Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Cornerstone Building Brands, Inc. | q32017exhibit991.htm |
| 8-K - 8-K - Cornerstone Building Brands, Inc. | ncs201709068-k.htm |
Our Mission & Vision
Q3 2017 Supplemental
Presentation
September 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 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, and other risks described in documents subsequently
filed by the Company from time to time with the SEC, which identify 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 2017 Financial Overview (Page 1 of 2)
3
Sales were $469.4 million, an increase of $7.0 million or 1.5% from $462.4 million in
the prior year’s third quarter
• Revenues for the quarter benefited from commercial pricing discipline in the pass-through of
higher costs in a rising steel price environment
• The comparability of year-over-year activity levels and operating metrics are impacted by the
abnormal prior year’s seasonal pattern which effectively pulled activity out of the fourth
quarter and into the third quarter of 2016
Gross profit margins for the period were 24.5%, compared to 27.7% in the prior year’s
period
• Sequentially, margins improved by 50 basis points, aided by improved pass-through of higher
material costs and seasonally higher capacity utilization
• Compared to the year ago period, margins declined by 320 basis points, resulting from a less
favorable steel market environment and lower year-over-year capacity utilization, partially
mitigated by continued manufacturing cost and efficiency initiatives
ESG&A Costs decreased to $76.3 million (16.3% of sales) from $80.4 million (17.2% of
sales) aided by the ongoing cost reduction programs and lower incentive
compensation costs
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 17
Our Mission & Vision
4
3Q 2017 Financial Overview (Page 2 of 2)
Operating income was $34.1 million, down from $43.5 million
Adjusted Operating Income(1) was $36.5 million, down from $45.1 million
Net income applicable to common shares was $18.1 million, or $0.25 per diluted
common share this quarter compared to $23.6 million, or $0.32 per diluted
common share in the third quarter of fiscal 2016. On an adjusted basis(1), diluted
earnings were $0.27 per share this quarter compared to $0.33 in the prior year
period
Adjusted EBITDA (1) was $50.4 million compared to $57.8 million in the prior year
period
Consolidated backlog grew 4.2% year-over-year to $580.7 million
(1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 17
Our Mission & Vision
5
Commercial
• Backlog in the Buildings segment at the end of the quarter increased 5.6% to
$376.8 million, resulting in the highest July backlog since 2009
• 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 intersegment sales increased 109% year-over-year
• Door intersegment sales increased 20% year-over-year
Steel Costs
• Steel costs continue to be elevated by trade cases and the current regulatory
environment
• Slower activity negatively impacted the flow through of higher priced inventory
layers and is reflected in the revised guidance for the fourth quarter of fiscal
2017
3Q 2017 Operational Overview
Our Mission & Vision
3Q 2017 Segment Overview (1)
6
Engineered Building Systems
• Revenue growth of 6.0% to $191.9 million, primarily as a result of improved pricing
• In the 4Q 2017, revenue will benefit from the full pass through of higher materials
costs
• At the end of the quarter, on a dollar for dollar basis, incremental material costs were being
passed through with an incremental margin
Metal Components
• Revenue growth of 3.4% to $297.0 million primarily resulting from continued growth in
insulated metal panels (“IMP”) and overhead doors through internal distribution channels
• Legacy components successfully passed through increased material costs which was offset
by lower year-over-year volumes
• Q3 of 2016 reflected an abnormal seasonal pattern for the business and volumes
were pulled forward from the Q4 of 2016 to avoid cost increases
• Lower capacity utilization negatively impacted margins in the segment partially offset by cost
and efficiency improvements
Metal Coil Coating
• Revenues declined 2.1% to $70.6 million as a result of lower volumes for both internal and
third-party customers
• Margins were compressed due to lower utilization combined with an unfavorable product
sales mix which reduced operating efficiencies
(1) Segment revenue includes intersegment sales
Our Mission & Vision
Steel Price Movements 2015 – 2017
7 Source: CRU Group
The graph above shows the monthly CRU Index data for the North American Steel Price Index. The
CRU North American Steel Price Index has been published by the CRU Group since 1994 and the
Company believes this index appropriately depicts the volatility it has experienced in steel prices. The
index is based on a CRU survey of industry participants of purchases for forward delivery, according to
mill lead time, which will vary. For example, the January index would likely approximate the Company’s
March steel purchase deliveries based on current lead-times and be representative of the steel costs
that would be recognized in April. The volatility in this steel price index is comparable to the volatility the
Company experiences in its average cost of steel.
173.9
135.3
113.3
173.8
145.0
180.6
167.2
172.3
100
110
120
130
140
150
160
170
180
190
Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17
Steel Price (CRU North American Index)
CRUFY 2015 FY 2016 YTD 2017
Our Mission & Vision
3Q 2017 Financial Summary
8 (1) Reconciliations of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 17
(Dollars in millions, except per share amounts)
July 30,
2017
July 31,
2016 % Chg.
July 30,
2017
July 31,
2016 % Chg.
Sales 469.4$ 462.4$ 1.5% 1,281.6$ 1,204.6$ 6.4%
Gross Profit 115.0$ 128.0$ -10.2% 299.8$ 307.0$ -2.4%
Gross Profit Margin 24.5% 27.7% -11.6% 23.4% 25.5% -8.2%
Income from Operations 34.1$ 43.5$ -21.7% 76.5$ 69.4$ 10.2%
Net Income 18.2$ 23.7$ -23.2% 37.2$ 32.0$ 16.3%
Diluted EPS 0.25$ 0.32$ -21.9% 0.52$ 0.43$ 20.9%
Adjusted Operating Income
1
36.5$ 45.1$ -19.1% 72.6$ 73.2$ -0.8%
Adjusted EBITDA
1
50.4$ 57.8$ -12.8% 113.5$ 112.4$ 1.0%
Adjusted Diluted EPS
1
0.27$ 0.33$ -18.2% 0.48$ 0.44$ 9.1%
Fiscal Three Months Ended Nine Months Ended
Our Mission & Vision
9
3Q 2017 Revenues and Volumes – by Segment
3Q-'17 3Q-'16 % Chg.
% Vol.
Chg.
1
3Q-'17 3Q-'16 % Chg.
% Vol.
Chg.
1
3Q-'17 3Q-'16 % Chg.
% Vol.
Chg.
1
Third-Party 28.7$ 30.7$ -6.4% -10.2% Third-Party 258.5$ 256.2$ 0.9% -6.9% Third-Party 182.2$ 175.5$ 3.8% -3.8%
Internal 41.8 41.4 1.1% -11.0% Internal 38.5 31.1 23.8% -6.6% Internal 9.7 5.5 75.4% 45.1%
Total Sales 70.6$ 72.1$ -2.1% -10.6% Total Sales 297.0$ 287.3$ 3.4% -6.9% Total Sales 191.9$ 181.0$ 6.0% -1.2%
Metal Coil Coating Metal Components Engineered Building Systems
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
3Q-'17 3Q-'16
Metal Coil Coating
Third-Party Internal
$-
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
3Q-'17 3Q-'16
Metal Components
Third-Party Internal
$-
$50.0
$100.0
$150.0
$200.0
$250.0
3Q-'17 3Q-'16
Engineered Building Systems
Third-Party Internal
Metal Coil
Coating
6%
Metal
Components
55%
Consolidated 3rd Party Revenue
3Q 2017
Metal Coil
Coating
7%
Metal
Components
55%
Consolidated 3rd Party Revenue
3Q 2016
($ in millions)
Engineered Building
Systems
39%
Engineered Building
Systems
38%
(1) Calculated as the year-over-year change in the tonnage volumes shipped
Our Mission & Vision
3Q 2017 Business Segment Results
10
(Dollars in millions)
$28.7
$258.5
$182.2
$469.4
$30.7
$256.2
$175.5
$462.4
Coatings Components Buildings Consolidated
(1) Reconciliation of non-GAAP financial measures to the nearest GAAP measure are included in the Company’s financial tables beginning on Slide 17
Third Party Revenue
$6.6
$35.3
$14.9
$34.1
$8.7
$37.5
$19.6
$43.5
Coatings Components Buildings Consolidated
Operating Income
Adjusted Operating Income1
$7.8
$41.9
$19.4
$50.4
$9.9
$44.6
$21.1
$57.8
Coatings Components Buildings Consolidated
2017
2016
Adjusted EBITDA1
$6.6
$35.4
$15.9
$36.5
$8.7
$37.8
$19.6
$45.1
Coatings Components Buildings Consolidated
Our Mission & Vision
Gross Margin Reconciliation
11
Gross Margin 3Q 2016 27.7%
Net impact of rising steel input costs and pricing discipline (2.95%)
Plant utilization, net of process efficiency improvements (0.85%)
Favorable product and segment mix, net 0.75%
Other (0.15%)
Gross Margin 3Q 2017 24.5%
For the quarter, gross profit was $115.0 million compared to $128.0 million in the
third quarter of fiscal 2016
The favorable product and segment mix was predominately in IMP sales and the
relative weighting of the three business segments
Note: Basis point attributions in the above tables are approximate
Our Mission & Vision
Key Cost Initiatives
12
($ 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
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
During the fourth quarter of 2017, management accelerated parts of the cost
reduction initiatives originally planned for 2018. Approximately $7 million to $9
million will be realized in 2018 as a result of these fourth quarter actions,
predominantly in the ESG&A cost area
(1) Key initiatives are anticipated to generate the target amount of savings by fiscal year-end 2018
Our Mission & Vision
13
Net Income:
Net income was $18.2 million compared to $23.7 million in the prior year’s third quarter
Adjusted EBITDA1:
(Dollars in millions)
3Q 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 17
$57.8
$50.4
$(6.1)
$4.1
$(6.5)
$1.1
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
Adjusted EBITDA 3Q
2016
Volume Product Mix and Margin
Contraction
ESG&A Cost Reductions
and Lower Incentive
Compensation
Other Adjusted EBITDA 3Q
2017
Our Mission & Vision
3Q 2017 Cash Flow Summary
14
Cash and Cash Equivalents, as of 3Q 2017 2Q 2017 1Q 2017 4Q 2016
Beginning balance $ 49,682 $ 15,789 $ 65,403 $ 50,710
Cash provided by (used in) operating activities (7,294) 38,254 (31,878) 28,169
Cash provided by (used in) investing activities 4,100 (4,483) (4,120) 4,054
Cash used in financing activities (961) 271 (13,702) (17,254)
Exchange rate effects 396 (149) 86 (276)
Ending balance $ 45,923 $ 49,682 $ 15,789 $ 65,403
Stock Repurchase
• During the quarter, the Company did not have any stock repurchase activity. As of the end of
the third quarter, $39.9 million remains available for stock repurchases under the September
2016 program
(Dollars in thousands)
Our Mission & Vision
3Q 2017 Results Compared to Guidance
15
($ in millions)
Range
Low High 3Q Actuals
Revenues $480.0 $505.0 $469.4
Gross Profit Margin 24.0% 26.25% 24.5%
ESG&A Expenses $79.0 $83.0 $76.3
Intangible Asset Amortization $2.3 $2.5 $2.4
Total Depreciation & Amortization
(inclusive of Intangibles above)
$10.0 $11.0 $10.3
Interest Expense $7.0 $7.4 $7.4
Effective Tax Rate 34.0% 37.0% 35.1%
Adjusted EBITDA $48.0 $58.0 $50.4
Revenues for the quarter reflect a continuing market hesitancy, particularly in the legacy
Components segment offset by improving sales of IMP
Lower ESG&A results reflect the impact of ongoing cost initiatives and lower incentive
compensation costs
Our Mission & Vision
4Q and FY 2017 Guidance (1)
16
($ in million)
4Q Range
Low High
Revenues $470.0 $500.0
Gross Profit Margin 24.3% 26.3%
ESG&A Expenses $77.0 $80.0
Intangible Asset Amortization $2.3 $2.5
Total Depreciation & Amortization
(inclusive of Intangible Asset Amortization above)
$10.0 $11.0
Interest Expense $7.1 $7.5
Effective Tax Rate 34.0% 37.0%
Adjusted EBITDA $48.0 $62.0
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 71.2 million for 4Q 2017
Total capital expenditures for fiscal 2017 are expected to be in the range of $25.0 million to $30.0 million
Full year 2017 revenues are expected to be in the range of $1.75 - $1.82 billion and Adjusted EBITDA is expected to
be in the range of $162 - $176 million. The revised fourth quarter EBITDA range includes an estimated impact of $3
to $8 million related to the disruptions from Hurricane Harvey and the potential impact on customer job sites and
their readiness for product delivery
(1) See “Forward Looking Statements” on Slide 2
Our Mission & Vision
Reconciliation of Net Income (Loss) and Adjusted Net Income (Loss) per
Diluted Common Share
17
(Dollars in thousands, except per share amounts)
July 30, July 31, July 30, July 31,
2017 2016 2017 2016
Net income per diluted common share, GAAP basis 0.25$ 0.32$ 0.52$ 0.43$
Restructuring and impairment charges 0.01 0.01 0.05 0.05
Strategic development and acquisition related costs 0.02 0.01 0.02 0.03
(Gain) on insurance recovery 0.00 - (0.14) -
Unreimbursed business interruption costs 0.00 - 0.01 -
Other losses (gains), net - (0.00) 0.00 (0.05)
Tax effect of applicable non-GAAP adjustments
(1)
(0.01) (0.01) 0.02 (0.02)
Adjusted net income per diluted common share
(2)
0.27$ 0.33$ 0.48$ 0.44$
July 30, July 31, July 30, July 31,
2017 2016 2017 2016
Net income applicable to common shares, GAAP basis 18,119$ 23,550$ 36,994$ 31,761$
Restructuring and impairment charges 1,009 778 3,587 3,437
Strategic development and acquisition related costs 1,297 819 1,778 2,080
(Gain) on insurance recovery (148) - (9,749) -
Unreimbursed business interruption costs 235 - 426 -
Other losses (gains), net - (52) 137 (3,568)
Tax effect of applicable non-GAAP adjustments
(1)
(933) (603) 1,490 (1,487)
Adjusted net income applicable to common shares
(2)
19,579$ 24,492$ 34,663$ 32,223$
#DIV/0! #DIV/0!
#DIV/0! #DIV/0!
(1) 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.
(2) 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.
Fiscal Three Months Ended Fiscal Nine Months Ended
Fiscal Three Months Ended Fiscal Nine Months Ended
Our Mission & Vision
Reconciliation of 3Q 2017 Operating Income(Loss) to Adjusted
Operating Income (Loss) by Segment
18
(Dollars in thousands)
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated
Consolidated
Operating income (loss), GAAP basis 14,948$ 35,289$ 6,562$ (22,702)$ 34,097$ 115,847$
Restructuring and impairment charges 941 68 - - 1,009 4,403
Strategic development and acquisition related costs - - - 1,297 1,297 2,368
Loss on sale of assets and asset recovery - - - - - 199
(Gain) on insurance recovery - (148) - - (148) (9,749)
Unreimbursed business interruption costs - 235 - - 235 426
Adjusted operating income (loss)
(1)
15,889$ 35,444$ 6,562$ (21,405)$ 36,490$ 113,494$
Trailing 12
Months
Engineered
Building
Systems
Metal
Components
Metal Coil
Coating Corporate Consolidated Consolidated
Operating income (loss), GAAP basis 19,561$ 37,497$ 8,748$ (22,271)$ 43,535$ 105,887$
Restructuring and impairment charges 106 261 - 411 778 11,048
Strategic development and acquisition related costs - 9 - 810 819 3,222
(Gain) on legal settlements - - - - (3,765)
(Gain) on sale of assets and asset recovery (52) - - - (52) (1,704)
Amortization of short lived acquired intangibles - - - - - 2,343
Adjusted operating income (loss)
(1)
19,615$ 37,767$ 8,748$ (21,050)$ 45,080$ 117,031$
(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 July 30, 2017
Fiscal Three Months Ended July 31, 2016
Our Mission & Vision
Reconciliation of 3Q 2017 Net Income (Loss) to Adjusted EBITDA by
Segment
19
(Dollars in thousands)
Trailing 12
Months
Engineered
Building Metal Metal Coil
Systems Components Coating Corporate Consolidated Consolidated
Net income (loss) 17,874$ 35,148$ 6,562$ (41,363)$ 18,221$ 56,235$
Add:
Depreciation and amortization 2,255 6,631 1,214 178 10,278 40,472
Consolidated interest expense, net 5 (15) - 7,363 7,353 29,123
(Benefit) provision for income taxes (1,640) - - 11,485 9,845 32,375
Restructuring and impairment charges 941 68 - - 1,009 4,403
Strategic development and acquisition related costs - - - 1,297 1,297 2,368
Share-based compensation - - - 2,284 2,284 11,327
Loss on sale of assets and asset recovery - - - - - 199
(Gain) on insurance recovery - (148) - - (148) (9,749)
Unreimbursed business interruption costs - 235 - - 235 426
Adjusted EBITDA
(1)
19,435$ 41,919$ 7,776$ (18,756)$ 50,374$ 167,179$
Trailing 12
Months
Engineered
Building Metal Metal Coil
Systems Components Coating Corporate Consolidated Consolidated
Net income (loss) 19,140$ 37,628$ 8,749$ (41,802)$ 23,715$ 50,434$
Add:
Depreciation and amortization 2,438 6,752 1,184 221 10,595 45,461
Consolidated interest expense, net (39) (8) - 7,732 7,685 31,317
(Benefit) provision for income taxes (471) 2 - 12,096 11,627 25,318
Restructuring and impairment charges 106 261 - 411 778 11,048
(Gain) from bargain purchsae - - - - - (1,864)
Strategic development and acquisition related costs - 9 - 810 819 3,222
(Gain) on legal settlements - - - - - (3,765)
Share-based compensation - - - 2,661 2,661 9,388
(Gain) on sale of assets and asset recovery (52) - - - (52) (1,704)
Adjusted EBITDA
(1)
21,122$ 44,644$ 9,933$ (17,871)$ 57,828$ 168,855$
(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 such definition. 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 special 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 30, 2017
Fiscal Three Months Ended July 31, 2016
Our Mission & Vision
K. DARCEY MATTHEWS
Vice President, Investor Relations
E: darcey.matthews@ncigroup.com
281.897.7785
ncibuildingsystems.com