- January 3, 2014
The recession bombarded impact-resistant window and door manufacturer PGT Inc. in a way that few other Sarasota-Bradenton area firms experienced.
The lifeblood of the firm's business model, new housing starts, plummeted 90% nationwide over six months in 2008. PGT President and CEO Rod Hershberger likens a decrease that quick and steep to going from 60 miles per hour on a highway to six with one slam of the brakes.
It's no surprise, then, that PGT sales fell 55% in three years, from an all-time high of $371.6 million in 2006 to $166 million in 2009. The company, which manufactures and sells multiple lines of high-end doors and windows to a network of dealers, laid off about 40% of its 2,500-employee workforce during the recession.
But a comeback from the abyss has begun.
And while the turnaround hasn't happened at the breakneck pace of Hershberger's highway-housing starts analogy, it is moving quickly. Some examples: Sales are back up, to $174.5 million in 2012 and $177.27 million through three quarters of 2013; cost-per-sales metrics are at all-time lows; and its stock, traded on the Nasdaq under PGTI, surpassed $11 a share in 2013 after it spent much of 2012 in a range of $1 a share to $4. The payroll, meanwhile, increased from around 1,000 employees in January 2013 to about 1,400 by the end of the year. The company expects to hire at least 100 people in 2014.
“We took a lot of market share this year,” says Hershberger. “We expected to have a pretty good year, but we didn't expect it to be this good.”
The company, further, recently announced expansion plans for a 12-acre site near its main facility in north Venice that it bought for $1.64 million. The project, a 50,000-square-foot glass plant, is expected to cost between $12 million and $14 million. It should be completed by late 2014.
PGT officials say the expansion will create 50 jobs and solve a pressing issue: glass inventory. Jeff Jackson, CFO and an executive vice president, says business rose so fast this year the firm had to buy glass from an outside supplier in some cases. Moving the work in-house, says Jackson, provides better quality control and lowers costs. “The last 12 months has been better than the past five years,” Jackson told the Business Observer in an interview in August, after the expansion announcement.
The PGT turnaround even humbled the already unassuming Hershberger — who grew a salt-and-pepper beard for charity in November and surfs the waters of Hawaii and Costa Rica to relax.
Two lessons of the comeback standout. One, Hershberger says, is to make sure a company's executive leadership team isn't a gaggle of yes-men and yes-women. That team, he says, has to contest and challenge the top executive without fear. The tougher the decision, says Hershberger, the more it requires uncomfortable feedback.
“I can't put enough emphasis on the team. You have to have a team that can sit in a room and have almost violent disagreements,” Hershberger says. “But then you have to be able to make a decision and leave the room as one.”
The second lesson is no matter how bad things are, plan ahead for even worse times. Hershberger recalls he had many “if this, then what” conversations, both in his own mind, and with PGT board members and officials. What if sales drop more?
What if housing starts fall even deeper? What if the economy gets worse?
“There was a tremendous amount of planning,” Hershberger says. “We constantly thought about what we would do next.”
Adds Hershberger: “If you are going to have sleepless nights, don't waste them on what you are doing now. Think about what you will be doing next.”
While retrospection like that is key to avoiding missteps in future downturns, not even the best long-term plans and a top-notch executive team truly prepared Hershberger for the recession. That period was still a torturous slow burn of tough decisions.
Early in the downturn, for instance, Hershberger broke a 25-year streak at the company of no cuts in hours for employees. But furloughs only temporarily plugged the deluge. Next came pay cuts, up to 16%, for salaried employees. The pay cuts hit top officers down to shift supervisors.
Then there were the layoffs. The PGT payroll dropped from 2,500 employees in September 2006 to less than 1,500 by April 2008. The job cuts spread from hourly employees to senior managers. Cuts also spread geographically, to North Carolina, where the firm closed a plant in 2010 that it had opened in 2006.
The recession, in total, devastated Hershberger, who co-founded PGT in 1980 and was named CEO in 2005. “I don't know if there's a word to describe how tough that process was,” says Hershberger. “I don't know if physically I could relive a time period like that.”
Hershberger, 56, hopes he won't have to. In addition to the new glass plant, the firm — the leaner, more efficient 2013 version of it — has several other factors in its favor to foster a continuation of the turnaround.
For starters, there's the new homes market, which many analysts project is at the early stages of its rebound. That's the gist of a message Deutsche Bank analyst Nishu Sood wrote to clients in June, according to an iStockanalyst.com report. Sood says the housing market should continue its robust gains, “which should drive solid results for PGT going forward.”
Another way the firm will win back customers, executives say, is through new products. Vice President of Sales and Marketing Todd Antonelli says the new product list includes French vinyl doors, which are scheduled to debut early next year. “We try to do things that our competitors in our market won't do,” Antonelli says. “We try to make it easy for our customers to do business with us.”
PGT, through Hershberger's direction, also made a decision to rebuild market share in the Sunshine State before it grows too much again in other areas. Says Hershberger: “We wanted to make sure that when the market comes back in Florida, we own it.”
Not that Hershberger will stunt PGT's long-term growth outside the state. The company, he says, has big plans for growth, only in a measured, disciplined way. “We are long term,” says Hershberger. “But we don't want to lose the intimacy with our customer. We think we can keep that and still be a large company.”
PGT Inc. CEO Rod Hershberger learned several lessons in leading a turnaround from the recession at the impact-resistant window and door company. Tips include:
Honesty policy: Always be upfront and clear with employees. “Don't tell them you are making a bunch of money when you're not,” he says. “They will see through it right away.”
Be visible:Getting to know employees at any level of the company helps build morale. “You need to be able to walk the plant,” says Hershberger, “and talk to anyone at anytime.”
Walk tall: Body posture and facial expressions, says Hershberger, go a long way toward conveying a message — positive or negative. Says Hershberger: “There is a certain calmness you need to display.”