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Cornerstone Building Brands Announces Second-Quarter 2020 Results

August, 11, 2020
  • Delivered earnings of 21 cents per diluted share, a 50 percent improvement over prior year
  • Achieved fifth consecutive quarter of Adjusted EBITDA 1 margin enhancement in all segments
  • Backlog for residential exterior building products are at record levels from positive market momentum
  • Reduced net debt by $44 million and increased liquidity with $483 million of cash and cash equivalents

CARY, N.C.--(BUSINESS WIRE)-- Cornerstone Building Brands, Inc. (NYSE: CNR) (the “Company”), a leading provider of exterior building products, today reported second-quarter 2020 net sales of $1,084.9 million and net income of $26.5 million or 21 cents per diluted share. This compares with net sales of $1,295.5 million and net income of $17.3 million or 14 cents per diluted share in the same quarter last year. Adjusted for the March 2020 acquisition of Kleary Masonry, Inc. first-half 2020 pro forma net sales1 were $2,207.1 million, down 7.9 percent compared with pro forma net sales1 for first-half 2019. The decrease was driven by lower volumes as a result of the COVID-19 pandemic.

Adjusted EBITDA1 for the second quarter of 2020 was $159.1 million or 14.7 percent of net sales, an improvement of 130 basis points from the same pro forma period a year ago. The improvement was due to effective near-term expense management and structural cost reductions partially offset by the impacts from lower demand as a result of the COVID-19 pandemic. For the first-half 2020, pro forma Adjusted EBITDA1 was $257.2 million or 11.7 percent of pro forma net sales1, an improvement of 4 percent or 140 basis points from the same pro forma period a year ago.

"I am proud of the Cornerstone Building Brands team, which is made up of people from many backgrounds, each unique, and valued as part of our organization. As a result of their efforts, we continue to foster a safe work environment while delivering quality products to our customers every day,” said James S. Metcalf, Chairman and Chief Executive Officer.

“Our culture of continuous improvement delivered the fifth consecutive quarter of Adjusted EBITDA margin expansion in all segments. We generated positive cash flow and structurally reduced our operating cost structure during this unprecedented market environment,” Metcalf continued.

“At the same time, we're also pushing forward with our growth strategy that is centered around our differentiated and profitable products and services, securing our leadership position in exterior building products. While it remains unclear how long this pandemic and the related economic challenges will last, I believe in the resiliency of Cornerstone Building Brands and I remain confident that the actions we are taking will make us a stronger Company,” Metcalf concluded.

Segment Results Versus Prior Year

Following are the Company’s results by segment for the second quarter of 2020 and year to date. 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 $428.3 million, a decrease of 15.8 percent, and operating income was $23.1 million, a decrease of 27.6 percent. Adjusted EBITDA1 was $60.6 million or 14.2 percent of net sales, an improvement of 140 basis points. On a year-to-date basis, Adjusted EBITDA margin1 improved 210 basis points, while net sales were 5.8 percent lower.
  • Siding segment net sales for the quarter were $285.2 million, a decrease of 10.4 percent, and operating income was $30.6 million, an increase of 18.1 percent. Adjusted EBITDA1 was $63.3 million or 22.2 percent of net sales, an improvement of 170 basis points. On a year-to-date basis, Adjusted EBITDA margin1 improved 220 basis points, while net sales were 4.6 percent lower.
  • Commercial segment net sales for the quarter were $371.4 million, a decrease of 22.7 percent, and operating income was $36.7 million, a decrease of 37.7 percent. Adjusted EBITDA1 was $56.5 million or 15.2 percent of net sales, an improvement of 10 basis points. On a year-to-date basis, Adjusted EBITDA1 margin improved 30 basis points, while net sales were 12.1 percent lower.

COVID-19 Response and Update

The health and safety of our employees, customers, and communities are our number one priority. We remain flexible and adjust our cost structure as we navigate the uncertainties created by the pandemic. Across all businesses, our teams are in constant communication with customers, along with suppliers and government officials, to maintain business continuity without disruption. The Company operates as an “essential” business, delivering quality products to our customers. We believe Cornerstone Building Brands’ broad and diverse product mix, extensive operating footprint, and resilient business model positions us well to continue to navigate the uncertainty in the current environment and emerge stronger than before.

Balance Sheet and Liquidity

In the second quarter of 2020, the Company generated strong cash flow from operations of $69.1 million compared with $18.8 million for the same period last year, a cash generation improvement of $50.3 million. Capital expenditures were $20.0 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 second quarter, we commissioned an automated glass line at the Toledo, Ohio Window’s facility, that doubled operating capacity and improved productivity by 50 percent.

Free cash flow was $49.1 million during the second quarter of 2020 compared with free cash flow usage of $11.2 million during the second quarter of 2019. The improvement was driven by net cash tax benefits from the CARES Act and other COVID-19 related government stimulus programs as well as effective working capital management.

The Company ended the quarter with approximately $483.5 million of unrestricted cash on hand and $145.8 million of excess availability on its asset-based revolving credit facility. Additionally, the net debt leverage ratio1 improved to 5.3x at the end of the second quarter of 2020 compared with 6.1x for the same period last year. We believe our liquidity is sufficient to weather the economic uncertainty related to the ongoing impact of the COVID-19 pandemic while providing the Company flexibility needed to continue executing our growth strategy.

Outlook

Third-Quarter 2020 Guidance

  • Expect net sales to be between $1,160 million and $1,240 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 $275 million and $300 million.
  • Expect Adjusted EBITDA2 to be between $170 million and $195 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.
  • Cash tax benefit of approximately $10 million.
  • Benefits from targeted primary working capital improvements are expected to generate approximately $50 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 third 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. EDT on Wednesday, August 12 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/8147407. 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 2Q20 Earnings Call

 

 

Date:

Wednesday, August 12, 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 https://event.on24.com/wcc/r/2403452/DFF10E9EA779D4793B94879DCAA90D0E

 

 

 

 

Replay dial-in will be available through August 26, 2020

 

 

Dial-in number:

855-859-2056

 

 

Replay code:

8147407

About Cornerstone Building Brands

Cornerstone Building Brands is a leading manufacturer of exterior building products in North America. Headquartered in Cary, North Carolina, the Company serves residential and commercial customers across new construction and the repair & remodel markets. As the #1 manufacturer of windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines a comprehensive portfolio of products with an expansive national footprint that includes approximately 20,000 employees at manufacturing, distribution and office locations throughout North America. For more information, visit us at www.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 third 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 Report on Form 10-Q for the quarterly period ended April 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 third 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

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net sales

$

1,084,936

 

 

 

$

1,295,457

 

 

 

$

2,198,747

 

 

 

$

2,360,289

 

 

Cost of sales

830,205

 

 

 

990,794

 

 

 

1,713,129

 

 

 

1,869,709

 

 

Gross profit

254,731

 

 

 

304,663

 

 

 

485,618

 

 

 

490,580

 

 

 

23.5

 

%

 

23.5

 

%

 

22.1

 

%

 

20.8

 

%

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

134,371

 

 

 

158,028

 

 

 

299,325

 

 

 

312,334

 

 

Intangible asset amortization

45,240

 

 

 

46,511

 

 

 

90,101

 

 

 

87,974

 

 

Restructuring and impairment charges, net

15,411

 

 

 

7,107

 

 

 

29,246

 

 

 

10,538

 

 

Strategic development and acquisition related costs

784

 

 

 

12,086

 

 

 

5,641

 

 

 

26,168

 

 

Goodwill impairment

 

 

 

 

 

 

503,171

 

 

 

 

 

Income (loss) from operations

58,925

 

 

 

80,931

 

 

 

(441,866

)

 

 

53,566

 

 

Interest income

341

 

 

 

121

 

 

 

679

 

 

 

336

 

 

Interest expense

(52,384

)

 

 

(58,299

)

 

 

(107,219

)

 

 

(116,585

)

 

Foreign exchange gain (loss)

2,025

 

 

 

523

 

 

 

(2,112

)

 

 

1,700

 

 

Other income (expense), net

660

 

 

 

(397

)

 

 

(2

)

 

 

(52

)

 

Income (loss) before income taxes

9,567

 

 

 

22,879

 

 

 

(550,520

)

 

 

(61,035

)

 

Provision (benefit) for income taxes

(17,332

)

 

 

5,346

 

 

 

(35,346

)

 

 

(18,551

)

 

 

(181.2

)

%

 

23.4

 

%

 

6.4

 

%

 

30.4

 

%

 

 

 

 

 

 

 

 

Net income (loss)

26,899

 

 

 

17,533

 

 

 

(515,174

)

 

 

(42,484

)

 

Net income allocated to participating securities

(442

)

 

 

(270

)

 

 

 

 

 

 

 

Net income (loss) applicable to common shares

$

26,457

 

 

 

$

17,263

 

 

 

$

(515,174

)

 

 

$

(42,484

)

 

 

 

 

 

 

 

 

 

Income (loss) per common share:

 

 

 

 

 

 

 

Basic

$

0.21

 

 

 

$

0.14

 

 

 

$

(4.09

)

 

 

$

(0.34

)

 

Diluted

$

0.21

 

 

 

$

0.14

 

 

 

$

(4.09

)

 

 

$

(0.34

)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

125,754

 

 

 

125,516

 

 

 

125,927

 

 

 

125,510

 

 

Diluted

125,755

 

 

 

125,516

 

 

 

125,927

 

 

 

125,510

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in sales

(16.3

)

%

 

183.4

 

%

 

(6.8

)

%

 

168.7

 

%

 

 

 

 

 

 

 

 

Selling, general and administrative expenses percentage of net sales

12.4

 

%

 

12.2

 

%

 

13.6

 

%

 

13.2

 

%

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

 

 

July 4,
2020

 

December 31,
2019

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

483,497

 

 

 

$

98,386

 

 

Restricted cash

6,223

 

 

 

3,921

 

 

Accounts receivable, net

522,612

 

 

 

491,740

 

 

Inventories, net

402,994

 

 

 

439,194

 

 

Income taxes receivable

36,741

 

 

 

48,466

 

 

Investments in debt and equity securities, at market

3,531

 

 

 

3,776

 

 

Prepaid expenses and other

67,933

 

 

 

78,516

 

 

Assets held for sale

2,646

 

 

 

1,750

 

 

Total current assets

1,526,177

 

 

 

1,165,749

 

 

 

 

 

 

Property, plant and equipment, net

644,284

 

 

 

652,841

 

 

Lease right-of-use assets

300,849

 

 

 

316,155

 

 

Goodwill

1,187,788

 

 

 

1,669,594

 

 

Intangible assets, net

1,665,591

 

 

 

1,740,700

 

 

Deferred income taxes

1,272

 

 

 

7,510

 

 

Other assets, net

11,884

 

 

 

11,797

 

 

Total assets

$

5,337,845

 

 

 

$

5,564,346

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

25,600

 

 

 

$

25,600

 

 

Accounts payable

198,936

 

 

 

205,629

 

 

Accrued compensation and benefits

54,590

 

 

 

92,130

 

 

Accrued interest

20,126

 

 

 

19,070

 

 

Accrued income taxes

501

 

 

 

 

 

Current portion of lease liabilities

71,294

 

 

 

72,428

 

 

Other accrued expenses

222,425

 

 

 

233,687

 

 

Total current liabilities

593,472

 

 

 

648,544

 

 

 

 

 

 

Long-term debt

3,578,341

 

 

 

3,156,924

 

 

Deferred income taxes

221,078

 

 

 

291,987

 

 

Long-term lease liabilities

226,371

 

 

 

243,780

 

 

Other long-term liabilities

340,371

 

 

 

287,793

 

 

Total long-term liabilities

4,366,161

 

 

 

3,980,484

 

 

 

 

 

 

Common stock

1,252

 

 

 

1,261

 

 

Additional paid-in capital

1,249,852

 

 

 

1,248,787

 

 

Accumulated deficit

(797,081

)

 

 

(281,229

)

 

Accumulated other comprehensive loss, net

(75,300

)

 

 

(32,398

)

 

Treasury stock, at cost

(511

)

 

 

(1,103

)

 

Total stockholders’ equity

378,212

 

 

 

935,318

 

 

 

 

 

 

Total liabilities and stockholders’ equity

$

5,337,845

 

 

 

$

5,564,346

 

 

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

Cash flows from operating activities:

 

 

 

Net loss

$

(515,174

)

 

 

$

(42,484

)

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

140,480

 

 

 

127,476

 

 

Non-cash interest expense

4,593

 

 

 

3,954

 

 

Share-based compensation expense

8,543

 

 

 

7,479

 

 

Non-cash fair value premium on purchased inventory

 

 

 

16,249

 

 

Goodwill impairment

503,171

 

 

 

 

 

Asset impairment

3,490

 

 

 

 

 

Loss (gain) on asset sales, net

169

 

 

 

(277

)

 

Provision for doubtful accounts

252

 

 

 

(205

)

 

Deferred income taxes

(48,190

)

 

 

(48,515

)

 

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

Accounts receivable

(24,844

)

 

 

(133,820

)

 

Inventories

36,872

 

 

 

29,430

 

 

Income taxes

12,226

 

 

 

2,245

 

 

Prepaid expenses and other

9,782

 

 

 

(706

)

 

Accounts payable

(7,818

)

 

 

15,079

 

 

Accrued expenses

(53,834

)

 

 

(2,952

)

 

Other, net

(2,756

)

 

 

(2,867

)

 

Net cash provided by (used in) operating activities

66,962

 

 

 

(29,914

)

 

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

(41,841

)

 

 

(179,184

)

 

Capital expenditures

(47,609

)

 

 

(57,220

)

 

Proceeds from sale of property, plant and equipment

114

 

 

 

873

 

 

Net cash used in investing activities

(89,336

)

 

 

(235,531

)

 

Cash flows from financing activities:

 

 

 

Proceeds from ABL facility

345,000

 

 

 

270,000

 

 

Payments on ABL facility

(30,000

)

 

 

(50,000

)

 

Proceeds from cash flow revolver

115,000

 

 

 

 

 

Payments on term loan

(12,810

)

 

 

(12,810

)

 

Payments related to tax withholding for share-based compensation

(467

)

 

 

(167

)

 

Purchases of treasury stock

(6,428

)

 

 

 

 

Net cash provided by financing activities

410,295

 

 

 

207,023

 

 

Effect of exchange rate changes on cash and cash equivalents

(508

)

 

 

2,300

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

387,413

 

 

 

(56,122

)

 

Cash, cash equivalents and restricted cash at beginning of period

102,307

 

 

 

147,607

 

 

Cash, cash equivalents and restricted cash at end of period

$

489,720

 

 

 

$

91,485

 

 

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

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net income (loss) per diluted common share, GAAP basis

$

0.21

 

 

 

$

0.14

 

 

 

$

(4.09

)

 

 

$

(0.34

)

 

Restructuring and impairment charges, net

0.12

 

 

 

0.06

 

 

 

0.23

 

 

 

0.08

 

 

Strategic development and acquisition related costs

0.01

 

 

 

0.10

 

 

 

0.04

 

 

 

0.21

 

 

Non cash loss (gain) on foreign currency transactions

(0.02

)

 

 

 

 

 

0.02

 

 

 

(0.01

)

 

Non cash charge of purchase price allocated to inventories

 

 

 

 

 

 

 

 

 

0.13

 

 

Goodwill impairment

 

 

 

 

 

 

4.00

 

 

 

 

 

Customer inventory buybacks

 

 

 

 

 

 

 

 

 

 

 

COVID-19(3)

0.05

 

 

 

 

 

 

0.06

 

 

 

 

 

Other, net

 

 

 

0.01

 

 

 

0.01

 

 

 

0.02

 

 

Tax effect of applicable non-GAAP adjustments(1)

(0.04

)

 

 

(0.04

)

 

 

(1.14

)

 

 

(0.11

)

 

Adjusted net income (loss) per diluted common share(2)

$

0.34

 

 

 

$

0.26

 

 

 

$

(0.86

)

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net income (loss) applicable to common shares, GAAP basis

$

26,457

 

 

 

$

17,263

 

 

 

$

(515,174

)

 

 

$

(42,484

)

 

Restructuring and impairment charges, net

15,411

 

 

 

7,107

 

 

 

29,403

 

 

 

10,538

 

 

Strategic development and acquisition related costs

784

 

 

 

12,086

 

 

 

5,641

 

 

 

26,168

 

 

Non cash loss (gain) on foreign currency transactions

(2,025

)

 

 

(523

)

 

 

2,112

 

 

 

(1,700

)

 

Non cash charge of purchase price allocated to inventories

 

 

 

 

 

 

 

 

 

16,249

 

 

Goodwill impairment

 

 

 

 

 

 

503,171

 

 

 

 

 

Customer inventory buybacks

193

 

 

 

175

 

 

 

313

 

 

 

417

 

 

COVID-19(3)

6,805

 

 

 

 

 

 

8,035

 

 

 

 

 

Other, net

474

 

 

 

1,357

 

 

 

1,612

 

 

 

2,081

 

 

Tax effect of applicable non-GAAP adjustments(1)

(5,627

)

 

 

(5,396

)

 

 

(143,075

)

 

 

(14,357

)

 

Adjusted net income (loss) applicable to common shares(2)

$

42,914

 

 

 

$

32,069

 

 

 

$

(107,962

)

 

 

$

(3,088

)

 

(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 six months ended July 4, 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

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Operating income (loss), GAAP

$

58,925

 

 

$

80,931

 

 

 

$

(441,866

)

 

 

$

53,566

 

 

Restructuring and impairment charges, net

15,411

 

 

7,107

 

 

 

29,403

 

 

 

10,538

 

 

Strategic development and acquisition related costs

784

 

 

12,086

 

 

 

5,641

 

 

 

26,168

 

 

Non cash charge of purchase price allocated to inventories

 

 

 

 

 

 

 

 

16,249

 

 

Goodwill impairment

 

 

 

 

 

503,171

 

 

 

 

 

Customer inventory buybacks

193

 

 

175

 

 

 

313

 

 

 

417

 

 

COVID-19

6,805

 

 

 

 

 

8,035

 

 

 

 

 

Other, net

474

 

 

1,357

 

 

 

1,612

 

 

 

2,081

 

 

Adjusted operating income

82,592

 

 

101,656

 

 

 

106,309

 

 

 

109,019

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

660

 

 

(397

)

 

 

(2

)

 

 

(52

)

 

Depreciation and amortization

70,711

 

 

67,529

 

 

 

140,480

 

 

 

127,476

 

 

Share-based compensation expense

5,156

 

 

3,474

 

 

 

8,543

 

 

 

7,479

 

 

Adjusted EBITDA

159,119

 

 

172,262

 

 

 

255,330

 

 

 

243,922

 

 

 

 

 

 

 

 

 

 

Impact of Environmental Stoneworks and Kleary acquisitions(1)

 

 

2,676

 

 

 

1,869

 

 

 

3,157

 

 

Pro Forma Adjusted EBITDA

$

159,119

 

 

$

174,938

 

 

 

$

257,199

 

 

 

$

247,079

 

 

 

 

 

 

 

 

 

 

(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 June 29, 2019 and January 1, 2020 to March 1, 2020.

Windows

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net Sales

$

428,275

 

 

 

$

508,647

 

 

 

$

876,725

 

 

 

$

930,241

 

 

 

 

 

 

 

 

 

 

Operating income (loss), GAAP

$

23,101

 

 

 

$

31,912

 

 

 

$

(290,089

)

 

 

$

27,593

 

 

Restructuring and impairment charges, net

4,184

 

 

 

900

 

 

 

5,650

 

 

 

1,021

 

 

Strategic development and acquisition related costs

 

 

 

8,052

 

 

 

16

 

 

 

12,061

 

 

Goodwill impairment

 

 

 

 

 

 

320,990

 

 

 

 

 

COVID-19

3,964

 

 

 

 

 

 

4,892

 

 

 

 

 

Other, net

(785

)

 

 

(424

)

 

 

 

 

 

(40

)

 

Adjusted operating income

30,464

 

 

 

40,440

 

 

 

41,459

 

 

 

40,635

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

 

(411

)

 

 

 

 

 

(738

)

 

Depreciation and amortization

30,182

 

 

 

24,848

 

 

 

60,035

 

 

 

48,825

 

 

Adjusted EBITDA

$

60,646

 

 

 

$

64,877

 

 

 

$

101,494

 

 

 

$

88,722

 

 

Adjusted EBITDA as a % of Net Sales

14.2

 

%

 

12.8

 

%

 

11.6

 

%

 

9.5

 

%

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Siding

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net Sales

$

285,249

 

 

 

$

306,525

 

 

 

$

526,292

 

 

 

$

524,802

 

 

Pro Forma Net Sales

285,249

 

 

 

318,255

 

 

 

534,650

 

 

 

560,441

 

 

 

 

 

 

 

 

 

 

Operating income (loss), GAAP

$

30,638

 

 

 

$

25,937

 

 

 

$

(138,229

)

 

 

$

14,283

 

 

Restructuring and impairment charges, net

2,524

 

 

 

5,544

 

 

 

3,615

 

 

 

5,631

 

 

Strategic development and acquisition related costs

955

 

 

 

 

 

 

976

 

 

 

 

 

Non cash charge of purchase price allocated to inventories

 

 

 

 

 

 

 

 

 

16,249

 

 

Goodwill impairment

 

 

 

 

 

 

176,774

 

 

 

 

 

Customer inventory buybacks

193

 

 

 

175

 

 

 

313

 

 

 

417

 

 

COVID-19

43

 

 

 

 

 

 

43

 

 

 

 

 

Other, net

412

 

 

 

1,202

 

 

 

 

 

 

1,435

 

 

Adjusted operating income

34,765

 

 

 

32,858

 

 

 

43,492

 

 

 

38,015

 

 

 

 

 

 

 

 

 

 

Other income (expense), net

(6

)

 

 

(750

)

 

 

(6

)

 

 

(1,016

)

 

Depreciation and amortization

28,514

 

 

 

30,415

 

 

 

56,521

 

 

 

54,765

 

 

Adjusted EBITDA

63,273

 

 

 

62,523

 

 

 

100,007

 

 

 

91,764

 

 

 

 

 

 

 

 

 

 

Impact of Environmental Stoneworks and Kleary acquisitions(1)

 

 

 

2,676

 

 

 

1,869

 

 

 

3,157

 

 

Pro Forma Adjusted EBITDA

$

63,273

 

 

 

$

65,199

 

 

 

$

101,876

 

 

 

$

94,921

 

 

Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales

22.2

 

%

 

20.5

 

%

 

19.1

 

%

 

16.9

 

%

(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 June 29, 2019 and January 1, 2020 to March 1, 2020.

Commercial

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

July 4,
2020

 

June 29,
2019

 

July 4,
2020

 

June 29,
2019

Net Sales

$

371,412

 

 

 

$

480,285

 

 

$

795,730

 

 

 

$

905,246

 

 

 

 

 

 

 

 

 

Operating income, GAAP

$

36,664

 

 

 

$

58,809

 

 

$

53,505

 

 

 

$

83,119

 

Restructuring and impairment charges, net

7,364

 

 

 

132

 

 

19,069

 

 

 

1,165

 

Strategic development and acquisition related costs

(149

)

 

 

733

 

 

(254

)

 

 

6,255

 

Goodwill impairment

 

 

 

 

 

5,407

 

 

 

 

COVID-19

1,220

 

 

 

 

 

1,522

 

 

 

 

Other, net

289

 

 

 

1,082

 

 

1,100

 

 

 

1,082

 

Adjusted operating income

45,388

 

 

 

60,756

 

 

80,349

 

 

 

91,621

 

 

 

 

 

 

 

 

 

Other income (expense), net

123

 

 

 

213

 

 

237

 

 

 

708

 

Depreciation and amortization

11,020

 

 

 

11,399

 

 

21,921

 

 

 

22,174

 

Adjusted EBITDA

$

56,531

 

 

 

$

72,368

 

 

$

102,507

 

 

 

$

114,503

 

Net Sales as a % of Adjusted EBITDA

15.2

 

%

 

15.1

%

 

12.9

 

%

 

12.6

%

CORNERSTONE BUILDING BRANDS, INC.

BUSINESS SEGMENTS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

July 4, 2020

 

June 29, 2019

 

 

 

 

% of
Net Sales

 

 

% of
Net Sales

 

% Change

Net Sales

 

 

 

 

 

 

 

Windows

$

428,275

 

 

39.5

 

%

 

$

508,647

 

 

39.2

%

 

(15.8

)

%

Siding

285,249

 

 

26.3

 

%

 

306,525

 

 

23.7

%

 

(6.9

)

%

Commercial

371,412

 

 

34.2

 

%

 

480,285

 

 

37.1

%

 

(22.7

)

%

Total net sales

$

1,084,936

 

 

100.0

 

%

 

$

1,295,457

 

 

100.0

%

 

(16.3

)

%

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

Windows

$

84,363

 

 

19.7

 

%

 

$

98,187

 

 

19.3

%

 

(14.1

)

%

Siding

78,137

 

 

27.4

 

%

 

85,042

 

 

27.7

%

 

(8.1

)

%

Commercial

92,231

 

 

24.8

 

%

 

121,434

 

 

25.3

%

 

(24.0

)

%

Total gross profit

$

254,731

 

 

23.5

 

%

 

$

304,663

 

 

23.5

%

 

(16.4

)

%

 

 

 

 

 

 

 

 

Operating Income (Loss)

 

 

 

 

 

 

 

Windows

$

23,101

 

 

5.4

 

%

 

$

31,912

 

 

6.3

%

 

(27.6

)

%

Siding

30,638

 

 

10.7

 

%

 

25,937

 

 

8.5

%

 

18.1

 

%

Commercial

36,664

 

 

9.9

 

%

 

58,809

 

 

12.2

%

 

(37.7

)

%

Corporate

(31,478

)

 

 

 

 

(35,727

)

 

%

 

(11.9

)

%

Total operating income

$

58,925

 

 

5.4

 

%

 

$

80,931

 

 

6.2

%

 

(27.2

)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

July 4, 2020

 

June 29, 2019

 

 

 

 

% of
Net Sales

 

 

% of
Net Sales

 

% Change

Net Sales

 

 

 

 

 

 

 

Windows

$

876,725

 

 

39.9

 

%

 

$

930,241

 

 

39.4

%

 

(5.8

)

%

Siding

526,292

 

 

23.9

 

%

 

524,802

 

 

22.2

%

 

0.3

 

%

Commercial

795,730

 

 

36.2

 

%

 

905,246

 

 

38.4

%

 

(12.1

)

%

Total net sales

$

2,198,747

 

 

100.0

 

%

 

$

2,360,289

 

 

100.0

%

 

(6.8

)

%

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

Windows

$

158,364

 

 

18.1

 

%

 

$

160,527

 

 

17.3

%

 

(1.3

)

%

Siding

137,179

 

 

26.1

 

%

 

118,218

 

 

22.5

%

 

16.0

 

%

Commercial

190,075

 

 

23.9

 

%

 

211,835

 

 

23.4

%

 

(10.3

)

%

Total gross profit

$

485,618

 

 

22.1

 

%

 

$

490,580

 

 

20.8

%

 

(1.0

)

%

 

 

 

 

 

 

 

 

Operating Income (Loss)

 

 

 

 

 

 

 

Windows

$

(290,089

)

 

(33.1

)

%

 

$

27,593

 

 

3.0

%

 

(1,151.3

)

%

Siding

(138,229

)

 

(26.3

)

%

 

14,283

 

 

2.7

%

 

(1,067.8

)

%

Commercial

53,505

 

 

6.7

 

%

 

83,119

 

 

9.2

%

 

(35.6

)

%

Corporate

(67,053

)

 

 

 

 

(71,429

)

 

%

 

(6.1

)

%

Total operating income (loss)

$

(441,866

)

 

(20.1

)

%

 

$

53,566

 

 

2.3

%

 

(924.9

)

%

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 June 29, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

Windows

$

508,647

 

 

$

 

 

$

508,647

 

 

 

Siding

306,525

 

 

11,730

 

 

318,255

 

 

 

Commercial

480,285

 

 

 

 

480,285

 

 

 

Total Net Sales

$

1,295,457

 

 

$

11,730

 

 

$

1,307,187

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

% of Net Sales

Windows

$

98,187

 

 

$

 

 

$

98,187

 

 

19.3

%

Siding

85,042

 

 

3,569

 

 

88,611

 

 

27.8

%

Commercial

121,434

 

 

 

 

121,434

 

 

25.3

%

Total Gross Profit

$

304,663

 

 

$

3,569

 

 

$

308,232

 

 

23.6

%

 

 

 

 

 

 

 

 

 

Reported

 

Acquisitions

 

Pro Forma

 

 

Three months ended July 4, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

Windows

$

428,275

 

 

$

 

 

$

428,275

 

 

 

Siding

285,249

 

 

 

 

285,249

 

 

 

Commercial

371,412

 

 

 

 

371,412

 

 

 

Total Net Sales

$

1,084,936

 

 

$

 

 

$

1,084,936

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

% of Net Sales

Windows

$

84,363

 

 

$

 

 

$

84,363

 

 

19.7

%

Siding

78,137

 

 

 

 

78,137

 

 

27.4

%

Commercial

92,231

 

 

 

 

92,231

 

 

24.8

%

Total Gross Profit

$

254,731

 

 

$

 

 

$

254,731

 

 

23.5

%

(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

 

 

Six months ended June 29, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

Windows

$

930,241

 

 

$

 

 

$

930,241

 

 

 

Siding

524,802

 

 

35,639

 

 

560,441

 

 

 

Commercial

905,246

 

 

 

 

905,246

 

 

 

Total Net Sales

$

2,360,289

 

 

$

35,639

 

 

$

2,395,928

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

% of Net Sales

Windows

$

160,527

 

 

$

 

 

$

160,527

 

 

17.3

%

Siding

118,218

 

 

24,439

 

 

142,657

 

 

25.5

%

Commercial

211,835

 

 

 

 

211,835

 

 

23.4

%

Total Gross Profit

$

490,580

 

 

$

24,439

 

 

$

515,019

 

 

21.5

%

 

 

 

 

 

 

 

 

 

Reported

 

Acquisitions (1)

 

Pro Forma

 

 

Six months ended July 04, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

Windows

$

876,725

 

 

$

 

 

$

876,725

 

 

 

Siding

526,292

 

 

8,358

 

 

534,650

 

 

 

Commercial

795,730

 

 

 

 

795,730

 

 

 

Total Net Sales

$

2,198,747

 

 

$

8,358

 

 

$

2,207,105

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

% of Net Sales

Windows

$

158,364

 

 

$

 

 

$

158,364

 

 

18.1

%

Siding

137,179

 

 

2,300

 

 

139,479

 

 

26.1

%

Commercial

190,075

 

 

 

 

190,075

 

 

23.9

%

Total Gross Profit

$

485,618

 

 

$

2,300

 

 

$

487,918

 

 

22.1

%

(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.

 

Investor Relations
Tina Beskid
1-866-419-0042
info@investors.cornerstonebuildingbrands.com

Source: Cornerstone Building Brands, Inc.

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