changes in cash on hand provided in connection with the issuance of the Notes, and resulting from the cash on hand of Western Window Systems not acquired by PGTI in the Western Window Systems Acquisition;

changes in indebtedness incurred in connection with the issuance of the Notes, and resulting from the indebtedness of Western Window Systems repaid at the closing, and not assumed by, PGTI in the Western Window Systems Acquisition;

transaction fees and debt issuance costs incurred in connection with the issuance of the Notes and the Western Window Systems Acquisition;

changes in interest expense resulting from the issuance of the Notes, including amortization of estimated debt issuance costs, and resulting interest expense not incurred on the indebtedness of Western Window Systems not assumed by PGTI in the Western Window Systems Acquisition;

changes in assets and liabilities to record the preliminary estimates of their fair values in accordance with acquisition accounting related to the Western Window Systems Acquisition;

changes in amortization expense resulting from the preliminary fair value adjustments to amortizable intangible assets in the Western Window Systems Acquisition;

a preliminary estimate of the effect of the above adjustments on deferred income tax assets, liabilities, and related provision for income taxes, including a tax benefit in the year ended December 30, 2017 relating to the revaluation of the net deferred tax liability as the result of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”); and

the equity impact of the elimination of historical equity balances of Western Window Systems.

ASSETS

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories

Contract assets, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Trade names and other intangible assets, net

Goodwill

Other assets, net

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

Current portion of long-term debt

Total current liabilities

Long-term debt, less current portion

Deferred income taxes

Other liabilities

Total liabilities

Shareholders’ equity:

Common stock

Additional paid-in-capital

Accumulated other comprehensive loss

Retained earnings (accumulated deficit)

Shareholders’ equity

Less: Treasury stock at cost

Total shareholders’ equity

Total liabilities and shareholders’ equity

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Income from operations

Interest expense, net

Income before income taxes

Income tax expense (benefit)

Net income

Net income per common share:

Basic

Diluted

Weighted average shares outstanding:

Basic

Diluted

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Gains on transfers of assets

Income from operations

Interest expense, net

Debt extinguishment costs

Other expense, net

Income before income taxes

Income tax expense (benefit)

Net income

Net income per common share:

Basic

Diluted

Weighted average shares outstanding:

Basic

Diluted

the historical audited consolidated statement of operations of PGTI for the year ended December 30, 2017 (the last day of PGTI’s 2017 fiscal year);

the historical audited consolidated statement of operations of Western Window Systems for the year ended December 31, 2017; and

the historical unaudited consolidated statement of operations of PGTI for the six-month period ended June 30, 2018 (the last day PGTI’s second quarter of 2018), and of Western Window Systems for the six-month period ended June 30, 2018.

(dollars in thousands)

Pro Forma Purchase Price Allocation for the Western Window Systems Acquisition

Total consideration

Current assets

Property, plant and equipment

Intangible assets

Other assets

Goodwill

Total assets acquired

Current liabilities assumed

Other liabilities assumed

Net assets acquired

Historically, Western Window Systems classified the cost of distributing its products as a component of the cost of goods sold. In accordance with PGTI’s accounting policy regarding distribution costs, after the Western Window Systems Acquisition, these costs are accounted for as a fulfillment activity and classified as a component of selling, general and administrative expenses.

Historically, Western Window Systems capitalized product certification costs as incurred, and amortized such costs over the life of the certifications, which typically had been four years. In accordance with PGTI’s accounting policy regarding product certification costs, after the Western Window Systems Acquisition, these costs are expensed as incurred.

(dollars in thousands)

Presentation in WWS’s
Historical Financial Statements

Presentation in Unaudited Pro Forma
Condensed Combined  Financial Statements

Cash

Equipment and leasehold improvements, net

Intangible assets, net

Product certifications, net

Current portion of note payable

Accounts payable

Accrued expenses

Deferred revenue

Other current liabilities

Note payable, less current portion

Other long-term liabilities

Members’ capital

Members’ accumulated earnings

(dollars in thousands)

Presentation in WWS’s

Historical

Financial Statements

Presentation in Unaudited Pro
Forma Condensed Combined
Financial Statements

Cost of goods sold—Materials

Cost of sales

Cost of goods sold—Labor and benefits

Cost of sales

Cost of goods sold—Shipping

Selling, general and administrative expenses

Cost of goods sold—Other manufacturing costs

Cost of sales

Total cost of goods sold

Cost of sales

The net change in cash is calculated as follows:

Proceeds from the issuance of the Notes

Less: Payment of financial advisor and underwriting fees

Less: Payment of estimated expenses

Total financing costs and transaction expenses

Net adjustment to cash

Includes the net adjustment to total debt associated with the issuance of the Notes, calculated as follows:

Issuance of the Notes

Less: Portion of total financing and transaction costs to be deferred and amortized

Net adjustment to long-term debt, less current portion

Represents adjustment to accumulated deficit for the portion of total financing and transactions costs expensed, net of tax effect:

Portion of total financing and transaction costs to be expensed

Effective tax rate

Net adjustment to accrued income taxes

Net adjustment to retained earnings (accumulated deficit)

The net change in cash is calculated as follows:

Contemporaneous repayment of Seller’s debt

Consideration to Seller paid in Western Window Systems Acquisition, net

Less: WWS cash not acquired

Net adjustment to cash

Includes adjustments to record acquired assets at estimated acquisition-date fair values. The estimated fair values of these assets are based on the preliminary valuations performed for the preparation of the pro forma financial information and are subject to the final valuations. The respective net adjustments have been calculated as follows:

Intangible assets acquired in the Western Window Systems Acquisition

Less: WWS historical intangible assets

Net adjustment to trade names and other intangible assets, net

Goodwill in the preliminary allocation

Less: WWS historical goodwill

Net adjustment to goodwill

Historically, Western Window Systems capitalized product certification costs as incurred, and amortized such costs over the life of the certifications, which typically had been approximately four years. In accordance with PGTI’s accounting policy regarding product certification costs, after the Western Window Systems Acquisition, such costs are expensed as incurred. At June 30, 2018, Western Window Systems had net product certification costs capitalized on its consolidated balance sheet of $480,000. This adjustment represents the elimination of Western Window Systems’ capitalized net product certification costs not acquired by PGTI in the Western Window Systems Acquisition.

Represents the repayment of Western Window Systems’ long-term debt from Seller’s proceeds, contemporaneously with the closing of the Western Window Systems Acquisition, including both the current and long-term portions, not assumed by PGTI in the Western Window Systems Acquisition, with the elimination of Seller’s deferred financing costs not acquired by PGTI. The respective net adjustments have been calculated as follows:

Seller’s long-term debt repaid, current portion

Seller’s long-term debt repaid, long-term portion

Less: Seller’s deferred financing costs not acquired

Net adjustment to long-term debt

Represents the elimination of the historical members’ equity balances of Western Window Systems.

Represents the net adjustment to reflect (i) the incremental interest expense on the Notes, resulting in an increase in outstanding indebtedness of $315.0 million, (ii) the increase in non-cash interest expense relating to the amortization of incremental deferred financing costs and (iii) the elimination of the historical interest expense of Western Window Systems. The net adjustments are calculated as follows:

Incremental interest expense on the Notes

Incremental amortization of deferred financing costs

Less: WWS historical interest expense

Net adjustment to interest expense, net

Represents the income tax benefit from the net incremental interest expense at PGTI’s effective income tax rate, excluding discrete items of income tax, which was 36.8% for the year ended December 30, 2017, and is estimated will be 25.6% in PGTI’s 2018 fiscal year.

Represents the net adjustment to reflect the incremental amortization expense related to amortizable intangible assets acquired in the Western Window Systems Acquisition. The estimated fair values of these intangible assets are based on the preliminary valuations performed for the preparation of the pro forma financial information and are subject to the final valuations that have not been completed. Western Window Systems historical amortization includes the amortization of its capitalized product certification costs which, as discussed in Note 1, PGTI expenses as incurred. The respective net adjustments have been calculated as follows:

Incremental amortization on acquired intangibles

Less: WWS historical intangible amortization

Net adjustment to selling, general and administrative expenses

Represents the impact to income tax expense (benefit) from transition of Western Window Systems to being a taxable entity upon acquisition by PGTI, and the net incremental amortization expense at PGTI’s effective income tax rate, excluding discrete items of income tax, which was 36.8% for the year ended December 30, 2017, and is estimated will be 25.6% in PGTI’s 2018 fiscal year. The income tax benefit for the year ended December 30, 2017 also includes a discrete item of income tax benefit of $610,000 due to the enactment of the Tax Cuts and Jobs Act, relating to the revaluation of the net deferred tax liability resulting from the difference between amortization expense for book purposes and amortization expense for tax purposes during 2017. The adjustments to income tax expense (benefit) have been calculated as follows:

WWS historical actual income before taxes

Acquisition adjustments effect on income before income taxes

Net change to income before income taxes

Effective tax rate

Incremental income tax expense

Effects of Tax Cuts and Jobs Act on deferred tax liability

Net change to income tax expense (benefit)