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| 8-K - 8-K - Cornerstone Building Brands, Inc. | cnr-20201110.htm |
NEWS RELEASE
Cornerstone Building Brands Announces Strong Third-Quarter 2020 Results
•Delivered earnings of 24 cents per diluted share, a 20% improvement over prior year
•Generated net income of $30.5 million, an improvement of 21.3% year-over-year
•Generated all-time high Adjusted EBITDA1 of $193.3 million and margin of 15.8%
•Achieved sixth consecutive quarter of year-over-year Adjusted EBITDA1 margin expansion in all segments
•Increased operating cash flow 173.9% over prior year to approximately $170 million
•Improved liquidity and financial flexibility with $500 million issuance of senior unsecured notes
CARY, NC, November 10, 2020 - Cornerstone Building Brands, Inc. (NYSE: CNR) (the “Company”), the largest manufacturer of exterior building products, today reported third-quarter 2020 net sales of $1,227.3 million and net income of $30.0 million or 24 cents per diluted share. This compares with net sales of $1,285.0 million and net income of $24.8 million or 20 cents per diluted share in the same quarter last year. Adjusted for the March 2020 acquisition of Kleary Masonry, Inc., pro forma net sales1 for the nine months ended October 3, 2020 were $3,434.4 million, down 7.0 percent compared with pro forma net sales1 for the nine-months ended September 28, 2019. The decrease was primarily driven by lower volumes as a result of the COVID-19 pandemic.
Net income for the third quarter of 2020 was $30.5 million compared to $25.2 million for the same period a year ago, an improvement of 21.3%. Adjusted EBITDA1 for the third quarter of 2020 was an all-time high of $193.3 million or 15.8 percent of net sales, an improvement of 160 basis points from the same pro forma period a year ago. The improvement was due to effective near-term expense management, structural cost reductions, and strong price, net of inflation partially offset by the impacts from lower demand and shift in product mix as a result of the COVID-19 pandemic. For the nine months ended October 3, 2020, pro forma Adjusted EBITDA1 was $450.5 million or 13.1 percent of pro forma net sales1, an improvement of 4.4 percent or 140 basis points from the same pro forma period a year ago.
“We delivered strong third quarter results having achieved Adjusted EBITDA margin expansion in all segments for six consecutive quarters, generated significant operating cash flow, and improved the Company's net debt leverage ratio to 4.9x,” said James S. Metcalf, Chairman and Chief Executive Officer.
“Strong demand in our residential businesses, combined with our strong balance sheet and cash flow, position us well heading into 2021,” Metcalf continued. “As we near the second anniversary of Cornerstone Building Brands, I have tremendous pride in our team and their many financial and operational accomplishments, while facing an environment of unprecedented uncertainty.” Metcalf concluded.
Segment Results Versus Prior Year
All segments delivered consecutive margin expansion over the prior year as a result of the quick and effective management of near-term expenses and acceleration of the Company's strategy to permanently improve its highly variable cost structure, despite the challenges in end-markets due to the COVID-19 pandemic.
•Windows segment net sales for the quarter were $501.3 million, a decrease of 0.6 percent, and gross profit was $99.1 million, an increase of 0.8 percent. Adjusted EBITDA1 was $70.6 million or 14.1 percent of net sales, an improvement of 130 basis points. On a year-to-date basis, Adjusted EBITDA margin1 improved 180 basis points, while net sales were 3.9 percent lower. Positive price and mix, net of material inflation, contributed to the achieved margin expansion during the period as well as the successful execution of cost improvement actions.
•Siding segment net sales for the quarter were $321.9 million, a decrease of 2.2 percent, and gross profit was $92.9 million, a decrease of 2.6% percent versus the pro forma third-quarter 2019. Adjusted EBITDA1 was $79.1 million or 24.6 percent of net sales, an improvement of 270 basis points. On a year-to-date basis, Adjusted EBITDA margin1
improved 230 basis points, while net sales were 3.7 percent lower. In addition to the successful execution of cost improvement actions, lower raw material costs contributed to the achieved margin expansion during the period.
•Commercial segment net sales for the quarter were $404.0 million, a decrease of 13.1 percent, and gross profit was $105.5 million, a decrease of 12.7 percent. Adjusted EBITDA1 was $70.3 million or 17.4 percent of net sales, an improvement of 180 basis points. On a year-to-date basis, Adjusted EBITDA margin1 improved 80 basis points, while net sales were 12.4 percent lower. In addition to the successful execution of cost improvement actions, effective price management with declining steel costs mostly offset the negative product mix impact from customers shifting to less complex projects as a result of the COVID-19 pandemic.
Balance Sheet and Liquidity
During the third quarter of 2020, the Company generated cash flow from operations of $169.9 million compared with $97.7 million for the same period last year, a cash generation improvement of $72.2 million. Capital expenditures were $14.9 million, as the Company remains committed to investing in innovative product offerings and process automation that are expected to generate profitable growth in the future. During the third quarter, we installed two automated window lines at the North Brunswick, New Jersey facility, which increased capacity by 20 percent for the largest product line supporting residential new construction applications.
Free cash flow was $155.0 million during the third quarter of 2020 compared with free cash flow of $68.6 million during the third quarter of 2019. The improvement was primarily driven by lower cash interest expenses, net cash tax benefits from the CARES Act and other COVID-19 related government stimulus programs, reduced capital spending and stronger earnings generation.
During the quarter, the Company issued $500 million of senior unsecured notes due January 2029 bearing interest at 6.125% per year. The proceeds were used to repay debt under the asset-based revolving credit facility and cash flow revolver, as well as transaction fees. The transaction improved liquidity, strengthened the Company’s financial flexibility and was aligned with our deleveraging strategy. The Company ended the quarter with approximately $627.6 million of unrestricted cash on hand, $570.0 million of excess availability on its asset-based revolving credit facility, and $115 million of availability on its cash flow revolver facility. Additionally, the net debt leverage ratio1 improved to 4.9x at the end of the third quarter of 2020 compared with 5.8x for the same period last year. We believe we have sufficient liquidity to weather impacts from the COVID-19 pandemic while providing the Company flexibility needed to continue executing our growth strategy.
Outlook
Fourth-Quarter 2020 Guidance
The Company’s fiscal quarters are based on a four-four-five-week calendar with periods ending on the Saturday of the last week in the quarter, except December 31st, which will always be the year-end date. Additionally, our sales and earnings are normally lower in the fourth quarter each fiscal year due to seasonal trends and business cycles affecting the construction industry.
•5% lower fiscal ship days; 59 ship days as compared to 62 ship days in the fourth-quarter 2019
•Expect net sales to be between $1,135 million and $1,200 million
◦Positive residential end-market momentum
◦Backlog at historic levels in Windows and Siding segments
◦Stable non-residential end-markets
•Anticipate Gross Profit to be between $255 million and $270 million.
•Expect Adjusted EBITDA1,2 to be between $145 million and $160 million
◦Lower cost structure from run rate of achieved and continued execution of cost savings
Additional Fiscal Year 2020 Guidance
•2020 capital spending is projected to be approximately $85 million.
•Cash interest expense is expected to be approximately $200 million.
•No cash tax expense or benefit projected due to delayed timing of refund.
•Benefits from primary working capital1 improvements are expected to generate approximately $25 million of cash.
•Cash restructuring costs are expected to be approximately $35 million to achieve between $80 and $100 million of structural savings.
(1)Adjusted financial metrics used in this release are non-GAAP measures and refer to the results for 2020 and 2019. Pro forma financial metrics used in this release for results in 2020 and 2019 are also non-GAAP measures and adjust for other items affecting comparability. See reconciliations of GAAP results to adjusted results and pro forma results in the accompanying tables.
(2)Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of the forecasted range for the fourth quarter of 2020 is not included in this release. See "Non-GAAP Financial Measures" below.
Conference Call Information
The Company will host a conference call at 9:00 a.m. EST on Wednesday, November 11 to discuss its financial performance with investors and securities analysts. The financial results and supplemental information will be available online at investors.cornerstonebuildingbrands.com.
To register, please use this link http://www.directeventreg.com/registration/event/2676784. After registering, an email confirmation will be sent providing dial-in details and a unique code for entry. Registration is open throughout the live call, however, to ensure you are connected for the entirety, please register a day in advance or at least 10 minutes before the start of the call. Additional call participation options are as follows:
By Webcast: Cornerstone Building Brands 3Q20 Earnings Call
Date: Wednesday, November 11, 2020
Time: 9:00 a.m. Eastern Daylight Time
Access link: Visit the Events & Presentations section of the Investors Page at investors.cornerstonebuildingbrands.com or access directly at http://www.directeventreg.com/registration/event/2676784.
Replay dial-in will be available through November 25, 2020
Dial-in number: 855-859-2056
Replay code: 2676784
About Cornerstone Building Brands
Cornerstone Building Brands is the largest manufacturer of exterior building products for residential and low-rise non-residential buildings in North America. Headquartered in Cary, North Carolina, we serve residential and commercial customers across new construction and repair and remodel markets. As the #1 manufacturer of vinyl windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines an expansive portfolio of strong brands and quality products with a broad multichannel distribution platform that includes approximately 20,000 employees at manufacturing, distribution and branch office locations throughout North America. For more information, visit us at www.cornerstonebuildingbrands.com.
Investor Relations
Tina Beskid
1-866-419-0042
info@investors.cornerstonebuildingbrands.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “anticipate," “guidance,” “plan,” “potential,” “expect,” “should,” “will,” “forecast,” “target” and similar expressions are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations, assumptions and/or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts, and estimates and, therefore, these forward-looking statements 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. Such forward-looking statements may include, but are not limited to, statements concerning our market commentary and expectations for residential and non-residential end markets and our financial outlook and guidance, including our fourth quarter 2020 forecasted net sales, gross profit and Adjusted EBITDA, and our fiscal year 2020 forecasted capital spending, cash interest expense, cash tax expense, benefits from primary working capital, cash restructuring costs and other consolidated financial performance guidance. 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; downturns in the residential new construction and repair and remodeling end markets, or the economy or the availability of consumer credit; volatility in the United States (“U.S.”) economy and abroad, generally, and in the credit markets; the outbreak of a health epidemic or pandemic, including the coronavirus disease 2019 (“COVID-19”) pandemic; precautions taken due to the recent COVID-19 pandemic that could harm our business; impairment of goodwill and/or intangible assets; our ability to successfully develop new products or improve existing products; the effects of manufacturing or assembly realignments; seasonality of the business and other external factors beyond our control; commodity price volatility and/or limited availability of raw materials, including steel, PVC resin, glass and aluminum; our ability to identify and develop relationships with a sufficient number of qualified suppliers and to avoid a significant interruption in our supply chains; retention and replacement of key personnel; enforcement and obsolescence of our intellectual property rights; costs related to compliance with, violations of or liabilities under environmental, health and safety laws; changes in building codes and standards; competitive activity and pricing pressure in our industry; our ability to make strategic acquisitions accretive to earnings; our ability to carry out our restructuring plans and to fully realize the expected cost savings; global climate change, including legal, regulatory or market responses thereto; breaches of our information system security measures; damage to our computer infrastructure and software systems; necessary maintenance or replacements to our enterprise resource planning technologies; potential personal injury, property damage or product liability claims or other types of litigation; compliance with certain laws related to our international business operations; increases in labor costs, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers; significant changes in factors and assumptions used to measure certain of our defined benefit plan obligations and the effect of actual investment returns on pension assets; the cost and difficulty associated with integrating and combining acquired businesses; volatility of the Company’s stock price; substantial governance and other rights held by the Investors; the effect on our common stock price caused by transactions engaged in by the Investors, our directors or executives; our substantial indebtedness and our ability to incur substantially more indebtedness; limitations that our debt agreements place on our ability to engage in certain business and financial transactions; our ability to obtain financing on acceptable terms; downgrades of our credit ratings; and the effect of increased interest rates on our ability to service our debt. See also the “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Quarterly Reports on Form 10-Q for the quarterly periods ended April 4, 2020 and July 4, 2020, 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.
Non-GAAP Financial Measures
This press release includes certain “non-GAAP financial measures” as defined under the Securities Exchange Act of 1934 and in accordance with Regulation G. Management believes the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the financial results between periods on a more comparable basis. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. We have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and provided in accordance with U.S. GAAP at the end of this release. A reconciliation of the forecasted range for Adjusted EBITDA for the fourth quarter of 2020 is not included in this presentation due to the number of variables in the projected range and because we are currently unable to quantify accurately certain amounts that would be required to be included in the GAAP measure or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net sales | $ | 1,227,253 | $ | 1,285,043 | $ | 3,426,000 | $ | 3,645,332 | |||||||||||||||
| Cost of sales | 929,751 | 975,240 | 2,642,880 | 2,844,949 | |||||||||||||||||||
| Gross profit | 297,502 | 309,803 | 783,120 | 800,383 | |||||||||||||||||||
| 24.2 | % | 24.1 | % | 22.9 | % | 22.0 | % | ||||||||||||||||
| Selling, general and administrative expenses | 137,250 | 154,034 | 436,575 | 466,368 | |||||||||||||||||||
| Intangible asset amortization | 45,446 | 44,725 | 135,547 | 132,699 | |||||||||||||||||||
| Restructuring and impairment charges, net | 2,918 | 4,984 | 32,164 | 15,522 | |||||||||||||||||||
| Strategic development and acquisition related costs | 7,909 | 10,500 | 13,550 | 36,668 | |||||||||||||||||||
| Goodwill impairment | — | — | 503,171 | — | |||||||||||||||||||
| Income (loss) from operations | 103,979 | 95,560 | (337,887) | 149,126 | |||||||||||||||||||
| Interest income | 328 | 155 | 1,007 | 491 | |||||||||||||||||||
| Interest expense | (51,519) | (56,549) | (158,738) | (173,134) | |||||||||||||||||||
| Foreign exchange gain (loss) | 812 | (616) | (1,300) | 1,084 | |||||||||||||||||||
| Other income (expense), net | (23) | 717 | (25) | 665 | |||||||||||||||||||
| Income (loss) before income taxes | 53,577 | 39,267 | (496,943) | (21,768) | |||||||||||||||||||
| Provision (benefit) for income taxes | 23,061 | 14,103 | (12,285) | (4,448) | |||||||||||||||||||
| 43.0 | % | 35.9 | % | 2.5 | % | 20.4 | % | ||||||||||||||||
| Net income (loss) | 30,516 | 25,164 | (484,658) | (17,320) | |||||||||||||||||||
| Net income allocated to participating securities | (488) | (374) | — | — | |||||||||||||||||||
| Net income (loss) applicable to common shares | $ | 30,028 | $ | 24,790 | $ | (484,658) | $ | (17,320) | |||||||||||||||
| Income (loss) per common share: | |||||||||||||||||||||||
| Basic | $ | 0.24 | $ | 0.20 | $ | (3.86) | $ | (0.14) | |||||||||||||||
| Diluted | $ | 0.24 | $ | 0.20 | $ | (3.86) | $ | (0.14) | |||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | 125,100 | 125,557 | 125,655 | 125,526 | |||||||||||||||||||
| Diluted | 125,289 | 125,558 | 125,655 | 125,526 | |||||||||||||||||||
| Increase (decrease) in sales | (4.5) | % | 134.4 | % | (6.0) | % | 155.5 | % | |||||||||||||||
| Selling, general and administrative expenses percentage of net sales | 11.2 | % | 12.0 | % | 12.7 | % | 12.8 | % | |||||||||||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| October 3, 2020 | December 31, 2019 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 627,603 | $ | 98,386 | |||||||
| Restricted cash | 6,223 | 3,921 | |||||||||
| Accounts receivable, net | 578,684 | 491,740 | |||||||||
| Inventories, net | 408,897 | 439,194 | |||||||||
| Income taxes receivable | 34,310 | 48,466 | |||||||||
| Investments in debt and equity securities, at market | 1,917 | 3,776 | |||||||||
| Prepaid expenses and other | 73,096 | 78,516 | |||||||||
| Assets held for sale | 5,087 | 1,750 | |||||||||
| Total current assets | 1,735,817 | 1,165,749 | |||||||||
| Property, plant and equipment, net | 635,904 | 652,841 | |||||||||
| Lease right-of-use assets | 277,037 | 316,155 | |||||||||
| Goodwill | 1,189,992 | 1,669,594 | |||||||||
| Intangible assets, net | 1,623,133 | 1,740,700 | |||||||||
| Deferred income taxes | 1,139 | 7,510 | |||||||||
| Other assets, net | 11,959 | 11,797 | |||||||||
| Total assets | $ | 5,474,981 | $ | 5,564,346 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | 25,600 | $ | 25,600 | |||||||
| Accounts payable | 229,353 | 205,629 | |||||||||
| Accrued compensation and benefits | 78,269 | 92,130 | |||||||||
| Accrued interest | 32,001 | 19,070 | |||||||||
| Accrued income taxes | 2,730 | — | |||||||||
| Current portion of lease liabilities | 69,408 | 72,428 | |||||||||
| Other accrued expenses | 258,890 | 233,687 | |||||||||
| Total current liabilities | 696,251 | 648,544 | |||||||||
| Long-term debt | 3,567,302 | 3,156,924 | |||||||||
| Deferred income taxes | 244,468 | 291,987 | |||||||||
| Long-term lease liabilities | 210,446 | 243,780 | |||||||||
| Other long-term liabilities | 336,224 | 287,793 | |||||||||
| Total long-term liabilities | 4,358,440 | 3,980,484 | |||||||||
| Common stock | 1,252 | 1,261 | |||||||||
| Additional paid-in capital | 1,253,877 | 1,248,787 | |||||||||
| Accumulated deficit | (766,565) | (281,229) | |||||||||
| Accumulated other comprehensive loss, net | (67,752) | (32,398) | |||||||||
| Treasury stock, at cost | (522) | (1,103) | |||||||||
| Total stockholders’ equity | 420,290 | 935,318 | |||||||||
| Total liabilities and stockholders’ equity | $ | 5,474,981 | $ | 5,564,346 | |||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Nine Months Ended | |||||||||||
| October 3, 2020 | September 28, 2019 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (484,658) | $ | (17,320) | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 212,413 | 191,485 | |||||||||
| Non-cash interest expense | 6,948 | 6,233 | |||||||||
| Share-based compensation expense | 12,568 | 10,613 | |||||||||
| Non-cash fair value premium on purchased inventory | — | 16,249 | |||||||||
| Goodwill impairment | 503,171 | — | |||||||||
| Asset impairment | 3,490 | — | |||||||||
| Loss (gain) on asset sales, net | 710 | (335) | |||||||||
| Provision for doubtful accounts | 3,762 | (492) | |||||||||
| Deferred income taxes | (27,052) | (45,192) | |||||||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | |||||||||||
| Accounts receivable | (84,309) | (138,329) | |||||||||
| Inventories | 30,980 | 63,327 | |||||||||
| Income taxes | 16,886 | 1,256 | |||||||||
| Prepaid expenses and other | 6,246 | (4,374) | |||||||||
| Accounts payable | 22,669 | 8,486 | |||||||||
| Accrued expenses | 12,920 | (21,005) | |||||||||
| Other, net | 132 | (2,783) | |||||||||
| Net cash provided by operating activities | 236,876 | 67,819 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions, net of cash acquired | (41,841) | (179,184) | |||||||||
| Capital expenditures | (62,535) | (86,364) | |||||||||
| Proceeds from sale of property, plant and equipment | 1,538 | 873 | |||||||||
| Net cash used in investing activities | (102,838) | (264,675) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from ABL facility | 345,000 | 290,000 | |||||||||
| Payments on ABL facility | (415,000) | (120,000) | |||||||||
| Proceeds from cash flow revolver | 115,000 | — | |||||||||
| Payments on cash flow revolver | (115,000) | — | |||||||||
| Payments on term loan | (19,215) | (12,810) | |||||||||
| Proceeds from senior notes | 500,000 | — | |||||||||
| Payments of financing costs | (6,905) | — | |||||||||
| Payments related to tax withholding for share-based compensation | (478) | (231) | |||||||||
| Purchases of treasury stock | (6,428) | — | |||||||||
| Net cash provided by financing activities | 396,974 | 156,959 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 507 | 1,406 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 531,519 | (38,491) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 102,307 | 147,607 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 633,826 | $ | 109,116 | |||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||||||||||||||
| ADJUSTED NET INCOME (LOSS) PER DILUTED COMMON SHARE AND | |||||||||||||||||||||||
| NET INCOME (LOSS) COMPARISON | |||||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net income (loss) per diluted common share, GAAP basis | $ | 0.24 | $ | 0.20 | $ | (3.86) | $ | (0.14) | |||||||||||||||
| Restructuring and impairment charges, net | 0.02 | 0.04 | 0.26 | 0.12 | |||||||||||||||||||
| Strategic development and acquisition related costs | 0.06 | 0.08 | 0.11 | 0.29 | |||||||||||||||||||
| Non-cash loss (gain) on foreign currency transactions | (0.01) | — | 0.01 | (0.01) | |||||||||||||||||||
| Non-cash charge of purchase price allocated to inventories | — | — | — | 0.13 | |||||||||||||||||||
| Goodwill impairment | — | — | 4.00 | — | |||||||||||||||||||
| Customer inventory buybacks | — | — | — | — | |||||||||||||||||||
COVID-19(3) | 0.02 | — | 0.08 | — | |||||||||||||||||||
| Other, net | — | 0.01 | 0.01 | 0.03 | |||||||||||||||||||
Tax effect of applicable non-GAAP adjustments(1) | (0.03) | (0.04) | (1.16) | (0.15) | |||||||||||||||||||
Adjusted net income (loss) per diluted common share(2) | $ | 0.31 | $ | 0.30 | $ | (0.54) | $ | 0.28 | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net income (loss) applicable to common shares, GAAP basis | $ | 30,028 | $ | 24,790 | $ | (484,658) | $ | (17,320) | |||||||||||||||
| Restructuring and impairment charges, net | 2,918 | 4,984 | 32,321 | 15,522 | |||||||||||||||||||
| Strategic development and acquisition related costs | 7,909 | 10,500 | 13,550 | 36,668 | |||||||||||||||||||
| Non-cash loss (gain) on foreign currency transactions | (812) | 616 | 1,300 | (1,084) | |||||||||||||||||||
| Non-cash charge of purchase price allocated to inventories | — | — | — | 16,249 | |||||||||||||||||||
| Goodwill impairment | — | — | 503,171 | — | |||||||||||||||||||
| Customer inventory buybacks | 140 | 159 | 453 | 576 | |||||||||||||||||||
COVID-19(3) | 2,599 | — | 10,634 | — | |||||||||||||||||||
| Other, net | (153) | 1,699 | 1,459 | 3,780 | |||||||||||||||||||
Tax effect of applicable non-GAAP adjustments(1) | (3,276) | (4,795) | (146,351) | (19,147) | |||||||||||||||||||
Adjusted net income (loss) applicable to common shares(2) | $ | 39,353 | $ | 37,953 | $ | (68,121) | $ | 35,244 | |||||||||||||||
(1)The Company calculated the tax effect of non-GAAP adjustments by applying the applicable federal and state statutory tax rate for the period to each applicable non-GAAP item.
(2)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.
(3)Costs included within the COVID-19 line item for the three and nine months ended October 3, 2020 include incremental labor costs due to quarantine related absenteeism, incremental facility cleaning costs, pandemic related supplies and personal protective equipment for employees, among other costs.
Certain amounts in this release have been subject to rounding adjustments. Accordingly, amounts shown as totals may not be the arithmetic aggregation of the individual amounts that comprise or precede them.
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Consolidated | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Operating income (loss), GAAP | $ | 103,979 | $ | 95,560 | $ | (337,887) | $ | 149,126 | |||||||||||||||
| Restructuring and impairment charges, net | 2,918 | 4,984 | 32,321 | 15,522 | |||||||||||||||||||
| Strategic development and acquisition related costs | 7,909 | 10,500 | 13,550 | 36,668 | |||||||||||||||||||
| Non-cash charge of purchase price allocated to inventories | — | — | — | 16,249 | |||||||||||||||||||
| Goodwill impairment | — | — | 503,171 | — | |||||||||||||||||||
| Customer inventory buybacks | 140 | 159 | 453 | 576 | |||||||||||||||||||
| COVID-19 | 2,599 | — | 10,634 | — | |||||||||||||||||||
| Other, net | (153) | 1,699 | 1,459 | 3,780 | |||||||||||||||||||
| Adjusted operating income | 117,392 | 112,902 | 223,701 | 221,921 | |||||||||||||||||||
| Other income (expense), net | (23) | 717 | (25) | 665 | |||||||||||||||||||
| Depreciation and amortization | 71,933 | 64,009 | 212,413 | 191,485 | |||||||||||||||||||
| Share-based compensation expense | 4,025 | 3,134 | 12,568 | 10,613 | |||||||||||||||||||
| Adjusted EBITDA | 193,327 | 180,762 | 448,657 | 424,684 | |||||||||||||||||||
Impact of Environmental Stoneworks and Kleary acquisitions(1) | — | 3,831 | 1,869 | 6,979 | |||||||||||||||||||
| Pro Forma Adjusted EBITDA | $ | 193,327 | $ | 184,593 | $ | 450,526 | $ | 431,663 | |||||||||||||||
(1)Reflects the Adjusted EBITDA of Environmental Stoneworks for the period January 1, 2019 to the acquisition date of February 20, 2019 and Kleary Masonry, Inc. for the periods January 1, 2019 to September 28, 2019 and January 1, 2020 to March 1, 2020.
| Windows | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net Sales | $ | 501,314 | $ | 504,338 | $ | 1,378,039 | $ | 1,434,579 | |||||||||||||||
| Operating income (loss), GAAP | $ | 37,295 | $ | 34,446 | $ | (252,794) | $ | 62,039 | |||||||||||||||
| Restructuring and impairment charges, net | 1,539 | 505 | 7,189 | 1,526 | |||||||||||||||||||
| Strategic development and acquisition related costs | — | 4,993 | 16 | 17,054 | |||||||||||||||||||
| Goodwill impairment | — | — | 320,990 | — | |||||||||||||||||||
| COVID-19 | 1,031 | — | 5,923 | — | |||||||||||||||||||
| Other, net | 252 | 577 | 252 | 537 | |||||||||||||||||||
| Adjusted operating income | 40,117 | 40,521 | 81,576 | 81,156 | |||||||||||||||||||
| Other income (expense), net | (115) | 285 | (115) | (453) | |||||||||||||||||||
| Depreciation and amortization | 30,644 | 23,778 | 90,679 | 72,603 | |||||||||||||||||||
| Adjusted EBITDA | $ | 70,646 | $ | 64,584 | $ | 172,140 | $ | 153,306 | |||||||||||||||
| Adjusted EBITDA as a % of Net Sales | 14.1 | % | 12.8 | % | 12.5 | % | 10.7 | % | |||||||||||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Siding | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net Sales | $ | 321,898 | $ | 315,799 | $ | 848,190 | $ | 840,601 | |||||||||||||||
| Pro Forma Net Sales | 321,898 | 329,063 | 856,548 | 889,504 | |||||||||||||||||||
| Operating income (loss), GAAP | $ | 45,313 | $ | 37,063 | $ | (92,916) | $ | 51,346 | |||||||||||||||
| Restructuring and impairment charges, net | (714) | 2,531 | 2,901 | 8,162 | |||||||||||||||||||
| Strategic development and acquisition related costs | 7,139 | — | 8,115 | — | |||||||||||||||||||
| Non-cash charge of purchase price allocated to inventories | — | — | — | 16,249 | |||||||||||||||||||
| Goodwill impairment | — | — | 176,774 | — | |||||||||||||||||||
| Customer inventory buybacks | 140 | 159 | 453 | 576 | |||||||||||||||||||
| COVID-19 | 24 | — | 67 | — | |||||||||||||||||||
| Other, net | (1,351) | (1,172) | (1,351) | 263 | |||||||||||||||||||
| Adjusted operating income | 50,551 | 38,581 | 94,043 | 76,596 | |||||||||||||||||||
| Other income (expense), net | (4) | 700 | (10) | (316) | |||||||||||||||||||
| Depreciation and amortization | 28,547 | 28,804 | 85,068 | 83,569 | |||||||||||||||||||
| Adjusted EBITDA | 79,094 | 68,085 | 179,101 | 159,849 | |||||||||||||||||||
Impact of Environmental Stoneworks and Kleary acquisitions(1) | — | 3,831 | 1,869 | 6,988 | |||||||||||||||||||
| Pro Forma Adjusted EBITDA | $ | 79,094 | $ | 71,916 | $ | 180,970 | $ | 166,837 | |||||||||||||||
| Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales | 24.6 | % | 21.9 | % | 21.1 | % | 18.8 | % | |||||||||||||||
(1)Reflects the Adjusted EBITDA of Environmental Stoneworks for the period January 1, 2019 to the acquisition date of February 20, 2019 and Kleary Masonry, Inc. for the periods January 1, 2019 to September 28, 2019 and January 1, 2020 to March 1, 2020.
| Commercial | |||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | October 3, 2020 | September 28, 2019 | ||||||||||||||||||||
| Net Sales | $ | 404,041 | $ | 464,906 | $ | 1,199,771 | $ | 1,370,152 | |||||||||||||||
| Operating income, GAAP | $ | 56,137 | $ | 59,317 | $ | 109,642 | $ | 142,436 | |||||||||||||||
| Restructuring and impairment charges, net | 1,358 | 802 | 20,427 | 1,967 | |||||||||||||||||||
| Strategic development and acquisition related costs | (8) | 238 | (262) | 6,493 | |||||||||||||||||||
| Goodwill impairment | — | — | 5,407 | — | |||||||||||||||||||
| COVID-19 | 1,063 | — | 2,585 | — | |||||||||||||||||||
| Other, net | (155) | 1,210 | 945 | 2,292 | |||||||||||||||||||
| Adjusted operating income | 58,395 | 61,567 | 138,744 | 153,188 | |||||||||||||||||||
| Other income (expense), net | 200 | 146 | 437 | 854 | |||||||||||||||||||
| Depreciation and amortization | 11,743 | 10,785 | 33,664 | 32,959 | |||||||||||||||||||
| Adjusted EBITDA | $ | 70,338 | $ | 72,498 | $ | 172,845 | $ | 187,001 | |||||||||||||||
| Net Sales as a % of Adjusted EBITDA | 17.4 | % | 15.6 | % | 14.4 | % | 13.6 | % | |||||||||||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| BUSINESS SEGMENTS | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | ||||||||||||||||||||||
| % of Net Sales | % of Net Sales | % Change | |||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 501,314 | 40.8 | % | $ | 504,338 | 39.2 | % | (0.6) | % | |||||||||||||
| Siding | 321,898 | 26.2 | % | 315,799 | 24.6 | % | 1.9 | % | |||||||||||||||
| Commercial | 404,041 | 33.0 | % | 464,906 | 36.2 | % | (13.1) | % | |||||||||||||||
| Total net sales | $ | 1,227,253 | 100.0 | % | $ | 1,285,043 | 100.0 | % | (4.5) | % | |||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Windows | $ | 99,125 | 19.8 | % | $ | 98,319 | 19.5 | % | 0.8 | % | |||||||||||||
| Siding | 92,882 | 28.9 | % | 90,608 | 28.7 | % | 2.5 | % | |||||||||||||||
| Commercial | 105,495 | 26.1 | % | 120,876 | 26.0 | % | (12.7) | % | |||||||||||||||
| Total gross profit | $ | 297,502 | 24.2 | % | $ | 309,803 | 24.1 | % | (4.0) | % | |||||||||||||
| Operating Income (Loss) | |||||||||||||||||||||||
| Windows | $ | 37,295 | 7.4 | % | $ | 34,446 | 6.8 | % | 8.3 | % | |||||||||||||
| Siding | 45,313 | 14.1 | % | 37,063 | 11.7 | % | 22.3 | % | |||||||||||||||
| Commercial | 56,137 | 13.9 | % | 59,317 | 12.8 | % | (5.4) | % | |||||||||||||||
| Corporate | (34,766) | — | (35,266) | — | % | (1.4) | % | ||||||||||||||||
| Total operating income | $ | 103,979 | 8.5 | % | $ | 95,560 | 7.4 | % | 8.8 | % | |||||||||||||
| Nine Months Ended | |||||||||||||||||||||||
| October 3, 2020 | September 28, 2019 | ||||||||||||||||||||||
| % of Net Sales | % of Net Sales | % Change | |||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 1,378,039 | 40.2 | % | $ | 1,434,579 | 39.3 | % | (3.9) | % | |||||||||||||
| Siding | 848,190 | 24.8 | % | 840,601 | 23.1 | % | 0.9 | % | |||||||||||||||
| Commercial | 1,199,771 | 35.0 | % | 1,370,152 | 37.6 | % | (12.4) | % | |||||||||||||||
| Total net sales | $ | 3,426,000 | 100.0 | % | $ | 3,645,332 | 100.0 | % | (6.0) | % | |||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Windows | $ | 257,489 | 18.7 | % | $ | 258,846 | 18.0 | % | (0.5) | % | |||||||||||||
| Siding | 230,061 | 27.1 | % | 208,826 | 24.8 | % | 10.2 | % | |||||||||||||||
| Commercial | 295,570 | 24.6 | % | 332,711 | 24.3 | % | (11.2) | % | |||||||||||||||
| Total gross profit | $ | 783,120 | 22.9 | % | $ | 800,383 | 22.0 | % | (2.2) | % | |||||||||||||
| Operating Income (Loss) | |||||||||||||||||||||||
| Windows | $ | (252,794) | (18.3) | % | $ | 62,039 | 4.3 | % | (507.5) | % | |||||||||||||
| Siding | (92,916) | (11.0) | % | 51,346 | 6.1 | % | (281.0) | % | |||||||||||||||
| Commercial | 109,642 | 9.1 | % | 142,436 | 10.4 | % | (23.0) | % | |||||||||||||||
| Corporate | (101,819) | — | (106,695) | — | % | (4.6) | % | ||||||||||||||||
| Total operating income (loss) | $ | (337,887) | (9.9) | % | $ | 149,126 | 4.1 | % | (326.6) | % | |||||||||||||
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||||||||||||||
| RECONCILIATION OF PRO FORMA SEGMENT INFORMATION | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Reported | Acquisitions (1) | Pro Forma | |||||||||||||||||||||
| Three months ended September 28, 2019 | |||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 504,338 | $ | — | $ | 504,338 | |||||||||||||||||
| Siding | 315,799 | 13,264 | 329,063 | ||||||||||||||||||||
| Commercial | 464,906 | — | 464,906 | ||||||||||||||||||||
| Total Net Sales | $ | 1,285,043 | $ | 13,264 | $ | 1,298,307 | |||||||||||||||||
| Gross Profit | % of Net Sales | ||||||||||||||||||||||
| Windows | $ | 98,319 | $ | — | $ | 98,319 | 19.5 | % | |||||||||||||||
| Siding | 90,608 | 4,731 | 95,339 | 29.0 | % | ||||||||||||||||||
| Commercial | 120,876 | — | 120,876 | 26.0 | % | ||||||||||||||||||
| Total Gross Profit | $ | 309,803 | $ | 4,731 | $ | 314,534 | 24.2 | % | |||||||||||||||
| Reported | Acquisitions | Pro Forma | |||||||||||||||||||||
| Three months ended October 3, 2020 | |||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 501,314 | $ | — | $ | 501,314 | |||||||||||||||||
| Siding | 321,898 | — | 321,898 | ||||||||||||||||||||
| Commercial | 404,041 | — | 404,041 | ||||||||||||||||||||
| Total Net Sales | $ | 1,227,253 | $ | — | $ | 1,227,253 | |||||||||||||||||
| Gross Profit | % of Net Sales | ||||||||||||||||||||||
| Windows | $ | 99,125 | $ | — | $ | 99,125 | 19.8 | % | |||||||||||||||
| Siding | 92,882 | — | 92,882 | 28.9 | % | ||||||||||||||||||
| Commercial | 105,495 | — | 105,495 | 26.1 | % | ||||||||||||||||||
| Total Gross Profit | $ | 297,502 | $ | — | $ | 297,502 | 24.2 | % | |||||||||||||||
(1)Acquisitions reflect the estimated impact for Kleary Masonry, Inc.
| CORNERSTONE BUILDING BRANDS, INC. | |||||||||||||||||||||||
| NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||||||||||||||
| RECONCILIATION OF PRO FORMA SEGMENT INFORMATION | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Reported | Acquisitions (1)(2) | Pro Forma | |||||||||||||||||||||
| Nine months ended September 28, 2019 | |||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 1,434,579 | $ | — | $ | 1,434,579 | |||||||||||||||||
| Siding | 840,601 | 48,903 | 889,504 | ||||||||||||||||||||
| Commercial | 1,370,152 | — | 1,370,152 | ||||||||||||||||||||
| Total Net Sales | $ | 3,645,332 | $ | 48,903 | $ | 3,694,235 | |||||||||||||||||
| Gross Profit | % of Net Sales | ||||||||||||||||||||||
| Windows | $ | 258,846 | $ | — | $ | 258,846 | 18.0 | % | |||||||||||||||
| Siding | 208,826 | 29,170 | 237,996 | 26.8 | % | ||||||||||||||||||
| Commercial | 332,711 | — | 332,711 | 24.3 | % | ||||||||||||||||||
| Total Gross Profit | $ | 800,383 | $ | 29,170 | $ | 829,553 | 22.5 | % | |||||||||||||||
| Reported | Acquisitions (1) | Pro Forma | |||||||||||||||||||||
| Nine months ended October 03, 2020 | |||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Windows | $ | 1,378,039 | $ | — | $ | 1,378,039 | |||||||||||||||||
| Siding | 848,190 | 8,358 | 856,548 | ||||||||||||||||||||
| Commercial | 1,199,771 | — | 1,199,771 | ||||||||||||||||||||
| Total Net Sales | $ | 3,426,000 | $ | 8,358 | $ | 3,434,358 | |||||||||||||||||
| Gross Profit | % of Net Sales | ||||||||||||||||||||||
| Windows | $ | 257,489 | $ | — | $ | 257,489 | 18.7 | % | |||||||||||||||
| Siding | 230,061 | 2,300 | 232,361 | 27.1 | % | ||||||||||||||||||
| Commercial | 295,570 | — | 295,570 | 24.6 | % | ||||||||||||||||||
| Total Gross Profit | $ | 783,120 | $ | 2,300 | $ | 785,420 | 22.9 | % | |||||||||||||||
(1)Acquisitions reflect the estimated impact for Environmental Stoneworks and Kleary Masonry, Inc.
(2)Gross margin adjustment for the non-cash inventory fair value step-up of $16.2 million associated with the Ply Gem merger and Environmental Stoneworks acquisition.