Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 - Cornerstone Building Brands, Inc. | q32016exhibit991.htm |
| 8-K - 8-K - Cornerstone Building Brands, Inc. | ncs201608308-k.htm |
Our Mission & Vision
NCI Building Systems
3Q 2016 Supplemental Presentation
August 30, 2016
Our Mission & Vision
Forward-looking Statements
2
Certain statements and information in this presentation may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “plan,” “intend,” “foresee,” “guidance,” “potential,”
“expect,” “should,” “will” “continue,” “could,” “estimate,” “forecast,” “goal,” “may,” “objective,” “predict,” “projection,” or similar
expressions are intended to identify forward-looking statements (including those contained in certain visual depictions) in this
presentation. These forward-looking statements reflect the Company's current expectations and/or beliefs concerning future events.
The Company has made every reasonable effort to ensure that the information, estimates, forecasts and assumptions on which these
statements are based are current, reasonable and complete. Our expectations with respect to the fourth quarter of fiscal 2016
contained in this presentation are forward looking statements based on management’s estimates, as of of the date of this presentation.
The estimates are unaudited, and reflect management’s current views with respect to future results. However, the forward-looking
statements in this presentation are subject to a number of risks and uncertainties that may cause the Company's actual performance to
differ materially from that projected in such statements. Among the factors that could cause actual results to differ materially include,
but are not limited to, industry cyclicality and seasonality and adverse weather conditions; challenging economic conditions affecting the
nonresidential construction industry; volatility in the U.S. economy and abroad, generally, and in the credit markets; substantial
indebtedness and our ability to incur substantially more indebtedness; our ability to generate significant cash flow required to service or
refinance our existing debt, including the 8.25% senior notes due 2023, and obtain future financing; our ability to comply with the
financial tests and covenants in our existing and future debt obligations; operational limitations or restrictions in connection with our
debt; increases in interest rates; recognition of asset impairment charges; commodity price increases and/or limited availability of raw
materials, including steel; our ability to make strategic acquisitions accretive to earnings; retention and replacement of key personnel;
enforcement and obsolescence of intellectual property rights; fluctuations in customer demand; costs related to environmental clean-
ups and liabilities; competitive activity and pricing pressure; increases in energy prices; volatility of the Company's stock price; dilutive
effect on the Company's common stockholders of potential future sales of the Company's common stock held by our sponsor;
substantial governance and other rights held by our sponsor; breaches of our information system security measures and damage to our
major information management systems; hazards that may cause personal injury or property damage, thereby subjecting us to liabilities
and possible losses, which may not be covered by insurance; changes in laws or regulations, including the Dodd–Frank Act; our ability to
integrate the acquisition of CENTRIA with our business and to realize the anticipated benefits of such acquisition; the timing and amount
of our stock repurchases; and costs and other effects of legal and administrative proceedings, settlements, investigations, claims and
other matters. See also the “Risk Factors” in the Company's Annual Report on Form 10-K for the fiscal year ended November 1, 2015,
which identifies other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially
from those set forth in the forward-looking statements. The Company expressly disclaims any obligation to release publicly any updates
or revisions to these forward-looking statements, whether as a result of new information, future events, or otherwise.
Our Mission & Vision
3Q 2016 Financial Summary
3 (1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 13
(Dollars in millions, except per share amounts)
July 31,
2016
August 2,
2015 % Chg.
July 31,
2016
August 2,
2015 % Chg.
Sales 462.4$ 420.8$ 9.9% 1,204.6$ 1,103.9$ 9.1%
Gross Profit 128.0$ 100.7$ 27.1% 307.0$ 248.7$ 23.5%
Gross Profit Margin 27.7% 23.9% 15.9% 25.5% 22.5% 13.3%
Income from Operations 43.5$ 19.4$ 124.7% 69.4$ 20.3$ 241.3%
Net Income 23.7$ 7.2$ 228.5% 32.0$ (0.6)$ n/m
Diluted EPS 0.32$ 0.10$ 220.0% 0.43$ (0.01)$ n/m
Adjusted Operating Income
1
45.1$ 25.2$ 79.2% 73.2$ 35.5$ 106.2%
Adjusted EBITDA
1
57.8$ 38.2$ 51.4% 112.4$ 73.6$ 52.6%
Adjusted Diluted EPS
1
0.33$ 0.15$ 120.0% 0.50$ 0.11$ 354.5%
Fiscal Three Months Ended Fiscal Nine Months Ended
Our Mission & Vision
3Q 2016 Financial Overview
4
Sales were $462.4 million, an increase of $41.6 million (9.9%) from $420.8 million a
year ago
• External tonnage volumes increased 11.6% year-over-year, with the Components segment
showing the largest increase with a 14.2% increase in volumes
• Reported revenues were within the updated guidance range for the quarter, per the July 18,
2016 press release
Gross profits improved in all three business segments on a year-over-year basis
• Gross profit margins expanded by 380 basis points from 23.9% in the comparable prior year
period to 27.7%
Operating income was $43.5 million compared to $19.4 million in the prior year period.
• Adjusted for special items, operating income increased 79.2% to $45.1 million compared to
$25.2 million in the prior year period
Net income increased 228.5% to $23.7 million, or $0.32 per diluted common share
compared to $7.2 million, or $0.10 per diluted common share in the prior year period
Adjusted EBITDA1 grew 51.4% to $57.8 million from $38.2 million in the prior year
period
Consolidated backlog grew 10.1% year-over-year to $557.5 million
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 13
Our Mission & Vision
5
Manufacturing
• The insulated metal panels (IMP) plant in Hamilton, ON commenced operations three
months prior to the original schedule and is ramping up as expected
• Equipment from two metal components plants in the U.S., which were closed during second
quarter, was relocated and installed in other plants
Commercial
• Underlying volume growth across segments outpaced reported market growth rates for non-
residential construction starts
• In the Components segment, IMP backlog continues to grow, with an increasing mixture of
high-end architectural projects
• Self-storage and rural/agricultural buildings continue to drive growth in the Company’s legacy
metal components products
Steel Costs
• As previously indicated, inbound steel costs, which have been lower year-over-year for the
first three quarters of fiscal 2016, have begun to increase and reached parity with the prior
year cost in the month of July
• The Company estimates that the pass-through of lower steel costs to customers reduced
revenue growth by approximately $10 million in the third quarter and $42 million for the nine
months ended July 31, 2016
• In the fourth quarter 2016, the Company expects steel costs to be higher on a year-over-year
basis, and therefore will not represent a revenue ‘headwind’ in the period
3Q 2016 Operational Overview
Our Mission & Vision
6
3Q 2016 Revenues and Volumes – by Segment
Q3-'16 Q3-'15 % Chg.
% Vol.
Chg.
1
Q3-'16 Q3-'15 % Chg.
% Vol.
Chg.
1
Q3-'16 Q3-'15 % Chg.
% Vol.
Chg.
1
Third-Party 30.7$ 26.6$ 15.3% 14.0% Third-Party 256.2$ 222.0$ 15.4% 14.2% Third-Party 175.5$ 172.2$ 1.9% 5.7%
Internal 41.4 35.8 15.7% 28.2% Internal 31.1 29.2 6.4% 26.1% Internal 5.5 4.3 28.0% 57.3%
Total Sales 72.1$ 62.4$ 15.5% 21.1% Total Sales 287.3$ 251.2$ 14.4% 15.9% Total Sales 181.0$ 176.5$ 2.5% 7.6%
Metal Coil Coating Metal Components Engineered Building Systems
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
Q3-'16 Q3-'15
Metal Coil Coating
Third-Party Internal
$-
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
Q3-'16 Q3-'15
Metal Components
Third-Party Internal
$-
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
Q3-'16 Q3-'15
Engineered Building Systems
Third-Party Internal
Metal Coil
Coating
7%
Metal
Components
55%
Consolidated 3rd Party Revenue
3Q 2016
Metal Coil
Coating
6%
Metal
Components
53%
Consolidated 3rd Party Revenue
3Q 2015
(Dollars in millions)
Engineered Building
Systems
38%
Engineered Building
Systems
41%
(1) Calculated as the year-over-year change in the tonnage volumes shipped
Our Mission & Vision
3Q 2016 Business Segment Results1
7
(Dollars in millions)
$72.1
$287.3
$181.0
$540.4
$62.4
$251.2
$176.5
$490.1
Coatings Components Buildings Consolidated
(1) Consolidated segments results do not include intersegment sales
(2) Reconciliation of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 13
Revenue
$8.7
$37.5
$19.6
$43.5
$5.5
$17.0
$14.4
$19.4
Coatings Components Buildings Consolidated
Operating Income
$8.7
$37.8
$19.6
$45.1
$5.5
$21.6
$14.5
$25.2
Coatings Components Buildings Consolidated
Adjusted Operating Income2
$9.9
$44.6
$21.1
$57.8
$6.6
$28.9
$16.7
$38.2
Coatings Components Buildings Consolidated
2016
2015 Adjusted EBITDA2
Our Mission & Vision
Gross Margin Reconciliation
8
Gross Margin 3Q 2015 23.9%
Supply chain effectiveness and commercial sales discipline 3.8%
Production and logistics efficiency improvements 0.4%
Prior year acquisition related inventory fair value adjustment 0.3%
Less favorable product and segment mix (0.2%)
New plant ramp-up costs, discontinued plant wind-down costs (0.6%)
Other 0.1%
Gross Margin 3Q 2016 27.7%
Gross profit increased to $128.0 million, up $27.3 million on a year-over-year
basis
Reported gross margin percentage of 27.7% was near the top end of the updated
guidance range for 3Q 2016 of 26.5% - 28.0%
Note: Point attributions in the above table are approximate
Our Mission & Vision
9
Net Income:
Net income increased 228.5% to $23.7 million from $7.2 million in the prior year’s third quarter.
Adjusted EBITDA1:
(Dollars in millions)
Net Income and Adjusted EBITDA
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 13
Our Mission & Vision
3Q 2016 Results Compared to Guidance
10
$ in Millions
Original Range Updated Range
Low High Low High 3Q Actuals
Revenues $435.0 $455.0 $458.0 $469.0 $462.4
Gross Profit Margin 23.0% 25.5% 26.5% 28.0% 27.7%
ESG&A Expenses $74.5 $77.5 $78.5 $81.0 $80.4
Adjusted EBITDA1 - - $53.0 $63.0 $57.8
Intangible Asset Amortization $2.3 $2.5 $2.3 $2.5 $2.4
Total Depreciation & Amortization
(inclusive of Intangibles above)
$10.5 $11.5 $10.5 $11.5 $10.6
Interest Expense $7.3 $7.8 $7.3 $7.8 $7.7
Effective Tax Rate 32.0% 35.0% 32.0% 35.0% 32.9%
The original guidance for 3Q 2016 was provided on May 31, 2016. It was updated on July 18,
2016
ESG&A expenses were $80.4 million, up $5.9 million from the prior year third quarter
• ESG&A expenses as a percentage of revenues decreased from 17.7% last year to 17.4% in the current
quarter
• The net increase in ESG&A expenses over the prior year is attributable primarily to the increased incentive
compensation accruals related to increased earnings
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 13
Our Mission & Vision
3Q 2016 Cash Flow Summary
11
Cash and Restricted Cash, as of 3Q 2016 2Q 2016 1Q 2016 YTD
Beginning balance 77,916 73,849 99,662 99,662
Cash provided by (used in) operating activities 20,586 24,213 (4,200) 40,599
Cash used in investing activities (4,044) (4,183) (5,777) (14,004)
Cash used in financing activities (43,547) (16,455) (15,495) (75,497)
Exchange rate effects (201) 492 (341) (50)
Ending balance 50,710 77,916 73,849 50,710
Debt Reduction
• During the first three fiscal quarters of 2016, the Company paid down $10.0 million each
quarter under its Term Loan, bringing the year-to-date repayments to $30.0 million
(Financing Activity)
Stock Repurchase
• Through July 31, 2016, ~4 million shares have been repurchased at an average price
$13.92. This amount includes the repurchase of $45 million (~2.9 million shares) from
CD&R Funds in a private transaction concurrent with the Secondary Offering completed
in July. Following this stock repurchase, the Company has repurchased the maximum
amount authorized under the current stock repurchase program (Financing Activity)
(Dollars in thousands)
Our Mission & Vision
4Q 2016 Guidance
12
$ in millions
Range
Low High
Revenues $475.0 $500.0
Gross Profit Margin 24.5% 27.0%
ESG&A Expenses $80.0 $84.0
Intangible Asset Amortization $2.3 $2.5
Total Depreciation & Amortization
(inclusive of Intangibles above)
$10.5 $11.5
Interest Expense $7.3 $7.7
Effective Tax Rate 33.0% 35.0%
Guidance for ESG&A excludes the amortization of intangible assets, which is a separate
line item
Total Depreciation & Amortization (including the intangible amortization) are reported on
the Company’s Statements of Operations within Cost of Goods Sold, ESG&A Expense
and Intangible Asset Amortization
Weighted average diluted common shares is expected to be ~71.4 million for 4Q 2016 and
~72.9 million for fiscal 2016
Total capital expenditures for fiscal 2016 are expected to be in the range of $24 million to
$28 million
Our Mission & Vision
Reconciliation of Net Income (Loss) and Adjusted Net Income (Loss) per
Diluted Common Share
13
(Dollars in thousands, except per share amounts)
Fiscal Three Months Ended Fiscal Nine Months Ended
July 31, August 2, July 31, August 2,
2016 2015 2016 2015
Net income (loss) per diluted common share, GAAP basis 0.32$ 0.10$ 0.43$ (0.01)$
Restructuring and impairment charges 0.01 0.01 0.05 0.05
Strategic development and acquisition related costs 0.01 0.01 0.03 0.04
Gain on sale of assets and asset recovery - - (0.02) -
Gain from bargain purchase - - 0.03 -
Fair value adjustment of acquired inventory - 0.01 - 0.03
Short lived acquisition method fair value adjustments - 0.05 - 0.08
Tax effect of applicable non-GAAP adjustments
(2)
(0.01) (0.03) (0.02) (0.08)
Adjusted net income (loss) per diluted common share
(1)
0.33$ 0.15$ 0.50$ 0.11$
Fiscal Three Months Ended Fiscal Nine Months Ended
July 31, August 2, July 31, August 2,
2016 2015 2016 2015
Net income (loss) applicable to common shares, GAAP basis 23,550$ 7,160$ 31,761$ (588)$
Restructuring and impairment charges 778 750 3,437 3,695
Strategic development and acquisition related costs 819 701 2,080 3,058
Gain on sale of assets and asset recovery (52) - (1,704) -
Gain from bargain purchase - - 1,864 -
Fair value adjustment of acquired inventory - 1,000 - 2,358
Short lived acquisition method fair value adjustments - 3,390 - 6,112
Tax effect of applicable non-GAAP adjustments
(2)
(603) (2,243) (1,487) (5,846)
Adjusted net income (loss) applicable to common shares
(1)
24,492$ 10,758$ 35,951$ 8,789$
0.332989 0.49
0 (0)
(1) The Company discloses a tabular comparison of Adjusted net income (loss) per diluted common share and Adjusted net income (loss) applicable to common shares,
which are non-GAAP measures, because they are referred to in the text of our press releases and are instrumental in comparing the results from period to period.
Adjusted net income (loss) per diluted common share and Adjusted net income (loss) applicable to common shares should not be considered in isolation or as a
substitute for net income (loss) per diluted common share and net income (loss) applicable to common shares as reported on the face of our consolidated statements
of operations.
(2) The Company calculated the tax effect of non-GAAP adjustments by applying the applicable statutory tax rate for the period to each applicable non-GAAP item.
Our Mission & Vision
Reconciliation of Operating Income (Loss) to Adjusted Operating
Income (Loss) by Segment
14
Engineered
Building
Systems
Metal
Components
Metal
Coil
Coating Corporate Consolidated
Operating income (loss), GAAP basis 19,561$ 37,497$ 8,748$ (22,271)$ 43,535$ -
Restructuring and impairment charges 106 261 - 411 778
Strategic development and acquisition related costs - 9 - 810 819 -
Gain on sale of assets and asset recovery (52) - - - (52)
Adjusted operating income (loss)
(1)
19,615$ 37,767$ 8,748$ (21,050)$ 45,080$
Engineered
Building
Systems
Metal
Components
Metal
Coil
Coating Corporate Consolidated
Operating income (loss), GAAP basis 14,363$ 17,025$ 5,497$ (17,507)$ 19,378$
Restructuring and impairment charges 138 262 - 350 750
Strategic development and acquisition related costs - - - 701 701
Fair value adjustment of acquired inventory - 1,000 - - 1,000
Short lived acquisition method fair value adjustments - 3,334 - - 3,334
Adju ted operating income (loss)
(1)
14,501$ 21,621$ 5,497$ (16,456)$ 25,163$
(1) The Company discloses a tabular comparison of Adjusted operating income (loss), which is a non-GAAP measure, because it is instrumental in comparing the results
from period to period. Adjusted operating income (loss) should not be considered in isolation or as a substitute for operating income (loss) as reported on the face of
our statements of operations.
Fiscal Three Months Ended August 2, 2015
Fiscal Three Months Ended July 31, 2016
(Dollars in thousands)
Our Mission & Vision
Reconciliation of Net Income (Loss) to Adjusted EBITDA by Segment
15
(Dollars in thousands)
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated
Net income (loss) 19,140$ 37,628$ 8,749$ (41,802)$ 23,715$
Add:
Depreciation and amortization 2,438 6,752 1,184 221 10,595
Consolidated interest expense, net (39) (8) - 7,732 7,685
Provision for income taxes (471) 2 - 12,096 11,627
Restructuring and impairment charges 106 261 - 411 778
Strategic development and acquisition related costs - 9 - 810 819
Share-based compensation - - - 2,661 2,661
Gain on sale of assets and asset recovery (52) - - - (52)
Adjusted EBITDA
(1)
21,122$ 44,644$ 9,933$ (17,871)$ 57,828$
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated
Net income (loss) 10,080$ 17,081$ 5,498$ (25,439)$ 7,220$
Add:
Depreciation and amortization 2,575 10,591 1,128 247 14,541
Consolidated interest expense, net 8 (16) - 8,143 8,135
Provision (benefit) for income taxes 3,909 3 - (392) 3,520
Restructuring and impairment charges 138 262 - 104 504
Strategic development and acquisition related costs - - - 701 701
Fair value adjustment of acquired inventory - 1,000 - - 1,000
Share-based compensation - - - 2,568 2,568
Adjusted EBITDA
(1)
16,710$ 28,921$ 6,626$ (14,068)$ 38,189$
(1) The Company's Credit Agreement defines Adjusted EBITDA. Adjusted EBITDA excludes non-cash charges for goodwill and other asset impairments
and stock compensation as well as certain special charges. As such, the historical information is presented in accordance with the definition above.
Concurrent with the amendment and restatement of the Term Loan facility, the Company entered into an Asset-Based Lending facility which has substantially
the same definition of Adjusted EBITDA except that the ABL facility caps certain non-recurring charges. The Company is disclosing Adjusted EBITDA, which is
a non-GAAP measure, because it is used by management and provided to investors to provide comparability of underlying operational results.
Fiscal Three Months Ended July 31, 2016
Fiscal Three Months Ended August 2, 2015
Our Mission & Vision
K. DARCEY MATTHEWS
Vice President, Investor Relations
E: darcey.matthews@ncigroup.com
10943 N. Sam Houston Pkwy W.
Houston, Texas 77064
P.O. Box 692055
Houston, Texas 77269-2055
281.897.7788
ncibuildingsystems.com