PGT Innovations Inc (PGTI) 2008 Q4 法說會逐字稿

Good day, and welcome to the PGT, Inc. fourth-quarter 2008 earnings results conference call. Today's call is being recorded. At this time, I'd like to turn the call over to Jeff Jackson. Please go ahead, sir.

Good morning and thank you for joining us for PGT's fourth-quarter and fiscal year 2008 conference call. I'm Jeff Jackson, CFO, and I'm joined today by Rod Hershberger, President and CEO. We will represent PGT on this morning's call.

Before we begin, let me remind everyone that today's conference call may contain statements concerning the Company's future prospects, business strategies, and industry trends. Such statements are considered to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and are subject the risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements. Please refer to yesterday's press release and our most recently filed Form 10-K filed with the SEC. We undertake no obligations to publicly update or revise any forward-looking statements.

A copy of our press release is posted on the "Investor Relations" section of our corporate website at www.PGTInc.com. Included in the press release are the unaudited consolidated balance sheets and statements of operations prepared in accordance with GAAP; non-GAAP information, which was quantitatively reconciled to GAAP.

Our Company uses non-GAAP measurements as key metrics for evaluating performance internally. A detailed explanation of these non-GAAP measures can be found in our Form 8-K filed yesterday with the SEC. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, we believe the presentation of non-GAAP measures provides additional information to investors to facilitate the comparison of past and present performance.

For today's call, Rod and I will provide an overview of the fourth quarter and the year. Then we'll discuss our results in more detail. After our prepared remarks, we will take your questions. With that, let me turn the call over to Rod. Rod?

Thanks, Jeff, and good morning, everyone. As I mentioned in our press release, the downward pressure on the homebuilding industry worsened in the fourth quarter as the effects of tight credit caused by the mortgage crisis continued impacting the overall economy. Housing starts in our core market were down 38% in the fourth quarter compared to last year's fourth quarter and down 50% for the year. Once again, we outperformed the housing market as our sales decreased only 9% in the fourth quarter compared to last year's fourth quarter and decreased 21% for the year. Compared to the fourth quarter of 2007, sales into the repair and remodeling market were flat, while sales into the new construction market were down 28%.

As a percentage of total sales for the fourth quarter of 2008, R&R sales accounted for 65% and new construction sales accounted for 35% of sales compared to the fourth quarter of 2007, where R&R sales accounted for 57% of sales and new construction represented 43%. For the year, sales into the repair and remodeling market were down 10% plus sales into the new construction market were down 36%.

As mentioned in previous calls, our plan for managing through the prolonged housing downturn includes driving sales, especially in out-of-state markets and growing our dominant share in our core market, Florida. Our new, nonimpact vinyl window targeted for the R&R market was introduced at the International Builder Show in January. The window was well-received and we expect the new product line to provide geographic sales growth as we continue to focus on increasing our distribution network in targeted states outside Florida.

We will begin taking orders on that product on March 2nd. We've increased our sales force and are also targeting sales in international markets as we continue to see a more stable market in the Caribbean Islands.

Our joint venture with ASI limited is completing two unitized curtain wall projects, estimated to generate $1.8 million in revenue for our Company over the next six months. We have also signed an additional project outside of Florida estimated to generate $2.4 million in revenue during 2009 and with the J.V., we continue to bid on numerous opportunities both inside and out of Florida.

We think the housing market and conditions in the economy will remain difficult during 2009, as consumer demand is down and credit markets are still in need of repair. While the new federal stimulus package contains measures to increase home ownership and additional measures to drive energy-efficient windows, it remains too early to predict the beneficial economic effect for 2009.

On a positive note, the Florida State Legislature passed a law that went into effect in 2009 requiring certain homes located in the windborne debris region to have impact-resistant protection on all openings to be eligible for insurance underwritten by citizens Property Insurance Corporation, Florida's state-sponsored homeowners insurance company. Citizens has an almost one-third market share in the state. However, as this law phases in, and insurance policies are renewed throughout 2009, it is too early to accurately predict its benefit for us.

Because the timing of any recovery in our industry is uncertain, we recently reduced our workforce and better aligned costs with recent sales levels, an action we estimate will save $6 million annually. We continue to believe that we can grow organically by gaining market share, but remain focused on controlling costs and conserving cash.

In the fourth quarter of 2008, gross margin decreased $1.7 million from the third quarter of 2008, due mainly to lower unit volume in our aluminum WinGuard product line, which was down 11%.

SG&A costs increased $1.6 million from the third quarter 2008. In the fourth quarter, we took action to increase our bad debt reserves in response to the continued downward pressure in the housing industry, the weakness in the economy and the effect it is having on our customer base. We also had an increase in selling and promotional costs related to distributor incentive programs to help drive volume.

These costs were partially offset by lower fuel costs. Adjusted EBITDA decreased to $3 million in the fourth quarter from $6 million in the third quarter. The decrease was driven by lower sales.

Driven by non-cash impairment charges for the fourth quarter, we had a net loss of $83 million. As we discussed in the second quarter, our market capitalization has been negatively affected by the significant and prolonged downturn in the housing industry, which led us to conclude that our goodwill was impaired. We performed our required annual impairment tests for goodwill and intangible assets in the fourth quarter. This resulted in us writing off the remaining $76.3 million of goodwill and writing down our trademarks by $17.8 million. Both of the adjustments are non-cash related.

Adjusting for these charges, our net loss was $2.3 million for the fourth quarter of 2008 compared to an adjusted net loss of $2.6 million for the fourth quarter of 2007. Adjusted net loss per diluted share was $0.06 for the fourth quarter of this year compared to adjusted net loss of $0.09 for the fourth quarter of 2007.

Though non-cash impairment charges negatively impacted our bottom line in the fourth quarter, our cash flow was still positive and we generated an adjusted EBITDA of approximately $3 million, which was equal to last year's fourth quarter, even though sales were down $5 million.

With that, I'll turn the call over to Jeff, who will review the results for the quarter and year in greater detail.

Thank you, Rod. Let me give you more detail on our numbers for the fourth quarter and full year. We reported net sales of $49.3 million for the fourth quarter, a decrease of 9.3% versus prior year's quarter. As Rod had mentioned, new housing starts in our core market were down 38%.

Our fourth-quarter decrease was mainly driven by our new construction sales, down 28% versus prior-year fourth quarter, and down 36% for the year. Our WinGuard products led our sales, representing approximately 68% of sales for the fourth quarter and 69% of sales for the full year.

Breaking our sales drivers for the fourth quarter compared to last year, we have WinGuard Impact sales at $33.6 million versus $37.2 million, down 10%. Aluminum nonimpact product sales at $7.8 million versus $10.2 million, down 24%. Architectural Systems sales were $3.7 million versus $3.1 million, up 19%. Vinyl nonimpact and other product sales were $4.2 million versus $3.8 million, up 11%.

When compared to our sequential quarter, our sales decreased approximately 9% from $54.3 million to our $49.3 million. This is in the face of a single family housing start decrease of 41%.

Our new construction sales decreased 13% while sales into the R&R market decreased 9% when compared to the third quarter of 2008. We expected single family housing starts to somewhat stabilize when starts from December 2007 to August 2008 averaged $3300 per month. But, they've fallen over the last four months to an average of $2,000 per month. In January of 2009, they were even lower, averaging about $1500.

Sales for the full year of 2008 were $218.6 million, a decrease of 21.5% versus 2007. Breaking down our sales drivers for the year compared to last year, we have WinGuard Impact sales at $152.1 million versus $189.7 million, down 20%. Aluminum nonimpact product sales at $34.6 million versus $53.9 million, down 36%. Vinyl, nonimpact and other product sales were $16.6 million versus $18.2 million, down 9%. Architectural Systems sales were $15.3 million versus $16.6 million, down 8%.

Our 2008 sales were achieved in a market where credit was tight and housing starts were down over 50%. Any recovery in the housing is difficult to predict, but we think the challenges we currently face will continue through 2009's physical year, at this point into early 2010.

Our gross margin for the quarter was 29.5% versus 27.1% in the fourth quarter of 2007, up 240 basis points. Our improvement in gross margin compared to prior year was driven by the impact of our cost reduction initiatives taken in late 2007 and Q1, 2008. These spending reductions improved our margins by 430 basis points compared to prior year. This was offset by an increase in input costs of approximately 190 basis points.

On the materials side, our average cost of aluminum was approximately 2643 per metric ton during the fourth quarter, comprised of spot purchases averaging 2265 a metric ton, for approximately 29% of our needs, and hedged purchases averaging 2796 per metric ton for 71% of our needs. This compares to our fourth quarter 2007 overall average of 2600 per metric ton.

Cash prices for aluminum at times during July of 2008 were over 3300 per metric ton. Since the end of the third quarter, the cash price for aluminum has fallen dramatically to levels we have not seen since 2005. January's 2009 average cash price for aluminum was approximately 1400 per metric ton.

With the significant decreases in aluminum prices, we have hedged further portions of our needs. As of today, we are hedged at approximately 73% of our estimated needs in 2009 at an average price of 2200 per metric ton, and 43% of our estimated needs in 2010 at an average price of 2,000 per metric ton.

As Rod mentioned earlier, in the fourth quarter, we performed our annual impairment test of goodwill and intangibles. This test resulted in a non-cash pre-tax impairment charge totaling $94.1 million. With these non-cash impairments, the remainder of our goodwill, of $76.3 million, was written off. And, $17.8 million of trademarks were written down.

We continue to believe in the long-term outlook for housing and our ability to expand both geographically and into new markets. As we said in the second quarter when we took our first impairment charge, our operating strategies and long-term vision for PGT remain the same. We will continue to be the dominant impact window and door company in Florida, the largest impact market in the nation, and aggressively expand into other states outside of Florida.

Our selling, general and administrative expenses were $16.2 million, down $1.8 million compared to prior year's fourth quarter, driven by lower personnel-related costs of $1.3 million, lower marketing expense of about $600,000, and overall lower expense in various other categories of approximately $700,000.

Offsetting these lower costs in the quarter was an increase of $800,000 in our bad debt expense as we added to our allowance for bad debts. This increase related to two customers who we were having collection issues with. We are continuing to work on collecting these two accounts, but wanted to take a more conservative view in estimating our reserves.

SG&A as a percent of sales in the fourth quarter was 32.9% compared to 33.1% in the prior-year fourth quarter, down 20 basis points, as the loss from leverage of lower sales was more than offset by the cost savings from our restructuring.

Interest expense for the fourth quarter was $2.1 million compared to $2.7 million in the fourth quarter of 2007. The difference primarily relates to lower debt compared to prior year as we were able to prepay $40 million in our long-term debt via the proceeds we received from our rights offering and cash from operations.

At the end of the fourth quarter, the interest rate on our bank debt was approximately 6.25%, based on our new credit agreement and the tiered interest rate structure.

For the fourth quarter, our effective tax rate was a benefit of 15.3% compared to an effective tax benefit of 35.3% in the fourth quarter of 2007.

In the fourth quarter of 2008, we provided a valuation allowance on certain deferred tax assets because their realization in this difficult economy cannot be assured. Excluding the effect of deferred tax assets on the valuation allowance, and the fourth-quarter impairment charges, our effective tax rate was a benefit of 38.4%. Going forward, we anticipate our tax rate to be in the range of 38% to 39% absent any future adjustments for the valuation allowance.

Our net loss for the fourth quarter was $83 million versus a net loss of $4 million in the fourth quarter of the prior year, resulting in a net loss of $2.36 per diluted share compared to a net loss of $0.14 per diluted share for the same period last year.

Adjusting the fourth quarter for the restructuring items mentioned in our press release, our adjusted net loss was $2.3 million, or a loss of $0.06 per diluted share compared to last year's adjusted net loss of $2.6 million or $0.09 per diluted share.

Adjusting for the non-cash impairment charges, EBITDA was $3 million or 6.2% of sales for the quarter versus $3 million or 5.5% of sales for the fourth quarter of 2007.

As additional information, fourth-quarter 2008 depreciation and amortization totaled $4.3 million. A reconciliation of the adjusted net loss and adjusted EBITDA that I've just discussed has been included in our earnings release for your reference.

Now, turning to the balance sheet, at year end, our net working capital, excluding cash, decreased by $7.6 million compared to the end of Q3 2008. This decrease in net working capital was driven by a decrease of $4.1 million in accounts receivable due to the lower sales volume in the fourth quarter, and a decrease of approximately $2.2 million in our inventories due to our efforts to keep inventories down, as well as a reduction in certain Architectural Systems inventories that were prepurchased during our third quarter for fourth-quarter production.

In reviewing free cash flow for the fourth quarter, we had an adjusted EBITDA of $3 million. A cash-based decrease in working capital of $5.2 million. Fourth-quarter 2008 capital additions were $1.1 million. And cash paid for interest was approximately $2 million. This resulted in operating net cash generated of $5.1 million in the fourth quarter, of which, we used $4.1 million for margin calls on aluminum hedges currently in place for 2009 and 2010. So net-net, we generated approximately $1 million in free cash flow for the fourth quarter.

Our cash on hand at quarter end was $19.6 million, giving us net debt of approximately $70 million.

With that, let me turn the call back over to Rod.

Thanks, Jeff. We are still in difficult market conditions that negatively affect our business, and the overall economy continues to be affected by tight credit caused by the mortgage crisis. As I have previously outlined, we have instituted several measures to stimulate sales, as well as to reduce operating costs to counteract the current market conditions and we will continue to monitor those conditions closely.

The insurance incentives I talked about earlier and the stimulus package putting much-needed dollars into the credit market and energy programs may each benefit us in 2009. But the continued uncertainty and lack of consumer confidence in the credit market and in the home construction industry mean the headwinds facing the construction industry have not yet dissipated.

Long term, we believe the US Impact-Resistant market will continue to grow and we will expand our presence in this market. Our new products in our Vinyl and Architectural Systems streams have been well-received and we continue to add new distribution. We are actively seeking new markets in other geographic areas.

During this market downturn, we have been able to leverage our value proposition while improving our customer service and to maintain our internal structure to quickly take advantage of opportunities when market conditions improve. I thank all our customers for believing in us and I thank our employees for committing to our strategy and outperforming our expectations.

With that, I will conclude and Jeff and I will be happy to answer your questions. Sicilia, could you take the first question, please?

(Operator Instructions). Sam Darkatsh, Raymond James.

A few questions here. First off, the growth outside of the state of Florida is very encouraging, obviously. What are the drivers there? Is that primarily coming from Impact-Resistant, Non-Impact-Resistant? What are the drivers there?

Well, kind of the two markets, Sam, we serve outside of Florida is what we consider out-of-state US market. And that increased -- that represented about 8% of our sales. And then there's the international market, which represented the other approximately 6% of sales for the quarter. So internationally, it would be driven by both vinyl and impact aluminum, as well as some high-rise, our AS products also go international. So we are still seeing, as Rod had mentioned in his script, we are still seeing some good activity in the Caribbean, and we plan on that continuing.

As far as out of state, it's both Vinyl Impact as well as success with our new Non-Impact Vinyl window, the 2100 series we introduced last year. So we are seeing the benefits of that as sales have started to grow for that product on a monthly basis here, pretty much consistently since the midsummer of '08.

And as I understand it, and correct me if I'm wrong, out of your North Carolina plant, I think you are just running Vinyl and Eze-Breeze, if I understand that right?

Sam, we're running Vinyl, Eze-Breeze, and curtain wall. One of our curtain wall projects is coming out of that plant.

Okay. So I'm guessing that your utilization rates there are real low. So, I guess what I'm trying to get at is what your incremental margins are, like, are you indifferent whether you sell an Impact-Resistant versus Non-Impact-Resistant outside of the state of Florida based on the incremental margins? Or is it still more beneficial for you to sell Impact-Resistant because of the high base margins?

From a contribution margin, it's definitely more beneficial to sell Impact-Resistant product. From a customer containment and growth point of view, I don't know that we put more importance on one than the other. Customers are selling product into both markets, and they like buying from a one-stop shop. So they've got to have both products in order to really keep that distribution level up. So we look at the value of maintaining a customer and the importance of having a Non-Impact line, as well as the better margins we get from selling that Impact line.

What is your utilization rate in North Carolina versus Florida?

Yes, Sam, we've really never tracked utilization rates in either plant. We think depending on volume, you can run up to three shifts, so what would be the real utilization rate? Right now, we're running basically one shift here in Florida and at times, two shifts in North Carolina, depending on demand. So we flex that. So we don't have a firm utilization rate that you would get in a standard environment, where production is consistent and not custom.

Two more questions then I will defer to others. You mentioned aluminum, Jeff, and that was very detailed. Thank you. What is the year-on-year expected impact of aluminum in dollars '09 versus '08?

In terms of a benefit for the year, we should, again, it's hard to tell only because of the spot price.

Assuming the spot price remains at current levels.

Yes, assuming the spot price remained at current levels, you're probably talking close to $4 million annually, benefit year over year.

And I'd just add, Sam, that's a pretty aggressive assumption. That price is somewhat unprecedented.

And selling prices would be the other side of that equation. What are you seeing in the field based on the difficult end markets and the aluminum prices coming down for all parties? Is pricing -- I know it's going to be different, Impact versus Non-Impact, but give us a flavor of what you are seeing in selling price, what did ASPs do in the quarter versus year on year?

Selling prices haven't really been dictated by input costs as much. As you know, we did not pass along a lot of input costs for almost a period of two years. And we just took a price increase the end of last year of only -- what was it, Rod, 3%?

It average about 3%. It was 1.5% and 4% depending on the product line.

So it's a minor price increase there. We have not went out and reduced our prices because of input costs or increased them dramatically because of that either. It's more driven towards competition and volume. If we want to get a certain job over a competitor and we have to use price, we're not afraid to. It's not something we want to do because we think, obviously, our value proposition warrants our premium price and we are getting that for the most part. But if we do have to on the competition side, we will use it.

Yes, Sam, if we look back, we could pretty much predict our run rate of all of our products. And as we're looking at the economic conditions we're going through now, there's a lot of projects out there that are being bid. And the project bidding is probably subject to a little more price pressure than you would normally have on a normal run rate. So we see that price pressure there, but it's kind of hard to bring that back in and say what that does to us effectively because those are incremental sales that we normally wouldn't have out there in the plan even though we know those projects are out there.

So on a like-for-like SKU basis, what are ASPs running year on year?

We don't have that. I mean WinGuard average prices are $650. But you got a door that's what, Rod, $1200 or more and you got a window that's $400. So it is a mix issue.

The hard part, Sam, is that if you take our WinGuard window and look at all the configurations of that product, there's over 2 million configurations, and so we don't track each one of those as a SKU.

So the ASP overall would be increasing probably because the WinGuard mix is increasing because it's not falling as much as the Non-Impact-Resistant; is that how to look at it?

That's exactly right. Mix would drive that and even mix within WinGuard would drive that. So there's two layers there you got to look at.

Thank you much. Very helpful.

Keith Hughes, SunTrust.

Thank you. I wanted to follow up on your comments on the Florida captive property insurer. Are they requiring just cladding protection or specifically Impact-Resistant windows?

They are requiring -- it's a fairly complicated law and I won't go into all the details. But the highlights are certain amount of miles from the coastline, insured value. There's a threshold insured value, and it requires impact protection on all openings.

So will they take shutters or is it going to have to be something -- your product some --?

Yes, it's impact protection. It can be shutters. It could be plywood, if you really want to go low-end.

But what I want to remind is that it's based on a threshold insured value and it is fairly close to the coastline. So we're not talking about a $200,000 house that tends to put in plywood. We're talking about $750,000 and above houses that tend to gravitate more toward the window immediately.

Okay. Jeff, on the aluminum, what was your average aluminum price in 2008?

In 2008, the average aluminum price, Keith, was approximately 2750 metric tons.

That's good. Okay.

And I guess the revenue results for the quarter were fantastic compared with the last couple years. Have you seen any competitors exit the market in Florida in the last three, six months?

Keith, I don't know that I could just sit here without a number in front of me and tell you all the either factories or branches or actual competitors that have exited the market. Literally one weekend we walked in on Monday morning and looked at the latest update and there was three people that went out over the weekend.

Oh, wow. Interesting. All right, thanks a lot, guys.

Michael Rehaut, JPMorgan.

Hi, guys. This is actually Ray Huang on for Mike. Just a couple questions. First question on the cash flow, what you guys are expecting for '09 and if you could maybe talk through some of the different levers there with working capital, CapEx and D&A?

In terms of CapEx for '09, we closed out 2008 at just right at $5 million in CapEx. We plan on being south of that number. We got to budget between $4 million and $5 million. And we will adjust it depending on '09 results.

Working capital, I don't see that being a use of cash. If anything, we will strive to make it a source of cash, and we've got a pretty good track record of doing that for the last three years anyway. So, I see that as either neutral or a source of cash. I'm not going to comment -- I can't comment about how much that would be. Obviously that will depend on the market and sales as well.

In terms of cash flow for '09, we don't like to give firm guidance on that. I will tell you anything, EBITDA-wise of say $3 million or so, we tend to generate some cash, depending, again, on those two factors, CapEx and working capital. But we look to make anything over $3 million, we definitely count it into that cash flow. So if we had a $5 million quarter, I can almost guarantee we're going to have at least $2 million of free cash flow in that EBITDA stream, but again, it just depends on numerous factors. Short of that, we don't want to give any more '09-type guidance.

Right. For the CapEx, is that $4 million to $5 million, is that mostly maintenance CapEx? Or is that some type of investment?

About half and half. I would say about -- almost half and half. $2.5 million or so in maintenance type CapEx, and we are going to put some money into one of our product lines, in one of our door lines. We're going to modify our door product, and we will have some money associated with that.

Okay. And then second question on the gross margins, you guys had a pretty nice year-over-year increase in the fourth quarter. Wondering trend-wise, is that kind of what we should expecting for '09, kind of a continued improvement in the gross margins?

You know, I think we will continue to try to improve gross margins in '09. We will do that through a number of ways. We will look to be more efficient on the labor side and we challenge, literally, we talk about that weekly, in terms of labor efficiencies and working smart.

We will continue to push materials and keep those in line in terms of cost increases. We will continue to drive minimal cost increases and if anything, decreases. So yes, I feel confident that we will hold our margin together, assuming we can stay ahead of the mix curve. Obviously, WinGuard being 70 -- 68% of our mix, we want that to continue or get better. So there's a lot of factors that's got to fall in line. But I don't -- I can sit here and say internally, we're going to try to improve that gross margin and we feel we can over time.

Okay, and then just last question, you guys mentioned you got some pretty good response from some of the new products you guys are rolling out. Given that we are a month and a half into the new year, can you guys give any color on what sales is doing in the first quarter so far?

Are you talking for the new products?

Just in general for the whole company.

We don't want to comment on what sales is doing during the quarter. In terms of the new products, though, I will comment real quickly there.

The R&R window that we introduced at the builder show, that Rod referenced, we will start taking orders in March. We do think that's going to be well-received, and we are actively setting up distribution based off the fact we're going to -- it's been well-received.

So we do expect that to be a nice addition in 2009. The 2100 series is the same product in a sense, but for the new construction side of the business. Those same customers that will be ordering the R&R window will also be most likely ordering a 2100 new construction window. So again, we think that's got potential and we continue to invest in that side.

We're also, we're cautiously optimistic about the commercial side of things. I think we're all aware that the commercial market is getting a lot of pressure right now, and we are seeing multifamily and commercial projects, start to come down. But our sales into that market are relatively small. So a lot of that is incremental, and we do have -- we've seen some pretty good response there. We've got a lot of work to do to really grow into that market. But again, very cautiously optimistic about what we can do in that market through the remainder of the year.

And I would make one more comment about '09 and volume from a big picture standpoint. We will obviously continue to execute and things like the change in the Citizens law to require impact and stuff like that definitely helps. Our new products definitely help, and we will push both those. But we live in an environment like every other company out there in '09. There's a lot of things out there.

Rod mentioned some in his comments. You got tightened credit markets. You've got consumer demand down. We're facing, like every company, a lot of different obstacles, but we are trying to execute strategies against those obstacles in 2009.

On the commercial side, what percent of sales is that currently for you guys?

Low.

Under 5% or --?

It was $15 million.

Yes, I think in the 8% to 10% range.

For the year? Hang on a second. I gave the detailed sales for -- like the AS sales for the quarter were $3.7 million.

We struggle a little bit categorizing it exactly right because you go four stories and above and four stories and below multifamily, and some of that is considered commercial and some of it is not. Our residential product is so highly rated, it goes higher than four floors.

Okay, great. Thanks, guys.

Rob Hansen, Deutsche Bank.

I just wanted to see if you could elaborate a little more on the restructuring initiatives and what parts of the business and whatnot were affected from the cuts?

Yes, as you all know, we announced in January, really the first week in January, second week in January, we were taking another restructuring. We took out approximately 170 people and about 10% of our workforce. We estimate an annualized savings of about $6 million, so $1.5 million or so a quarter. It's pretty much immediate savings because it is salary-related, unfortunately, salary-related reductions. But, it was spread. It was both production and overhead in terms of the categories. Probably 50-50 -- maybe a little bit heavier towards overhead, maybe 60-40.

Headcount about 50-50 dollar, a little heavier on admin.

Yes. But other than that, we don't -- that's all we have to comment on it. We'll see it through our results, and obviously it's an unfortunate thing we had to do.

Yes.

(Operator Instructions). Jim Wilson, JMP Securities.

Thanks. Good morning, guys. Was wondering a couple things. First, maybe you mentioned it, but I missed it. What are the gross margin for WinGuard compared to the rest of the business? How did that look?

Yes, the gross margin for WinGuard was 38%. And the rest of the business was roughly 10%.

Okay.

And again, that's way down by volume at this point. So --

Right. Okay. And, the other thing I was wondering was in the stimulus plan, I don't know if you have any thoughts or commentary or if it's way too early. There is a $5 billion allocation to weatherization improvement, and it is focused on low-income housing. Any sense whether that's an opportunity? Obviously, you wouldn't think of your WinGuard product normally for low-income housing, but it's a government plan, so --?

As we look at the stimulus package, it's a little tough to pick out the items that we think will make a huge difference. We think weatherization is a small opportunity. It usually hits roofing first and then openings second. So we're not sure how that's going to play out.

The energy portion -- we actually think the energy portion may be beneficial, but we're still sorting out the details. The positive part is there is money there for putting in more energy-efficient windows. The negative part is the criteria for energy efficiency in southern Florida is exactly the same as the criteria for energy efficiency in northern Minnesota. And I'm not sure that makes complete sense for anyone changing out windows in those two different climates. But we think that's going to be a positive effect for us. We'll see how that plays out.

We think that the stimulus to try to get more home ownership, although it's not all new home ownership now, it looks like first-time homes, but that will at least get some inventory off the market. So I think there are some drivers there that will benefit us.

The disappointing part for us is we feel that housing and the overabundance of housing and the mortgage crisis kind of took us into this downturn. And the stimulus package probably wasn't quite as strong on the housing side as it was on maybe infrastructure spending and that type of thing. But we do think there are some benefits there for us.

Okay, all right. Good. Thanks.

And with no further questions in queue, I'd like to turn it back over to Mr. Jackson for any additional or concluding comments.

Thank you for your time in joining us today. We look forward to speaking with you again next quarter. If you have any questions, please feel free to give me a call and good day.

That does conclude today's conference, ladies and gentlemen. Again, we appreciate your participation today, and you may disconnect at anytime.