Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Cornerstone Building Brands, Inc. | ncs201706068-k.htm |
| EX-99.1 - EXHIBIT 99.1 - Cornerstone Building Brands, Inc. | q22017exhibit991.htm |
Our Mission & Vision
Q2 2017 Supplemental
Presentation
June 6, 2017
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 believes the information, estimates, forecasts and assumptions on which these statements are based are current,
reasonable and complete. Our expectations with respect to the third and fourth quarter of fiscal 2017 and the full year fiscal 2017
that are contained in this presentation are forward looking statements based on management’s best estimates, as of the date of this
presentation. These 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; interruptions in our supply chain; our ability to
make strategic acquisitions accretive to earnings; retention and replacement of key personnel; our ability to carry out our
restructuring plans and to fully realize the expected cost savings; 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; 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 October 30, 2016, 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
2Q 2017 Financial Overview (Page 1 of 2)
3
Sales were $420.5 million, an increase of $48.2 million or 13.0% from $372.2 million a
year ago
• Revenues for the quarter benefited from tonnage volume increases, particularly in the
Buildings and Components segments, and commercial pricing discipline in the pass-through
of higher costs in a rising steel price environment
Gross profit margins for the period and the comparable prior year period were each
24.0%. In the second quarter 2017, margins were affected by the following:
• 230 basis points improvement was from the overall product mix changes particularly in IMP
where sales of higher margin architectural panels increased during the period and company-
wide manufacturing efficiency improvements
• 200 basis points impact from rising steel input costs, compared to declining costs in 2Q 2016
Operating income was $32.5 million up from $10.6 million and Adjusted Operating
Income was $23.6 million up from $11.4 million in the respective prior year periods
Net income increased to $16.9 million, or $0.24 per diluted common share this quarter
compared to $2.4 million, or $0.03 per diluted common share in the prior year period.
On an adjusted basis, diluted earnings were $0.16 per share this quarter compared to
$0.04 in the prior year period
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 16
Our Mission & Vision
4
2Q 2017 Financial Overview (Page 2 of 2)
Adjusted EBITDA1 was $37.0 million compared to $25.5 million in the prior year
period
Consolidated backlog grew 3.2% year-over-year to $552.3 million
On May 2, 2017, the Company amended and extended its Existing Term Loan
Facility. Benefits to NCI included the extension of the final maturity to June 24,
2022 and a 25 basis point reduction in the interest rate margin on LIBOR
borrowings from 3.25% to 3.00% (LIBOR, not less than 1.00%.)
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 16
Our Mission & Vision
5
Manufacturing
• In connection with its manufacturing cost rationalization plans, the Company completed
the consolidation of a small plant in the Eastern U.S. into an existing facility
Commercial
• Backlog in the Buildings segment at the end of the quarter increased 9.0% to $368.8
million, resulting in the highest April backlog since 2008
• The Buildings and Components legacy distribution channels continue to expand their
product offerings, leveraging products from the other business lines and recognizing the
following revenue growth
• IMP sales increased 81% year-over-year
• Door sales increased 84% year-over-year
Steel Costs
• Steel costs continue to be elevated by trade cases and the current regulatory environment
2Q 2017 Operational Overview
Our Mission & Vision
Steel Price Movements 2015 – 2017
6
[VALUE]
[VALUE]
113.3
173.8
145.0
180.6
100
110
120
130
140
150
160
170
180
190
Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17
CRU Steel Price Index North America
CRU
FY 2015 FY 2016 YTD 2017
Apr-17
Source: CRU Group
The graph above shows the monthly CRU Index data for the North American Steel Price Index. The
CRU North American Steel Price Index has been published by the CRU Group since 1994 and the
Company believes this index appropriately depicts the volatility it has experienced in steel prices. The
index is based on a CRU survey of industry participants of purchases for forward delivery, according to
mill lead time, which will vary. For example, the January index would likely approximate the Company’s
fiscal March steel purchase deliveries based on current lead-times and be representative of the steel
costs that would be recognize in April. The volatility in this steel price index is comparable to the
volatility the Company experiences in its average cost of steel.
Our Mission & Vision
2Q 2017 Financial Summary
7 (1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 16
(Dollars in millions, except per share amounts)
April 30,
2017
May 1,
2016 % Chg.
April 30,
2017
May 1,
2016 % Chg.
Sales 420.5$ 372.2$ 13.0% 812.2$ 742.3$ 9.4%
Gross Profit 100.8$ 89.4$ 12.8% 184.8$ 179.1$ 3.2%
Gross Profit Margin 24.0% 24.0% 0.0% 22.8% 24.1% -5.7%
Income from Operations 32.5$ 10.6$ 206.5% 42.4$ 25.9$ 63.8%
Net Income 17.0$ 2.4$ 601.4% 19.0$ 8.3$ 128.7%
Diluted EPS 0.24$ 0.03$ 629.8% 0.27$ 0.11$ 140.5%
Adjusted Operating Income
1
23.6$ 11.4$ 107.4% 36.1$ 28.1$ 28.5%
Adjusted EBITDA
1
37.0$ 25.5$ 45.2% 63.1$ 54.6$ 15.7%
Adjusted Diluted EPS
1
0.16$ 0.04$ 300.0% 0.21$ 0.11$ 90.9%
Fiscal Three Months Ended Six Months Ended
Our Mission & Vision
8
2Q 2017 Revenues and Volumes – by Segment
2Q-'17 2Q-'16 % Chg.
% Vol.
Chg.
1
2Q-'17 2Q-'16 % Chg.
% Vol.
Chg.
1
2Q-'17 2Q-'16 % Chg.
% Vol.
Chg.
1
Third-Party 26.4$ 26.1$ 1.1% -6.0% Third-Party 239.6$ 211.7$ 13.2% 1.3% Third-Party 154.5$ 134.5$ 14.9% 13.6%
Internal 36.9 29.0 27.0% 14.3% Internal 31.0 23.0 35.1% 30.8% Internal 8.2 3.6 128.9% 118.8%
Total Sales 63.3$ 55.1$ 14.8% 3.5% Total Sales 270.6$ 234.6$ 15.3% 4.8% Total Sales 162.6$ 138.0$ 17.8% 17.9%
Metal Coil Coating Metal Components Engineered Building Systems
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
2Q-'17 2Q-'16
Metal Coil Coating
Third-Party Internal
$-
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
2Q-'17 2Q-'16
Metal Components
Third-Party Internal
$-
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
2Q-'17 2Q-'16
Engineered Building Systems
Third-Party Internal
Metal Coil
Coating
6%
Metal
Components
57%
Consolidated 3rd Party Revenue
2Q 2017
Metal Coil
Coating
7%
Metal
Components
57%
Consolidated 3rd Party Revenue
2Q 2016
(Dollars in millions)
Engineered Building
Systems
37%
Engineered Building
Systems
36%
(1) Calculated as the year-over-year change in the tonnage volumes shipped
Our Mission & Vision
2Q 2017 Business Segment Results1
9
(Dollars in millions)
$26.4
$239.6
$154.5
$420.5
$26.1
$211.7
$134.5
$372.2
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 16
Revenue
$5.5
$40.1
$6.9
$32.5
$4.7
$17.8
$7.2
$10.6
Coatings Components Buildings Consolidated
Operating Income
Adjusted Operating Income2
$6.7
$37.6
$9.4
$37.0
$5.9
$24.9
$9.8
$25.5
Coatings Components Buildings Consolidated
2017
2016
Adjusted EBITDA2
$5.5
$30.8
$7.2
$23.6
$4.7
$18.5
$6.4
$11.4
Coatings Components Buildings Consolidated
Our Mission & Vision
Gross Margin Reconciliation
10
Gross Margin 2Q 2016 24.0%
Net impact of rising steel input costs (2.00%)
Favorable product and segment mix 1.10%
Process improvements – manufacturing and logistics 1.20%
Prior year gain on sale of assets and asset recovery (0.20%)
Other (0.10%)
Gross Margin 2Q 2017 24.0%
For the quarter, gross profit was $100.8 million compared to $89.4 million in the
prior year period
The favorable product and segment mix was predominately in the insulated metal
panel sales
Note: Point attributions in the above tables are approximate
Our Mission & Vision
Key Cost Initiatives
11
$ in millions
Original
Target 1
2016 Cost
Savings
Realized
Expected
2017 Cost
Savings
Manufacturing Consolidation $15.0 - $20.0 $6.0 $6.5
ESG&A Restructuring $15.0 - $20.0 $6.0 $3.5
Total $30.0 - $40.0 $12.0 $10.0
The Manufacturing cost initiative includes the continuing rationalization of
manufacturing facilities and relocation of equipment and machinery
• During the period, the Company consolidated a small sized plant in the Eastern
U.S. into an existing facility
The ESG&A initiative includes the elimination of certain fixed and indirect
costs through restructuring and consolidation
Both initiatives remain on target to achieve the expected 2017 cost savings
(1) Key initiatives are anticipated to generate the target amount of savings by fiscal year-end 2018
Our Mission & Vision
12
Net Income:
Net income increased to $17.0 million in 2Q from $2.4 million in the prior year’s second quarter
Adjusted EBITDA1:
(Dollars in millions)
2Q 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 16
$25.5
$37.0
$2.1
$4.5
$5.9
$(1.0)
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
Adjusted EBITDA 2Q
2016
Volume ESG&A Cost Reductions Product Mix and Margin
Expansion
Other Adjusted EBITDA 2Q
2017
Our Mission & Vision
2Q 2017 Cash Flow Summary
13
Cash and Restricted Cash, as of 2Q 2017 1Q 2017 4Q 2016 3Q 2016
Beginning balance $ 15,789 $ 65,403 $ 50,710 $ 77,916
Cash provided by (used in) operating activities 38,254 (31,878) 28,169 20,586
Cash (provide by) used in investing activities (4,483) (4,120) 4,054 (4,044)
Cash used in financing activities 271 (13,702) (17,254) (43,547)
Exchange rate effects (149) 86 (276) (201)
Ending balance $ 49,682 $ 15,789 $ 65,403 $ 50,710
Refinancing
• On May 2, 2017, the Company amended and extended its Existing Term Loan Facility. Benefits
to NCI included the extension of the final maturity by three years to June 24, 2022 and 25 basis
point reduction in the interest rate margin on LIBOR borrowings from 3.25% to 3.00% (LIBOR,
not less than 1.00%)
• As part of the refinancing, the Company agreed to a prepayment premium for a six month
period. As a result of the timing of the refinancing and the prepayment penalty, the Company
plans to delay any repayments of the Term Loan Facility until fiscal 2018
Stock Repurchase
• During the quarter, the Company did not have any stock repurchase activity. As of the end of
the quarter $39.9 million remains available for stock repurchases under the September 2016
program
(Dollars in thousands)
Our Mission & Vision
2Q 2017 Results Compared to Guidance
14
$ in Millions
Range
Low High 2Q Actuals
Revenues $400.0 $425.0 $420.5
Gross Profit Margin 22.5% 24.5% 24.0%
ESG&A Expenses $72.5 $76.5 $75.1
Intangible Asset Amortization $2.3 $2.5 $2.4
Total Depreciation & Amortization
(inclusive of Intangibles above)
$10.0 $11.0 $10.1
Interest Expense $7.2 $7.5 $7.5
Effective Tax Rate 36.0% 38.0% 34.2%
Revenues increased with sales in higher margin products in IMP and the strength of the
legacy Components segment
Gross profit margins were toward the higher end of the range as a result of the mix and
volume in the IMP products and the legacy Components segment
The effective tax rate was favorably affected by intercompany foreign currency gains/losses
and the utilization of the China tax asset valuation allowance
Our Mission & Vision
3Q, 4Q and FY 2017 Guidance
15
$ in million
3Q Range
Low High
Revenues $480.0 $505.0
Gross Profit Margin 24.00% 26.25%
ESG&A Expenses $79.0 $83.0
Intangible Asset Amortization $2.3 $2.5
Total Depreciation & Amortization
(inclusive of Intangible Asset Amortization above)
$10.0 $11.0
Interest Expense $7.0 $7.4
Effective Tax Rate 34.00% 37.00%
Adjusted EBITDA $48.0 $58.0
On a year-over-year basis, revenues are expected to grow approximately 6.8% to 11.0% during the third quarter
based on current backlog and order rates
Guidance for ESG&A excludes the amortization of intangible assets, which is shown as a separate line item above
Total Depreciation & Amortization includes the intangible amortization and is 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 71.1 million for 3Q 2017
Total capital expenditures for fiscal 2017 are expected to be in the range of $25.0 million to $30.0 million
For the 4Q, revenues are expected to be in the range of $510 - $545 million and Adjusted EBITDA in the range of
$69 – $79 million
Full year 2017 guidance is expected to reflect the normal quarterly patterns with the second half of fiscal 2017
expected to be stronger than the first half. Revenues are expected to be in the range of $1.80 - $1.86 billion and
Adjusted EBITDA is expected to be in the range of $180 - $200 million
Our Mission & Vision
Reconciliation of Net Income (Loss) and Adjusted Net Income (Loss) per
Diluted Common Share
16
(Dollars in thousands, except per share amounts)
April 30, May 1, April 30, May 1,
2017 2016 2017 2016
Net income per diluted common share, GAAP basis 0.24$ 0.03$ 0.86$ 0.46$
Restructuring and impairment charges 0.00 0.02 0.06 0.15
Strategic development and acquisition related costs 0.00 0.01 0.03 0.04
(Gain) on sale of assets 0.00 (0.01) 0.00 (0.02)
(Gain) on insurance recovery (0.13) - (0.13) -
Unreimbursed business interruption costs 0.00 - - -
(Gain) from bargain purchase - - - (0.03)
(Gain) on legal settlements - - - (0.05)
Fair value adjustment of acquired inventory - - - 0.01
Amortization of short lived acquired intangibles - - - 0.08
Tax effect of applicable non-GAAP adjustments
(2)
0.05 (0.01) 0.02 (0.08)
Adjusted net income per diluted common share
(1)
0.16$ 0.04$ 0.84$ 0.56$
April 30, May 1, April 30, May 1,
2017 2016 2017 2016
Net income applicable to common shares, GAAP basis 16,859$ 2,397$ 61,336$ 33,578$
Restructuring and impairment charges 315 1,149 4,172 11,020
Strategic development and acquisition related costs 124 579 1,890 3,104
Loss (gain) on sale of assets 137 (927) 147 (1,652)
(Gain) on insurance recovery (9,601) - (9,601) -
Unreimbursed business interruption costs 191 - 191 -
(Gain) from bargain purchase - - - (1,864)
(Gain) on legal settlements - - - (3,765)
Fair value adjustment of acquired inventory - - - 1,000
Amortization of short lived acquired intangibles - - - 5,733
Tax effect of applicable non-GAAP adjustments
(2)
3,445 (312) 1,248 (5,986)
Adjusted net income applicable to common shares
(1)
11,470$ 2,886$ 59,383$ 41,168$
0.051063
0
(1) The Company discloses a tabular comparison of Adjusted net income per diluted common share and Adjusted net income 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 per diluted common share
and Adjusted net income applicable to common shares should not be considered in isolation or as a substitute for net income per diluted common share and net income 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.
Fiscal Three Months Ended
Trailing 12 Months
Trailing 12 Months
Fiscal Three Months Ended
Our Mission & Vision
Reconciliation of 2Q 2017 Operating Income(Loss) to Adjusted
Operating Income (Loss) by Segment
17
(Dollars in thousands)
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated Consolidated
Operating income (loss), GAAP basis 6,894$ 40,087$ 5,514$ (20,023)$ 32,472$ 125,285$
Restructuring and impairment charges 186 129 - - 315 4,172
Strategic development and acquisition related costs - - - 124 124 1,890
(Gain) on insurance recovery - (9,601) - - (9,601) (9,601)
Loss on sale of assets 137 - - - 137 137
Amortization of short lived acquired intangibles - - - - - 10
Unreimbursed business interruption costs - 191 - - 191 191
Adjusted operating income (loss)
(1)
7,217$ 30,806$ 5,514$ (19,899)$ 23,638$ 122,084$
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated Consolidated
Operating income (loss), GAAP basis # 7,193$ 17,835$ 4,704$ (19,138)$ 10,594$ 81,730$
Restructuring and impairment charges 149 608 39 353 1,149 11,020
Strategic development and acquisition related costs - 28 - 551 579 3,104
Fair value adjustment of acquired inventory - - - - - 1,000
Gain o ale of assets (927) - - - (927) (5,417)
Amortization of short lived acquired intangible - - - - - 5,677
Adjusted operating income (loss)
(1)
6,415$ 18,471$ 4,743$ (18,234)$ 11,395$ 97,114$
(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 April 30, 2017
Fiscal Three Months Ended May 1, 2016
Our Mission & Vision
Reconciliation of 2Q 2017 Net Income (Loss) to Adjusted EBITDA by
Segment
18
(Dollars in thousands)
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated Consolidated
Net income (loss) 4,991$ 40,571$ 5,514$ (34,102)$ 16,974$ 61,729$
Add:
Depreciation and amortization 2,285 6,414 1,155 208 10,062 40,789
Consolidated interest expense, net (9) (92) - 7,442 7,341 29,455
Provision for income taxes 1,787 - - 6,819 8,606 34,157
Restructuring and impairment charges 186 129 - - 315 4,172
(Gain) on insurance recovery - (9,601) - - (9,601) (9,601)
(Gain) loss on sale of assets 137 - - - 137 147
Strategic development and acquisition related costs - - - 124 124 1,890
Unreimbursed business interruption costs - 191 - - 191 191
Share-based compensation - - - 2,820 2,820 11,704
Adjusted EBITDA
(1)
9,377$ 37,612$ 6,669$ (16,689)$ 36,969$ 174,633$
-$
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated Consolidated
Net income (loss) 7,013$ 17,457$ 4,687$ (26,737)$ 2,420$ 33,939$
Add:
Depreciation and amortization 2,436 6,853 1,146 330 10,765 49,407
Consolidated interest expense, net (48) 2 17 7,821 7,792 31,767
Provision (benefit) for income taxes 1,166 0 - 43 1,209 17,211
Restructuring and impairment charges 149 608 39 353 1,149 10,774
(Gain) on sale of assets (927) - - - (927) (3,516)
Strategic development and acquisition related costs 0 28 - 551 579 3,104
(Gain) on legal settlements - - - - - (3,765)
Fair value adjustment of acquired inventory - - - - - 1,000
Share-based compensation - - - 2,468 2,468 9,295
Adjusted EBITDA
(1)
9,789$ 24,948$ 5,889$ (15,171)$ 25,455$ 149,216$
(1) - 1 1 -
(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 April 30, 2017
Fiscal Three Months Ended May 1, 2016
Our Mission & Vision
K. DARCEY MATTHEWS
Vice President, Investor Relations
E: darcey.matthews@ncigroup.com
281.897.7785
ncibuildingsystems.com