Cornerstone Building Brands Announces Fourth-Quarter and Full-Year 2020 Results; Expects Strong Growth in 2021

Cornerstone Building Brands, Inc. (NYSE: CNR) (the "Company"), the largest manufacturer of exterior building products, today reported fourth-quarter 2020 net sales of $1,191.4 million and net income of $1.9 million or one cent per diluted share. This compares with net sales of $1,244.4 million and net income of $1.9 million or two cents per diluted share in the same quarter last year.

Adjusted EBITDA¹ for the fourth quarter of 2020 was $158.1 million or 13.3 percent of net sales, an improvement of 40 basis points from the same pro forma period a year ago, with 5 percent fewer ship days. The improvement was primarily due to effective structural cost reductions and better price/mix, partially offset by the impacts from lower non-residential demand. These results represent the seventh consecutive quarter of year-over-year Adjusted EBITDA¹ margin expansion for the Company.

"We delivered strong fourth-quarter results, rounding out a year of record performance despite a challenging market environment," said James S. Metcalf, Chairman and Chief Executive Officer. "The resilience of our business model and strength of our dedicated team helped us deliver on our strategic priorities. 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."

2020 Full Year Results and Highlights

Net sales for 2020 were $4,617.4 million, 5.6 percent lower than in 2019. The decline was primarily driven by lower end market demand across all segments as a result of the COVID-19 pandemic. Loss from operations was $266.5 million, including a non-cash, pre-tax goodwill impairment accounting adjustment of $503.2 million.

Pro forma net sales¹ were $4,625.7 million, a 6.5 percent decrease over prior year. Pro forma Adjusted EBITDA¹ for 2020 was $608.7 million or 13.2 percent of pro forma net sales¹, an improvement of 2.6 percent or 120 basis points from the same pro forma period a year ago. The improvement was due to structural cost reductions, effective near-term expense management, and strong price/mix, net of inflation partially offset by the impacts from lower demand and shift in product mix as a result of the COVID-19 pandemic.

"Our focus on our customer partnerships, expanding our product offerings and developing innovative solutions, positions us to expand our market leadership as residential markets continue their strong recovery." Metcalf continued. "Moving forward, we will continue to execute on our priorities which include maintaining price discipline, driving operational excellence and investing in growth opportunities to deliver enhanced profitability and value to our stakeholders."

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.

Due to the timing of the Company's fiscal calendar, the fourth quarter of 2020 had three fewer ship days than the fourth quarter of 2019, which was approximately 5 percent less ship days.

• Windows segment net sales for the quarter were $511.6 million, an increase of 3.2 percent from the prior-year quarter. Effective price discipline coupled with volume leverage on higher demand from both distribution and retail channels supporting single family new home construction and repair and remodel were the primary drivers of the increase. Adjusted EBITDA¹ was $61.6 million or 12.0 percent of net sales, an improvement of 20 basis points. For the full year, Adjusted EBITDA margin¹ improved 140 basis points, while net sales were 2.1 percent lower.
• Siding segment net sales for the quarter were $293.8 million an increase of 4.4 percent versus the pro forma¹ fourth-quarter 2019. Adjusted EBITDA¹ was $62.1 million or 21.1 percent of net sales, an improvement of 180 basis points. For the full year, pro forma Adjusted EBITDA margin¹ improved 220 basis points, while pro forma net sales¹ were 1.8 percent lower than in the prior year. Effective price discipline coupled with cost management contributed to the favorable year-over-year variances.
• Commercial segment net sales for the quarter were $386.0 million, a decrease of 19.2 percent from the prior-year quarter. Adjusted EBITDA¹ was $61.7 million or 16.0 percent of net sales, an improvement of 20 basis points. For the full year, Adjusted EBITDA margin¹ improved 60 basis points, while net sales were 14.2 percent lower. Delays in construction activity and shifts in product mix toward less complex projects because of the impact of the COVID-19 pandemic were more than offset by effective management of price with declining steel costs, and execution of cost savings initiatives.

Balance Sheet and Liquidity

The Company generated strong cash flow in 2020, with cash from operations of $308.4 million, a cash generation improvement of $78.8 million over 2019. Capital expenditures were $81.9 million, with approximately 50 percent invested in innovative product offerings and process automation that are expected to generate profitable growth in the future.

Free cash flow² of $226.6 million was an increase of 108.8 percent over 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, and reduced capital spend.

During the year, 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, and to pay transaction fees. The transaction improved liquidity, strengthened the Company's financial flexibility, and advanced our deleveraging strategy. The Company ended the year with approximately $674 million of unrestricted cash on hand and $1,317 million of liquidity. Additionally, the net debt leverage ratio¹ improved to 4.9x at the end of 2020 compared with 5.3x at the end of 2019.

Outlook

First-Quarter 2021 Guidance

• The first quarter of fiscal 2021 will have three fewer ship days; 64 ship days as compared to 67 ship days in the first quarter of 2020
• The Company expects net sales to be between $1,195 million and $1,240 million as a result of:
  • Strong single-family housing end-market momentum; expect double digit growth in residential businesses over prior year
  • Improving non-residential end-markets
• Gross Profit is anticipated to be between $250 million and $265 million.
• Adjusted EBITDA¹ is expected to be between $110 million and $125 million based on the following assumption:
  • Disciplined price leadership to more than offset increasing raw material costs

Additional Fiscal Year 2021 Guidance

• Cost savings initiatives of $75 million to $80 million
• Return of near-term costs of approximately $20 million to $30 million
• Capital spending is projected to be approximately 2.5% of net sales
• Cash interest expense is expected to be approximately $215 million
• Cash tax rate expected to be approximately 30%
• Expect to improve net debt leverage by 3/4 to one turn

Conference Call

The Company will host a conference call at 9:00 a.m. EST on Thursday, March 4 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/5127615. 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 the largest manufacturer of exterior building products for residential and low-rise non-residential buildings in North America. Headquartered in Cary, North Carolina, the organization serves 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 multi-channel distribution platform that includes approximately 20,500 employees at manufacturing, distribution and branch office locations throughout North America. At Cornerstone Building Brands, corporate stewardship is a responsibility that is deeply embedded in our 75-year history. We are committed to our purpose of contributing positively to the communities where we live, work and play. 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, including our first quarter 2021 forecasted net sales, gross profit, and Adjusted EBITDA, and our fiscal year 2021 forecasted capital spending, cash interest expense, cash tax rate 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 severity, duration and spread of the COVID-19 pandemic, as well as actions that may be taken by the Company or governmental authorities to contain COVID-19 or to treat its impact; an impairment of our 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 our sponsor investors, the effect on our common stock price caused by transactions engaged in by our sponsor 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, 2020, to be filed with the SEC on the date hereof, 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 first quarter of 2021 is not included in this release 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.