PGT INNOVATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF
The accompanying unaudited condensed consolidated financial statements include the accounts of PGT Innovations, Inc. and its direct and
indirect wholly-owned subsidiaries, including, PGT Industries, Inc., CGI Window and Door Holdings, Inc. (CGI), CGI Commercial, Inc. (CGIC), WinDoor, Incorporated, Coyote Acquisition Co. and WWS Acquisition LLC (formerly known
as GEF WW Parent LLC) (collectively, the Company), after elimination of intercompany accounts and transactions.
On August 13, 2018, PGT
Innovations, Inc. completed the acquisition (the WWS acquisition) of GEF WW Parent LLC (now known as WWS Acquisition LLC) (Western Window Systems or WWS) and its subsidiaries pursuant to that certain purchase
agreement (PA), dated as of July 24, 2018, by and among the Company, Coyote Acquisition Co., WWS, WWS Blocker LLC, various entities that collectively owned all the equity interests of WWS and a seller representative. Headquartered in
Phoenix, Arizona, Western Window Systems designs and manufactures award winning contemporary door and window systems that unify indoor/outdoor living for the residential, commercial and multi-family markets. As a result of the PA, WWS became a
wholly-owned subsidiary of PGT Innovations, Inc. and its accounts are reflected in these financial statements as of and from August 13, 2018. The purchase price paid to the sellers at the closing was $355.2 million, which has been preliminarily
allocated to the net assets acquired and liabilities assumed as of the acquisition date, in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. For a more detailed discussion of this WWS
acquisition, see Note 6 herein. As a result of the WWS acquisition and the expansion of our geographical footprint, we are in the process of analyzing the impact of this acquisition, if any, on the determination of our reportable segments under ASC
280, Segment Reporting.
These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnotes required by United States Generally Accepted Accounting Principles (GAAP) for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period is not necessarily indicative of the results that may be expected for the
remainder of the current year or for any future periods. Each of the Companys fiscal quarters ended September 29, 2018, and September 30, 2017, consisted of 13 weeks.
The condensed consolidated balance sheet as of December 30, 2017, is derived from the audited consolidated financial statements, but does not include all
disclosures required by GAAP. The condensed consolidated balance sheet as of December 30, 2017, and the unaudited condensed consolidated financial statements as of and for the period ended September 29, 2018, should be read in conjunction
with the more detailed audited consolidated financial statements for the year ended December 30, 2017, included in the Companys most recent Annual Report on Form 10-K. Except for the adoption of the
guidance relating to revenue from contracts with customers discussed below, the accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the
Notes to Consolidated Financial Statements included in the Companys Annual Report on Form 10-K.
Recently Adopted Accounting Pronouncements
2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments under ASU
2017-12 refine and expand hedge accounting requirements for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on
the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 was effective for us in the first
quarter of 2019, but we elected to early-adopt this guidance effective on December 31, 2017, the first day of our 2018 fiscal year. During the three and nine months ended September 29, 2018, we entered into several aluminum forwards
contracts which we have designated as cash flow hedges and are accounting for as derivative financial instruments to which we are applying the provisions of ASU 2017-12. For additional information, see Note
In February 2017, the FASB issued ASU 2017-05, Other Income - Gain and Losses from the Derecognition of
Nonfinancial Assets. ASU 2017-05 clarifies the scope of Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets and adds
guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU 2014-09, provides guidance for recognizing gains and
losses from the transfer of nonfinancial assets in contracts with non-customers. We adopted this update effective on December 31, 2017, the first day of our 2018 fiscal year. The adoption of this guidance
had no impact on our financial position, results of operations or cash flows.
In January 2017, the FASB issued ASU
2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. ASU 2017-01 affects all companies and other reporting
organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals,