We lease certain of our manufacturing facilities under operating leases. We also lease production equipment, vehicles, computer equipment, storage units and office equipment under operating leases. Our leases have remaining lease terms of 1 year to 910 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.~~year. All of our leases are operating leases. We did not recognize right-of-use assets or lease liabilities for certain short-term leases that are month-to-month leases. The lease expense relating to these leases is not significant.

The components of lease expense for the three and six months ended July 2, 2022 and July 3, 2021, ~~and July 4, 2020,~~ are as ~~follows. Certain amounts in the prior year period have been reclassified to conform to the current presentation~~follows (in thousands):


	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,		July 2,		July 3,		July 2,		July 3,
	2021		2020		2021		2020		2022		2021		2022		2021

Operating lease cost	$	3,898	$	2,307	$	6,777	$	4,411	$	5,001	$	3,898	$	9,840	$	6,777
Variable lease cost		2,216		810		4,416		1,596
Short-term lease cost										2,515		2,216		4,820		4,416
Total lease cost	$	6,114	$	3,117	$	11,193	$	6,007	$	7,516	$	6,114	$	14,660	$	11,193

- 23 -

Other information relating to leases for the three and six months ended July ~~3, 2021~~2, 2022 and July ~~4, 2020,~~3, 2021, are as follows (in thousands, except years and percentages):

Three Months Ended

Six Months Ended

July 3,

July 4,

July 3,

July 4,

2021

2020

2021

2020

Supplemental cash flows information

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

Operating cash flows relating to
  operating leases
$
(3,304
)

$
(2,212
)

$
(6,068
)

$
(4,221
)

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

Operating leases
$
17,415

$
233

$
46,905

$
14,838

Weighted average remaining lease term in years

Operating leases

6.74

7.10

6.74

7.10

Weighted average discount rate

Operating leases

5.5
%

5.9
%

5.5
%

5.9
%

~~- 23 -~~


	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2022			2021			2022			2021
Supplemental cash flows information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows relating to operating leases	$	(4,788	)	$	(3,304	)	$	(9,317	)	$	(6,068	)

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	10,938		$	17,415		$	12,262		$	46,905

Weighted average remaining lease term in years
Operating leases		6.56			6.74			6.56			6.74

Weighted average discount rate
Operating leases		5.4	%		5.5	%		5.4	%		5.5	%

Future maturities under operating leases were as follows at July ~~3, 2021~~2, 2022 and January ~~2, 2021~~1, 2022 (in thousands):

July 3,

January 2,

2021

2021

Remainder of 2021

$
7,107

$
8,327

2022

15,055

7,626

2023

14,751

7,149

2024

14,422

6,748

2025

13,771

6,253

Thereafter

35,817

13,800

Total future minimum lease payments

100,923

49,903

Less: Imputed interest

(17,258
)

(8,641
)

Operating lease liability - total

$
83,665

$
41,262

Reported as of July 3, 2021 and January 2, 2021:

Current portion of operating lease liability

$
10,311

$
6,132

Operating lease liability, less current portion

73,354

35,130

Operating lease liability - total

$
83,665

$
41,262


	July 2,			January 1,
	2022			2022
Remainder of 2022	$	9,775		$	17,929
2023		19,367			17,577
2024		18,797			16,990
2025		17,697			15,987
2026		16,584			15,025
2027		15,763			14,358
Thereafter		22,943			17,891

Total future minimum lease payments		120,926			115,757

Less: Imputed interest		(18,529	)		(18,674	)

Operating lease liability - total	$	102,397		$	97,083

Reported as of July 2, 2022 and January 2, 2021:
Current portion of operating lease liability	$	14,883		$	13,180
Operating lease liability, less current portion	��	87,514			83,903

Operating lease liability - total	$	102,397		$	97,083

As of July ~~3, 2021,~~2, 2022, we had no additional operating or finance leases that have not yet ~~commenced.~~ commenced. Our operating leases expire at various times through ~~2030.~~2032. Lease expense was $7.5 million for the three months ended July 2, 2022 and was $6.1million for the three months ended July 3, ~~2021 and was~~ 2021. Of the $~~$3.1~~ 7.5million for the three months ended July ~~4, 2020. Of the~~ 2, 2022, $~~$6.1~~ 3.8~~million for the three months ended July 3, 2021,~~ ~~$4.2~~ million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Of the $~~$3.1~~ 6.1million for the three months ended July ~~4, 2020,~~ 3, 2021, $~~$1.6~~ 4.2million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Lease expense was $14.7 million for the six months ended July 2, 2022 and was $11.2million for the six months ended July 3, ~~2021 and was~~ 2021. Of the $~~$6.0~~ 14.7million for the six months ended July ~~4, 2020. Of the~~ 2, 2022, $~~$11.2~~ 7.4~~million for the six months ended July 3, 2021,~~ ~~$6.4~~ million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses. Of the $~~$6.0~~ 11.2million for the six months ended July ~~4, 2020,~~ 3, 2021, $~~$3.1~~ 6.4million is classified as cost of sales in the accompanying condensed consolidated statement of operations, with the remainder classified within selling, general and administrative expenses.

~~The~~ ~~$46.9~~ - 24 -~~million in operating lease right-of-use assets obtained in exchange for operating lease obligations during the six months ended July 3, 2021 includes~~ ~~$27.9~~ ~~million related to the Eco Acquisition in the first quarter of 2021, and~~ ~~$2.7~~ ~~million related to the CRi Acquisition in the second quarter of 2021. See Note 6 for additional information.~~

NOTE 11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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 material adverse effect on our operations, financial position or cash flows.

NOTE 12. INCOME TAXES

~~Our~~We had income tax expense ~~was $2.7~~of $12.0 million for the three months ended July 2, 2022, compared with income tax expense of $2.7 million for the three months ended July 3, ~~2021, compared with income tax benefit of $0.5 million for the three months ended July 4, 2020.~~2021. Our effective tax rate for the three months ended July ~~3, 2021,~~2, 2022, was an expense rate of ~~20.3%~~24.8%, and was ~~a benefit~~an expense rate of ~~27.0%~~20.3% for the three months ended July ~~4, 2020.~~3, 2021. Our income tax expense ~~was~~ for the three months ended July 2, 2022, and July 3, 2021, includes $237 thousand and $426 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco. We had an income tax expense of $19.8 million for the six months ended July 2, 2022, compared with income tax expense of $6.7million for the six months ended July 3, ~~2021, compared with income tax expense of~~ ~~$3.7~~ ~~million for the six months ended July 4, 2020.~~2021. Our effective tax rate for the six months ended July ~~3, 2021,~~2, 2022, was an expense rate of ~~22.1%~~24.7%, and was an expense rate of ~~17.1%~~22.1% for the six months ended July ~~4, 2020.~~3, 2021. Our income tax expense for the ~~three and~~ six months ended July 2, 2022, and July 3, 2021, includes $~~$426~~ 742thousand and $$731thousand, respectively, relating to our ~~75%~~75% share of the pre-tax earnings of Eco.

~~- 24 -~~

Income tax expense in the three and six months ended July 3,2, 2022 includes a refund from the state of Florida, received by the Company in the second quarter of 2022, relating to excess taxes received by the state in 2021, which was $584 thousand, benefiting tax expense by $462 thousand, net of its Federal tax effect. Income tax expense in the three months ended July 2, 2022 and July ~~4, 2020~~3, 2021 include discrete items of income tax benefit relating to excess tax benefits from the ~~exercises of stock options and~~ lapses of restrictions on stock awards, which totaled $~~$605~~ 40~~thousand and~~ ~~$700~~ thousand in the three months ended July 2, 2022, and $605 thousand in the three months ended July 3, 2021. Income tax expense in the six months ended July 2, 2022 and July 3, 2021 include discrete items of income tax benefit relating to excess tax benefits from the lapses of restrictions on stock awards, which totaled $96 thousand in the six months ended July 2, 2022, and $700 thousand in the six months ended July 3, ~~2021, respectively, and nearly 0 and~~ ~~$737~~ thousand in the three and six months ended July 4, 2020. The three- and six-month periods ended July 4, 2020 also included the benefit of a refund from the state of Florida relating to excess taxes received by the state caused by the Tax Cuts and Jobs Act of 2017, which totaled ~~$553~~ ~~thousand, net of its Federal tax effect. Other discrete items included in all four periods include true-ups of research and development tax credit estimates to actual tax credits claimed.~~2021. Excluding discrete items of income tax, the effective tax rates for the three months ended July ~~3, 2021,~~2, 2022 and July ~~4, 2020,~~3, 2022, would have been income tax expense rates of ~~24.1%~~25.6% and ~~21.7%~~24.1%, respectively. Excluding discrete items of income tax, the effective tax rates for the six months ended July ~~3, 2021,~~2, 2022 and July ~~4, 2020,~~3, 2022, would have been income tax expense rates of ~~24.1%~~25.4% and ~~24.6%~~24.1%, respectively.

During the first quarters of 2022 or 2021, we were 0t required to make any payments of estimated federal or state income taxes. During the first half of ~~2021~~2022, we made payments of estimated taxes totaling $~~$10.9~~ 9.6million, which included $~~$7.6~~ 8.8million in Federal estimated income taxes with the remainder to various states, primarily Florida. ~~We made 0 payments of estimated Federal or state income taxes during~~During the first half of ~~2020.~~2021, we made payments of estimated taxes totaling $10.9 million, which included $7.6 million in Federal estimated income taxes with the remainder to various states, primarily Florida.

NOTE 13. FAIR VALUE

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

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

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

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

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

- 25 -

During the three ~~and~~or six months ended July 2, 2022 or July 3, 2021, ~~or July 4, 2020,~~ we did 0t0t make any transfers between Level 2 and Level 3 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts and notes receivable, and accounts payable and accrued liabilities, whose carrying amounts approximate their fair values due to their short-term nature. Our financial instruments also include borrowings under our 2016 Credit Agreement, ~~due 2022,~~ as well as the ~~2018~~2021 Senior Notes, ~~due 2026, both~~all classified as long-term debt. The fair value of borrowings under the 2016 Credit Agreement due ~~2022 approximates~~2024 approximated its carrying value due to its variable-rate nature, and was approximately ~~$54.0~~$60.0 million as of July ~~3, 2021,~~2, 2022, and January 1, 2022, compared to a principal outstanding value of ~~$54.0~~$60.0 million ~~and fair value of~~ ~~$54.0~~ ~~million as of January 2, 2021, compared to a principal outstanding value of~~ ~~$54.0~~ ~~million.~~at those dates, respectively. The fair value of the ~~2018~~2021 Senior Notes ~~due 2026~~ is based on debt with similar terms and characteristics and was approximately ~~$447.8~~$452.1 million as of July ~~3, 2021,~~2, 2022, compared to a principal outstanding value of ~~$425.0~~$575.0 million, ~~which includes the Second Additional Senior Notes,~~ and the fair value was approximately $~~$387.8~~ 578.2million as of January ~~2, 2021,~~1, 2022, compared to a principal outstanding value of $~~$365.0~~ 575.0million. ~~Fair values were determined based on observed trading prices of our debt between domestic financial institutions, which we consider to be a Level 2 input.~~

~~- 25 -~~

Items Measured at Fair Value ~~on a Recurring Basis~~

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

	Fair Value Measurements
	Assets (Liabilities)								Fair Value Measurements
			Quoted		Significant				Assets (Liabilities)
			Prices in		Other		Significant					Quoted		Significant
			Active		Observable		Unobservable					Prices in		Other			Significant
	July 3,		Markets		Inputs		Inputs					Active		Observable			Unobservable
		2021	(Level 1)		(Level 2)		(Level 3)					Markets		Inputs			Inputs
July 2, 2022									Total			(Level 1)		(Level 2)			(Level 3)
Description
Aluminum contracts	$	8,229	$	—	$	8,229	$	—	$	(5,173	)	$	—	$	(5,173	)	$	—
MTP contracts		6,836		—		6,836		—		1,987			—		1,987			—

	$	15,065	$	—	$	15,065	$	—	$	(3,186	)	$	—	$	(3,186	)	$	—


	Fair Value Measurements
	Assets (Liabilities)
			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
			Markets		Inputs		Inputs
January 1, 2022	Total		(Level 1)		(Level 2)		(Level 3)
Description
Aluminum contracts	$	4,829	$	—	$	4,829	$	—
MTP contracts		4,599		—		4,599		—
	$	9,428	$	—	$	9,428	$	—

Fair Value Measurements

Assets (Liabilities)

Quoted

Significant

Prices in

Other

Significant

Active

Observable

Unobservable

January 2,

Markets

Inputs

Inputs

2021

(Level 1)

(Level 2)

(Level 3)

Description

Aluminum contracts
$
3,190

$
—

$
3,190

$
—

MTP contracts

421

—

421

—

$
3,611

$
—

$
3,611

$
—

See Note 14 for a description of the methods and assumptions used in the determination of the fair values of our aluminum forward and Midwest Transaction Premium (“MTP”) contracts, as well as the basis for classifying these assets and liabilities as Level 2.

- 26 -

NOTE 14. DERIVATIVES

Aluminum Contracts and Midwest Transaction Premium

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

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

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

~~- 26 -~~

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

At July ~~3, 2021,~~2, 2022, the fair value of our aluminum forward contracts was in ~~an asset~~a liability position of ~~$8.2~~$5.2 million. We had 30 16outstanding forward contracts for the purchase of ~~40.2~~ 24.3million pounds of aluminum through December 2022, at an average price of $~~$0.95~~ 1.32per pound, which excludes the Midwest premium, with maturity dates of between one ~~month~~ and~~eighteen~~ six months ~~months.~~. At July ~~3, 2021,~~2, 2022, the fair value of our MTP contracts was in an asset position of $~~$6.8~~2.0 million. We had 24 4outstanding MTP contracts to hedge the Platt US MW Transaction price per pound for the delivery of ~~46.3~~ 10.5million pounds of aluminum through December 2022, at an average price of $~~$0.12~~ 0.11per pound, with maturity dates of between one ~~month~~ and ~~eighteen~~six months ~~months.~~. We assessed the risk of non-performance of the Company and our counterparty to these contracts, as applicable, and determined it was immaterial and, therefore, did not record any adjustment to their fair values as of July ~~3, 2021.~~2, 2022.

We assess the effectiveness of our aluminum forward and MTP contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our aluminum forward contracts is reported as a component of accumulated other comprehensive income (loss) and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. ~~The~~We expect the amount of ~~income, net, recognized in the “accumulated~~accumulated other comprehensive ~~income (loss)” line item~~loss of approximately $3.2 million in the accompanying condensed consolidated balance sheet as of July ~~3, 2021, that we expect will~~2, 2022, to be reclassified to earnings within the next twelve ~~months, is approximately $13.2 million.~~months.

- 27 -

The fair values of our aluminum hedges and MTP contracts are classified in the accompanying condensed consolidated balance sheets at July ~~3, 2021~~2, 2022 and January ~~2, 2021,~~1, 2022, as follows (in thousands):


	Derivative Assets			Derivative Liabilities				Derivative Assets			Derivative Liabilities
	July 3, 2021			July 3, 2021				July 2, 2022			July 2, 2022
Derivatives designated as hedging
instruments under Subtopic 815-20:	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivative instruments:
Aluminum contracts	Other current assets	$	7,752	Accrued liabilities	$	—		Other current assets	$	152	Accrued liabilities	$	(5,325	)
MTP contracts	Other current assets		5,437	Accrued liabilities		—		Other current assets		1,987	Accrued liabilities		—
Aluminum contracts	Other assets		477	Other liabilities		—		Other assets		—	Other liabilities		—
MTP contracts	Other assets		1,399	Other liabilities		—		Other assets		—	Other liabilities		—
Total derivative instruments	Total derivative assets	$	15,065	Total derivative liabilities	$	—		Total derivative assets	$	2,139	Total derivative liabilities	$	(5,325	)

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

~~- 27 -~~

The ending accumulated balance for the aluminum forward and MTP contracts included in accumulated other comprehensive income (losses), net of tax, was an accumulated other comprehensive income of $~~$11.3~~ 2.4million as of July ~~3, 2021,~~2, 2022, and was an accumulated other comprehensive income of $~~$2.7~~ 7.0million at January ~~2, 2021.~~1, 2022. The income tax effects of accumulated comprehensive income (losses) are released as amounts are reclassified out of accumulated comprehensive income (losses) at the income tax rate used at the time those income tax effects were provided, which generally represents our blended statutory income tax rate.

The following represents the gains (losses) on derivative financial instruments, and their classifications within the accompanying condensed consolidated financial statements, for the three and six months ended July 2, 2022 and July 3, 2021 ~~and July 4, 2020~~ (in thousands):


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

Aluminum contracts	$	(13,022	)	$	5,108	Cost of sales	$	1,210	$	2,764

MTP contracts	$	93		$	3,965	Cost of sales	$	2,488	$	1,369

	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
	Six Months Ended						Six Months Ended
	July 2,			July 3,			July 2,		July 3,
	2022			2021			2022		2021

Aluminum contracts	$	(7,415	)	$	9,191	Cost of sales	$	2,588	$	4,152

MTP contracts	$	561		$	8,170	Cost of sales	$	3,172	$	1,756

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

July 3,

July 4,

July 3,

July 4,

2021

2020

2021

2020

Aluminum contracts

$
5,108

$
1,556

Cost of sales

$
2,764

$
(1,506
)

MTP contracts

$
3,965

$
(26
)

Cost of sales

$
1,369

$
(87
)

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

Six Months Ended

Six Months Ended

July 3,

July 4,

July 3,

July 4,

2021

2020

2021

2020

Aluminum contracts

$
9,191

$
(3,604
)

Cost of sales

$
4,152

$
(2,118
)

MTP contracts

$
8,170

$
(79
)

Cost of sales

$
1,756

$
(87
)

- 28 -

NOTE 15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table shows the components of accumulated other comprehensive income (loss) for the three and six months ended July 2, 2022 and July 3, 2021 ~~and July 4, 2020~~ (in thousands):

Three months ended July 3, 2021

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at April 3, 2021

$
4,428

$
3,187

$
7,615

Change in fair value of derivatives

5,108

3,965

9,073

Amounts reclassified from other comprehensive loss

(2,764
)

(1,369
)

(4,133
)
Tax effect

(581
)

(644
)

(1,225
)
Net current-period other comprehensive income

1,763

1,952

3,715

Balance at July 3, 2021

$
6,191

$
5,139

$
11,330

Six months ended July 3, 2021

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at January 2, 2021

$
2,403

$
317

$
2,720

Change in fair value of derivatives

9,191

8,170

17,361

Amounts reclassified from other comprehensive loss

(4,152
)

(1,756
)

(5,908
)
Tax effect

(1,251
)

(1,592
)

(2,843
)
Net current-period other comprehensive income

3,788

4,822

8,610

Balance at July 3, 2021

$
6,191

$
5,139

$
11,330


Three months ended July 2, 2022	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at April 2, 2022	$	6,784		$	3,205		$	9,989
Increase (decrease) in fair value of derivatives		(13,022	)		93			(12,929	)
Amounts reclassified from accumulated other comprehensive income (loss)		(1,210	)		(2,488	)		(3,698	)
Tax effect		3,602			668			4,270
Net current-period other comprehensive loss		(10,630	)		(1,727	)		(12,357	)
Balance at July 2, 2022	$	(3,846	)	$	1,478		$	(2,368	)

Six months ended July 2, 2022	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at January 1, 2022	$	3,610		$	3,396		$	7,006
Increase (decrease) in fair value of derivatives		(7,415	)		561			(6,854	)
Amounts reclassified from accumulated other comprehensive income (loss)		(2,588	)		(3,172	)		(5,760	)
Tax effect		2,547			693			3,240
Net current-period other comprehensive loss		(7,456	)		(1,918	)		(9,374	)
Balance at July 2, 2022	$	(3,846	)	$	1,478		$	(2,368	)



Three months ended July 3, 2021	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at April 3, 2021	$	4,428		$	3,187		$	7,615
Increase (decrease) in fair value of derivatives		5,108			3,965			9,073
Amounts reclassified from accumulated other comprehensive income (loss)		(2,764	)		(1,369	)		(4,133	)
Tax effect		(581	)		(644	)		(1,225	)
Net current-period other comprehensive income		1,763			1,952			3,715
Balance at July 3, 2021	$	6,191		$	5,139		$	11,330

Six months ended July 3, 2021	Aluminum			MTP
(in thousands)	Contracts			Contracts			Total
Balance at January 2, 2021	$	2,403		$	317		$	2,720
Increase (decrease) in fair value of derivatives		9,191			8,170			17,361
Amounts reclassified from accumulated other comprehensive income (loss)		(4,152	)		(1,756	)		(5,908	)
Tax effect		(1,251	)		(1,592	)		(2,843	)
Net current-period other comprehensive income		3,788			4,822			8,610
Balance at July 3, 2021	$	6,191		$	5,139		$	11,330

Three months ended July 4, 2020

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at April 4, 2020

$
(3,648
)

$
(40
)

$
(3,688
)
Change in fair value of derivatives

1,556

(26
)

1,530

Amounts reclassified from other comprehensive loss

1,506

87

1,593

Tax effect

(766
)

(15
)

(781
)
Net current-period other comprehensive income

2,296

46

2,342

Balance at July 4, 2020

$
(1,352
)

$
6

$
(1,346
)

Six months ended July 4, 2020

Aluminum

MTP

(in thousands)

Contracts

Contracts

Total

Balance at December 28, 2019

$
(238
)

$
-

$
(238
)
Change in fair value of derivatives

(3,604
)

(79
)

(3,683
)
Amounts reclassified from other comprehensive loss

2,118

87

2,205

Tax effect

372

(2
)

370

Net current-period other comprehensive income

(1,114
)

6

(1,108
)
Balance at July 4, 2020

$
(1,352
)

$
6

$
(1,346
)

- 29 -

NOTE 16. SEGMENTS

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 sales from our facilities in ~~Florida, including the net sales of our Eco Acquisition.~~Florida. The Western reporting segment, also an operating segment, is composed of ~~the results of WWS.~~sales from our facilities in Arizona and California.

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

The following table represents summary financial data attributable to our operating segments for the three and six months ended July 2, 2022, and July 3, 2021. Results of the Southeast segment for the three and six months ended July 2, 2022 includes the results of Eco for the entire three- and six-month periods, whereas for the three and six months ended July 3, 2021, the three months ended July 3, 2021 includes the results of Eco for the entire three-month period, but the six months ended July 3, 2021 includes only its post-acquisition period from February 1, 2021. Results of the Western segment for the three and six months ended July 2, 2022 includes the results of CRi, acquired May 1, 2021, and Anlin, acquired October 25, 2021. Results of the Western segment for the three and six months ended July 3, 2021, includes CRi's results for the post acquisition period from May 1, 2021, and no results from Anlin. Corporate overhead has been allocated to each segment using an allocation method we believe is reasonable (in thousands):


	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
	2022		2021		2022		2021
Net sales:
Southeast segment	$	307,492	$	242,449	$	579,259	$	476,087
Western segment		99,029		43,051		185,924		80,505

Total net sales	$	406,521	$	285,500	$	765,183	$	556,592

Income from operations:
Southeast segment	$	41,014	$	15,521	$	66,570	$	34,264
Western segment		14,611		5,743		27,766		11,196

Total income from operations		55,625		21,264		94,336		45,460

Interest expense, net		7,155		7,825		14,235		15,282

Total income before income taxes	$	48,470	$	13,439	$	80,101	$	30,178

Depreciation expense for the three months ended July 2, 2022 and July ~~4, 2020 (in thousands):~~3, 2021, was $7.0 million and $6.8 million for our Southeast segment, respectively, and $1.5 million and $0.8 million for our Western segment, respectively. Depreciation expense for the six months ended July 2, 2022 and July 3, 2021, was $13.9 million and $12.6 million for our Southeast segment, respectively, and $3.1 million and $1.7 million for our Western segment, respectively. Amortization expense for the three months ended July 2, 2022 and July 3, 2021, $2.8 million, and $2.8 million for our Southeast segment, respectively, and $3.1 million and $2.4 million for our Western segment, respectively. Amortization expense for the six months ended July 2, 2022 and July 3, 2021, $5.5 million, and $5.2 million for our Southeast segment, respectively, and $8.4 million and $4.7 million for our Western segment, respectively.

Total assets of our Southeast segment as of July 2, 2022 and January 1, 2022 were $979.8 million and $911.3 million, respectively. Total assets of our Western segment as of July 2, 2022 and January 1, 2022 were $586.6 million and $549.3 million, respectively.

Three Months Ended

Six Months Ended

July 3,

July 4,

July 3,

July 4,

2021

2020

2021

2020

Net sales:

Southeast segment
$
242,449

$
172,859

$
476,087

$
356,500

Western segment

43,051

29,924

80,505

66,487

Total net sales
$
285,500

$
202,783

$
556,592

$
422,987

Income from operations:

Southeast segment
$
15,521

$
18,717

$
34,264

$
44,538

Western segment

5,743

1,777

11,196

2,863

Impairment of trade name⁽¹⁾

—

(8,000
)

—

(8,000
)
Restructuring costs and charges⁽²⁾

—

(3,906
)

—

(3,906
)

Total income from operations

21,264

8,588

45,460

35,495

Interest expense, net

7,825

6,856

15,282

14,025

Total income before income taxes
$
13,439

$
1,732

$
30,178

$
21,470

~~(1)~~

~~For the three and six months ended July 4, 2020, the impairment of $8.0 million relates to WWS trade name.~~

~~(2)~~

~~For the three and six months ended July 4, 2020, the restructuring costs and charges of $3.9 million relates to Southeast segment.~~

- 30 -

NOTE 17. REEDEMABLE NON-CONTROLLING INTEREST

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

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

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

Based on the formula in the operating agreement governing this transaction, the future redemption value of the redeemable non-controlling interest was estimated to be $~~55.1~~ 51.4million, which we accreted to $~~$33.0~~ 39.6million as of July ~~3, 2021.~~

2, 2022.

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


	Six Months Ended
	July 2,		July 3,
(in thousands)	2022		2021
Balance at beginning of period	$	36,863	$	—
Redeemable non-controlling interest in Eco at initially estimated fair value		—		28,464
Net income attributable to redeemable non-controlling interest		961		979
Change in value of redeemable non-controlling interest		1,785		3,563
Balance at end of period	$	39,609	$	33,006

Six Months Ended

July 3,

(in thousands)
2021

Balance at beginning of period
$
—

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

28,464

Net income attributable to redeemable non-controlling interest

979

Change in value of redeemable non-controlling interest

3,563

Balance at end of period
$
33,006

- 31 -

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

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

Special Note Regarding Forward-Looking Statements

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

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

increases in transportation costs, including increases in fuel prices;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

~~increases in transportation costs, including increases in fuel prices;~~

•

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

•

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

•

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

•

risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by “hackers” and theft of data and information from our systems, and the risks that our information technology systems do not function as intended or experience temporary or long-term failures to perform as intended;

•

~~product liability and warranty claims brought against us;~~

•

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

•

the other risks and uncertainties discussed under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarter ended July 3, 2021, and under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended January 2, 2021 and our other filings with the Securities and Exchange Commission.

- 32 -

•

product liability and warranty claims brought against us;

•

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

•

the other risks and uncertainties discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K/A for the year ended January 1, 2022 and our other filings with the Securities and Exchange Commission.

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

EXECUTIVE OVERVIEW

Sales and Operations

During the second quarter of ~~2021,~~2022, we experienced ~~increases in sales~~strong growth at both our Southeast and Western segments, as ~~demand~~the momentum of growth we experienced over last year continued in 2022. Additionally, we continue to make strategic marketing investments which are paying dividends through customer awareness during the repair and remodeling season. Of our key markets of Florida and in the western U.S. continued to increase. We believe this increased demand is being driven by improved economic conditions in 2021 as compared to the challenging conditions of 2020 which were a result of the Pandemic. Our sales also increased due to the inclusion of thetotal net sales ~~of our investment in Eco of~~ ~~$24~~ ~~million in~~for the second quarter of ~~2021. Strength in the housing sector and improving economic conditions in our key markets in the southeast and west U.S. continued to drive solid growth in order entry in the second quarter~~2022 of ~~2021~~$406.5 million, which increased 42.4% compared to ~~last year’s second quarter resulting in year-over-year order growth of 35%. Excluding sales of Eco, our Southeast segment net sales were~~ ~~$218~~ $285.5 million in the second quarter of 2021, ~~compared to~~ ~~$173~~ growth was both organic and from acquisitions. Our Southeast segment's net sales were $307.5 millionin the second quarter of ~~2020, an increase of~~ ~~$45~~ ~~million, or~~ ~~26%.~~ ~~Net sales of our Western segment increased~~ ~~$13~~ ~~million, or~~ ~~44%~~,2022, compared to ~~$43~~ $242.4 million in the second quarter of 2021, an increase of $65.1 million, or 26.8%. This growth was entirely organic. We believe some of this organic growth was driven by gaining market share as the changing market dynamics in our largest market of Florida has led one of our larger competitors in our southeast region to discontinue its aluminum product line, allowing us to pick up market share. Our NewSouth brand continues to perform well, and is benefitting from organic growth in our main market of Florida, but also the expansion of our direct-to-consumer footprint in markets outside of Florida as we are in various stages of adding new retail locations to our existing list of stores, with our planned Atlanta location expected to be opened in August 2022.

One of the biggest events that occurred recently was the passage of Florida House Bill 7071, signed into law in May 2022. This bill provides two-year tax relief to Florida residences who choose to "harden" their homes against the damaging effects of storms by investing in impact-resistant windows, doors, and other product categories. We're excited about this great benefit for Florida home owners which ~~included sales~~we believe will provide them with the incentive needed to improve the safety and value of their homes, and that their materials of choice will include impact-resistant windows and doors from our ~~CRi Acquisition~~Company's portfolio of Florida impact-resistant brands. Going forward, we believe our Florida operations will benefit from this home-hardening legislation. The main highlight of the bill includes a sales tax exemption for Floridians that harden their homes against natural disasters using impact-resistant products like those sold by the Company, which is available for the next two years.$3

Our Western segment's net sales were $99.0 million ~~from~~ ~~$30~~ ~~million~~in the second quarter of 2020. We expect demand at both our Southeast and Western business units to continue to recover as economic conditions will improve as the economy continues to reopen and the country approaches pre-Pandemic activity, provided that variants of COVID-19 do not cause a return to the strict restrictions experienced in the spring of 2020. We also continued to execute on several strategic selling and marketing initiatives, which have also been key drivers of sales.

~~Although 2021 second quarter consolidated net sales increased~~ ~~$83~~ ~~million, or~~ ~~40.8%~~,2022, compared to ~~last year’s second quarter, our gross margin decreased to~~ ~~34.0%~~$43.1 million in the second quarter of 2021, an increase of $55.9 million. While sales for the second quarter of 2022 of our Western segment includes acquisition growth from Anlin and CRi, our existing business grew organically by 40.6% compared to ~~36.7%~~last year's second quarter. We believe the strength in our Western segment is due to our production builder business as this sector has overperformed for several quarters, as we believe that demand for conversion to indoor/outdoor living continues to be strong. We believe we are also benefitting from our capacity expansion in the ~~prior year~~Phoenix, Arizona area and our new San Diego showroom in Southern California. We believe the organic growth we had in the second ~~quarter. During~~quarter of 2022 reflects the strength of our portfolio of brands across our entire geographic footprint.

Our gross profit increased to $165.1 million in the second quarter of 2022, producing a gross margin of 40.6%, compared to $97.0 million in the 2021 second quarter, and a gross margin of 34.0%, an improvement in gross margin of 660 basis points from the second quarter of 2021 in response to increasing demand and a resulting increase in our backlog of orders, we determined to increase our company-wide manufacturing headcount. This resulted in a 17% increase in overall headcount across our Florida operations during the second quarter of 2021 as compared to headcount at the end of the 2021 first quarter. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in 2021 second quarter as compared to the second quarter of ~~2020.~~2022. We were able to produce this operational improvement despite headwinds of inflationary pressure being felt on material and labor costs, as well as supply-chain challenges we have experienced in obtaining the required volumes of aluminum needed to meet demand. We also ~~saw a continuation of inflationary pressures on material costs and labor rates that existed~~benefitted from price increases implemented earlier in the ~~first quarter of 2021 into~~year to offset such inflationary headwinds. During the 2022 second quarter, we have been focused on improving our manufacturing processes in order to reduce lead-times to meet the continued growing demand. Recent investments in our team to help them achieve higher talent levels have also helped generate improved operational efficiencies across our entire portfolio of ~~2021. Earlier this year, we announced price increases to attempt to offset these inflationary conditions,~~brands, which we expect will begin to offset these cost impacts during our 2021 second half. Specific to our Western business unit, beginning in 2020 and into 2021, we have made significant enhancements to manufacturing operations at our Western business unit facility in Phoenix, which has resulted in an improvement in gross margin at our Western business unit in the first half of 2021 compared to last year’s first half.

~~Because we~~ believe ~~housing demand in the United States~~ will continue to ~~strengthen in~~benefit our ~~key markets, we have increased our 2021 full-year sales guidance to a range~~gross margin through the balance of $1.1 billion to $1.2 billion, from our prior guidance of $1.050 billion to $1.125 billion. These ranges include our Eco Acquisition from the date of our investment of February 1, 2021 at 100% of its sales.2022.

- 33 -

Performance Summary

The following table presents financial data derived from our unaudited condensed consolidated statements of operations as a percentage of total net sales for the periods indicated. The ~~three-month~~three- and six-month periods ended July ~~3, 2021~~2, 2022 and July ~~4. 2020~~3, 2021 are composed of 13 ~~weeks. The six-month period ended July 3, 2021 is composed of~~weeks and 26 weeks, ~~whereas the six-month period ended July 4, 2020 is composed of 27 weeks~~respectively (in thousands, except percentages):

	Three Months Ended
	July 3,				July 4,				Three Months Ended
	2021				2020				July 2, 2022				July 3, 2021
	(unaudited)								(unaudited)
Net sales	$	285,500		100.0%	$	202,783		100.0%	$	406,521		100.0 %	$	285,500		100.0 %
Cost of sales		188,491		66.0%		128,320		63.3%		241,391		59.4 %		188,491		66.0 %
Gross profit		97,009		34.0%		74,463		36.7%		165,130		40.6 %		97,009		34.0 %
Selling, general and administrative expenses		75,745		26.5%		53,969		26.6%		109,505		26.9 %		75,745		26.5 %
Impairment of trade name		—		-		8,000		3.9%
Restructuring costs and charges		—		-		3,906		1.9%
Income from operations		21,264		7.4%		8,588		4.2%		55,625		13.7 %		21,264		7.4 %
Interest expense, net		7,825		2.7%		6,856		3.4%		7,155		1.8 %		7,825		2.7 %
Income before income taxes		13,439		4.7%		1,732		0.9%		48,470		11.9 %		13,439		4.7 %
Income tax expense (benefit)		2,726		1.0%		(467	)	(0.2)%
Income tax expense										12,005		3.0 %		2,726		1.0 %
Net income		10,713		3.8%		2,199		1.1%		36,465		9.0 %		10,713		3.8 %
Less: Net income attributable to redeemable non-controlling interest		(568	)	(0.2)%		—		-
Less: Net income attributable to redeemable RNCI										(304	)	(0.1)%		(568	)	(0.2)%
Net income attributable to the Company	$	10,145		3.6%	$	2,199		1.1%		36,161		8.9 %		10,145		3.6 %
Decrease (increase) in redemption value of RNCI										351		0.1 %		(3,563	)	(1.2)%
Net income attributable to common shareholders									$	36,512		9.0 %	$	6,582		2.3 %

	Six Months Ended
	July 3,				July 4,			Six Months Ended
	2021				2020			July 2, 2022				July 3, 2021
	(unaudited)							(unaudited)
Net sales	$	556,592		100.0%	$	422,987	100.0%	$	765,183		100.0 %	$	556,592		100.0 %
Cost of sales		365,621		65.7%		267,397	63.2%		465,460		60.8 %		365,621		65.7 %
Gross profit		190,971		34.3%		155,590	36.8%		299,723		39.2 %		190,971		34.3 %
Selling, general and administrative expenses		145,511		26.1%		108,189	25.6%		205,387		26.8 %		145,511		26.1 %
Impairment of trade name		—		-		8,000	1.9%
Restructuring costs and charges		—		-		3,906	0.9%
Income from operations		45,460		8.2%		35,495	8.4%		94,336		12.3 %		45,460		8.2 %
Interest expense, net		15,282		2.7%		14,025	3.3%		14,235		1.9 %		15,282		2.7 %
Income before income taxes		30,178		5.4%		21,470	5.1%		80,101		10.5 %		30,178		5.4 %
Income tax expense		6,670		1.2%		3,671	0.9%		19,810		2.6 %		6,670		1.2 %
Net income		23,508		4.2%		17,799	4.2%		60,291		7.9 %		23,508		4.2 %
Less: Net income attributable to redeemable non-controlling interest		(979	)	(0.2)%		—	-
Less: Net income attributable to redeemable RNCI									(961	)	(0.1)%		(979	)	(0.2)%
Net income attributable to the Company	$	22,529		4.0%	$	17,799	4.2%		59,330		7.8 %		22,529		4.0 %
Decrease (increase) in redemption value of RNCI									(1,785	)	(0.2)%		(3,563	)	(0.6)%
Net income attributable to common shareholders								$	57,545		7.5 %	$	18,966		3.4 %

- 34 -

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 2, 2022 AND JULY 3, 2021

The three-month periods ended July 2, 2022 and July 3, 2021 ~~AND JULY 4, 2020~~are each composed of 13 weeks.

Net sales

Three Months Ended

July 3, 2021

July 4, 2020

Net Sales

% of sales

Net Sales

% of sales

% change

By segment:

Southeast segment

$
242.4

84.9%

$
172.9

85.3%

40.3%

Western segment

43.1

15.1%

29.9

14.7%

43.9%

Total net sales

$
285.5

100.0%

$
202.8

100.0%

40.8%


	Three Months Ended
	July 2, 2022			July 3, 2021
	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	307.5	75.6%	$	242.4	84.9%	26.8%
Western segment		99.0	24.4%		43.1	15.1%	130.0%

Total net sales	$	406.5	100.0%	$	285.5	100.0%	42.4%

Net sales for the second quarter of ~~2021~~2022 were ~~$285.5~~ $406.5 million, an ~~$82.7~~ a $121.0 million, or ~~40.8%~~42.4%, increase in sales, from ~~$202.8~~ $285.5 million in the second quarter of the prior year.

~~Net sales~~During the second quarter of 2022, we experienced strong growth at both our Southeast ~~segment were~~ ~~$242.4~~ and Western segments, as the momentum of growth we experienced over last year continued in 2022. Additionally, we continue to make strategic marketing investments which are paying dividends through customer awareness during the repair and remodeling season. Of our total net sales for the second quarter of 2022 of $406.5 million, which increased 42.4% compared to $285.5 million in the second quarter of 2021, ~~compared with~~ ~~$172.9~~ ~~million in the 2020 second quarter, an increase of~~ ~~$69.5~~ ~~million, or~~ ~~40.3%~~.growth was both organic and from acquisitions. Our Southeast ~~segment~~segment's net sales ~~in the second quarter of 2021 includes~~ ~~$24.1~~ ~~million from our investment in Eco. Net sales of our Western segment~~ were ~~$43.1~~ $307.5 million in the second quarter of ~~2021, compared with~~ ~~$29.9~~ ~~million in the second quarter of 2020, an increase of~~ ~~$13.2~~ ~~million, or~~ ~~43.9%. Sales of our Western segment are composed of the sales of WWS, including sales from our CRi Acquisition, which totaled~~ ~~$3.1~~ ~~million in the 2021 second quarter.~~

~~The~~ ~~$82.7~~ million increase in net sales for the second quarter of 2021 was primarily driven by organic growth, and the effects of the recovery from the Pandemic, at both our Southeast and Western segments, and the inclusion in the second quarter of 2021 of the net sales of our acquisition of Eco. Net sales of our Southeast segment for the second quarter of 2021, excluding the sales of Eco of ~~$24.1~~ ~~million, increased~~ ~~$45.4~~ ~~million, or~~ ~~26.3%~~ as2022, compared to the second quarter of 2020. We believe the organic increase in sales of our Southeast segment is due to a resumption of demand for our products in both the new construction and repair and remodel markets that approached the pre-Pandemic strength that existed in early 2020. Our NewSouth direct-to-consumer brand also experienced solid organic growth in the 2021 second quarter, compared to last year’s second quarter. Our Western segment experienced strong growth in the second quarter of 2021, compared to the 2020 second quarter, which we believe continued to see a strengthening housing market in the western United States that began in late 2020, but also as the effects of the Pandemic, which appeared to be more pronounced in the West, lessened in the 2021 second quarter compared to last year.

~~Gross profit and gross margin~~

~~Gross profit was~~ ~~$97.0~~ $242.4 million in the second quarter of 2021, an increase of ~~$22.5~~ $65.1 million, or ~~30.3%, from~~ ~~$74.5~~ 26.8%. This growth was entirely organic. Our Western segment's net sales were $99.0 million in the second quarter of ~~2020. Our gross margin was~~ ~~34.0%~~ ~~in the second quarter of 2021,~~2022, compared to ~~36.7%~~ in the prior year second quarter. During the second quarter of 2021, in response to increasing demand and a resulting increase in our backlog of orders, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in gross margin in the 2021 second quarter as compared to the second quarter of 2020. Gross margin was also negatively impacted by inflationary conditions, which continued into the second quarter of 2021 from the 2021 first quarter. Earlier this year, we announced price increases to attempt to offset these inflationary conditions, which we expect will begin to offset these cost impacts during our 2021 second half. Gross margin in the second quarter of 2021benefitted from improved operating efficiencies in our Western segment, and the addition of and accretion from our investment in Eco.

~~Selling, general and administrative expenses~~

~~Selling, general and administrative (“SG&A”) expenses were~~ ~~$75.7~~ $43.1 million in the second quarter of 2021, an increase of ~~$21.8~~ ~~million,~~$55.9 million. While sales for the second quarter of 2022 of our Western segment includes acquisition growth from Anlin and CRi, our existing business grew organically by 40.6% compared to last year's second quarter. We believe the strength in our Western segment is due to our production builder business as this sector has overperformed for several quarters, as we believe that demand for conversion to indoor/outdoor living continues to be strong. We believe we are also benefitting from our capacity expansion in the Phoenix, Arizona area and our new San Diego showroom in Southern California.~~$54.0~~

Gross profit and gross margin

Gross profit was $165.1 million in the second quarter of ~~2020.~~2022, an increase of $68.1 million, or 70.2%, from $97.0 million in the second quarter of 2021. Our gross margin was 40.6% in the second quarter of 2022, compared to 34.0% in the prior year second quarter. The increases in gross profit and gross margin include the effects of price increase actions we took to offset the impacts of labor and material cost headwinds we have experienced for several quarters. Also, during the second quarter of 2022, we maintained a high degree of focus on our supply chain to minimize disruptions, which helped us maintain a high level of operational efficiency which lead to reduced delivery lead-times. We also continued to invest in our labor talent which helped generate operational efficiencies across all our businesses in response to increasing demand and believe these actions will continue to benefit our gross margin as we try to offset the impacts of rising costs for materials and labor, and will continue to grow our company with high-quality talent.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were $109.5 million in the second quarter of 2022, an increase of $33.8 million, from $75.7 million in the second quarter of 2021. SG&A in the second quarter of ~~2021~~2022 was ~~26.5%~~26.9% of net sales, compared to ~~26.6%~~26.5% of net sales in the second quarter of ~~2020.~~2021. The increase in SG&A in the second quarter of 2022, compared to last year's second quarter is partially due to the inclusion of SG&A from our 2021 acquisition of ~~Eco~~Anlin, which added $8.1 million of SG&A in the ~~2021~~2022 second quarter, ~~which totaled~~ ~~$5.1~~ ~~million. Excluding~~and included $0.6 million of non-cash amortization expense relating to its intangible assets. However, the year-over-year increase in SG&A of ~~$5.1~~ ~~million,~~was also driven by increasing distribution and ~~sales of Eco of~~ ~~$24.1~~ ~~million, SG&A as a percentage of sales would be~~ ~~27.0%~~.

~~Additionally, there were increases compared~~variable overhead costs due to the second quarter of 2020 in several other categories, including depreciation, stock-based compensation, as well as additional costs from investing in our strategic selling and marketing initiatives, as well as higher distribution costs on increased sales levels.

~~- 35 -~~

~~Impairment of trade name~~

~~There was an impairment of our WWS trade name of~~ ~~$8.0~~ ~~million in the three months ended July 4, 2020. Following an~~ increase in ~~net sales of~~ ~~14.3%~~ insales. Increasing fuel costs and the ~~first quarter of 2020, compared to~~inflationary conditions we have experienced over the ~~first quarter of 2019, net sales at our~~ ~~WWS reporting unit decreased~~ last few quarters have also impacted SG&A year-over-year.~~19.3%~~

in the second quarter of 2020 compared to the 2019 second quarter. As a result of this decrease in net sales, as well as continued deterioration in macro-economic conditions in our core western markets relating to the Pandemic, we determined to complete an interim impairment test of our WWS trade name as of July 4, 2020, which included decreases in modeling assumptions for net sales of our WWS reporting unit for our 2020 and 2021 fiscal years. Based on our revised modeling, we concluded that the fair value of our WWS trade nameIncome from operations

Income from operations was ~~less than its carrying value, which resulted in an impairment of our WWS trade name of~~ ~~$8.0~~ $55.6 million in the second quarter of ~~2020.~~

~~Restructuring costs and charges~~

In April 2020, the Company’s management approved a plan to consolidate its manufacturing operations in Florida, which included exiting our manufacturing facility in Orlando, Florida, where our WinDoor and Eze-Breeze products were assembled and relocate the manufacturing2022, an increase of those products to our Venice and Tampa, Florida plants, respectively. We ceased production at the Orlando facility during June 2020. As a result of this consolidation, we recorded restructuring costs and charges totaling $3.9$34.3 million, ~~in the three months ended July 4, 2020.~~

~~Income~~ from ~~operations~~

~~Income from operations was~~ ~~$21.3~~ $21.3 million in the second quarter of ~~2021, an increase of~~ ~~$12.7~~ ~~million, from~~ ~~$8.6~~ ~~million in the second quarter of 2020.~~2021. Income from operations in the second quarter of ~~2021~~2022 includes ~~$15.5~~ $41.0 million from our Southeast segment and nearly ~~$5.8~~ $14.6 million from our Western segment, compared to ~~$18.7~~ $15.5 million and ~~$1.8~~ $5.8 million from our Southeast and Western segments, respectively, in the second quarter of ~~2020,~~2021, all after allocation of corporate operating costs in both ~~periods, but also included an impairment charge of~~ periods.~~$8.0~~ ~~million relating to our WWS trade name of our Western segment, and restructuring costs and charges of~~

~~$3.9 million relating to our Florida plant consolidation actions taken in the 2020 second quarter relating to our Southeast segment.~~The increase in income from operations was ~~also~~ related to ~~leverage~~the benefit from higher sales in the second quarter of ~~2021~~2022 compared to last year’s second quarter, as well as the benefits of the continued efficiency improvements at ~~our Western segment. Income from operations in the second quarter of 2021 also includes the operating profits of~~ both our ~~Eco~~Southeast and ~~CRi acquisitions.~~Western segments, more than offsetting the rising costs for materials in aluminum and glass, including the increasing costs of distribution being passed onto us by our vendors, and the continuing costs of attracting, training and retaining an experienced labor force.

- 35 -

Interest expense, net

Interest expense was ~~$7.8~~ $7.2 million in the second quarter of ~~2021, an increase~~2022, a decrease of ~~$1.0~~ $0.7 million, or ~~14.1%~~8.6%, from ~~$6.9~~ $7.8 million in the second quarter of ~~2020. Interest~~2021. The redemption of the $425.0 million of higher rate 6.75% 2018 Senior Notes due 2026, with the $575.0 million of lower rate 4.375% 2021 Senior Notes in 2021 primarily resulted in a lower level of interest expense in the second quarter of ~~2021 includes an increase in interest expense due~~2022 compared to the ~~issuance~~second quarter of ~~the Second Additional Senior Notes totaling~~ ~~$60.0~~ 2021.million effective on January 25, 2021, which we used to finance a portion of the purchase price for our investment in Eco. This increase was partially offset by a decrease in interest costs relating to the amortization of the ~~$3.3~~ ~~million premium we received on the Second Additional Senior Notes.~~

Income tax expense

~~Our~~We had income tax expense ~~was~~of $12.0 million for the three months ended July 2, 2022, compared with income tax expense of $2.7 million for the three months ended July 3, ~~2021, compared with income tax benefit of $0.5 million for the three months ended July 4, 2020.~~2021. Our effective tax rate for the three months ended July ~~3, 2021,~~2, 2022, was ~~an expense rate of 20.3%~~24.8%, and was ~~a benefit rate of 27.0%~~20.3% for the three months ended July ~~4, 2020.~~3, 2021. Our income tax expense for the three months ended July 2, 2022, and July 3, 2021, includes ~~$426~~ $237 thousand and $426 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco.

Income tax expense in the three months ended July 2, 2022 includes a refund from the state of Florida, received by the Company in the second quarter of 2022, relating to excess taxes received by the state in 2021, which was $584 thousand, benefiting tax expense by $462 thousand, net of its Federal tax effect. Income tax expense in the three months ended July 2, 2022 and July 3, 2021 ~~includes~~include discrete items of income tax benefit relating to excess tax benefits from the ~~exercises of stock options and~~ lapses of restrictions on stock awards, which totaled ~~$605~~ ~~thousand. Such discrete item was nearly zero~~$40 thousand in the three months ended July ~~4, 2020. The three-month period~~2, 2022, and $605 thousand in the three months ended July ~~4, 2020 also included the benefit of a refund from the state of Florida relating to excess taxes received by the state caused by the Tax Cuts and Jobs Act of 2017, which totaled~~ ~~$553~~ ~~thousand, net of its Federal tax effect. Other discrete items included in both periods include true-ups of research and development tax credit estimates to actual tax credits claimed.~~3, 2021. Excluding discrete items of income tax, the effective tax rates for the three months ended July ~~3, 2021,~~2, 2022 and July ~~4, 2020,~~3, 2022, would have been income tax expense rates of ~~24.1%~~25.6% and ~~21.7%~~24.1%, respectively.

~~We estimate~~In September 2021, the state of Florida announced that the corporate income tax rate for the 2021 tax year was being lowered from its then current level of 4.458% to 3.535%. However, for 2022, Florida's corporate income tax rate returned to its statutory level before the passage of the Tax Cuts and Jobs Act, which is 5.5%. As such, we adjusted our annual effective tax rate for ~~2021, excluding discrete items, will approximate~~2022 to include this increase in rate in Florida, where a substantial portion of our ~~current~~business is apportioned, to an estimated combined statutory federal and state rate of ~~24.7%~~25.7% from our estimate in 2021 of 24.2%. During the first quarters of 2022 and 2021, we were not required to make any payments of estimated federal or state income taxes. In the second quarters of 2022, we made payments of estimated taxes totaling $9.6 million, which included $8.8 million in Federal estimated income taxes with the remainder to various states, primarily Florida. During the second quarter of 2021, we made payments of estimated taxes totaling $10.9 million, which included $7.6 million in Federal estimated income taxes with the remainder to various states, primarily Florida.

Net income attributable to redeemable non-controlling interest

Net income attributable to redeemable non-controlling interest for the three months ended July 2, 2022, was $0.3 million, compared to $0.6 million for the three months ended July 3, 2021, ~~was~~ ~~$0.6~~ ~~million~~ and represents the share of the net income of Eco for the period, attributable to the 25% interest of Eco not acquired by the Company. ~~There was no~~

Change in redemption value of redeemable non-controlling interest

The change in the ~~second quarter~~redemption value of ~~2020.~~the redeemable non-controlling interest for the three-month period ended July 2, 2022, was a decrease of $0.4 million, compared to an increase of $3.6 million in the three months ended July 3, 2021. See Note 17 in Part I, Item 1, for a further discussion of the change in the redemption value of the redeemable non-controlling interest.

- 36 -

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY ~~3, 2021~~2, 2022 AND JULY ~~4, 2020~~3, 2021

The six-month ~~period~~periods ended July 2, 2022 and July 3, 2021 isare each composed of 26 ~~weeks, whereas the six-month period ended July 4, 2020 was composed of 27~~ weeks. ~~We do not believe that this difference significantly affects comparability of the following results of operations.~~

Net sales

Six Months Ended

July 3, 2021

July 4, 2020

Net Sales

% of sales

Net Sales

% of sales

% change

By segment:

Southeast segment

$
476.1

85.5%

$
356.5

84.3%

33.5%

Western segment

80.5

14.5%

66.5

15.7%

21.1%

Total net sales

$
556.6

100.0%

$
423.0

100.0%

31.6%


	Six Months Ended
	July 2, 2022			July 3, 2021
	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	579.3	75.7%	$	476.1	85.5%	21.7%
Western segment		185.9	24.3%		80.5	14.5%	130.9%

Total net sales	$	765.2	100.0%	$	556.6	100.0%	37.5%

Net sales for the first half of ~~2021 were~~ ~~$556.6~~ 2022 was $765.2 million, a ~~$133.6~~ $208.6 million, or ~~31.6%~~37.5%, increase in sales, from ~~$423.0~~ $556.6 million in the first half of the prior year.

~~Net sales~~During the first half of 2022, we experienced strong growth at both our Southeast ~~segment were~~ ~~$476.1~~ and Western segments, as the momentum of growth we experienced over last year continued in 2022. Additionally, we continue to make strategic marketing investments which are paying dividends through customer awareness during the repair and remodeling season. Of our total net sales for the first half of 2022 of $765.2 million, which increased 37.5% compared to $476.1 million in the first half of 2021, ~~compared with~~ ~~$356.5~~ ~~million in the 2020 first half, an increase of~~ ~~$119.6~~ ~~million, or~~ ~~33.5%~~.growth was both organic and from acquisitions. Our Southeast ~~segment~~segment's net sales ~~in the first half of 2021 includes~~ ~~$39.5~~ ~~million from our acquisition of Eco. Net sales of our Western segment~~ were ~~$80.5~~ $579.3 million in the first half of ~~2021, compared with~~ ~~$66.5~~ ~~million in the first half of 2020, an increase of~~ ~~$14.0~~ ~~million, or~~ ~~21.1%. Sales of our Western segment are composed of the sales of WWS, including sales from our CRi Acquisition, which totaled~~ ~~$3.1~~ ~~million in the 2021 first half.~~

~~The~~ ~~$133.6~~ million increase in net sales for the first half of 2021 was primarily driven by organic growth, and the effects of the recovery from the Pandemic, at both our Southeast and Western segments, and the inclusion in the first half of 2021 of the net sales of our acquisition of Eco. Net sales of our Southeast segment for the first half of 2021, excluding the sales of Eco of ~~$39.5~~ ~~million, increased~~ ~~$80.0~~ ~~million, or~~ ~~22.4%~~ as2022, compared to the first half of 2020. We believe the organic increase in sales of our Southeast segment is due to a resumption of demand for our products in both the new construction and repair and remodel markets that approached the pre-Pandemic strength that existed in early 2020. Our NewSouth direct-to-consumer brand also experienced solid organic growth in the 2021 first half, compared to last year’s first half. Our Western segment experienced strong growth in the first half of 2021, compared to the 2020 first half, which we believe continued to see a strengthening housing market in the western United States that began in late 2020, but also as the effects of the Pandemic, which appeared to be more pronounced in the West, lessened in the 2021 second half compared to last year.

~~Gross profit and gross margin~~

~~Gross profit was~~ ~~$191.0~~ $476.1 million in the first half of 2021, an increase of ~~$35.4~~ $103.2 million, or ~~22.7%, from~~ ~~$155.6~~ 21.7%. This growth was entirely organic. Our Western segment's net sales were $185.9 million in the first half of ~~2020. Our gross margin was~~ ~~34.3%~~ ~~in the first half of 2021,~~2022, compared to ~~36.8%~~ in the prior year first half. During the second quarter of 2021, in response to increasing demand and a resulting increase in our backlog of orders, we determined to increase our manufacturing headcount across our Florida operations. While this increase in headcount positions us to better respond to increasing demand through higher production rates, it also required additional investments in training and onboarding of the new members of our manufacturing team to maintain our high standards for safety and quality as new members gain experience in their new roles. These incremental investments resulted in a reduction in gross margin in the 2021 second quarter as compared to the second quarter of 2020. Gross margin was also negatively impacted by inflationary conditions, which continued into the second quarter of 2021 from the 2021 first quarter. Earlier this year, we announced price increases to attempt to offset these inflationary conditions, which we expect will begin to offset these cost impacts during our 2021 second half. Gross margin benefitted from improved operating efficiencies in our Western segment, and the addition of and accretion from our investment in Eco.

~~Selling, general and administrative expenses~~

~~SG&A expenses were~~ ~~$145.5~~ $80.5 million in the first half of 2021, an increase of ~~$108.2~~ ~~million,~~$105.4 million. While sales for the first half of 2022 of our Western segment includes acquisition growth from Anlin and CRi, our existing business grew organically by 40.0% compared to last year's first half. We believe the strength in our Western segment is due to our production builder business as this sector has overperformed for several quarters, as we believe that demand for conversion to indoor/outdoor living continues to be strong. We believe we are also benefitting from our capacity expansion in the Phoenix, Arizona area and our new San Diego showroom in Southern California.~~$37.3~~

Gross profit and gross margin

Gross profit was $299.7 million in the first half of ~~2020.~~2022, an increase of $108.8 million, or 56.9%, from $191.0 million in the first half of 2021. Our gross margin was 39.2% in the first half of 2022, compared to 34.3% in the prior year first half. The increases in gross profit and gross margin include the effects of price increase actions we took to offset the impacts of labor and material cost headwinds we have experienced for several quarters. Also, during the first half of 2022, we maintained a high degree of focus on our supply chain to minimize disruptions, which helped us maintain a high level of operational efficiency which lead to reduced delivery lead-times. We also continued to invest in our labor talent which helped generate operational efficiencies across all our businesses in response to increasing demand and believe these actions will continue to benefit our gross margin as we try to offset the impacts of rising costs for materials and labor, and will continue to grow our company with high-quality talent.

Selling, general and administrative expenses

SG&A expenses were $205.4 million in the first half of 2022, an increase of $59.9 million, from $145.5 million in the first half of 2021. SG&A in the first half of ~~2021~~2022 was ~~26.1%~~26.8% of net sales, compared to ~~25.6%~~26.1% of net sales in the first half of ~~2020.~~2021. The increase in SG&A in the first half of 2022, compared to last year's first half is partially due to the inclusion of SG&A from our 2021 acquisition of ~~Eco~~Anlin, which added $17.3 million of SG&A in the ~~2021~~2022 first half, ~~which totaled~~ ~~$9.3~~ ~~million. Excluding~~and included $3.4 million of non-cash amortization expense relating to its intangible assets. However, the year-over-year increase in SG&A of ~~$9.3~~ ~~million,~~was also driven by increasing distribution and ~~sales of Eco of~~ ~~$39.5~~ ~~million, SG&A as a percentage of sales would be~~ ~~26.4%~~.

~~Additionally, there were increases compared~~variable overhead costs due to the first half of 2020 in several other categories, including depreciation, stock-based compensation, as well as additional costs from investing in our strategic selling and marketing initiatives, as well as higher distribution costs on increased sales levels.

~~- 37 -~~

~~Impairment of trade name~~

~~There was an impairment of our WWS trade name of~~ ~~$8.0~~ ~~million in the six months ended July 4, 2020. Following an~~ increase in ~~net sales of~~ ~~14.3%~~ insales. Increasing fuel costs and the ~~first quarter of 2020, compared to~~inflationary conditions we have experienced over the ~~first quarter of 2019, net sales at our~~last few quarters have also impacted SG&A year-over-year.

~~WWS reporting unit decreased~~ Income from operations

~~19.3%~~ in the second quarter of 2020 compared to the 2019 second quarter. As a result of this decrease in net sales, as well as continued deterioration in macro-economic conditions in our core western markets relating to the Pandemic, we determined to complete an interim impairment test of our WWS trade name as of July 4, 2020, which included decreases in modeling assumptions for net sales of our WWS reporting unit for our 2020 and 2021 fiscal years. Based on our revised modeling, we concluded that the fair value of our WWS trade nameIncome from operations was ~~less than its carrying value, which resulted in an impairment of our WWS trade name of~~ ~~$8.0~~ $94.3 million in the first half of ~~2020.~~

~~Restructuring costs and charges~~

In April 2020, the Company’s management approved a plan to consolidate its manufacturing operations in Florida, which included exiting our manufacturing facility in Orlando, Florida, where our WinDoor and Eze-Breeze products were assembled and relocate the manufacturing2022, an increase of those products to our Venice and Tampa, Florida plants, respectively. We ceased production at the Orlando facility during June 2020. As a result of this consolidation, we recorded restructuring costs and charges totaling $3.9$48.8 million, ~~in the first half ended July 4, 2020.~~

~~Income~~ from ~~operations~~

~~Income from operations was~~ ~~$45.5~~ $45.5 million in the first half of ~~2021, an increase of~~ ~~$10.0~~ ~~million, from~~ ~~$35.5~~ ~~million in the first half of 2020.~~2021. Income from operations in the first half of ~~2021~~2022 includes ~~$34.3~~ $66.6 million from our Southeast segment and ~~$11.2~~ over $27.7 million from our Western segment, compared to ~~$44.5~~ $34.3 million and ~~$2.9~~ $11.2 million from our Southeast and Western segments, respectively, in the first half of ~~2020,~~2021, all after allocation of corporate operating costs in both ~~periods, but also included an impairment charge of~~ periods.

~~$8.0~~ ~~million relating to our WWS trade name of our Western segment, and restructuring costs and charges of~~ ~~$3.9 million relating to our Florida plant consolidation actions taken in the 2020 first half relating to our Southeast segment.~~

- 37 -

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

Interest expense, net

Interest expense was ~~$15.3~~ $14.2 million in the first half of ~~2021, an increase~~2022, a decrease of ~~$1.3~~ $1.0 million, or ~~9.0%~~6.9%, from ~~$14.0~~ $15.3 million in the first half of ~~2020. Interest~~2021. The redemption of the $425.0 million of higher rate 6.75% 2018 Senior Notes due 2026, with the $575.0 million of lower rate 4.375% 2021 Senior Notes in 2021 primarily resulted in a lower level of interest expense in the first half of ~~2021 includes an increase in interest expense due~~2022 compared to the ~~issuance~~first half of ~~the Second Additional Senior Notes totaling~~ ~~$60.0~~ 2021.million effective on January 25, 2021, which we used to finance a portion of the purchase price for our investment in Eco. This increase was partially offset by a decrease in interest costs relating to the amortization of the ~~$3.3~~ ~~million premium we received on the Second Additional Senior Notes.~~

Income tax expense

~~Our~~We had an income tax expense ~~was~~ ~~$6.7~~ of $19.8 million for the six months ended July 2, 2022, compared with income tax expense of $6.7 million for the six months ended July 3, ~~2021, compared with income tax expense of~~ ~~$3.7~~ ~~million for the six months ended July 4, 2020.~~2021. Our effective tax rate for the six months ended July ~~3, 2021,~~2, 2022, was ~~an expense rate of~~ ~~22.1%~~24.7%, and was ~~an expense rate of~~ ~~17.1%~~22.1% for the six months ended July ~~4, 2020.~~3, 2021. Our income tax expense for the six months ended July 2, 2022, and July 3, 2021, includes ~~$731~~ $742 thousand and $731 thousand, respectively, relating to our 75% share of the pre-tax earnings of Eco.

Income tax expense in the six months ended July 3,2, 2022 includes a refund from the state of Florida, received by the Company in the second quarter of 2022, relating to excess taxes received by the state in 2021, which was $584 thousand, benefiting tax expense by $462 thousand, net of its Federal tax effect. Income tax expense in the six months ended July 2, 2022 and July ~~4, 2020~~3, 2021 include discrete items of income tax benefit relating to excess tax benefits from the ~~exercises of stock options and~~ lapses of restrictions on stock awards, which totaled ~~$700~~ $96 thousand in the six months ended July 2, 2022, and $700 thousand in the six months ended July 3, ~~2021, and~~ ~~$737~~ thousand in the six months ended July 4, 2020. The six-month period ended July 4, 2020 also included the benefit of a refund from the state of Florida relating to excess taxes received by the state caused by the Tax Cuts and Jobs Act of 2017, which totaled ~~$553~~ ~~thousand, net of its Federal tax effect. Other discrete items included in both periods include true-ups of research and development tax credit estimates to actual tax credits claimed.~~2021. Excluding discrete items of income tax, the effective tax rates for the six months ended July ~~3, 2021,~~2, 2022 and July ~~4, 2020,~~3, 2022, would have been income tax expense rates of ~~24.1%~~25.4% and ~~24.6%~~24.1%, respectively.

~~We estimate~~In September 2021, the state of Florida announced that the corporate income tax rate for the 2021 tax year was being lowered from its then current level of 4.458% to 3.535%. However, for 2022, Florida's corporate income tax rate returned to its statutory level before the passage of the Tax Cuts and Jobs Act, which is 5.5%. As such, we adjusted our annual effective tax rate for ~~2021, excluding discrete items, will approximate~~2022 to include this increase in rate in Florida, where a substantial portion of our ~~current~~business is apportioned, to an estimated combined statutory federal and state rate of ~~24.7%~~25.7% from our estimate in 2021 of 24.2%. During the first quarters of 2022 and 2021, we were not required to make any payments of estimated federal or state income taxes. During the second quarter of 2022, we made payments of estimated taxes totaling $9.6 million, which included $8.8 million in Federal estimated income taxes with the remainder to various states, primarily Florida. During the second quarter of 2021, we made payments of estimated taxes totaling $10.9 million, which included $7.6 million in Federal estimated income taxes with the remainder to various states, primarily Florida.

Net income attributable to redeemable non-controlling interest

Net income attributable to redeemable non-controlling interest for the six months ended July 2, 2022, was $1.0 million, compared to $1.0 million for the six months ended July 3, 2021, ~~was~~ ~~$1.0~~ ~~million~~ and represents the share of the net income of Eco for the period, attributable to the 25% interest of Eco not acquired by the Company. ~~There was no~~

Change in redemption value of redeemable non-controlling interest

The change in the ~~first half~~redemption value of ~~2020.~~the redeemable non-controlling interest for the six-month period ended July 2, 2022, was an increase of $1.8 million, compared to an increase of $3.6 million in the six months ended July 3, 2021. See Note 17 in Part I, Item 1, for a further discussion of the change in the redemption value of the redeemable non-controlling interest.

~~- 38 -~~

LIQUIDITY AND CAPITAL RESOURCES

Consolidated Cash Flows

Our principal source of liquidity is cash flow generated by operations, ~~and~~ supplemented by borrowings under our credit facilities. We expect that this cash generating capability will provide us with financial flexibility in meeting operating and investing needs, but there can be no assurance that will be the case in future periods. Our primary capital requirements are to fund working capital needs, meet required debt service payments on our credit facilities and fund capital expenditures.

- 38 -

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


	Components of Cash Flows						Components of Cash Flows
	Six Months Ended						Six Months Ended
	July 3,			July 4,			July 2,			July 3,
(in millions)	2021			2020			2022			2021
Cash provided by operating activities	$	8.5		$	46.5		$	84.9		$	8.5
Cash used in investing activities		(122.4	)		(97.2	)		(18.1	)		(122.4	)
Cash provided by financing activities		61.2			51.8
Cash (used in) provided by financing activities								(3.7	)		61.2

(Decrease) increase in cash and cash equivalents	$	(52.7	)	$	1.1
Increase (decrease) in cash and cash equivalents							$	63.1		$	(52.7	)

Operating activities. Cash provided by operating activities during the first half of ~~2021~~2022 was ~~$8.5~~ $84.9 million, compared to cash provided in operating activities of ~~$46.5~~ $8.5 million in the first half of ~~2020.~~2021. The ~~decrease~~increase in cash provided by operating activities for the first half of ~~2021,~~2022, as compared to the first half of ~~2020, of~~ ~~$38.0~~ 2021, was $76.4 million, and was due to the factors set forth in the table below.

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


	Direct Operating Cash Flows						Direct Operating Cash Flows
	Six Months Ended						Six Months Ended
	July 3,			July 4,			July 2,			July 3,
(in millions)	2021			2020			2022			2021
Collections from customers	$	503.0		$	418.7		$	740.0		$	503.0
Other collections of cash		3.5			2.7			9.1			3.5
Disbursements to vendors		(337.8	)		(256.9	)		(456.0	)		(337.8	)
Personnel related disbursements		(136.0	)		(106.6	)		(185.5	)		(136.0	)
Income taxes paid, net		(10.9	)		0.7
Income taxes paid, net of refunds								(8.8	)		(10.9	)
Debt service payments		(13.2	)		(12.1	)		(14.0	)		(13.2	)
Other cash activity, net		(0.1	)		-			0.1			(0.1	)

Cash from operations	$	8.5		$	46.5
Cash provided by operations							$	84.9		$	8.5

During the second quarter of 2022, a customer with whom we have had a long-term relationship experienced financial difficulties. As such, we determined to cease taking orders and provide additional reserves of approximately $3.0 million against our existing exposure to this customer. During the six-months ended July 2, 2022, we recorded provisions for credit losses totaling $6.0 million, including the provision relating to this customer.

Inventory as of July ~~3, 2021,~~2, 2022, was ~~$78.2~~ $110.2 million, compared to ~~$60.3~~ $91.4 million at January ~~2, 2021,~~1, 2022, an increase of ~~$17.9~~ $18.8 million. ~~Inventory at July 3, 2021 includes~~ ~~$7.0~~ ~~million relating to our investment in Eco.~~

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

Investing activities. Cash used in investing activities was ~~$122.4~~ $18.1 million for the first half of ~~2021,~~2022, compared to cash used in investing activities of ~~$97.2~~ over $122.4 million for the first half of ~~2020,~~2021, an ~~increase~~decrease in cash used in investing activities of ~~$25.2~~ $104.3 million. There was cash used to acquire businesses in the first half of 2022 relating to the finalization of the Anlin acquisition working capital adjustment, resulting in a final payment to sellers of $0.8 million. Cash used to ~~invest in and~~ acquire businesses in the first half of 2021 totaled ~~$106.5~~ $106.5 million, which included ~~$94.4~~ $94.3 million related to ~~invest in~~our acquisition of Eco, and ~~$12.1~~ $12.2 million relating to ~~acquire CRi, compared with cash used in the first half~~our acquisition of ~~2020 to acquire NewSouth of~~ ~~$90.1~~ ~~million.~~CRi. There was ~~also~~ an increase in cash used in ~~investing activities due to an increase in~~ capital expenditures of ~~$8.8~~ $1.2 million which went from ~~$7.3~~ $16.1 million in the first half of ~~2020,~~2021, to ~~$16.1~~ $17.3 million in the first half of ~~2021.~~2022. Proceeds from the sales of assets was less than ~~$0.2~~ $0.1 million in the first half of ~~2021,~~2022, compared to ~~$0.3~~ with $0.2 million in the first half of ~~2020, a decrease in cash provided of~~ ~~$0.1~~ ~~million.~~2021.

~~- 39 -~~

In the first half of 2020, management made the decision to decrease spending on a majority of capital projects as part of its cash preservation strategy due to the uncertainty around the Pandemic and its potential impact to the Company’s liquidity. During the third quarter of 2020, the Company’s management determined to begin funding certain previously deferred capital projects in view of the increased order entry, sales, cash position and overall liquidity the Company experienced, and has continued to return capital spending to near pre-Pandemic levels.

Financing activities. Cash ~~provided~~used in financing activities was ~~$61.2~~ $3.7 million in the first half of ~~2021,~~2022, compared to cash provided in financing activities of ~~$51.8~~ ~~million in the first half of 2020, an increase in cash provided of~~ ~~$9.4~~ ~~million. In the first half of 2021, we issued the Second Additional Senior Notes, which provided proceeds of~~ ~~$63.3~~ ~~million, including a premium of~~ ~~$3.3~~ million. Proceeds from the issuance of the Second Additional Senior Notes were used to partially fund our investment in Eco. In the first half of 2020, we issued the First Additional Senior Notes, which provided proceeds of ~~$53.2~~ ~~million, including a premium of~~ ~~$3.2~~ ~~million. Proceeds from the issuance of the First Additional Senior Notes were used to partially fund our acquisition of NewSouth. We paid financing costs totaling~~ ~~$1.4~~ nearly $61.3 million in the first half of 2021, ~~related to the issuance of the Second Additional Senior Notes, compared to~~ ~~$1.3~~ ~~million~~a decrease in cash provided that totaled $65.0 million. In the first half of ~~2020, related~~2022, we made payments of contingent consideration relating to our acquisition of Anlin totaling $2.7 million, representing the ~~issuance~~first payment we were required to make under the Anlin purchase agreement based on their 2021 EBITDA, as defined in the agreement. Because these payments were not required to be made within a reasonably short period of time after the effective date of the ~~First Additional Senior Notes.~~ acquisition, we classified the portion of these payments representing the fair value of the first payment, which was $2.4 million, as a financing activity, with the difference classified within operating activities.

- 39 -

Taxes paid relating to common stock withheld from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock awards were ~~$1.0~~ $1.7 million in the first half of 2022, versus $1.0 million in the first half of 2021, ~~versus~~ ~~$0.8~~ ~~million in the first half of 2020,~~ an increase in cash used of ~~$0.2~~ ~~million. Proceeds from the exercises of stock options for the first half of 2021 was~~ ~~$0.1~~ ~~million, compared to proceeds of~~ ~~$0.5~~ ~~million in the first half of 2020, a decrease in cash provided from the exercise of stock options of~~ ~~$0.4~~ $0.7 million. There were proceeds from stock issued under our 2019 Employee Stock Purchase Plan of ~~$0.2~~ $0.3 million during the first half of ~~2021,~~2022, compared to ~~$0.1~~ $0.2 million during the first half of ~~2020.~~2021.

In the first half of 2021, we issued the $60.0 million of Additional Senior Notes, with a premium of $3.3 million, which provided proceeds totaling $63.3 million. The proceeds of $63.3 million from the issuance of the Additional Senior Notes were used to partially fund our acquisition of Eco. We paid financing costs totaling $1.4 million in the first half of 2021, including financing costs relating to bank fees and professional services costs relating to the offering and issuance of the Additional Senior Notes.

Capital Resources and Debt Covenant

~~2018~~2021 Senior Notes due ~~2026.~~2029

On ~~August 10, 2018,~~September 24, 2021, we completed the issuance of ~~$315.0~~ $575.0 million aggregate principal amount of ~~6.75%~~4.375% senior notes (“~~2018~~2021 Senior ~~Notes due 2026”~~Notes”), issued at 100% of their principal amount. The ~~2018~~2021 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~~2021 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~~2021 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.

~~On January 24, 2020, we completed an add-on issuance of~~ ~~$50.0~~ ~~million aggregate principal amount of 6.75% 2018~~The 2021 Senior Notes ~~due 2026 (“First Additional Senior Notes”), issued at 106.375% of their principal amount, resulting in a premium to us of~~ ~~$3.2~~ million. The First Additional Senior Notes are part of the same issuance of, and rank equally and form a single series with, the 2018 Senior Notes due 2026. Proceeds from the First Additional Senior Notes, including premium, were used, together with cash on hand, to pay the ~~$90.4~~ ~~million purchase price in the NewSouth Acquisition.~~

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

~~The 2018 Senior Notes due 2026~~ mature on ~~August 10, 2026.~~October 1, 2029. Interest on the ~~2018~~2021 Senior Notes ~~due 2026~~ is payable semi-annually, in arrears, beginning on ~~February 16, 2019,~~April 1, 2022, with interest accruing at a rate of ~~6.75%~~4.375% per annum from ~~August 10, 2018.~~September 24, 2021. 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, the First Additional~~2021 Senior Notes totaling ~~$1.3~~ $8.7 million, ~~offset by the~~ ~~$3.2~~ ~~million premium~~which included a 1.25% lender spread on the ~~First Additional~~total principal value of the 2021 Senior Notes, or $7.2 million, and ~~the Second Additional Senior Notes totaling~~ ~~$1.4~~ $1.5 million ~~offset by the~~ ~~$3.3~~ ~~million premium on the Second Additional Senior Notes,~~of other costs, all of which are being amortized under the effective interest method. ~~See “Deferred Financing Costs” below.~~

As of July ~~3, 2021,~~2, 2022, the face value of debt outstanding under the 2021 Senior Notes was $575.0 million, and interest began accruing on September 24, 2021. Proceeds from the 2021 Senior Notes were used, in part, to redeem in full the $425.0 million of 2018 Senior Notes due 2026, ~~was~~ ~~$425.0~~ including the related fees, costs and the prepayment call premium of $21.5 million, representing 5.063% of the $425.0 million face value then outstanding, prepay the outstanding term loan borrowings under the 2016 Credit Agreement of $54.0 million and ~~accrued interest totaled~~ ~~$12.1~~ the related fees and costs, and finance the Anlin Acquisition in the fourth quarter of 2021. See Note 6, Acquisitions, for a discussion of the Anlin Acquisition.~~million.~~

~~- 40 -~~

The indenture for the ~~2018~~2021 Senior Notes ~~due 2026~~ gives us the option to redeem some or all of the ~~2018~~2021 Senior Notes ~~due 2026~~ at the redemption prices and on the terms specified in the indenture governing the ~~2018~~2021 Senior ~~Notes due 2026.~~Notes. The indenture governing the ~~2018~~2021 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. We also may make optional redemptions at various premiums including a make-whole call at the then current treasury rate plus 50 basis points prior to October 1, 2024, then 102.188% on or after August 1, 2024, 101.094% on or after August 2025, then at 100.000% on or after August 1, 2026.

The indenture for the ~~2018~~2021 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.

2016 Credit Agreement due ~~2022.~~2024

On February 16, 2016, we entered into the 2016 Credit Agreement due ~~2022,~~2024, among us, the lending institutions identified in the 2016 Credit Agreement due ~~2022,~~2024, and Truist Financial Corporation (formerly known as SunTrust Bank), as Administrative Agent and Collateral Agent. The 2016 Credit Agreement due ~~2022~~2024 establishes senior secured credit facilities in an aggregate amount of $310.0 million, consisting of a $270.0 million Term B term loan facility originally maturing in February 2022 that amortizes on a basis of 1% annually during its six-year term, and a $40.0 million revolving credit facility originally maturing in February 2021 that ~~includes~~included a swing line facility and a letter of credit facility. Our obligations under the 2016 Credit Agreement due ~~2022~~2024 are, subject to exceptions, guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries that are restricted subsidiaries and secured by substantially all of our assets as well as our direct and indirect restricted subsidiaries’ assets.

- 40 -

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

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

~~Pursuant~~assets, and is senior in position to the ~~Third Amendment, interest on all loans under the~~2021 Senior Notes.

On October 25, 2021, we entered into an amendment of our 2016 Credit Agreement ~~is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto.~~("Fourth Amendment"). The ~~Third~~Fourth Amendment ~~decreases the applicable interest rate margins~~provides for, ~~the Initial~~among other things, a three-year Term ~~Loan~~ A ~~from (i) 2.50% to a spread of 1.00% to 1.75% based on our first lien net leverage ratio,~~loan in the ~~case~~aggregate maximum available amount of $60.0 million (the "Incremental Term A Loan"), proceeds from which were used to fund the ~~Base Rate Loans (with a floor of 100 basis points), and (ii) 3.50%~~Anlin Acquisition. The Fourth Amendment does not change any terms relating 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,~~Revolving Facility, under which 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. As of July ~~3, 2021,~~2, 2022, there were ~~$5.3 million~~$5.7 million in letters of credit outstanding and ~~$74.7~~ $74.3 million available under the Revolving Facility.

~~Fees and costs relating to the Third Amendment were~~ ~~$0.9~~ million, which are deferred and being amortized. In connection with the Third Amendment, certain existing lenders modified their positions in or exited the 2016 Credit Agreement. Deferred financing costs and original issue discount allocated to these lenders of ~~$1.5~~ million were written-off and classified as debt extinguishment costs in our consolidated statement of operations for the year ended December 28, 2019. As of July 3, 2021, after making prepayments of borrowings totaling ~~$10.0~~ ~~million during the third quarter of 2020, the principal amount of debt outstanding under the 2016 Credit Agreement due 2022 was~~ ~~$54.0~~ ~~million. Accrued interest at July 3, 2021 was~~ ~~$16~~ ~~thousand.~~

~~- 41 -~~

The weighted average all-in interest rate for borrowings under the term-loan portion of the 2016 Credit Agreement due ~~2022~~2024 was ~~2.09%~~3.67% as of July ~~3, 2021,~~2, 2022, and was ~~2.15%~~2.10% at January ~~2, 2021.~~1, 2022.

Pursuant to the Third Amendment, the 2016 Credit Agreement due 2022 contains a springing financial covenant that would apply if we draw in excess of thirty-five percent (35%) of the revolving facility commitment (excluding $7.5 million of undrawn letters of credit and letters of credit and draws thereunder that are cash collateralized at 103% of the stated amount thereof from such availability test). To the extent in effect, the springing financial covenant would prohibit us from exceeding a maximum first lien net leverage ratio (based on the ratio of total first lien (less unrestricted cash) debt to EBITDA) as of the last day of each applicable fiscal quarter. To the extent the springing financial covenant is in effect, the first lien net leverage ratio currently cannot exceed 4.00:1.00 (4.50:1.00 during a significant acquisition period, as defined, which we are in as of July 3, 2021). We have not been required to test our first lien net leverage ratio because we have not exceeded 35% of our revolving capacity.

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, 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.

Deferred Financing Costs

The activity relating to deferred financing costs, composed of third-party fees and costs, and lender fees, ~~discount and premiums~~ for the ~~first half~~six months ended July ~~3, 2021,~~2, 2022, are as follows. All ~~debt-related fees,~~deferred financing costs ~~discount and premiums~~ are classified as a reduction of the carrying value of long-term debt:


(in thousands)	Total			Total
At beginning of year	$	6,902		$	9,345
Add: Deferred financing costs from the issuance of Second Additional Senior Notes		1,363
Less: Premium on the Second Additional Senior Notes		(3,300	)
Less: Amortization expense		(446	)		(611	)

At end of period	$	4,519		$	8,734

Estimated amortization expense relating to ~~third-party fees and~~deferred financing costs ~~lender fees, discount and premiums~~ for the years indicated as of July ~~3, 2021,~~2, 2022, is as follows:


(in thousands)	Total		Total
Remainder of 2021	$	441
2022		905
Remainder of 2022			$	622
2023		844		1,282
2024		889		1,282
2025		861		1,083
2026				1,114
Thereafter		579		3,351

Total	$	4,519	$	8,734

~~As a result~~We have no scheduled payments of ~~prepayments~~outstanding debt until the contractual maturity of the 2016 Credit Agreement ~~due 2022 totaling~~ ~~$214.0~~ ~~million since its inception~~ in ~~February 2016, we have no future scheduled repayments until the maturity of the facility on~~ October ~~31, 2022. The~~2024. Our contractual future maturities of long-term debt ~~outstanding, including the remaining balance of the financing arrangement described as other debt, as of July 3, 2021,~~ are as follows (at face value):


(in thousands)
Remainder of 2021	$	—
2022		54,000
Remainder of 2022			$	—
2023		—		—
2024		—		60,000
2025		—		—
2026				—
Thereafter		425,000		575,000

Total	$	479,000	$	635,000

- 4241 -

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

The fair value of consideration transferred in the acquisition of CRi totaled $12.5 million, and included $12.1 million in cash, funded from cash on hand, and $0.4 million of accounts receivable owed by CRi to the Company’s western business unit relating to sales prior to the acquisition, which are considered settled as a result of the acquisition. The preliminary estimated fair value of assets acquired and liabilities assumed totaled $17.7 million and $5.2 million, respectively, which included offsetting operating lease right of use assets and operating lease liabilities totaling $2.7 million. The estimated fair value of assets acquired also included current assets totaling $4.1 million, primarily accounts receivable, identifiable intangible assets totaling $6.4 million, goodwill of $4.3 million, and a small amount of property and equipment. Liabilities assumed included the aforementioned operating lease liability, as well as a total of $2.5 million in trade accounts payable and customer deposits. We believe goodwill in the acquisition relates to the expansion of our footprint in an existing market, in a way that we believe will enhances our long-term profitability in that market of our Western business.

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

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

Capital Expenditures. Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. For the first half of ~~2021,~~2022, capital expenditures were ~~$16.1~~$17.3 million,, compared to ~~$7.3~~ $16.1 million for the ~~first~~ half of 2020. During the first half of 2020, management made the decision to decrease spending on a majority of capital projects as part of its cash preservation strategy implemented in response to the uncertainty around the Pandemic’s impact on the Company’s business and liquidity. During the third quarter of 2020, the Company’s management determined to begin funding certain previously deferred capital projects in view of the increased order entry, sales, cash position and overall liquidity the Company has experienced, and has continued to return capital spending to near pre-Pandemic levels. The Company’s management will continue to evaluate the level of capital expenditures the Company may incur for the remainder of 2021 and thereafter, but we expect to continue to fund previously deferred capital projects, which may continue to result in a higher level of capital spending in 2021 as compared to 2020. However, we may return to a more conservative approach to managing capital expenditures going forward based on our evaluation of future economic conditions and the performance of our businesses and operations, including any further impact of the Pandemic and the economic uncertainty it has caused on our sales, cash position and overall liquidity.2021. Our capital expenditure program is directed towards making investments in capital assets that we believe will increase both gross sales and margins, but also includes capital expenditures for ~~maintenance capital.~~maintenance.

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

~~- 43 -~~

At July ~~3, 2021,~~2, 2022, the fair value of our MTP contracts was in an ~~asset~~liability position of ~~$6.8~~$2.0 million. We had 24 4 outstanding MTP contracts to hedge the Platt US MW Transaction price per pound for the delivery of ~~46.3~~ 10.5 million pounds of aluminum through December 2022, at an average price of ~~$0.12~~ $0.11 per pound, with maturity dates of between one ~~month~~ and ~~eighteen~~six months. ~~months.~~ We assessed the risk of non-performance of the Company to these contracts and determined it was immaterial and, therefore, did not record any adjustment to fair value as of July ~~3, 2021.~~2, 2022.

We assess the effectiveness of our aluminum forward contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our aluminum forward contracts is reported as a component of accumulated other comprehensive income (loss) and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. ~~The~~We expect the amount of ~~income (loss), net, recognized in the “accumulated~~accumulated other comprehensive ~~income (loss)” line item~~loss of approximately $3.2 million in the accompanying condensed consolidated balance sheet as of July ~~3, 2021, that we expect will~~2, 2022, to be reclassified to earnings within the next twelve ~~months, will be approximately~~ ~~$13.2~~ ~~million.~~

~~Contractual Obligations~~. ~~Except for the issuance of the Second Additional Senior Notes, as described in Part I., Item 1., Note 9, and the addition of~~ ~~$46.9 million in operating lease liabilities in the half ended July 3, 2021, as described in Part I., Item 1., Note 10, including the~~ ~~$27.9~~ ~~million in operating lease liabilities we are consolidating as a result of our investment in Eco, and~~ ~~$2.7~~ million related to the CRi Acquisition in the second quarter of 2021, described in Part I., Item 1., Note 6, there have been no significant changes to the “Disclosures of Contractual Obligations and Commercial Commitments” table in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended January 2, 2021.months.

Significant Accounting Policies and Critical Accounting Estimates. Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Significant accounting policies are those that are both important to the accurate portrayal of a Company’s financial condition and results, and those that require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the condensed consolidated financial statements and the possibility that future events may be significantly different from our expectations. We identified our significant accounting policies in our Annual Report on Form ~~10-K~~10-K/A for the year ended January ~~2, 2021.~~1, 2022. There have been no changes to our critical accounting policies during the first ~~half~~six months of ~~2021.~~2022.

Recently Issued Accounting Pronouncements. Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and in March 2021, a subsequent amendment to the initial guidance, ASU 2021-01, “Reference Rate Reform (Topic 848): Scope” (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ~~The amendments apply only~~We have not elected adoption of this optional guidance and do not intend to ~~contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because~~elect this guidance before the sunset date of ~~reference rate reform. The guidance generally can be applied from March 12, 2020 through~~ December 31, ~~2022. We are currently assessing the impacts of the practical expedients provided in Topic 848 and which, if any, we will adopt.~~2022, as there is no material impact on our consolidated financial statements.

- 4442 -

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We utilize derivative financial instruments to hedge price movements in aluminum materials used in our manufacturing process and to hedge the delivery component of our aluminum needs, known as the Midwest Transaction Premium (“MTP”). As of July ~~3, 2021,~~2, 2022, we are covered for approximately ~~69%~~80% of our anticipated aluminum needs ~~during~~for the remainder of ~~2021 at an average price of $0.84 per pound, and for approximately~~ ~~27%~~ ~~of our anticipated aluminum needs in~~ 2022 at an average price of ~~$1.07~~$1.32 per pound. These calculations are based only on the LME price of aluminum and excludes an estimate for the MTP, which we hedge separately. As of July ~~3, 2021,~~2, 2022, we are covered for approximately ~~74%~~34% of our anticipated MTP costs for the remainder of ~~2021 at an average price of~~ ~~$0.12~~ ~~per pound, and for approximately~~ ~~33%~~ ~~of our anticipated MTP costs in~~ 2022 at an average price of ~~$0.12~~$0.11 per pound. As of the date of this report, we had not added any further coverage since July 2, 2022. However, we may add more coverage for our anticipated aluminum needs during the rest of 2022 and/or 2023, as we deem necessary.

Regarding our aluminum hedging instruments for the purchase of aluminum, as of July ~~3, 2021,~~2, 2022, a 10% decrease in the price of aluminum per pound would decrease the fair value of our forward contracts of aluminum by an estimated ~~$4.5~~$2.7 million. This calculation utilizes our actual commitment of ~~40.2~~24.3 million pounds under contract (to be settled ~~throughout~~through December 2022) and the market price of aluminum as of July ~~3, 2021.~~2, 2022. This calculation is based only on the LME price of aluminum and excludes an estimate for the MTP. Regarding our MTP contracts for hedging of the delivery component of our aluminum needs, as of July ~~3, 2021,~~2, 2022, a 10% decrease in the Platts MW US Transaction price per pound would decrease the fair value of our MTP contracts an estimated ~~$1.2~~$0.3 million. This calculation utilizes our actual commitment of ~~46.3~~10.5 million pounds under contract (to be settled ~~throughout~~through December 2022) and the then current Platts MW US Transaction price per pound as of July ~~3, 2021.~~2, 2022.

We experience changes in interest expense when market interest rates change. Changes in our debt could also increase these risks. Based on debt outstanding with a variable rate as of the date of filing of this Quarterly Report on Form 10-Q of ~~$54.0~~ $60.0 million, a 100 basis-point increase in interest rate would result in approximately ~~$0.5~~$0.6 million of additional interest costs annually.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

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

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

Our chief executive officer and ~~interim~~ chief financial officer, with the assistance of management, evaluated the design, operation and effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (“Evaluation Date”). Based on that evaluation, our chief executive officer and ~~interim~~ chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective for the purposes of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our chief executive officer and ~~interim~~ chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

During the period covered by this report, there have been no changes in our internal control over financial reporting identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, during ~~our first quarter of 2021,~~the year ended January 1, 2022, we acquired ~~Eco. During our second quarter of 2021, we acquired CRi. We have elected to exclude both~~ Eco and ~~CRi from~~Anlin. We are currently integrating Eco and Anlin into our operations, compliance programs and internal control processes. As such Eco and Anlin were not included in our assessment of ~~effectiveness of our~~ internal ~~controls~~control over financial reporting as of January 1, 2022. We will include Eco and Anlin into our assessment of internal controls as of December 31, 2022, the end of our 2022 fiscal year. Eco Enterprises and Anlin Industries were included in the 2021 consolidated financial statements of the Company and constituted 22.0% of total assets as of January 1, 2022 and 9.2% of revenues for the fiscal year ~~but will include Eco and CRi in our assessment for our 2022 fiscal year.~~then ended.

- 4543 -

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities with respect to claims and lawsuits. We do not believe that the ultimate resolution of the matters pending or threatened against us at this time will have a material adverse impact on our financial position or results of operations.

Although our business and facilities are subject to federal, state, and local environmental regulation, environmental regulation does not have a material impact on our operations. We believe that our facilities are in material compliance with such laws and regulations. As owners and lessees of real property, we can be held liable for the investigation or remediation of contamination on such properties, in some circumstances without regard to whether we knew of or were responsible for such contamination. Our current expenditures with respect to environmental investigation and remediation at our facilities are minimal, although no assurance can be provided that more significant remediation may not be required in the future as a result of spills or releases of petroleum products or hazardous substances, or the discovery of previously unknown environmental conditions.

ITEM 1A. RISK FACTORS

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

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

None during the quarter cover by this report.

- 4644 -

ITEM 6. EXHIBITS


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

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

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

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

101.INS	Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF	Inline XBRL Taxonomy Definition Linkbase

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase

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

*Filed herewith.

**Furnished herewith.

- 4745 -

SIGNATURE

~~SIGNATURE~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PGT INNOVATIONS, INC.
	(Registrant)


Date: August ~~12, 2021~~4, 2022	~~/s/ Brad West~~By: /s/ John Kunz
	~~Brad West~~Name: John Kunz
	~~Interim Chief Financial Officer and~~Title: Senior Vice President ~~of Corporate Development~~ and ~~Treasurer~~Chief Financial Officer

- 4846 -


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


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


	July 3,			January 2,			July 2,			January 1,
	2021			2021			2022			2022
ASSETS
Current assets:
Cash and cash equivalents	$	47,587		$	100,320		$	159,261		$	96,146
Accounts receivable, net		139,688			92,844			178,185			141,221
Inventories		78,228			60,317			110,245			91,440
Contract assets, net		48,456			28,723			59,309			55,239
Prepaid expenses		12,822			8,357			13,455			8,727
Other current assets		22,107			11,111			15,386			28,985
Total current assets		348,888			301,672			535,841			421,758

Property, plant and equipment, net		162,464			135,155			185,597			185,266
Operating lease right-of-use asset, net		80,021			38,567			95,511			91,162
Intangible assets, net		324,717			256,507			374,801			394,525
Goodwill		360,230			329,695			372,652			364,598
Other assets, net		3,861			925			1,963			3,301

Total assets	$	1,280,181		$	1,062,521		$	1,566,365		$	1,460,610

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	125,874		$	84,344		$	175,129		$	122,681
Current portion of operating lease liability		10,311			6,132			14,883			13,180
Total current liabilities		136,185			90,476			190,012			135,861

Long-term debt		474,481			412,098
Long-term debt, net								626,266			625,655
Operating lease liability, less current portion		73,354			35,130			87,514			83,903
Deferred income taxes		31,172			28,329			34,249			37,489
Other liabilities		10,361			11,354			7,910			11,742

Total liabilities		725,553			577,387			945,951			894,650

Commitments and contingencies								—			—

Redeemable non-controlling interest		33,006			—			39,609			36,863

Shareholders' equity:
Preferred stock; par value $.01 per share; 10,000 shares authorized; 0 shares outstanding		—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 63,192 and 62,542 shares issued and 59,587 and 58,999 shares outstanding at July 3, 2021 and January 2, 2021, respectively		632			625
Preferred stock; par value $.01 per share; 10,000 shares authorized; 0 shares outstanding								—			—
Common stock; par value $.01 per share; 200,000 shares authorized; 63,927 and 63,516 shares issued and 59,947 and 58,696 shares outstanding at July 2, 2022 and January 1, 2022, respectively								639			635
Additional paid-in-capital		429,268			420,202			437,207			433,347
Accumulated other comprehensive income		11,330			2,720
Accumulated other comprehensive income (loss)								(2,368	)		7,006
Retained earnings		98,681			79,896			163,616			106,398
Treasury stock at cost		(18,289	)		(18,309	)		(18,289	)		(18,289	)
Total shareholders' equity		521,622			485,134			580,805			529,097

Total liabilities, redeemable non-controlling interest and shareholders' equity	$	1,280,181		$	1,062,521		$	1,566,365		$	1,460,610


	Six Months Ended						Six Months Ended
	July 3,			July 4,			July 2,			July 3,
	2021			2020			2022			2021
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income	$	23,508		$	17,799		$	60,291		$	23,508
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
provided by operating activities:
Depreciation		14,358			11,451			17,064			14,358
Amortization		9,890			9,424			13,924			9,890
Impairment of trade name		—			8,000
Non-cash portion of restructuring costs and charges		—			2,442
Provision for allowance for doubtful accounts		2,882			826
Provision for credit losses								6,048			2,882
Stock-based compensation		3,494			2,918			4,909			3,494
Amortization of deferred financing costs, debt discount and premium		446			589			611			446
Loss (gain) on sales of assets		70			(155	)
Change in operating assets and liabilities (net of effects of acquisition):
Asset impairment charges								2,131			—
(Gain) loss on sales of assets								(39	)		70
Change in operating assets and liabilities (net of effects of acquisitions):
Accounts receivable		(40,763	)		(15,050	)		(44,148	)		(40,763	)
Inventories		(10,586	)		(5,914	)		(18,539	)		(10,586	)
Contract assets, net, prepaid expenses, other current and other assets		(13,262	)		(1,080	)		5,713			(13,262	)
Accounts payable, accrued and other liabilities		18,428			15,261			36,958			18,428

Net cash provided by operating activities		8,465			46,511			84,923			8,465

Cash flows from investing activities:
Purchases of property, plant and equipment		(16,107	)		(7,315	)		(17,328	)		(16,107	)
Investment in and acquisition of businesses		(106,480	)		(90,145	)
Investment in and acquisitions of business								(787	)		(106,480	)
Proceeds from sales of assets		142			284			41			142

Net cash used in investing activities		(122,445	)		(97,176	)		(18,074	)		(122,445	)

Cash flows from financing activities:
Proceeds from issuance of senior notes		63,300			53,188			—			63,300
Payments of contingent consideration in Anlin Acquisition								(2,362	)		—
Payments of financing costs		(1,363	)		(1,266	)		—			(1,363	)
Purchases of common stock relating to tax withholdings on employee equity awards		(1,005	)		(815	)		(1,663	)		(1,005	)
Proceeds from exercise of stock options		138			549			—			138
Proceeds from issuance of common stock under employee stock purchase plan (ESPP)		177			119			291			177

Net cash provided by financing activities		61,247			51,775
Net cash (used in) provided by financing activities								(3,734	)		61,247

Net decrease in cash and cash equivalents		(52,733	)		1,110
Net increase (decrease) in cash and cash equivalents								63,115			(52,733	)
Cash and cash equivalents at beginning of period		100,320			97,243			96,146			100,320
Cash and cash equivalents at end of period	$	47,587		$	98,353		$	159,261		$	47,587

Non-cash activity:
Issuance of common stock in Eco Acquisition	$	6,108		$	—		$	—		$	6,108
Establish right-of-use asset	$	46,905		$	14,838
Establish operating lease liability	$	(46,905	)	$	(14,838	)
Additions to right-of-use asset							$	12,262		$	46,905
Additions to operating lease liability							$	(12,262	)	$	(46,905	)
Property, plant and equipment additions in accounts payable	$	1,533		$	1,690		$	543		$	1,533


	Beginning		Acquisition-		Charged								End of		Beginning		Acquisition-		Charged								End of
Accrued Warranty	of Period		Related		to Expense		Adjustments			Settlements			Period		of Period		Related		to Expense		Adjustments			Settlements			Period
(in thousands)
Three months ended July 2, 2022															$	16,321	$	—	$	6,844	$	(237	)	$	(6,777	)	$	16,151

Three months ended July 3, 2021	$	9,643	$	189	$	5,343	$	(748	)	$	(4,968	)	$	9,459	$	9,643	$	189	$	5,343	$	(748	)	$	(4,968	)	$	9,459

Three months ended July 4, 2020	$	7,388	$	—	$	3,613	$	53		$	(3,787	)	$	7,267
Six months ended July 2, 2022															$	13,504	$	—	$	15,992	$	513		$	(13,858	)	$	16,151

Six months ended July 3, 2021	$	8,001	$	189	$	12,309	$	(359	)	$	(10,681	)	$	9,459	$	8,001	$	189	$	12,309	$	(359	)	$	(10,681	)	$	9,459

Six months ended July 4, 2020	$	6,244	$	1,592	$	7,454	$	33		$	(8,056	)	$	7,267


			Page
			Number
Part I.	Financial Information		3
	Item 1.	Condensed Consolidated Financial Statements (unaudited):	3
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive Income	4
		Condensed Consolidated Balance Sheets	5
		Condensed Consolidated Statements of Cash Flows	6
		Condensed Consolidated Statements of Shareholders’ Equity	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4543
	Item 4.	Controls and Procedures	4543

Part II.	Other Information		4644
	Item 1.	Legal Proceedings	4644
	Item 1A.	Risk Factors	4644
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4644
	Item 6.	Exhibits	4745
		Signature	46

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

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

	Three Months Ended
	July 3, 2021			July 4, 2020
	Net Sales		% of sales	Net Sales		% of sales	% change
By segment:
Southeast segment	$	242.4	84.9%	$	172.9	85.3%	40.3%
Western segment		43.1	15.1%		29.9	14.7%	43.9%

Total net sales	$	285.5	100.0%	$	202.8	100.0%	40.8%