CORNERSTONE BUILDING BRANDS, INC. Item 8.01. Other Events.
As previously announced, onMarch 5, 2022 ,Cornerstone Building Brands, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement"), by and amongCamelot Return Intermediate Holdings, LLC ("Parent"),Camelot Return Merger Sub, Inc. ("Merger Sub") and the Company. Parent and Merger Sub are subsidiaries of investment funds managed byClayton, Dubilier & Rice, LLC ("CD&R"). Upon the terms and subject to the conditions set forth in the Merger Agreement, among other things, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger. As a result of the Merger, the Company will cease to be a publicly traded company, and investment funds managed by CD&R will become the indirect owner of all of the Company's outstanding shares of common stock that it does not already own.
The Company is presenting the following selected preliminary unaudited financial
information for the two months ended
Two Months Ended
(in thousands)
(unaudited)
May 28, 2022 May 29, 2021
Net Sales $ 1,121,600 $ 851,243
Pro Forma Net Sales 1 1,082,205 834,988
Operating Income 110,726 54,736
Adjusted Operating Income 1, 2 110,077 58,880
Adjusted EBITDA 1, 3 160,157 108,249
Pro Forma Adjusted EBITDA 1 150,839 106,522
1.ProForma Net Sales , Adjusted Operating Income, Adjusted EBITDA and Pro Forma Adjusted EBITDA are non-GAAP measures. Pro Forma measures include the results of Prime Windows for the month endedApril 29, 2021 andCascade Windows and Union Corrugating for the two months endedMay 29, 2021 and exclude the results of the insulted metal panels business (IMP) and the roll-up sheet doors business for the two months endedMay 29, 2021 and the results of the previously announced and anticipated divestiture of the Company's metal coil coatings business ("Coaters Divestiture") for the two months endedMay 28, 2022 andMay 29, 2021 , assuming it is completed. 2.Adjusted Operating Income excludes restructuring and impairment charges, strategic development and acquisition related costs, gain on disposition of business, and other items, net. 3.Adjusted EBITDA is calculated based on the terms contained in the Company's term loan credit agreement and excludes restructuring and impairment charges, strategic development and acquisition related costs, gain on disposition of business, and other items, net. The increase in ProForma Net Sales and Pro Forma Adjusted EBITDA from the two months endedMay 29, 2021 to the two months endedMay 28, 2022 is primarily due to price and price/mix over inflation, respectively, with year-over-year growth in Pro Forma Adjusted EBITDA driven by the Windows and Commercial segments.
The below table provides reconciliations of non-GAAP financial measures
presented in this Current Report on Form 8-K (the "Form 8-K") to the most
directly comparable measures prepared in accordance with generally accepted
accounting principles for the two months ended
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Two Months Ended
(in thousands)
(unaudited)
May 28, 2022 May 29, 2021
Net Sales $ 1,121,600 $ 851,243
Impact of acquisitions and divestitures 1 (39,395) (16,255)
Pro Forma Net Sales $ 1,082,205 $ 834,988
Operating Income (GAAP) $ 110,726 $ 54,736
Restructuring and impairment charges, net (476) 1,819
Strategic development and acquisition related costs 6,541 2,171
Gain on disposition of business 2 (7,186) -
Other, net 472 154
Adjusted Operating Income $ 110,077 $ 58,880
Other income (expense), net 237 205
Depreciation and amortization 46,543 45,961
Share-based compensation expense 3,300 3,203
Adjusted EBITDA $ 160,157 $ 108,249
Adjusted EBITDA as a % of Net Sales 14.3 % 12.7 %
Impact of acquisitions and divestitures1 (9,318) (1,727)
Pro Forma Adjusted EBITDA $ 150,839 $ 106,522
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales 13.9 % 12.8 %
1.Includes the results of Prime Windows for the month ended April 29, 2021 and
Cascade Windows and Union Corrugating for the two months ended May 29, 2021 and
excludes the results of IMP and the roll-up sheet doors business for the two
months ended May 29, 2021 and the results of the previously announced and
anticipated Coaters Divestiture for the two months ended May 28, 2022 and May
29, 2021 .
2.Reflects the working capital adjustment associated with the divestiture of the
IMP business, which was finalized in the two months ended May 28, 2022 .
The financial information for the two months ended May 28, 2022 presented in
this Form 8-K is preliminary and subject to completion. As a result, the
preliminary financial information for the two months ended May 28, 2022 set
forth above reflects the Company's preliminary estimate with respect to such
information based on preliminary unaudited information available to management,
and may vary from the Company's actual financial results as of and for the two
months ended May 28, 2022 . This preliminary financial information is not a
comprehensive statement of the Company's financial results for this period, and
is subject to change pending completion of the Company's financial closing
procedures for the quarter ended July 2, 2022 , final adjustments and other
developments that may arise prior to the time the Company's financial results
are finalized. This preliminary financial information should not be viewed as a
substitute for financial statements prepared in accordance with GAAP and is not
necessarily indicative of the results to be achieved in any future period.
Accordingly, you should not place undue reliance on this preliminary financial
information as additional information and disclosures would be required for a
more complete understanding of the Company's financial position and results of
operations for this period. The Company's independent registered public
accounting firm has not conducted a review of, and does not express an opinion
or any other form of assurance with respect to, this preliminary unaudited
financial information. It is possible that the Company or its independent
registered public accounting firm may identify items that require them to make
adjustments to the preliminary estimates set forth above and those changes could
be material. The Company undertakes no obligation, and specifically disclaims
any obligation, to update the information presented in this Form 8-K in the
future to reflect events and circumstances occurring or existing after the date
hereof, except as may be required by law. See "Forward-Looking Statements" in
this Form 8-K for additional information regarding factors that could result in
differences between the preliminary estimates of certain of our financial
results that are presented in this Form 8-K and the actual financial results for
this and future periods.
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Forward- Looking Statements
Certain statements and information in this Form 8-K may constitute
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 ability to achieve potential costs savings and synergies, quality
of earnings benefit and other performance expectations. Among the factors that
could cause actual results to differ materially include, but are not limited to,
the consummation of CD&R's acquisition of the Company and the proposed sale of
the Company's coil coatings business, including the timely receipt of
stockholder and regulatory approvals (or any conditions, limitations or
restrictions placed on such approvals); the effect of CD&R's acquisition of the
Company and the sale of the coil coatings business on our ability to maintain
relationships with customers and other third parties, on management's attention
and other risks and uncertainties that may affect future results; industry
cyclicality and seasonality and adverse weather conditions; challenging economic
conditions affecting the residential, non-residential and repair and remodeling
construction industries and markets; commodity price volatility and/or limited
availability of raw materials, including steel, polyvinyl chloride ("PVC")
resin, glass, aluminum and natural gas due to supply chain disruptions; our
ability to identify and develop relationships with a sufficient number of
qualified suppliers and to mitigate risk in the event that a significant
supplier experiences a significant production or supply chain interruption; the
increasing difficulty of consumers and builders in obtaining credit or
financing; an increase in the macroeconomic inflationary environment; our
ability to successfully achieve price increases to offset cost increases; our
ability to successfully implement operational efficiency initiatives; our
ability to successfully integrate our acquired businesses; retention and
replacement of key personnel; volatility in the U.S. and international economies
and in the credit markets; the severity, duration and spread of the COVID-19
pandemic, the impact of Company and government actions taken in response and the
resulting impact on supply chain and labor pressures; macroeconomic uncertainty
and market volatility resulting from geopolitical concerns, including Russia's
invasion of Ukraine ; the impairment of goodwill and/or intangible assets; our
ability to successfully develop new products or improve existing products;
enforcement and obsolescence of our intellectual property rights; costs related
to compliance with, violations of or liabilities under environmental, health and
safety laws; competitive activity and pricing pressure in our industry; our
ability to complete and realize the anticipated benefits from strategic
acquisitions and dispositions; our ability to fund operations, provide increased
working capital necessary to support our strategy and acquisitions using
available liquidity; our ability to carry out our restructuring plans and to
fully realize the expected cost savings; global climate change, including
compliance with new laws or regulations relating 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, including stockholder
litigation related to the proposed acquisition of the Company by CD&R;
compliance with certain laws related to our international business operations;
increases in labor costs, labor market pressures, 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 and achieving synergies; our
ability to compete effectively against competitors with substitutable products;
additional costs from new regulations which relate to the utilization or
manufacturing of our products or services, including changes in building codes
and standards; volatility of the Company's stock price, substantial governance
and other rights held by CD&R; the effect on our common stock price caused by
transactions engaged in by CD&R, 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; exchange rate fluctuations; 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 Quarterly Report on Form 10-Q for
the quarterly period ended April 2, 2022 and the Annual Report for the year
ended December 31, 2021 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 these
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.
Additional Information and Where to Find It
This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. In connection with the Merger, the Company has filed a proxy statement (the "Proxy Statement") with theSEC , which was first mailed to the Company's stockholders onMay 24, 2022 , and the Company and affiliates of CD&R have jointly filed a transaction statement on Schedule 13e-3 (the "Schedule 13e-3"). This communication is not a substitute for the Proxy Statement, the Schedule 13e-3 -------------------------------------------------------------------------------- or any other document that the Company may file with theSEC or send to its stockholders in connection with the Merger. THE COMPANY URGES YOU TO READ THE PROXY STATEMENT, THE SCHEDULE 13E-3 AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE MERGER AND RELATED MATTERS. Investors are able to obtain a free copy of the Proxy Statement, the Schedule 13e-3 and other related documents filed by the Company with theSEC at the website maintained by theSEC at www.sec.gov. Investors also will be able to obtain a free copy of the Proxy Statement, the Schedule 13e-3 and other documents (when available) filed by the Company with theSEC by accessing the Investors section of the Company's website at https://investors.cornerstonebuildingbrands.com/investor-home/default.aspx.
Participants in the Solicitation
The Company and certain of its directors, executive officers and employees may be considered to be participants in the solicitation of proxies from the Company's stockholders in connection with the Merger. Information regarding the persons who may, under the rules of theSEC , be deemed participants in the solicitation of the stockholders of the Company in connection with the Merger, including a description of their respective direct or indirect interests, by security holdings or otherwise, can be found in the Proxy Statement and Schedule 13e-3. You may also find additional information about the Company's directors and executive officers in the Company's definitive proxy statement for its 2021 annual meeting of stockholders, which was filed with theSEC onApril 20, 2021 , or in its Annual Report on Form 10-K for the year endedDecember 31, 2021 , which was filed with theSEC onMarch 1, 2022 , and in other documents filed by the Company with theSEC . You can obtain free copies of these documents from the Company using the contact information above.
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