© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the PGT Innovations Inc First Quarter 2018 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Brad West, Senior VP and CFO. Please go ahead.
Thank you, Brad, and good morning, everyone. Welcome to PGT Innovations' first quarter 2018 conference call. I am Brad West, the company's CFO, and I'm joined today by Jeff Jackson, our CEO and President. This morning, we are pleased to provide our 2018 first quarter results as well as an outlook for the remainder of 2018. We also have posted a presentation on the quarterly results to the Investor Relations portion of our website.
Before we begin our formal comments, I'd like to remind you that today's remarks contain forward-looking statements that fall within the meaning of the Private Securities Litigation Reform Act of 1995, including our 2018 financial performance outlook. These remarks involve risks, uncertainties and other factors that could cause actual results to differ materially. These factors are detailed in the company's earnings press release and in the Risk Factors section of our 2017 annual report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements.
You should also note that we will report our results using non-GAAP measures, which, we believe, provide additional information for investors to help facilitate the comparison of past and present performance. A reconciliation of these non-GAAP measures to their GAAP counterparts is available in the Investor Relations section of our website.
Now, I'll turn the call over to our CEO, Jeff Jackson. Jeff?
Thank you, Brad. Good morning everyone and thanks for joining us today. I am excited to report PGT Innovations had a strong start to 2018. Our first quarter top-line performance has 24% growth delivered a solid operating performance. In the first quarter, we demonstrated our ability to leverage fixed cost on the significant increase in sales. This leverage combined with manufacturing and operating efficiencies delivered nearly a 4 percentage point increase in gross margin for the quarter compared to last year.
Demand continues to be strong in both new construction and repair and remodeling sectors of our business with sales in both sectors continuing to grow compared to last year. This is especially true for sales into the repair and remodeling market after the hurricane season that included the most power storm ever recorded in the Atlantic and the first to hit the coast of Florida in 12 years Hurricane Irma.
Florida was ranked number one for its residential building codes by the Insurance Institute for Business and Home Safety rating them as the safest residential building codes in the country, our products exceeding these very stringent codes. We believe homeowners are choosing our impact-resistant products and increasing rates for the repair and remodeling products. This is driven because of the increased post-Irma awareness they have with the benefits they are, in fact, resistant-products provide and comply with Florida’s building codes. Experts are forecasting another active season in 2018, which begins in June 1st and goes through the end of November.
We successfully completed another strategic initiative with a move into our new 330,000 square foot leased facility in Miami. This move was well-planned by our team and I'm pleased with the execution of this plan as all employees that made it happen were incredibly diligent in their efforts. Production began in this new facility in late March, and we were fully operational by mid-April.
We are excited about the initial production space and flexibility this facility provide us. Increasing our production capacity in Miami area allows us to continue to meet the demand for impact-resistant products across Florida. Initial capacity to accommodate CGI's new Slim Front commercial product and its Sparta line was critical.
The Sparta launch is PGT Innovations' first value-custom impact-resistant window product line, an entry point solution with an emphasis on affordability. This makes it easier for homeowners to upgrade from the cumbersome plywood and shutters to protect their families and homes from the next big storm.
We continue to provide value to our shareholders by refinancing our credit facility in the first quarter. This refinancing lowered our interest rate by 125 basis, significantly improving our cost of capital.
For the first quarter of 2018, we delivered sales of $140 million, adjusted EBITDA of $21.7 million and adjusted earnings per diluted share of $0.19, a growth of $0.12 compared with last year. Our sales growth represents an increase of $27.5 million in the first quarter of 2018 compared to the first quarter of 2017. This growth was driven by our ability to continue to gain share in the repair and remodeling market.
Our sales into the market increased 32% in the first quarter compared to the same period last year. This drove a favorable shift in mix, with higher margin sales into the repair and remodeling sector in the first quarter of 2018, representing 63% of our total sales.
Our adjusted EBITDA margin finished up two full percentage points as gains from strong sales and improved operations were partially offset by increased incentive compensations and increased marketing investments as we continue to execute on our strategy of leveraging hurricane awareness driven and making our impact-resistant products the products of choice.
We ended the quarter with a strong consolidated backlog at $76 million, as the surge in demand we experienced in the fourth quarter of 2017 continued during the first quarter of 2018. Inflationary conditions continued to apply pressure on margins during the first quarter. Aluminum prices have increased because of tariffs and sanctions, and we also experienced inflationary labor and transportation costs.
Transportation costs were affected by higher average fuel costs in 2018's first quarter compared to the first quarter of last year. However, we were able to offset the impact of these costs through our strength of our first quarter operating results and through previously announced price increases.
Our strong start to 2018 demonstrates our team remains focused on long-term vision and strategic priorities. The momentum we built in 2017 continued to the first quarter of 2018, and we believe it will continue for the remainder of 2018. Florida is the third most populous and second fastest-growing state in our country and continues to increase in population and wealth, especially in our key southern coastal markets.
We believe there's significant growth potential in Florida, driven by continued growth in new construction, where normalized single-family housing starts should be approximately 120,000 starts per year. We also believe that solid demand in repair and remodeling market will continue, driven by heightened awareness and the potential for damage from hurricanes. This recently renew awareness that generated increased demand for impact-resistant windows and doors as the preferred choice of impact protection for homes and business. PGT Innovations is well positioned to continue to capture an increasing share of this growth.
We have executed four strategic pillars to focus, from which we expect to create long-term customer and shareholder value. First, we believe that being loyal to our customers builds our brands. We brand this loyalty by positioning our brands in the marketplace through focused investments in advertising, developing new innovative products and offering customer sales incentives and homeowner rebate programs. We believe this loyalty to our customers and investments in our brands results in the close relationships we have with our customer base.
Second, we're focused on attracting talented, hardworking leaders at PGT Innovations' family. We believe that leading new talent is a key ingredient to success in our business. We develop and offer a team member benefits and programs that help them to succeed. We also offer team members family scholarships, leadership and workforce development programs and opportunities to advance to our company. In short, we strive to make our company the best place to the best place to have a career.
Third, expanding our operations to meet the increased demand is critical to our success. Besides our increased footprint in Miami, we are also adding more automation to our manufacturing processes, which gives our manufacturing leaders and team members more time to focus on maintaining and increasing the quality of our products. We believe our ability to increase production is a big reason why we continue to take share in Florida. Initiatives such as Six Sigma, [indiscernible] and lean manufacturing processes, implemented over the past few years, are driving capacity and efficiency gains.
Finally, because resources are not limitless, we have a strategic focus on allocating capital generated from our strong free cash flow in a way that supports our Florida growth strategies. This accretive lean investment of our free cash flow is core to driving shareholder value and enables us to consider out-of-state acquisitions in the future.
Our execution on these strategic pillars to this point is evident by our quarter's results. And this is the playbook that we will continue to use going forward, because we believe it will ensure continued customer loyalty and drive shareholder value. I am very proud of our team and they're continuing to execute against our strategy of profitable growth and disciplined capital allocation.
Now I'd like to turn the call over back over to Brad to discuss the financial results for the first quarter of 2018 in more detail and give an update on the 2018 outlook.
Thank you, Jeff. We reported net sales of $140.3 million in the first quarter, an increase of 24% compared to last year. We were able to achieve this result from the continuation of our momentum we had in the fourth quarter of 2017. This strong growth was driven by an increased post-Irma demand combined with execution of our investment and our advertising and marketing strategies.
On Slide 9, we give you a breakdown of the net sales for the quarter. Our increase in overall impact sales of 28% includes increases in sales of our vinyl impact products of 40% and our aluminum impact products of 22% compared to the same period last year. This growth was driven by solid demand for our vinyl WinGuard products, which grew 44% versus the same quarter of last year.
Our sales growth for vinyl impact products highlights the shift in our markets towards energy-efficient products and our ability to design attractive and innovative windows and doors to meet those needs. Since 2014, our vinyl WinGuard products have grown at a compound annual rate of nearly 35%.
Now please turn to Slide 10, and I will briefly cover a few income statement items. For the first quarter of 2018, our gross profit was up $13.0 million, and our gross margin increased 370 basis points versus last year. Our gross margin benefited from higher volume, improved operating effectiveness and a favorable mix of sales. Gross margin also benefited from price increases that took effect during the first quarter. Offsetting these benefits were inflationary factors, including an increase in the price of aluminum and increases in labor and fuel costs.
Gross margins in our first quarter results were impacted by costs relating to the planned relocation of our CP operations into its new facility in Miami and costs associated with machinery and equipment relocations within our glass plant operations in Venice. On an adjusted basis, gross margin in the first quarter of 2018 was 32.2% compared to 28.6% last year's first quarter, and that represented an increase of 360 basis points from last year.
With regards to aluminum. As of today, the price of aluminum is approximately $1.23 per pound. This is up from the $1.11 per pound the end of last year. After considering the effects of our active forward-buy and hedging programs, the increase in aluminum prices had a negative impact of 110 basis points on our gross margin in the first quarter that was previously mentioned, we increased prices to cover these inflationary costs.
As of today, we have covered for approximately 60% of our estimated aluminum needs for the remainder of 2018 at an average delivered price of $1.10 per pound, which compares to $0.98 per pound in 2017. Going forward, we will continue to monitor the price of aluminum and the regulatory environment, and we may increase our coverage or consider additional price increases as we see fit.
Selling, general and administrative expenses were $28.7 million in the first quarter, an increase of $5.9 million from the same quarter last year and in line as a percentage of sales. This increase was mainly driven by $2.0 million of additional distribution costs due to higher sales; $1.9 million of additional personnel-related costs, including higher incentive compensation; and $400,000 of additional investment in marketing and advertising initiatives. The remaining increase was due to higher costs, consistent with higher sales.
Stock-compensation expense was $514,000 in the first quarter of 2018, and our estimate for the full year is still $2.5 million. Interest expense in the first quarter was $4.0 million, a decrease of $900,000 from last year. During the second half of 2017, we made a total of $40 million of voluntary prepayment to our borrowings. The decrease in interest expense is primarily the result of a lower average level of outstanding borrowings in this year's first quarter compared to last year.
On March 16, 2018, we financed our 2016 credit agreement, which resulted in a 125 basis point reduction in the stated interest rate margin for borrowings under the term loan portion of the facility. This refinancing was accomplished at par with minimal additional lender fee and minimal third-party costs. We estimate that the repricing of our terminal facility will save us $2.8 million in debt service costs over the next 12 months. Because of the refinancing, we did record a non-cash debt extinguishment charge of $3.1 million related to the write-off of financing costs.
Depreciation and amortization was $4.6 million, slightly higher than last year. We recorded tax expense of $1.7 million in the first quarter, which represents an effective tax rate of 18.4%. This compares to $1.0 million and 25.8% in the first quarter of last year.
Tax expense in the first quarter of 2018 has been reduced by $613,000 of excess tax benefits related to the vesting of equity awards compared to $388,000 last year. Excluding these benefits, our effective tax rate would have been 25.2% in the first quarter of 2018, which is compared with 35.4% in the first quarter of last year.
The lower effective tax rate in 2018 compared to last year is due to the decrease in the corporate tax rate from the recently enacted Tax Cuts and Jobs Act. As such, we are expecting to have an effective tax rate for 2018 of approximately 26%.
We recorded net income of $7.3 million or $0.14 per diluted share for the first quarter of 2018 versus $3.0 million or $0.06 per diluted share in the first quarter of 2017. However, after adjusting for the impact of the non-cash debt extinguishment charge, and the facility and machinery equipment relocation costs in the first quarter of 2018, adjusted net income for the quarter was $9.9 million or $0.19 per diluted share.
This increase over prior year was primarily the result of the significant increase in our top line sales for the quarter as well as improved operational performance and efficiencies versus the first quarter of last year.
Adjusted EBITDA for the first quarter was $21.7 million or a margin of 15.5% compared to adjusted EBITDA of $15.2 million or 13.5% last year. Both adjusted net income and adjusted EBITDA were affected by those same factors that benefited gross profit and gross margin, including increases due to higher sales volume and improved operating effectiveness. A reconciliation of our non-GAAP financial measures to the GAAP equivalent has been included in our earnings release for your reference.
Now please turn to Slide 11 for a discussion of balance sheet items. We ended the first quarter of 2018 with a cash balance of $34.0 million, which was unchanged from the end of 2017. We invested $6.6 million in capital expenditures in the quarter, which is $3.5 million more than last year's first quarter.
Additionally, we made an income tax payment of $9.0 million related to the 2017 income taxes. We received $10.0 million in cash proceeds relating to the sale of our PGT-branded door glass asset executed in September 2017. We expect to receive the remaining $50 million during the second quarter of 2018 when we complete the second and final transfer of assets.
We further reduced our net leverage during the first quarter of 2018 to 2.1 times. We intend to continue to focus on maintaining a strong balance sheet that should give us flexibility to make further investments and fund future needs.
At this point, I would like to turn the call back over to Jeff for comments on the remainder of 2018 and some other closing comments. Jeff?
Thanks, Brad. We remain confident that this quarter’s economic factors that impact our business are positive and expect those factors will continue to be favorable to our business for the remainder of 2018. Housing starts have continued to grow steadily during the first quarter of 2018, and are still well below what we believe the market can support. Starts grew by an average – estimated average of 13% during January and February of 2018 compared to the same month last year.
As that pays, single-family starts in Florida would reach approximately 96,000 starts in 2018. In addition to increasing our sales into the new construction market, we have demonstrated our ability to gain share in the repair and remodeling sector. We expect growth in the repair and remodeling sector to continue to be strong, as more homeowners are choosing impact-resistant windows and doors over shutters or other impact systems for their home-protection needs.
On our 2017 year-end earnings call in February, we provided guidance for 2018. Based on our top line performance and operating results for the first quarter, we expect to finish at the high-end of those ranges. As a reminder, those ranges are: net sales of $550 million to $575 million, representing an increase between 8% and 13% versus last year; adjusted EBITDA of $95 million to $105 million, representing an increase of 10% to 22%; net income for diluted share of $0.81 to $0.98, which assumes $52 million weighted average diluted shares outstanding.
And free cash flow of $59 million to $67 million, reflecting our expectations of solid growth for the remainder of 2018 and disciplined capital spending. This free cash flow includes the $25 million of cash proceeds we expect to receive during 2018 from finalizing the sale of certain glass-plant assets [indiscernible]
Our free cash flow target for 2018 also includes the impact of an estimated federal income tax payment of $9 million or 2017 income taxes, which we made in January of 2018. Before taking your questions, I want to say thanks to the entire PGT Innovations’ family for a strong start to the year. To our team, our partners, customers and our shareholders, thank you for your efforts and continued support. Our company has a culture that drives innovation, which makes PGT Innovations a fun, exciting place to be, and our 2,900 team members remains focused on generating value for our shareholders.
At this time, we’d like to turn to call over to conference operator to begin the Q&A portion. Brandon?
Thank you. We would now begin the question-and-answer session. [Operator Instructions] Our first question comes from Sam Darkatsh with Raymond James. Please go ahead.
Good morning, Jeff. Good morning, Brad. How are you?
Good morning.
Three questions, if I may. First, a clerical one. I missed – and if you’ve mentioned this on the call and I missed it, I apologize. What was the backlog at the end of the quarter? But with my notes, I have 56 million at the end of last year’s first quarter, just trying to get a sense of year-on-year.
Yes, $76 million, Sam.
$76 million? Okay. And then, another clerical question. Within the sales guidance, how much sales contribution are you anticipating or expecting from the Miami facility itself?
Well, as we mentioned during the call, we are implementing some new product launches that will affect our sales towards the back half of the year with the Sparta launch as the first and foremost. But the move initially was this design have kind of improved our operating effectiveness and give ourselves the capability to grow into the future. We won from 120,000, 150,000 square feet, so over 300,000 square feet, so there’s a lot of excess long-term, but we do believe that, that move will help us grow, and especially with the whole new products that we’re launching in the back half of this year.
Yes, I can figure that. And also, Sam, I’d like to point out on that backlog increase, that’s the true backlog sales-driven market increase. Our lead times are still – are standard three weeks to four weeks across most of our product lines.
Thank you. And final question. This might be a bit elementary and may require some math. But it looks like the first quarter incremental EBITDA margins were about call it, 25% or so. And then if you take the high end of your guidance for sales and EBITDA, it looks like the rest of the year incrementals will be right around 40% or so. Just trying to get a sense of – I know you highlighted some of the puts and takes, but what pressured first quarter EBITDA margins that become alleviated incrementally in the back half of the year, the last three quarters of the year?
Well, I think the target is we really focus since first quarter and some of that investments in marketing and advertising, and we’ll continue to do so. But I think the first quarter of this year compared to last year that investment was specifically designed to capitalize on what happened with the storm last year. And then also, I would tend to say that the incentive compensation accrual difference between first year and last year – or between this year’s first quarter and last year’s first quarter will start to normalize as we get towards the back half of the year. Those are the two main factors, I would say. We, obviously, had a strong back half of the year last year. Operationally, the first quarter was the kind of the easier comp for us.
Yes, fourth quarter last year was an incredibly strong quarter, if you look at it. And it’s still early in the year, I know we guided to the high end of our range. But, keep in mind, we just seen four months of this year so far and they’ve been strong, all four months have been strong, but it’s still too early for us to take that range up.
What was the quantification of the extra marketing spend? I know you had extra marketing spend last quarter or two, the TV ad spending, how much was in this quarter?
It’s $400,000 specifically from marketing. But if you want to look at the total spend that we did on the entire promotion, the one we are trying to generate, that actually might have been closer about $700,000.
Okay. Thank you very much and a terrific quarter sales volume, West.
Thanks, Sam.
Our next question comes from Michael Eisen with RBC Capital Markets. Please go ahead.
Good morning, gentlemen. Thanks for taking the questions. Just wanted to quickly touch on – can you talk about the actions you took last year that drove that such high level of R&R spending? And kind of how that compares to the broader market? And what kind of share gains you guys picked up in the quarter?
Yes. I think actions we’ve taken actually both last year, end of last year, and this year is just driving brand awareness. We went – obviously, coming off the storm, off the heels of the storm of Hurricane Irma, we were in our first commercial, we’ve done in 12 years, and we’re receiving incredibly strong feedback from the market over that in terms of leads and dual flow. We’ve also been actively just branding more – whether it’s redoing all our trucks to showrooms with our dealers to mobile promotions and ads that are running. I think we’ve got a very heavy incidents on our brands and in the awareness of benefits of having impact protection versus not, versus shutters and indoor plywood.
And I think you’re seeing that kind of take in the R&R growth is really what we’ve always thought it would be in terms of an awareness factor when a hurricane does hit interstate, you have a lot of people that’s the first time they experience that hurricane and estimates were 5 million to 6 million people trying to evacuate Florida at one point. So we had that kind of disruption, you do have a good awareness factor that we’re benefiting from, and I think we’ll continue to benefit from through the remainder of 2018 and beyond.
Got it. That’s helpful. And then just a quick follow-up on that. When thinking of the potential for R&R spend, especially after last year’s storms and the potential for more, do you guys have any indication of the Florida housing stock? How many are up to current code and what the runway is from an R&R perspective in the state?
There’s really – no – there’s really no measure in a third-party data point or measure out there in terms of how many houses are up the code or not up the code as a potential market. I think it’s more – if you’re familiar with the market, it’s the retirement community, we have a lot of folks come down here during certain times of the year, and when they come down, they’re even buying older homes and renovating them or going into condos, they’re older and in need of renovation.
So it’s got an inherent kind of fear to that market with the population dynamics. But in terms of the metric I could point you to, there really isn’t one out there that would tell us that.
Understood. Congrats on a great quarter.
Thank you.
Our next question comes from Alvaro Lacayo with Gabelli & Company. Please go ahead.
Good morning. Thanks. I just have – just a few questions regarding trends throughout the quarter and maybe some commentary around April, just both on a macro level and what you’re seeing with your own business with regards to both new construction and repair and remodel in Florida. And if you’ve seen any sort of shifts or changes based on what you saw at the beginning of the year?
Yes. I’ll cover the first part of that question. As the quarter went, we had some pretty solid growth all quarter long. March was the last – the least amount at only 18%, but that’s being – still a great number. Obviously, the other two months were higher than that. And I think the trend in April is not necessarily continuing with respect – I mean the trend of good growth is continuing, but I mentioned last quarter that Q2 and Q4 are just generally our tougher comps.
So I think we’re still seeing really solid growth, and we feel comfortable with the high end of the range, which is why we said that. But I think as the trends have gone throughout the year, that I think I’m just trying to showing that we’ve got good growth and the high-end of the range is certainly what we think we can accomplish.
Yes, I would say, all centers are really kind of growing, the low end and high end in terms of housing and what we’re seeing. If you look at kind of the beginning of the year that kind of enforcing that code awareness, that factor continues to be strong. Mid last year, there was actually talk, are the codes too tough? And obviously, that question was answered when you have it forward come in, [indiscernible] and then back over I think mark alignment. The codes aren’t too tough. We actually save lives and home and property. We’re having incredibly good codes in the state of Florida.
So we’ve normally got footages from people that have [indiscernible] and stayed in their home and did recordings from their iPhones and send into us. So the impact to that kind of awareness is what we're benefiting from and is driving a lot of the R&R in these trend you are seeing.
Great. Thank you very much.
Our next question comes from Jeremy Hamblin with Dougherty & Company. Please go ahead.
Good morning, guys. I’ll add my congratulations. I wanted to see if I could start by asking about your CGI and WinDoor brands. I know they haven't quite performed as well as your PGT brand. But wanted to see if you could give me some insight into how those two brands performed in Q1?
Well, I don't think we want to get specific numbers, Jeremy. But I -- we've seen some great results in the Miami market, especially within the last 12 months. We've seen some strong sales and growth in the Miami area, both in new construction and in R&R. And CGI, from my perspective, has done quite well with that program actually. And that's one of the reasons for the focus on expanding our space down there to be able to accommodate that growth. So I guess, I'm disagree whole that, that's the CGI brand, I think they're growing nicely.
And we're not going to get specific numbers on that, but I think you should take the increase in four states down there as a sign that we're very comfortable with the Miami market. And in terms of WinDoor and the high end, guess, we're starting to see some recovery in that market in the high end, it's especially an access to WinDoor but also PGT and CGI so a little bit in that marketplace, so we're very comfortable that in the future, WinDoor will also be able to achieve the kind of growth levels that the rest of the company is seeing. But obviously, overall, it's the total company's growth that's quite impressive.
Yes, I understand that's the CGI and the market expansion within there. We've been in that roughly about a year, from kind of start to finish and the plant is at full capacity. They're creeping out products. We are very pleased with the layout in that facility, it allows us to expand quite frankly, to a market that continued to grow and especially the aluminum side of the business and that's kind of what will be our plans, the launch of the new Spart line. So we do see the dynamics that's taking off and continually we need to be strong for the next several years.
Okay. And then a follow-up question on your SG&A costs, which came in very high again relative to your sales growth, about a 24%, almost 25% incremental gain on that versus your sales gains. So I think you had indicated, Brad, that the marketing costs were up about $400,000 year-over-year. Does that imply that incentive costs were up about $3 million on that incremental $27.5 million -- because overall, SG&A was up about $8.5 million?
No, that’s…
I’m sorry, $6.5 million.
Yes, we talked about higher transportation costs. And from my perspective, the inline as a percentage of sales, the increase in incentive compensation is about $1 million of that growth. I think the rest of it is more just the typical spend we see in the first quarter. And as a percentage of sales, the first quarter SG&A is the highest it will be for the whole year. And that's, by design, that's when we cover a customer, that's when the ideas show is. I know it's every year that way, but it's not a $3 million increase, I think there might be something wrong with your math there.
Okay. What was the transportation impact or fuel cost?
About $400,000.
Okay. And then a follow-up question – or not a follow-up. You had this agreement in place with Cardinal Glass for your impact ore production. I wanted to get a sense – I know they've broken ground on a new facility. I wanted to get a sense of where that transition is and when you expect to fully transition over to Cardinal Glass taking that production off your hands?
That transition is complete, Jeremy. That happened in the first quarter. All of our door glass is now coming from Cardinal. What's still finalized is just the actual move of the equipment, and as you can imagine, temporary – does not move overnight, right? It takes a while to move those things. So production is fully transitioned, and it went very smooth. And our team here has been working with that process for a few months now, and you will receive that last bed here shortly as they get the last piece of equipment out of the building.
Yes, Jeremy, Cardinal obviously has multiple plants, so right now, we're just getting that glass from their various locations. And they're pretty big outfit. So they necessarily need our tempering of them to meet our demand. Now they will use that to meet our demand once it's up and running, but they were able to tap on their other plants to supply our needs until then.
Great. If I could just take one more in. You mentioned the housing starts were on track. I think for about 96,000, I heard, and that you think the normalized level is about 120 per year. what would be incremental revenues, if you just maintain share be on that closing that GAAP of roughly 25,000 starts a year?
Well. Let me just think about that. Well, thank you, Jeremy. If you look at what we did last year, in the world of new construction, we were averaging about, call it, roughly $50 million a quarter company-wide on new construction sales, and that was about 85,000 starts. So you could pick up another half of that, right, if you keep the same shares can [indiscernible] 120, that's roughly 50% growth. So in theory, you would add $25 million a quarter, I guess, that would be about $100 million a year.
Great. Thanks for the color guys and best wishes on continued success.
Thanks, Jeremy.
[Operator Instruction] Our next question comes from Min Cho with B. Riley FBR. Please go ahead.
Great. Thank you and congratulations on the quarter and an impressive backlog. couple of questions, yes. Can you talk a little bit about any change in your competitive environment that you're seeing in Florida?
Yes, I think we still see robust competition in the local markets. We have a couple of competitors we do away in that Miami area, that's more lower-end products. And in fact, that's when we launch the Sparta line to kind of go into their market versus our high-end and they try to creep up in the high-end markets at times. And so we launched part of this kind of attack to their market. From a vinyl standpoint, there's no other product around that we will see – make our performance and esthetics kind of combination. But we do have a couple of players that try competing us, this and that, that's probably more on north and [indiscernible] region or Jacksonville region. But it's really, really regional-based. I think they're growing somewhat in the market. We’re definitely taking some share, but I think the market dynamics in Florida were getting net 1000 people a week at least in Florida, so we’ll go in a live and there’s a lot of construction activity there.
Okay. And, obviously, you guys are very busy in Florida right now. But can you talk a little bit about your diversification strategy outside of Florida? Is that kind of on hold for the time being? Or is that something that you’re working on going forward?
It’s not only how long, we’re not pushing our brand outside the state, I don’t have the outside dish, I mean they’ve grown very good.
We’re good. Out of state, we’re 20% and our international market year-over-year actually doing 90%, smaller numbers but very solid growth.
Yes, we do have growth initiatives and activities going on outside the state with our current brand portfolio. With that said, obviously, we’re always looking for the right accretive acquisition, the best way to use our capital we generate here. And that’s an ongoing activity, so that’s still very much active.
Okay. And then if you can just provide an update on your commercial division. Were you still expecting growth in 2018?
Yes. We are in as also other than locations down in Miami as well. So we’ve been working out expanding their footprint as well. And they are growing – they had some nice growth last year. And with the new Slim Front products that we just launched this year, we continue to expect that growth. So it’s definitely a good complement to our business.
Hopefully I don’t see. So let it be $20 million plus this year.
Okay, thank you very much.
Okay. [Operator Instructions] Our next question comes from Ken Zener with KeyBanc. Please go ahead.
Good morning gentlemen.
Good morning, Ken.
Given the strong growth that you guys had in 4Q, following the hurricane, given the strong growth you had this quarter and obviously much higher growth on the impact side, is it really like the 4Q comp that is keeping you from taking up? Is it the fact your lead times – because your backlog is out, the fact that your lead times haven’t creaked up, I guess, what kind of gives you pause? And it’s understandable, but would give you pause about these trends that we’re seeing carrying through at a stronger rate than your higher end of guidance? Is it really just conservatism which makes sense?
It’s definitely earlier in the year, and that’s part of the business. There are things that we see – the labor market continues to be tight in that, that impact on us has been – we’ve done a lot of nice things to help mitigate that risk and our operations are operating effectively. [Indiscernible] We still have 1,200 customers who have to deal with that, and have been increasing their install base. So that’s one of the circumstances that you think might limit the overall systems willing to grow. And then it’s just early in the year, and there’s different factors that you have to consider, including whether there could be destruction from another storm.
Yes, I would say, if we continue the trends we’re seeing again in April, we would most likely come to the market without any guidance before the next earnings release.
Okay. And I guess it’s obviously a variety of factors. If I could just focus in on aluminum. I think you said it was £1 right now and you have 60% of your remaining I guess, purchase high to your guidance at $1.10. What type of price increases are you going to need to cover aluminum, where it is today in the spot market.
Yeah. Well, it’s not something that we’d obviously willing to disclose and this type of price increase; we don’t have aluminum and our vinyl products as well. So it would be a price increase that’s not necessarily out of line with the type of price increases that we’ve seen in the past. We have to actually calculate that amount now. But there will be more of it that we will do in the second price increase in the year as opposed to just the one year that we’ve typically been doing.
Right and obviously, your competitors are, I assume, facing the same pressure. My last question is given how well you executed this quarter – last quarter; I mean it’s just very good, given some of the challenges in the past in terms of computer programs or just labor in the beginning. You’ve redone your vinyl production line. Is there a feeling of growth that where you guys would just not be taking business, because it would be stressing your system too much?
No. And I think what we’ve done what we’ve demonstrated really since this market started taking off in 2013, but with investment in 2014 as well. We allocate our capital and handle the volume trends we see is coming at us in the future. And the perfect example is the expansion of the Miami facility. We’re in 330,000 square feet, now approximately double what we’re in. That facility is not full. it’s just up to full production from a CGI standpoint, branding standpoint. We could still add shifts and add capacity in that plant to address growth demand.
And actually here, even at PGT, remember forming out glass, cardinal was strategic in bringing up both labor and capacity – plant capacity to which we’re expanding that as well, because of that vinyl growth that Brad quoted in his comments. No, the answer is solid no; we’re not going to walk away from business. As long as it’s profitable, we’re not going to – we’re a mid- to high-end margin company, we’re not going to give it away. So the only time we would walk away from business is it didn’t make sense from a profit standpoint.
Okay. And if you have any of those videos that your customers are sending, I’m trying to look at them on your website?
Yeah, okay. We’ll see – the reality isn’t doing that, they are all cool, next time you’re here, I’ll definitely show them.
Thank you.
You’re welcome.
We have a follow-up question from Jeremy Hamblin with Dougherty & Company. Please go ahead.
Hey guys. Actually, my question has been asked, that was on the aluminum cost. So, thank you.
Thanks, Jeremy.
Thank you, Jeremy.
This concludes our question-and-answer session. I would like to turn the conference back over to Brad West for any closing remarks.
Thank you for joining us today and we look forward to speaking to you guys next quarter. Thank you everybody.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.