- Exceeded expectations and delivered third consecutive quarter
of margin expansion in all segments
- Ample liquidity with $476 million of cash and cash equivalents
and no near-term debt maturities
- Decisive actions taken in response to COVID-19 to ensure safety
of employees and business continuity
- Implemented meaningful initiatives to adjust the Company’s cost
structure
- Financial discipline and long-term fundamentals position the
Company for a strong recovery
Cornerstone Building Brands, Inc. (NYSE: CNR) (the
“Company”), a leading provider of exterior building products, today
reported first-quarter 2020 net sales of $1,113.8 million, up 4.6
percent from the same period a year ago. Adjusted for acquisitions,
first-quarter 2020 pro forma net sales1 were $1,122.2 million as
compared to pro forma net sales1 of $1,088.7 million for
first-quarter 2019. The increase was primarily driven by positive
price/mix and higher volume.
In the first quarter of 2020, the Company recorded a net loss of
$542.1 million, including a non-cash pre-tax goodwill impairment
accounting adjustment of $503.2 million related to the COVID-19
pandemic. Excluding the accounting adjustment, first-quarter 2020
net loss was $38.9 million, a 35.2 percent improvement from the net
loss of $60.0 million during first-quarter 2019.
Pro forma Adjusted EBITDA1 was $98.1 million or 8.7 percent of
pro forma net sales1, an improvement of 210 basis points from the
same pro forma period a year ago. The improvement was primarily
driven by favorable price/mix, net of inflation partially offset by
higher direct labor and other compensation and benefits costs.
"Our team’s focus on executing our strategy delivered
profitability that exceeded our guidance expectations for the first
quarter," said James S. Metcalf, Chairman and Chief Executive
Officer. "Price leadership and continuous improvement are core
competencies of our business model that have driven margin
expansion in all segments for three consecutive quarters.”
“Now, as we navigate the uncertainty of the COVID-19 pandemic,
we have been focused on taking decisive actions to protect the
health and safety of our employees and customers, and the ongoing
strength of our Company. Our extensive operating footprint provides
us with the flexibility to manage production schedules to ensure
that our customers continue to receive quality products without
disruption. We have also taken necessary actions to safeguard our
solid financial position, strengthen liquidity, and improve cash
generation. 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 am confident that the actions
we are taking will help us emerge even stronger than before,”
Metcalf concluded.
Segment Results
During the first-quarter of 2020, there were four additional
ship days contributing to the favorable year-over-year
variance:
- Windows segment net sales increased 6.4 percent and gross
profit as a percent of net sales improved 170 basis points
primarily from favorable price/mix, net of inflation, within the
U.S. Windows business and achieved cost savings in
manufacturing.
- Siding segment net sales increased 10.4 percent and gross
profit as a percent of net sales improved 930 basis points.
Adjusted for acquisition impacts, Siding segment net sales
increased 3.0 percent and gross margin expanded 230 basis points
primarily from favorable price/mix, net of inflation.
- Commercial segment net sales were about flat and gross profit
as a percent of net sales improved 180 basis points primarily from
favorable price/mix, net of inflation, partially offset by higher
manufacturing expenses.
COVID-19 Response and
Update
The health and safety of our employees, customers, and
communities is our number one priority. Throughout this pandemic,
Cornerstone Building Brands has been adhering to mandates and other
guidance from local governments and health authorities, including
the World Health Organization and the Centers for Disease Control
and Prevention. The Company has taken extraordinary measures and
invested in practices to protect employees and reduce the risk of
spreading the virus, while continuing to operate where permitted
and to the extent possible. These actions include additional
cleaning of our facilities, staggering crews, incorporating visual
cues to reinforce social distancing, providing face coverings and
gloves, as well as implementing daily health validation at our
manufacturing and office facilities.
Across all of our businesses, our teams are in constant
communication with customers, along with suppliers and government
officials, to maintain business continuity without disruption. The
Company has continued operations as an ‘essential’ business,
delivering quality products to our customers. Cornerstone Building
Brands has remained flexible, effectively managing production
schedules in response to short-term shutdowns for extensive
cleaning, and changes in demand due to the pandemic.
Additionally, the Company has been taking prudent and
precautionary actions to maintain financial flexibility and enhance
liquidity by:
- Rationalizing facility and organizational structures
- Reducing discretionary and non-essential expenses
- Lowering 2020 capital expenditures
- Effectively managing working capital
- Drawing on its asset-based revolving credit facility and cash
flow revolver
Balance Sheet and
Liquidity
Cornerstone Building Brands has sufficient liquidity to meet its
needs with $475.7 million of unrestricted cash and cash equivalents
on the balance sheet as of April 4, 2020, no near-term debt
maturities and a covenant-lite structure. Additionally, the Company
had excess availability of $118.0 million on its asset-based
revolving credit facility as of April 4, 2020.
Outlook
Given the continued uncertainty surrounding COVID-19, the
Company has suspended its practice of providing segment sales and
earnings guidance. Cornerstone Building Brands is anticipating net
sales for second-quarter 2020 to be in line with, or better than,
April 2020 net sales, which were 25 percent lower than pro forma
net sales for the same period last year. The Company expects to
maintain financial flexibility and enhance liquidity from the
following significant cash generating actions:
- Structural cost reduction initiatives totaling $80 million to
$100 million
- Near-term expense management actions totaling $40 million to
$60 million in savings
- Capital expenditure reduction of approximately $30 million
- Effective working capital management of $100 million to $120
million
The Company plans to reinstate quarterly financial guidance at
the earliest reasonable opportunity.
(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.
Conference Call
Information
The Company will host a conference call at 9:00 a.m. EST on
Wednesday, May 13 to discuss its financial performance with
investors and securities analysts. The call will be webcast on the
Company’s website, www.cornerstonebuildingbrands.com, in the Events
& Presentations section of the Investors Page. The dial-in
number for the conference call is 1-833-380-0405. After the live
webcast, a telephonic replay of the call will be available until
May 27, 2020. The replay dial-in number is 1-800-585-8367 and the
replay code is 1196945. Additionally, the slide presentation to be
used in connection with the Company’s webcast and conference call
is available in the Investor Relations section of the Company’s
website at www.cornerstonebuildingbrands.com.
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 performance expectations. 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 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.
CORNERSTONE BUILDING BRANDS,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
April 4,
2020
March 30,
2019
Net sales
$
1,113,811
$
1,064,832
Cost of sales
882,924
878,915
Gross profit
230,887
185,917
20.7
%
17.5
%
Selling, general and administrative
expenses
164,954
154,306
Intangible asset amortization
44,861
41,463
Restructuring and impairment charges,
net
13,835
3,431
Strategic development and acquisition
related costs
4,857
14,082
Goodwill impairment
503,171
—
Loss from operations
(500,791
)
(27,365
)
Interest income
338
215
Interest expense
(54,835
)
(58,286
)
Foreign exchange gain (loss)
(4,137
)
1,177
Other income (expense), net
(662
)
345
Loss before income taxes
(560,087
)
(83,914
)
Benefit for income taxes
(18,014
)
(23,897
)
3.2
%
28.5
%
Net loss
(542,073
)
(60,017
)
Net income allocated to participating
securities
—
—
Net loss applicable to common shares
$
(542,073
)
$
(60,017
)
Loss per common share:
Basic
$
(4.30
)
$
(0.48
)
Diluted
$
(4.30
)
$
(0.48
)
Weighted average number of common shares
outstanding:
Basic
126,093
125,503
Diluted
126,093
125,503
Increase in sales
4.6
%
152.7
%
Selling, general and administrative
expenses percentage of net sales
14.8
%
14.5
%
CORNERSTONE BUILDING BRANDS,
INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
April 4,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
475,701
$
98,386
Restricted cash
7,924
3,921
Accounts receivable, net
476,779
491,740
Inventories, net
460,405
439,194
Income taxes receivable
35,774
48,466
Investments in debt and equity securities,
at market
2,891
3,776
Prepaid expenses and other
76,098
78,516
Assets held for sale
2,564
1,750
Total current assets
1,538,136
1,165,749
Property, plant and equipment, net
651,800
652,841
Lease right-of-use assets
301,332
316,155
Goodwill
1,183,432
1,669,594
Intangible assets, net
1,704,371
1,740,700
Deferred income taxes
1,292
7,510
Other assets, net
12,066
11,797
Total assets
$
5,392,429
$
5,564,346
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
25,600
$
25,600
Accounts payable
219,300
205,629
Accrued compensation and benefits
62,279
92,130
Accrued interest
34,478
19,070
Accrued income taxes
5,523
—
Current portion of lease liabilities
69,307
72,428
Other accrued expenses
213,044
233,687
Total current liabilities
629,531
648,544
Long-term debt
3,612,610
3,156,924
Deferred income taxes
234,112
291,987
Long-term lease liabilities
232,660
243,780
Other long-term liabilities
335,628
287,793
Total long-term liabilities
4,415,010
3,980,484
Common stock
1,262
1,261
Additional paid-in capital
1,251,252
1,248,787
Accumulated deficit
(823,980
)
(281,229
)
Accumulated other comprehensive loss,
net
(80,137
)
(32,398
)
Treasury stock, at cost
(509
)
(1,103
)
Total stockholders’ equity
347,888
935,318
Total liabilities and stockholders’
equity
$
5,392,429
$
5,564,346
CORNERSTONE BUILDING BRANDS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
April 4,
2020
March 30,
2019
Cash flows from operating activities:
Net loss
$
(542,073
)
$
(60,017
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
69,769
59,947
Non-cash interest expense
2,274
2,672
Share-based compensation expense
3,387
4,005
Non-cash fair value premium on purchased
inventory
—
16,249
Goodwill impairment
503,171
—
Asset impairment
3,079
—
Provision for doubtful accounts
725
(189
)
Deferred income taxes
(35,734
)
(7,434
)
Changes in operating assets and
liabilities, net of effect of acquisitions:
Accounts receivable
20,532
(43,635
)
Inventories
(20,724
)
16,704
Income taxes
18,212
(34,090
)
Prepaid expenses and other
1,554
18,524
Accounts payable
12,461
(7,216
)
Accrued expenses
(40,662
)
(12,373
)
Other, net
1,805
(1,869
)
Net cash used in operating activities
(2,224
)
(48,722
)
Cash flows from investing activities:
Acquisitions, net of cash acquired
(39,857
)
(182,418
)
Capital expenditures
(27,567
)
(27,190
)
Net cash used in investing activities
(67,424
)
(209,608
)
Cash flows from financing activities:
Proceeds from ABL facility
345,000
220,000
Proceeds from cash flow revolver
115,000
—
Payments on term loan
(6,405
)
(6,405
)
Payments related to tax withholding for
share-based compensation
(327
)
(156
)
Net cash provided by financing
activities
453,268
213,439
Effect of exchange rate changes on cash
and cash equivalents
(2,302
)
911
Net increase (decrease) in cash, cash
equivalents and restricted cash
381,318
(43,980
)
Cash, cash equivalents and restricted cash
at beginning of period
102,307
147,607
Cash, cash equivalents and restricted cash
at end of period
$
483,625
$
103,627
CORNERSTONE BUILDING BRANDS,
INC.
NON-GAAP FINANCIAL MEASURES
AND RECONCILIATIONS
ADJUSTED NET LOSS PER DILUTED
COMMON SHARE AND
NET LOSS COMPARISON
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
April 4,
2020
March 30,
2019
Net loss per diluted common share, GAAP
basis
$
(4.30
)
$
(0.48
)
Restructuring and impairment charges,
net
0.11
0.03
Strategic development and acquisition
related costs
0.04
0.11
Non cash loss (gain) on foreign currency
transactions
0.03
(0.01
)
Non cash charge of purchase price
allocated to inventories
—
0.13
Goodwill impairment
3.99
—
Customer inventory buybacks
—
—
COVID-19(3)
0.01
—
Other, net
0.01
0.01
Tax effect of applicable non-GAAP
adjustments(1)
(1.09
)
(0.07
)
Adjusted net loss per diluted common
share(2)
$
(1.20
)
$
(0.28
)
Three Months Ended
April 4,
2020
March 30,
2019
Net loss applicable to common shares,
GAAP basis
$
(542,073
)
$
(60,017
)
Restructuring and impairment charges,
net
13,992
3,431
Strategic development and acquisition
related costs
4,857
14,082
Non cash loss (gain) on foreign currency
transactions
4,137
(1,177
)
Non cash charge of purchase price
allocated to inventories
—
16,249
Goodwill impairment
503,171
—
Customer inventory buybacks
120
242
COVID-19(3)
1,230
—
Other, net
1,138
724
Tax effect of applicable non-GAAP
adjustments(1)
(137,448
)
(8,727
)
Adjusted net loss applicable to common
shares(2)
$
(150,876
)
$
(35,193
)
(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
months ended April 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)
Three Months Ended
April 4,
2020
March 30,
2019
Operating loss, GAAP
$
(500,791
)
$
(27,365
)
Restructuring and impairment charges,
net
13,992
3,431
Strategic development and acquisition
related costs
4,857
14,082
Non cash charge of purchase price
allocated to inventories
—
16,249
Goodwill impairment
503,171
—
Customer inventory buybacks
120
242
COVID-19
1,230
—
Other, net
1,138
724
Adjusted operating income
23,717
7,363
Other income (expense), net
(662
)
345
Depreciation and amortization
69,769
59,947
Share-based compensation expense
3,387
4,005
Adjusted EBITDA
96,211
71,660
Impact of Environmental
Stoneworks and Kleary acquisitions(1)
1,869
481
Pro Forma Adjusted EBITDA
$
98,080
$
72,141
(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 March
30, 2019 and January 1, 2020 to March 1, 2020.
CORNERSTONE BUILDING BRANDS,
INC.
BUSINESS SEGMENTS
(In thousands)
(Unaudited)
Three Months Ended
April 4, 2020
March 30, 2019
% of
Net Sales
% of
Net Sales
% Change
Net Sales
Windows
$
448,450
40.3
%
$
421,594
39.6
%
6.4
%
Siding
241,043
21.6
%
218,277
20.5
%
10.4
%
Commercial
424,318
38.1
%
424,961
39.9
%
(0.2
)%
Total net sales
$
1,113,811
100.0
%
$
1,064,832
100.0
%
4.6
%
Gross Profit
Windows
$
74,001
16.5
%
$
62,340
14.8
%
18.7
%
Siding
59,042
24.5
%
33,176
15.2
%
78.0
%
Commercial
97,844
23.1
%
90,401
21.3
%
8.2
%
Total gross profit
$
230,887
20.7
%
$
185,917
17.5
%
24.2
%
Operating Income (Loss)
Windows
$
(313,190
)
(69.8
)%
$
(4,319
)
(1.0
)%
7,151.4
%
Siding
(168,867
)
(70.1
)%
(11,654
)
(5.3
)%
1,349.0
%
Commercial
16,841
4.0
%
24,310
5.7
%
(30.7
)%
Corporate
(35,575
)
—
(35,702
)
—
%
(0.4
)%
Total operating loss
$
(500,791
)
(45.0
)%
$
(27,365
)
(2.6
)%
1,730.0
%
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
Three months ended March 30,
2019
Net Sales
Windows
$
421,594
$
—
$
421,594
Siding
218,277
23,909
242,186
Commercial
424,961
—
424,961
Total Net Sales
$
1,064,832
$
23,909
$
1,088,741
Gross Profit
% of Net Sales
Windows
$
62,340
$
—
$
62,340
14.8
%
Siding
33,176
20,870
54,046
22.3
%
Commercial
90,401
—
90,401
21.3
%
Total Gross Profit
$
185,917
$
20,870
$
206,787
19.0
%
Reported
Acquisitions (1)
Pro Forma
Three months ended April 4,
2020
Net Sales
Windows
$
448,450
$
—
$
448,450
Siding
241,043
8,358
249,401
Commercial
424,318
—
424,318
Total Net Sales
$
1,113,811
$
8,358
$
1,122,169
Gross Profit
% of Net Sales
Windows
$
74,001
$
—
$
74,001
16.5
%
Siding
59,042
2,300
61,342
24.6
%
Commercial
97,844
—
97,844
23.1
%
Total Gross Profit
$
230,887
$
2,300
$
233,187
20.8
%
(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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200512005909/en/
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