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Cornerstone Building Brands Announces Strong Third-Quarter 2020 Results

November, 10, 2020
  • 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, N.C.--(BUSINESS WIRE)-- 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.

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.

 

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

Source: Cornerstone Building Brands, Inc.

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