News Details

• 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.

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:

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.