cnr-20230401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: April 1, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-14315

Cornerstone Building Brands, Inc.

(Exact name of registrant as specified in its charter)


Delaware			76-0127701
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5020 Weston Parkway

Suite 400

Cary

27513

(Address of principal executive offices)

(Zip Code)

(866) 419-0042

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No ý

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	ý	Accelerated filer	☐
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No

APPLICABLE ONLY TO CORPORATE ISSUERS

There are no longer publicly traded shares of common stock of Cornerstone Building Brands, Inc.


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TABLE OF CONTENTS



	Part I — Financial Information
Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Statements of (Loss) Income	1
	Condensed Consolidated Statements of Comprehensive (Loss) Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

	Part II — Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	32


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PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

CORNERSTONE BUILDING BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(In thousands, except per share data)

(Unaudited)


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Net sales	$	1,279,088	$	1,566,838
Cost of sales	997,227		1,232,931
Gross profit	281,861		333,907
Selling, general and administrative expenses	227,801		231,166
Gain on legal settlements	—		(76,575)
Income from operations	54,060		179,316
Interest expense	(94,111)		(44,106)
Foreign exchange gain	2,017		1,444
Loss on extinguishment of debt	(563)		—
Other income (expense), net	1,173		(5)
(Loss) income before income taxes	(37,424)		136,649
Income tax (benefit) provision	(8,609)		34,366
Net (loss) income	(28,815)		102,283
Net income allocated to participating securities	—		(757)
Net (loss) income applicable to common shares	$	(28,815)	$	101,526

Income per common share:
Basic			$	0.80
Diluted			$	0.79

Weighted average number of common shares outstanding:
Basic			127,129
Diluted			128,466

See accompanying notes to the condensed consolidated financial statements.


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CORNERSTONE BUILDING BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Comprehensive (loss) income
Net (loss) income	$	(28,815)	$	102,283
Other comprehensive income (loss), net of tax:
Foreign exchange translation (losses) gains	(963)		4,784
Unrealized (loss) gain on derivative instruments, net of income tax of $3,354 and $(11,625), respectively	(10,892)		60,696
Amount reclassified from accumulated other comprehensive income (loss) into earnings relating to derivative instruments	—		7,288
Other comprehensive (loss) income	(11,855)		72,768
Comprehensive (loss) income	$	(40,670)	$	175,051

See accompanying notes to the condensed consolidated financial statements.


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CORNERSTONE BUILDING BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	Successor
	April 1, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	379,231	$	553,551
Accounts receivable, net	621,277		665,936
Inventories	571,887		551,828
Other current assets	73,750		125,306
Total current assets	1,646,145		1,896,621
Property, plant and equipment, net	635,104		618,064
Lease right-of-use assets	351,765		365,552
Goodwill	1,690,549		1,688,548
Intangible assets, net	2,471,216		2,519,023
Other assets, net	89,348		105,842
Total assets	$	6,884,127	$	7,193,650
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	29,000	$	29,000
Current portion of lease liabilities	58,942		61,899
Accounts payable	254,751		288,938
Accrued income and other taxes	45,466		21,867
Employee-related liabilities	79,550		184,187
Rebates, warranties and other customer-related liabilities	130,817		157,752
Other current liabilities	114,923		149,596
Total current liabilities	713,449		893,239
Long-term debt	3,364,687		3,366,588
Long-term lease liabilities	290,571		302,339
Deferred income tax liabilities	579,471		653,745
Other long-term liabilities	245,352		248,794
Total liabilities	5,193,530		5,464,705

Commitments and contingencies (Note 12)

Equity:
Common stock, $0.01 par value, 1,000 shares authorized, issued and outstanding at April 1, 2023 and December 31, 2022	—		—
Additional paid-in capital	1,760,254		1,757,932
Accumulated deficit	(92,311)		(63,496)
Accumulated other comprehensive income	22,654		34,509
Total equity	1,690,597		1,728,945
Total liabilities and equity	$	6,884,127	$	7,193,650

See accompanying notes to the condensed consolidated financial statements.


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CORNERSTONE BUILDING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)

	Common Stock			Additional Paid-In Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Equity
	Shares	Amount								Shares	Amount
Balance, December 31, 2022 (Successor)	1,000	$	—	$	1,757,932	$	(63,496)	$	34,509	—	$	—	$	1,728,945
Other comprehensive loss	—	—		—		—		(11,855)		—	—		(11,855)
Share-based compensation	—	—		2,492		—		—		—	—		2,492
Other	—	—		(170)		—		—		—	—		(170)
Net loss	—	—		—		(28,815)		—		—	—		(28,815)
Balance, April 1, 2023 (Successor)	1,000	$	—	$	1,760,254	$	(92,311)	$	22,654	—	$	—	$	1,690,597


Balance, December 31, 2021 (Predecessor)	126,992,107	$	1,270	$	1,279,931	$	(98,826)	$	(5,612)	(21,071)	$	(424)	$	1,176,339
Treasury stock purchases	—	—		—		—		—		(170,400)	(4,082)		(4,082)
Retirement of treasury shares	(170,400)	(2)		(4,080)		—		—		170,400	4,082		—
Issuance of restricted stock	472,521	5		(5)		—		—		—	—		—
Stock options exercised	35,248	—		364		—		—		—	—		364
Other comprehensive income	—	—		—		—		72,768		—	—		72,768
Deferred compensation obligation	—	—		(424)		—		—		21,071	424		—
Share-based compensation	—	—		11,451		—		—		—	—		11,451
Net income	—	—		—		102,283		—		—	—		102,283
Balance, April 2, 2022 (Predecessor)	127,329,476	$	1,273	$	1,287,237	$	3,457	$	67,156	—	$	—	$	1,359,123

See accompanying notes to the condensed consolidated financial statements.


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CORNERSTONE BUILDING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Cash flows from operating activities:
Net (loss) income	$	(28,815)	$	102,283
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization	72,662		73,932
Amortization of debt issuance costs, debt discount and fair values	22,824		8,928
Share-based compensation expense	2,492		11,451
Loss on extinguishment of debt	563		—
Unrealized loss on foreign currency exchange rates	—		—
Asset impairments	—		368
Loss on sale of assets	169		—
Provision for credit losses	1,667		242
Deferred income taxes	(71,338)		(15,749)
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	43,029		(23,628)
Inventories	(20,029)		(68,857)
Income taxes	45,263		11,012
Prepaid expenses and other	3,886		36,446
Accounts payable	(35,096)		84,726
Accrued expenses	(140,488)		(28,312)
Other, net	(7,360)		(2,736)
Net cash (used in) provided by operating activities	(110,571)		190,106
Cash flows from investing activities:
Acquisitions, net of cash acquired	—		4,396
Capital expenditures	(41,706)		(33,306)
Proceeds from sale of property, plant and equipment	—		—
Net cash used in investing activities	(41,706)		(28,910)
Cash flows from financing activities:
Payments on term loans	(6,500)		(6,500)
Repurchases of senior notes	(15,500)		—
Payments on derivative financing obligations	—		(3,282)
Other	—		(3,718)
Net cash used in financing activities	(22,000)		(13,500)
Effect of exchange rate changes on cash and cash equivalents	(43)		(108)
Net (decrease) increase in cash, cash equivalents and restricted cash	(174,320)		147,588
Cash, cash equivalents and restricted cash at beginning of period	554,014		396,658
Cash, cash equivalents and restricted cash at end of period	$	379,694	$	544,246

See accompanying notes to the condensed consolidated financial statements.


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CORNERSTONE BUILDING BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data, unless otherwise noted)

(Unaudited)

Note 1 —Basis of Presentation

Description of Business

Cornerstone Building Brands, Inc. (“Cornerstone Building Brands” or, collectively with its subsidiaries, unless the context requires otherwise, the “Company”) is a holding company incorporated in Delaware. The Company is the largest exterior building products manufacturer by sales in North America and serves residential and commercial customers across new construction and the repair and remodel end markets. The Company is organized in three reportable segments, which we have renamed as follows: Aperture Solutions, Surface Solutions and Shelter Solutions.

Organization and Ownership Structure

On July 25, 2022 and pursuant to an Agreement and Plan of Merger dated March 5, 2022 (the “Merger Agreement”) by and among the Company, Camelot Return Intermediate Holdings, LLC (“Camelot Parent”), and Camelot Return Merger Sub, Inc. (“Merger Sub”), investments funds managed by Clayton, Dubilier and Rice, LLC (“CD&R”) became the indirect owners of all the issued and outstanding shares of common stock of Cornerstone Building Brands. Pursuant to the Merger Agreement, Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger as a subsidiary of Camelot Parent (the “Surviving Corporation”). At the effective time of the Merger (the “Effective Time”), the Company became a privately held company and its shares were no longer traded on the New York Stock Exchange.

At the Effective Time, in accordance with the terms and conditions set forth in the Merger Agreement, each share of Company common stock outstanding immediately prior to the Effective Time of the Merger (other than (i) shares of Company common stock that were cancelled or converted into shares of common stock of the Surviving Corporation in accordance with the Merger Agreement and (ii) shares of Company common stock held by stockholders of the Company (other than CD&R, certain investment funds managed by CD&R and other affiliates of CD&R that held shares of Company common stock) who did not vote in favor of the Merger Agreement or the Merger and who have perfected and not withdrawn a demand for appraisal rights pursuant to Section 262 of the General Corporation Law of the State of Delaware), was converted into the right to receive cash in an amount equal to $24.65 in cash per share, without interest and subject to any required withholding taxes.

On July 25, 2022, the Company amended its Certificate of Incorporation to authorize 1,000 shares of common stock, par value of $0.01. Each share of common stock will have one vote and all shares of common stock vote together as a single class.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements have been prepared with the Company's accounting policies and on the same basis as those financial statements included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2022 and should be read in conjunction with those Consolidated Financial Statements and the Notes thereto. Certain disclosures normally included in the Company’s Consolidated Financial Statements prepared in accordance with U.S. GAAP have been omitted on a basis consistent with the rules and regulations of the SEC.

The accompanying Condensed Consolidated Financial Statements include the accounts and operations of the Company and its majority-owned subsidiaries and all adjustments (consisting of normal recurring adjustments) that the Company considered necessary to present a fair statement of its results of operations, financial position and cash flows. All intercompany accounts and transactions have been eliminated in consolidation. Through application of pushdown accounting, the Company’s Condensed Consolidated Financial Statements are presented as Predecessor for periods prior to the Merger and Successor for subsequent periods. The Company has reclassified certain prior year amounts to conform to the current year’s presentation. The results reported in these Condensed Consolidated Financial Statements should not be regarded as necessarily indicative of results that may be expected for the entire year.


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Note 2 — Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the Condensed Consolidated Financial Statements and accompanying notes. These estimates include, but are not limited to: establishing the allowance for expected credit losses; allowance for obsolete inventory; the impairment of goodwill and intangible assets; establishing useful lives for and evaluating the recovery of long-lived assets; recognizing the fair value of assets acquired and liabilities assumed in business combinations; accounting for rebates and product warranties; the valuation and expensing for share-based compensation; certain assumptions made in accounting for pension benefits; accounting for contingencies and uncertainties and accounting for income taxes. Actual results may differ from the estimates used in preparing the Condensed Consolidated Financial Statements.

Cash, Cash Equivalents and Restricted Cash

Cash equivalents consists of instruments with an original maturity of three months or less. As of April 1, 2023, the Company’s cash and cash equivalents were only invested in cash.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that total the amounts shown in the Condensed Consolidated Statements of Cash Flows:


	Successor
	April 1, 2023		December 31, 2022
Cash and cash equivalents	$	379,231	$	553,551
Other current assets - Restricted cash(1)	463		463
Total cash, cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	379,694	$	554,014

(1) Restricted cash primarily relates to indemnification agreements and is included in other current assets in the Condensed Consolidated Balance Sheets.

Accounts Receivable, Net

The Company reports accounts receivable net of an allowance for expected credit losses. The Company establishes provisions for expected credit losses based on the Company’s assessment of the collectability of amounts owed to the Company by its customers. In establishing the allowance, the Company considers changes in the financial position of a customer, age of the accounts receivable balances, availability of security, unusual macroeconomic conditions, lien rights and bond rights as well as disputes, if any, with its customers. The Company’s allowance for expected credit losses was $2.9 million at April 1, 2023 and was $2.1 million at December 31, 2022.

Fair Value Measurements

The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of April 1, 2023 and December 31, 2022 given the instruments relatively short maturities. The carrying amounts of the indebtedness under revolving credit facilities approximate fair value as the interest rates are variable and reflective of market rates. Fair values for our other debt instruments are measured using Level 1 and Level 2 inputs. U.S. GAAP, requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.


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Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the reference rate transition. The amendments in these ASUs are elective, apply to all entities that have contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, that deferred the sunset date of Topic 848 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The Company is evaluating the impact of electing to apply the amendments.

Note 3 — Merger

CD&R Merger Transaction

On July 25, 2022, Merger Sub merged with and into the Company, with the Company surviving the Merger as a subsidiary of Camelot Parent. CD&R previously held 61.9 million shares of the Company immediately prior to the Merger. As a result of the Merger, CD&R became the indirect owners of all of the issued and outstanding shares of Company common stock that CD&R did not already own.

The Merger was accounted for as a business combination. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair market value at the date of the Merger.

The Merger was funded in part with proceeds from the following issuances:

•$300.0 million aggregate principal amount term loan facility, due August 2028;

•$710.0 million of 8.750% Senior Secured Notes due August 2028;

•$564.4 million of cash from the Company;

•$464.4 million aggregate principal amount of 2.99% senior payment-in-kind notes due 2029 that were issued by Camelot Return Parent, LLC (“Camelot Return Parent”), an indirect parent of the Company, and are held by Arawak X, L.P. (“Arawak X”), an affiliate of CD&R; and

•$195.0 million from preferred shares of Camelot Return Parent.

Neither the Company nor any of its subsidiaries is a guarantor of or is obligated to make any payments related to the 2.99% senior payment-in-kind notes due 2029 issued by Camelot Return Parent.

The calculation of the total consideration paid is as follows:


	Consideration
Common shares purchased	65,613,349
Common share closing price	$	24.65
Merger consideration, common shares purchased	$	1,617,369
Effective settlement of pre-existing relationships (1)	128,721
Total merger consideration	1,746,090
Fair value of common shares previously held by CD&R and other adjustments(2)	1,526,591
Total equity value	$	3,272,681

(1) Consists mainly of employee share-based compensation awards that were outstanding at that time the Merger was consummated.

(2) Consists of 61.9 million common shares, with shares rolled over or acquired by Camelot Parent.


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The following table summarizes the fair value of net assets acquired:


	Fair Value
Merger consideration	$	1,746,090
Fair value of common shares previously held by CD&R and other adjustments	1,526,591
Total equity value	$	3,272,681

Cash and cash equivalent	$	1,087,586
Accounts receivable	794,341
Inventories	768,827
Property, plant and equipment	581,617
Lease right-of-use assets	252,262
Goodwill	1,694,848
Intangible assets	2,610,685
Other assets	120,543
Total assets acquired	7,910,709
Accounts payable	329,896
Accrued liabilities	624,497
Long-term debt	2,467,210
Long-term lease liabilities	252,262
Deferred income tax liabilities	678,627
Other liabilities	285,536
Total liabilities assumed	4,638,028
Net assets acquired	$	3,272,681

The above purchase price allocation is based upon provisional information and is subject to revision during the measurement period (up to one year from the date of the Merger) as additional information concerning valuations is obtained. During the measurement period, as the Company obtains new information regarding facts and circumstances that existed as of the date of the Merger that, if known, would have resulted in revised estimated values of those assets or liabilities, the Company will accordingly revise the provisional purchase price allocation and may include, but not limited to, adjustments pertaining to intangible assets acquired, property, plant and equipment acquired and tax liabilities assumed. The effect of measurement period adjustments on the estimated fair value elements will be reflected as if the adjustments had been made as of the date of the Merger. Residual amounts will be allocated to goodwill.

As part of pushdown accounting, the Company recorded the provisional goodwill and it has been allocated to reporting units expected to benefit from the business combination. The goodwill is mainly attributable to costs savings in manufacturing productivity; freight and logistics; procurement; and other operating costs, as well as operational improvements in recent acquisitions to be achieved subsequent to the Merger. The goodwill recorded is not deductible for income tax purposes.

The Company identified intangible assets for customer relationships and trade names and other. Intangible assets are amortized on a straight-line basis over their expected useful lives. The provisional fair value and weighted average estimated useful life of identifiable intangible assets consists of the following:


	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	2,088,548	13
Trade names and other	522,137		13
Total	$	2,610,685

The Company incurred transaction costs of $29.4 million associated with the Merger, of which $0.7 million was recognized in the period from July 25, 2022 through December 31, 2022 and $28.7 million was recognized in the period from January 1, 2022


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through July 24, 2022. These costs are included in selling, general and administrative expenses on the Condensed Consolidated Statements of (Loss) Income.

Unaudited Pro Forma Financial Information

Had the Merger occurred at the beginning of 2022, unaudited pro forma revenues and net income for the three months ended April 1, 2023 and April 2, 2022 would not have been materially different than the amounts reported as the pro forma adjustments would primarily reflect the amortization of intangibles and depreciation of property, plant and equipment that received a step up in basis and the cost to finance the transaction, net of the related tax effects. The unaudited supplemental pro forma financial information would not give effect to the potential impact of current financial conditions, operating efficiencies or cost savings that may result from the Merger or any integration costs. Unaudited pro forma balances would not necessarily be indicative of operating results had the Merger occurred on January 1, 2022 or of future results.

Note 4 — Inventories

The following table sets forth the components of inventories:


	Successor
	April 1, 2023		December 31, 2022
Raw materials	$	323,980	$	312,380
Work in process	68,480		67,424
Finished goods	179,427		172,024
Total inventories	$	571,887	$	551,828

Note 5 — Goodwill and Intangible Assets

Goodwill

The following table sets forth the changes in the carrying amount of goodwill by reportable segment:


	Aperture Solutions		Surface Solutions		Shelter Solutions		Total
Balance, December 31, 2022 (Successor)	$	624,009	$	790,452	$	274,087	$	1,688,548
Measurement period adjustments(1)	1,254		—		—		1,254
Currency translation	427		320		—		747
Balance, April 1, 2023 (Successor)	$	625,690	$	790,772	$	274,087	$	1,690,549

(1) Measurement period adjustments have been recorded as the Company has obtained additional information since the preliminary purchase price allocation of the assets and liabilities acquired in connection with the Merger.


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Intangible Assets, Net

The following table sets forth the major components of intangible assets:


	Range of Life (Years)		Weighted Average Amortization Period (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of April 1, 2023(1) (Successor)
Amortized intangible assets:
Trademarks, trade names and other		13	13	$	522,137	$	(27,894)	$	494,243
Customer lists and relationships		13	13	2,088,548		(111,575)		1,976,973
Total intangible assets				$	2,610,685	$	(139,469)	$	2,471,216

As of December 31, 2022(1) (Successor)
Amortized intangible assets:
Trademarks, trade names and other		13	13	$	522,137	$	(18,332)	$	503,805
Customer lists and relationships		13	13	2,088,548		(73,330)		2,015,218
Total intangible assets				$	2,610,685	$	(91,662)	$	2,519,023

(1) In connection with the Merger, the Company recorded a provisional intangible asset fair value. The fair value is based on preliminary information and subject to revision during the measurement period.

Intangible assets are amortized on a straight-line basis. Amortization expense related to intangible assets was $47.9 million for the three months ended April 1, 2023 and $49.0 million for the three months ended April 2, 2022.

Note 6 — Product Warranties

The following table sets forth the changes in the carrying amount of product warranties liability:


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Balance, beginning of period	$	202,463	$	218,356
Warranties sold	324		390
Revenue recognized	(612)		(606)
Expense	12,501		10,817
Settlements	(11,292)		(8,481)
Balance, end of period	$	203,384	$	220,476
Reflected as:
Current liabilities – Rebates, warranties and other customer-related liabilities	$	26,936	$	29,944
Noncurrent liabilities – Other long-term liabilities	176,448		190,532
Total product warranty liability	$	203,384	$	220,476


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Note 7 – Long-Term Debt

The following table sets forth the components of long-term debt:


			Successor
			April 1, 2023								December 31, 2022
	Effective Interest Rate		Principal Outstanding		Unamortized Fair Value Adjustment(1)		Unamortized Discount and Issuance Costs		Carrying Amount		Principal Outstanding		Unamortized Fair Value Adjustment(1)		Unamortized Discount and Issuance Costs		Carrying Amount
Term loan facility, due April 2028	8.57	%	$	2,548,000	$	(335,240)	$	—	$	2,212,760	$	2,554,500	$	(348,769)	$	—	$	2,205,731
Term loan facility, due August 2028	9.69	%	300,000		—		(20,780)		279,220		300,000		—		(21,538)		278,462
6.125% Senior Notes, due January 2029	12.16	%	343,866		(101,445)		—		242,421		365,541		(111,524)		—		254,017
8.750% Senior Secured Notes, due August 2028	10.61	%	710,000		—		(50,714)		659,286		710,000		—		(52,622)		657,378
Total long-term debt			$	3,901,866	$	(436,685)	$	(71,494)	$	3,393,687	$	3,930,041	$	(460,293)	$	(74,160)	$	3,395,588
Reflected as:
Current liabilities - Current portion of long-term debt									$	29,000							$	29,000
Non-current liabilities - Long-term debt									3,364,687								3,366,588
Total long-term debt									$	3,393,687							$	3,395,588
Fair value - Senior notes - Level 1									$	904,809							$	907,993
Fair value - Term loans - Level 2									2,562,460								2,580,000
Total fair value									$	3,467,269							$	3,487,993

(1) On July 25, 2022, as a result of the pushdown accounting related to the Merger, the carrying values of the term loan facility due April 2028 and the 6.125% senior notes were adjusted to fair value.

Revolving Credit Facilities

The following table sets forth the Company’s availability under its credit facilities:


	Successor
	April 1, 2023						December 31, 2022
	Available		Borrowings		Letters of Credit and Priority Payables		Available		Borrowings		Letters of Credit and Priority Payables
Asset-based lending facility	$	850,000	$	—	$	47,000	$	850,000	$	—	$	48,000
Cash flow revolver(1)	115,000		—		—		115,000		—		—
First-in-last-out tranche asset-based lending facility	95,000		—		—		95,000		—		—
Total	$	1,060,000	$	—	$	47,000	$	1,060,000	$	—	$	48,000

(1) Cash flow revolver commitments of $23.0 million matured in April 2023 and $92.0 million will mature in April 2026.

Term Loan Facility due April 2028 and Cash Flow Revolver

In April 2018, Ply Gem Midco, Inc. (“Ply Gem Midco”) entered into a Cash Flow Agreement (as amended from time to time, the “Cash Flow Credit Agreement”), which provides for (i) a term loan facility (the “Term Loan Facility”) in the aggregate principal amount of $2,600.0 million, issued with a discount of 0.5% and (ii) a cash flow-based revolving credit facility (the “Cash Flow Revolver”) of up to $115.0 million. In connection with the consummation of the Ply Gem merger, the Company and Ply Gem Midco entered into a joinder agreement in which the Company became the Borrower (as defined in the Cash Flow Credit Agreement) under the Term Loan Facility and Cash Flow Revolver (together the “Cash Flow Facilities”). On April 11, 2023, the Company amended the Cash Flow Credit Agreement to replace the adjusted LIBOR rate with the Secured Overnight Financing Rate (“SOFR”) rate.


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The Term Loan Facility amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity. The Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Company’s option, either (i) a Term SOFR rate with a credit spread adjustment of 0.10% (subject to a floor of 0.50%) plus an applicable margin of 3.25% per annum or (ii) an alternate base rate plus an applicable margin of 2.25% per annum.

Loans outstanding under the Cash Flow Revolver bear annual interest at a floating rate measured by reference to, at the Company’s option, either (i) a Daily Simple SOFR rate or a Term SOFR rate with (only in the case of Term SOFR rate borrowings with an interest period greater than one month) a credit spread adjustment of 0.10% (subject to a floor of 0.00%) plus an applicable margin ranging from 2.50% to 3.00% per annum depending on the Company’s secured leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 1.50% to 2.00% per annum depending on the Company’s secured leverage ratio. There are no amortization payments under the Cash Flow Revolver. Additionally, unused commitments under the Cash Flow Revolver are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Company’s secured leverage ratio.

Subject to certain exceptions, the Term Loan Facility is subject to mandatory prepayments in an amount equal to:

•the net cash proceeds of (i) certain asset sales, (ii) certain debt offerings and (iii) certain insurance recovery and condemnation events; and

•50% of annual excess cash flow (as defined in the Cash Flow Credit Agreement), subject to reduction to 25% and 0% if specified secured leverage ratio targets are met to the extent that the amount of such excess cash flow exceeds $10.0 million. No payments were required in 2022 under the year 2021 excess cash flow calculation.

Both the Term Loan Facility and Cash Flow Revolver may be prepaid at the Company’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal amount requirements.

ABL Facility due July 2027

On April 12, 2018, Ply Gem Midco entered into an ABL Credit Agreement (as amended from time to time, the “ABL Credit Agreement”), which provides for (a) an asset-based revolving credit facility of up to $850.0 million (amended from time to time the “ABL Facility”), a portion of which is (i) available to United States (“U.S.”) borrowers and (ii) available to U.S. and Canadian borrowers. In connection with the consummation of the Ply Gem merger, the Company and Ply Gem Midco entered into a joinder agreement in which the Company became the Parent Borrower (as defined in the ABL Credit Agreement) under the ABL Facility, and (b) a first-in-last-out tranche asset-based revolving credit facility of up to $95.0 million (the “ABL FILO Facility”) available to U.S. borrowers.

Borrowing availability under the ABL Facility and the ABL FILO Facility (collectively, the “ABL Facilities”) is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of eligible inventory, accounts receivable, less certain allowances and subject to certain other adjustments as set forth in the ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings.

Loans outstanding under the ABL Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) a term SOFR rate (subject to a SOFR floor of 0.00%) plus an applicable margin ranging from 1.25% to 1.75% per annum depending on the average daily excess availability under the ABL Facility or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 0.75% per annum depending on the average daily excess availability under the ABL Facility. Additionally, unused commitments under the ABL Facility are subject to a 0.25% per annum fee.

Loans outstanding under the ABL FILO Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) a term SOFR rate (subject to a SOFR floor of 0.00%) plus an applicable margin ranging from 2.25% to 2.75% per annum depending on the average daily excess availability under the ABL FILO Facility or (ii) an alternate base rate plus an applicable margin ranging from 1.25% to 1.75% per annum depending on the average daily excess availability under the ABL FILO Facility. Additionally, unused commitments under the ABL FILO Facility are subject to a 0.25% per annum fee.

Side Car Term Loan Facility due August 2028

On July 25, 2022, the Company entered into a Term Loan Credit Agreement (as amended from time to time, the “Side Car Term Loan Credit Agreement”) which provides for a term loan facility (the “Side Car Term Loan Facility”) in an original aggregate principal amount of $300.0 million. The Side Car Term Loan Credit Agreement will mature on August 1, 2028.

Loans outstanding under the Side Car Term Loan Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) a term SOFR rate plus 5.625% (subject to a SOFR floor of 0.50%) or (ii) an alternate base rate


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plus 4.625%. Borrowings under the Side Term Loan Credit Agreement amortize in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount.

The Side Car Term Loan Facility may be prepaid at the Company’s option at any time, subject to certain prepayment premiums if prepaid prior to August 1, 2026.

6.125% Senior Notes due January 2029

On September 24, 2020, the Company issued $500.0 million in aggregate principal amount of 6.125% Senior Notes due January 2029 (the “6.125% Senior Notes”). The 6.125% Senior Notes bear interest at 6.125% per annum and will mature on January 15, 2029. Interest is payable semi-annually in arrears on January 15 and July 15.

The 6.125% Senior Notes are unsecured senior indebtedness and are effectively subordinated to all of the Company’s existing and future senior secured indebtedness, including indebtedness under the Term Loan Facility, the Cash Flow Revolver, the Side Car Term Loan Facility, the 8.750% Senior Secured Notes and the ABL Facilities, and are senior in right of payment to future subordinated indebtedness of the Company.

The Company may redeem the 6.125% Senior Secured Notes in whole or in part at any time subject to certain prepayment premiums if the 6.125% Senior Secured Notes were to be redeemed prior to September 15, 2023.

Repurchase of 6.125% Senior Notes

The Company repurchased an aggregate principal amount of $21.7 million of 6.125% Senior Notes for $15.5 million in cash during the three months ended April 1, 2023. The repurchases, which resulted in the write-off of associated unamortized debt discount and deferred financing costs, resulted in a loss totaling $0.6 million, recognized as a loss on extinguishment of debt in the Condensed Consolidated Statements of Income.

8.750% Senior Secured Notes due August 2028

On July 25, 2022, the Company issued $710.0 million in aggregate principal amount of 8.750% Senior Secured Notes due August 2028 (the “8.750% Senior Secured Notes”). The 8.750% Senior Secured Notes bear interest at 8.750% per annum and will mature on August 1, 2028. Interest is payable semi-annually in arrears on January 15 and July 15 of each year.

The 8.750% Senior Secured Notes are secured senior indebtedness and rank equal in right of payment with all existing and future senior indebtedness, and are senior in right of payment to all existing and future subordinated indebtedness of the Company, including the 6.125% Senior Notes.

The Company may redeem the 8.750% Senior Secured Notes in whole or in part at any time subject to certain prepayment premiums if the 8.750% Senior Secured Notes were to be redeemed prior to August 1, 2026.

Other Information

The obligations under the Company’s debt agreements are generally guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions. In addition, the obligations of the Canadian borrowers under the ABL Facility are guaranteed by each direct and indirect wholly-owned Canadian restricted subsidiary of the Canadian borrowers, subject to certain exceptions. In addition, the obligations under the Cash Flow Credit Agreement, the ABL Credit Agreement, the Side Car Term Loan Facility and the Company’s various secured notes are guaranteed by Camelot Parent, which guarantee is non-recourse and limited to the equity interests of the Company. The obligations under the Cash Flow Credit Agreement, the ABL Credit Agreement, the Side Car Term Loan Facility and the Company’s various secured notes are also secured by a perfected security interest in substantially all tangible and intangible assets of the Company and each subsidiary guarantor and in the capital stock of the Company, subject to certain exceptions and subject to priority of security interests provided therein.

Covenant Compliance

The ABL Credit Agreement includes a minimum fixed charge coverage ratio of 1.00:1.00, which is tested only when specified availability is less than 10.0% of the lesser of (x) the then applicable borrowing base and (y) the then aggregate effective commitments under the ABL Facility, and continuing until such time as specified availability has been in excess of such threshold for a period of 20 consecutive calendar days. The Cash Flow Credit Agreement includes a financial covenant set at a maximum secured leverage ratio of 7.75:1.00, which will apply if the outstanding amount of loans and drawings under letters of credit which have not then been reimbursed exceeds a specified threshold at the end of any fiscal quarter.


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The Company’s debt agreements contain a number of covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness; make dividends and other restricted payments; incur additional liens; consolidate, merge, sell or otherwise dispose of all or substantially all assets; make investments; transfer or sell assets; enter into restrictive agreements; change the nature of the business; and enter into certain transactions with affiliates. The Company is in compliance with all of its covenants as of April 1, 2023.

Interest Rate Swaps

The Company uses certain interest rate swaps to manage a portion of the interest rate risk on its term loans. The following table sets forth the terms of the Company’s interest rate swap agreements:


	May 2019 Swap(1)			April 2021 Swaps
Notional amount	$	500,000		$	1,000,000
Forecasted term loan interest payments being hedged	1-month LIBOR			1-month LIBOR
LIBOR floor (per annum - matches floor in hedged item)	0.00		%	0.50		%
Fixed rate paid on $500,000 and $1,500,000 notional amounts	2.1680		%	2.0340		%
Fixed rate received on $(500,000) notional amount	n/a			(2.1680)		%
Origination date	July 12, 2019			April 15, 2021
Maturity - Fixed rate paid	July 12, 2023			April 15, 2026
Maturity - Fixed rate received	n/a			July 12, 2023
Fair value at April 1, 2023:
Other current assets	$	3,969		$	—
Other assets, net	$	—		$	78,119
Other current liabilities	$	—		$	3,969
Fair value at December 31, 2022:
Other current assets	$	7,000		$	—
Other assets, net	$	—		$	95,361
Other current liabilities	$	—		$	7,000
Level in fair value hierarchy(2)	Level 2			Level 2

(1)The May 2019 swap was de-designated from cash flow hedge accounting in April 2021.

(2)Interest rate swaps are based on cash flow hedge contracts that have fixed rate structures and are measured against market-based LIBOR yield curves. These interest rate swaps are classified within Level 2 of the fair value hierarchy because they are valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.

Note 8 — Accumulated Other Comprehensive Income

The following tables sets forth the change in accumulated other comprehensive income (loss) attributable to the Company by each component of accumulated other comprehensive income, net of applicable income taxes:


	Foreign Currency Translation Adjustment		Derivative Instruments		Unrecognized Gain (Loss) on Retirement Benefits		Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2022 (Successor)	$	(6,789)	$	40,962	$	336	$	34,509
Other comprehensive loss	(963)		(10,892)		—		(11,855)
Balance, April 1, 2023 (Successor)	$	(7,752)	$	30,070	$	336	$	22,654


Balance, December 31, 2021 (Predecessor)	$	22,741	$	(23,407)	$	(4,946)	$	(5,612)
Other comprehensive income	4,784		67,984		—		72,768
Balance, April 2, 2022 (Predecessor)	$	27,525	$	44,577	$	(4,946)	$	67,156


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Note 9— Share-Based Compensation

Merger Transaction

Prior to July 24, 2022, under its long-term stock incentive plan, the Company had several share-based compensation award types, including stock options, restricted stock units and performance share unit awards (collectively, the “Pre-Merger Awards”). In connection with the Merger, outstanding vested stock option awards were canceled and converted to the right to receive a fixed amount of cash equal to the intrinsic value of the awards and were paid in August 2022. Performance share units (“PSUs”) granted to certain key, non-executive employees in March 2021 were paid in cash in September 2022 with the applicable total shareholder return metric determined using a per share price equal to the Merger Consideration and the EBITDA-based metric determined based on target performance.

Resulting from the Merger, unvested restricted stock units were cancelled and converted into a contingent contractual right to receive a payment in cash equal to the Merger consideration per award and unvested stock options were cancelled and converted into a contingent contractual right to receive a payment in cash equal to the intrinsic value of the awards, subject to the same vesting conditions as the original awards.

Resulting from the Merger, unvested PSUs that were granted to key employees and executives in March 2020 and to executives in March 2021 were cancelled and converted into a contingent contractual right to receive a cash payment from the Company equal to the product of the number of PSUs earned under the terms of the applicable award agreement, with the applicable total stockholder return metric determined using a per share price equal to the Merger consideration and the EBITDA-based metric determined based on actual performance as of the end of the three-year performance period applicable to such PSUs. PSUs granted in March 2020 vested and were paid out in cash during the three months ended April 1, 2023. PSUs granted in March 2021 to executives are expected to be paid out in cash in the first quarter of 2024. The Pre-Merger Awards are accounted for under ASC Topic 710.

As of April 1, 2023, the Company has liabilities of $14.9 million classified within employee-related liabilities on its Condensed Consolidated Balance Sheet related to the Pre-Merger Awards that will be settled in cash. For the three months ended April 1, 2023, the Company paid out $89.5 million of cash to settle Pre-Merger Awards, which mainly related to those PSUs granted in March 2020 and vested in March 2023.

Incentive Units

Beginning in the fourth quarter of 2022, pursuant to an incentive unit grant agreement, certain participants were granted incentive units in Camelot Return Ultimate, L.P. (the “Partnership”). The incentive units provide the holder with the opportunity to receive, upon certain vesting events and subject to Partnership repurchase rights and conditions, a return based upon the appreciation of the Partnership’s equity value from the date of grant. The incentive units vest over a five-year period on a straight-line basis. For the three months ended April 1, 2023, the Company granted 27 thousand incentive units at an average grant date fair value of $49.76 per incentive unit.

Compensation Expense

For the three months ended April 1, 2023, the Company recognized $2.5 million of expense from incentive units and a gain of $4.8 million from the Pre-Merger Awards. The gain recognized on the Pre-Merger Awards during the three months ended April 1, 2023 related to the Company updating its vesting expectations for certain PSU awards which have a range of payouts based on an EBITDA-based metric.

As of April 1, 2023, the Company estimates that unrecognized expense is expected to be recognized over a weighted-average period of 4.3 years totaling $46.5 million, of which $9.5 million relates to Pre-Merger Awards and $37.0 million relates to incentive units.

Note 10 — Income Taxes

The effective tax rate was 23.0% for the three months ended April 1, 2023 and 25.1% for the three months ended April 2, 2022.

For the Predecessor and Successor periods, the Company’s effective tax rate includes state income taxes, foreign tax rate differentials and changes in the valuation allowance.


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Note 11 — Reportable Segment and Geographical Information

The Company is organized in three reportable segments: Aperture Solutions, Surface Solutions and Shelter Solutions, which operate principally in the U.S. with limited operations in Canada.

•The Aperture Solutions reportable segment offers a broad line of windows and doors at multiple price-points for residential new construction and repair and remodel end markets in the U.S. and Canada. Its main products include vinyl, aluminum, wood-composite and aluminum clad-wood windows and patio doors, as well as steel, wood-composite and fiberglass entry doors.

•The Surface Solutions reportable segment offers a broad suite of surface solutions products and accessories at multiple price-points for the residential new construction and repair and remodel end markets as well as stone installation services. Its main products include vinyl siding and accessories, cellular polyvinyl chloride trim, vinyl fencing and railing, stone veneer and gutter protection products.

•The Shelter Solutions reportable segment designs, engineers, manufactures and distributes extensive lines of metal products for the low-rise commercial construction market under multiple brand names and through a nationwide network of manufacturing plants and distribution centers. The Company defines low-rise commercial construction as building applications of up to five stories.

Management monitors the operations results of its reportable segments separately for purposes of making decisions about resources and evaluating performance. Management evaluates performance on the basis of segment earnings before interest, income taxes, depreciation and amortization (“Adjusted reportable segment EBITDA”).

Corporate operating expenses are not allocated to reportable segments. Corporate and Other consists specifically of corporate operating expenses that are generally not allocated to reportable segments, related-party management fees, and other items that are not assigned or allocated to reportable segments. Any intercompany revenues or expenses are eliminated in consolidation.

The following table sets forth net sales, Adjusted reportable segment EBITDA and a reconciliation to income before income taxes:


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Net sales:
Aperture Solutions	$	604,569	$	702,110
Surface Solutions	268,591		332,990
Shelter Solutions	405,928		531,738
Total net sales	$	1,279,088	$	1,566,838
Adjusted reportable segment EBITDA:
Aperture Solutions	$	64,793	$	82,379
Surface Solutions	26,307		56,472
Shelter Solutions	83,414		89,568
Total reportable adjusted segment EBITDA	174,514		228,419
Corporate and other	(47,792)		24,829
Depreciation and amortization	(72,662)		(73,932)
Interest expense	(94,111)		(44,106)
Foreign exchange gain	2,017		1,444
Loss on extinguishment of debt	(563)		—
Other income, net	1,173		(5)
(Loss) income before income taxes	$	(37,424)	$	136,649


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The following table sets forth net sales disaggregated by reportable segment:


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Aperture Solutions:
Vinyl windows	$	567,193	$	657,796
Aluminum windows and other	37,376		44,314
Total	$	604,569	$	702,110
Surface Solutions:
Vinyl siding	$	132,185	$	161,200
Metal siding	60,437		73,702
Injection molded siding	12,486		18,773
Stone	18,019		20,322
Stone veneer installation and other	45,464		58,993
Total	$	268,591	$	332,990
Shelter Solutions:
Metal building products	$	405,928	$	476,458
Metal coil coating	—		55,280
Total	$	405,928	$	531,738
Total net sales	$	1,279,088	$	1,566,838

Note 12 — Commitments and Contingencies

As a manufacturer of products primarily for use in building construction, the Company is inherently exposed to various types of contingent claims, both asserted and unasserted, in the ordinary course of business. As a result, from time to time, the Company may become involved in various legal proceedings or other contingent matters arising from claims or potential claims arising out of its operations and businesses that cover a wide range of matters, including, among others, environmental, contract, employment, intellectual property, securities, personal injury, property damage, product liability, warranty, and modification, adjustment or replacement of component parts or units sold, which may include product recalls. The Company insures (or self-insures) against these risks to the extent deemed prudent by its management and to the extent insurance is available. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s results of operations, financial position or cash flows. However, such matters are subject to many uncertainties and outcomes and are not predictable with assurance.

Environmental

The Company’s operations are subject to various federal, state, local and foreign environmental, health and safety laws. Among other things, these laws regulate the emissions or discharge of materials into the environment; govern the use, storage, treatment, disposal and management of hazardous substances and wastes; protect the health and safety of its employees and the end-users of its products; regulate the materials used in its products; and impose liability for the costs of investigating and remediating (as well as other damages resulting from) present and past releases of hazardous substances. Violations of these laws or of any conditions contained in environmental permits could impact the Company's current and future operations.

The Company believes it is in material compliance with all applicable laws and regulations and has recorded a liability of $8.8 million at April 1, 2023 and December 31, 2022.


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Litigation

The Company is a party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company is also included in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines or penalties and other costs in substantial amounts and are described below.

Stockholder Litigation

In January 2023, purported former stockholders filed two separate complaints challenging the fairness of the CD&R Merger. The complaints are captioned Firefighters’ Pension System of the City of Kansas City, Missouri Trust and Gary D. Voigt v. Affeldt et al., C.A. No. 2023-0091-JTL (Del. Ch.) and Whitebark Value Partners LP and Robert Garfield v. Clayton Dubilier & Rice, LLC et al., C.A. No. 2023-0092-JTL (Del. Ch.). In both complaints, the plaintiffs allege that CD&R and its affiliates controlled the Company prior to the transaction and that certain directors and officers of the Company, as well as CD&R and its affiliates, breached their fiduciary duties and engaged in conduct resulting in a sale of the Cornerstone Building Brands public stockholders’ shares to CD&R at an unfair price. The plaintiffs seek unspecified monetary damages, attorneys’ fees, expenses, and costs. The court consolidated the two cases, and on May 3, 2023, selected Whitebark Value Partners LP as lead plaintiff. The Company does not believe these claims have merit and intend to vigorously defend against them. The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. The Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on its financial condition, although the outcome could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such period.

Note 13 — Earnings Per Common Share

Basic earnings per common share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding. Diluted income per common share, if applicable, considers the dilutive effect of common stock equivalents. The reconciliation of the numerator and denominator used for the computation of basic and diluted earnings per common share is as follows:


	Predecessor
	Three Months Ended April 2, 2022
Numerator for Basic and Diluted Earnings Per Common Share
Net income applicable to common shares	$	101,526
Denominator for Basic and Diluted Earnings Per Common Share:
Weighted average basic number of common shares outstanding	127,129
Common stock equivalents:
Employee stock options	1,337
Weighted average diluted number of common shares outstanding	128,466

Basic earnings per common share	$	0.80
Diluted earnings per common share	$	0.79

Incentive plan securities excluded from dilution(1)	72

(1)Represents securities not included in the computation of diluted earnings per common share because their effect would have been anti-dilutive.

The Company calculates earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings per share. The calculation of earnings per share presented here excludes the income attributable to unvested restricted stock units related to our Incentive Plan from the numerator and excludes the dilutive impact of those shares from the denominator. Awards subject to the achievement of performance conditions or market conditions for which such conditions had been met at the end of any of the periods presented are included in the computation of diluted earnings per common share if their effect was dilutive.


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Earnings per common share is not presented for the Successor period as the Company’s common stock is no longer publicly traded either on a stock exchange or in the over-the-counter market.

Note 14 — Supplemental Cash Flow Information

The following table sets forth supplemental cash flow information:


	Successor		Predecessor
	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	89,062	$	45,879
Income taxes paid	$	1,521	$	1,562


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CORNERSTONE BUILDING BRANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is management’s discussion and analysis of certain significant factors that have affected our consolidated financial condition and results of operations during the periods presented (the “MD&A”). This information should be read in conjunction with the Condensed Consolidated Financial Statements included herein “Item 1. Condensed Consolidated Financial Statements” and the Consolidated Financial Statements and the Notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Forward-Looking Statements

This Quarterly Report includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will,” “target” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These risks, uncertainties and other factors include, but are not limited to:

•seasonality of the business and adverse weather conditions;

•challenging macroeconomic conditions affecting the residential, commercial and repair and remodeling construction industry and markets, including increasing interest rates, and demand in new construction and repair and remodeling;

•commodity price volatility and/or limited availability of raw materials, including steel, polyvinyl chloride (“PVC”) resin, aluminum, and glass due to supply chain disruptions;

•increases in the macroeconomic inflationary environment and our ability to react accordingly;

•our ability to identify and develop relationships with a sufficient number of qualified suppliers to mitigate risk in the event a significant supplier experiences a significant production or supply chain interruption;

•the increasing difficulty of consumers and builders in obtaining credit or financing;

•our ability to successfully implement operational efficiency initiatives, including to increase automation and mitigate increases in our manufacturing costs;

•our ability to successfully achieve price increases to offset cost increases;

•ability to compete effectively against competitors;

•our ability to successfully integrate our acquired businesses and to realize anticipated benefits;

•our ability to employ, train and retain qualified personnel;

•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;

•increases in energy costs;

•increases in freight and transportation costs;

•volatility in the United States (“U.S.”) and international economies and in the credit markets;

•the severity, duration and spread of the COVID-19 pandemic and its variants (collectively, the “COVID-19 pandemic”), as well as actions that may be taken by the Company or governmental authorities due to any resurgence of the COVID-19 pandemic or to treat its impact and the resulting impact on supply chain and labor pressures;

•an impairment of our goodwill and/or intangible assets;

•our ability to successfully develop new products or improve existing products;


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•enforcement and obsolescence of our intellectual property rights;

•costs related to compliance with, violations of or liabilities under environmental, health and safety laws;

•our ability to make strategic acquisitions accretive to earnings and dispositions at favorable prices and terms;

•our ability to fund operations, provide increased working capital necessary to support our strategy and acquisitions using available liquidity;

•global climate change, and compliance with new or changed laws or regulations relating to environmental, social and governance (“ESG”);

•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 Merger (as defined herein);

•compliance with certain laws related to our international business operations;

•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;

•additional costs from new regulations which relate to the utilization or manufacturing of our products or services, including changes in building codes and standards;

•increases in tariffs or import and trade restrictions;

•our controlling stockholder’s interests differing from the interests of holders of our indebtedness;

•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;

•the effect of increased interest rates on our ability to service our debt;

•uncertainty as to the acceptance of Secured Overnight Financing Rate (“SOFR”) and phasing out of London Interbank Offered Rate (“LIBOR”) interest rates; and

•other risks detailed under the caption “Risk Factors” in this Quarterly Report on Form 10-Q, in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Form 10-K”), and other filings we make with the SEC.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report, including those described under the caption “Risk Factors” in this report and the 2022 Form 10-K, and other risks described in documents subsequently filed by the Company from time to time with the SEC. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations unless the securities laws require us to do so.

Company Overview

Our Company

Cornerstone Building Brands, Inc. (“Cornerstone Building Brands”, together with its subsidiaries, unless the context requires otherwise, the “Company,” “we,” “us” or “our”) is a holding company incorporated in Delaware. We are the largest manufacturer of exterior building products in North America by sales and serve residential and commercial customers across both the new construction and repair and remodel markets.

Our operations are organized as three reportable segments: Aperture Solutions, Surface Solutions and Shelter Solutions. We have:

•One of the broadest product offerings and the most well-regarded brand portfolio in our industry. Our total addressable market is diverse and expands across multiple geographies, end markets, channels, customers and products providing us with significant benefits.


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•A leading market position in various North American markets we serve, including, among others, vinyl windows, vinyl siding, stone veneer installations, metal accessories, metal roofing and wall systems and engineered metal building systems.

•An extensive coast-to-coast network of manufacturing, distribution and branch office facilities throughout North America.

•A vertically integrated manufacturing process that enables us to deliver better service and positions us to be a cost-advantaged manufacturer.

We are mindful of the harmful effects of global climate change and the contributions to climate change from manufacturing operations and the end-use of building construction products. We have made and continue to make progress on our work related to ESG matters.

Merger Transaction

On July 25, 2022 and pursuant to an Agreement and Plan of Merger dated March 5, 2022 (the “Merger Agreement”) by and among the Company, Camelot Return Intermediate Holdings, LLC (“Camelot Parent”), and Camelot Return Merger Sub, Inc. (“Merger Sub”), investment funds managed by Clayton, Dubilier and Rice, LLC (“CD&R”) became the indirect owners of all the issued and outstanding shares of common stock of Cornerstone Building Brands. Pursuant to the Merger Agreement, Merger Sub merged with and into the Company (the “Merger”), with the Company surviving the Merger as a subsidiary of Camelot Parent (the “Surviving Corporation”). At the effective time of the Merger (the “Effective Time”), we became a privately held company and our shares were no longer traded on the New York Stock Exchange.

Non-GAAP Financial Measures

We use several measures derived from consolidated financial information, but not presented in our Condensed Consolidated Financial Statements prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). These measures are considered non-GAAP financial measures. Specifically, in this report, we refer to adjusted EBITDA and adjusted EBITDA as a percentage of net sales which are non-GAAP financial measures (collectively, our “non-GAAP financial measures”). Our non-GAAP financial measures are not intended to replace the presentation of the comparable measures under U.S. GAAP. However, we believe the presentation of the non-GAAP financial measures, when considered together with the comparable U.S. GAAP financial measure, along with a reconciliation to its respective U.S. GAAP financial measure, enables investors to better understand the factors and trends affecting our underlying business that could not be obtained absent these disclosures. Additionally, we believe that the presentation of our non-GAAP financial measures enables investors to evaluate trends in the business excluding certain items which are not entirely a result of our core operations.

Furthermore, the presentation of these non-GAAP financial measures supplements other metrics we use to internally evaluate our business and facilitates the comparison of past and present operations. The non-GAAP financial measures we use may differ from non-GAAP financial measures used by other companies, and other companies may not define non-GAAP financial measures we use in the same way, even if similarly titled.

Predecessor and Successor Periods

The Management Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides an overview of our financial condition as of April 1, 2023 and the results of operations for the periods subsequent to July 25, 2022 (“Successor”) and for periods prior to July 25, 2022 (“Predecessor”). Our Condensed Consolidated Statements of (Loss) Income as reported in our Condensed Consolidated Financial Statements for these periods are prepared in accordance with U.S. GAAP.


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Reconciliation of Net (Loss) Income to Adjusted EBITDA and Adjusted EBITDA as a Percentage of Net Sales

The following table presents the reconciliation of net income (loss) to Adjusted EBITDA and computes Adjusted EBITDA as a percentage of net sales:


	Successor			Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023			Three Months Ended April 2, 2022
Net (loss) income	$	(28,815)		$	102,283
Depreciation and amortization	72,662			73,932
Interest expense	94,111			44,106
Income tax (benefit) provision	(8,609)			34,366
Earnings before interest, income taxes, depreciation and amortization	129,349			254,687
Strategic development and acquisition related costs	7,622			4,791
Asset impairments	—			368
Gain on legal settlements	—			(76,575)
Long-term incentive plan compensation(1)	(2,355)			11,451
Foreign exchange gain	(2,017)			(1,444)
Loss on extinguishment of debt	563			—
Employee separation and facility closure charges	8,822			304
Other (income) expense, net	(1,173)			5
Other	369			328
Adjusted EBITDA(2)	$	141,180		$	193,915
Adjusted EBITDA as a percentage of net sales	11.0		%	12.4		%

(1)For the three months ended April 1, 2023, the Company recognized a gain of $4.8 million from awards that were granted prior to the Merger (“Pre-Merger Awards”), partially offset by $2.5 million of expense from incentive units. The gain recognized on the Pre-Merger Awards during the three months ended April 1, 2023 related to the Company updating its vesting expectations for certain performance-based awards which have a range of payouts based on an EBITDA-based metric.

(2)The above periods, to the extent applicable, exclude the operations of divestitures as noted below in the “Impact of Divestitures” section.

Seasonality

Our sales volume is generally higher during our second and third quarters, which is historically the peak season for construction and remodeling in North America. Seasonal variations in our operational results may be negatively impacted by inclement weather and other conditions. Working capital requirements have generally been greatest during the first half of our fiscal year due to the timing of the buildup of inventory to support the heavier construction season. In our Shelter Solutions reportable segment, low-rise building application construction typically lags housing cycles by 12 to 24 months.

Impact of Divestitures

In our MD&A, the impact of divestitures, when presented, is quantified as the portion of the preceding twelve months post- or pre-transaction where no comparable period is available. Specifically, in our Shelter Solutions reportable segment, we completed the sale of our coil coatings business in June 2022.


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Results of Operations

The following table represents key results of operations on a consolidated basis for the interim periods indicated, and the changes between periods:


	Successor			Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023			Three Months Ended April 2, 2022
Net sales	$	1,279,088		$	1,566,838
Gross profit	281,861			333,907
% of net sales	22.0		%	21.3		%
Selling, general and administrative expenses	227,801			231,166
% of net sales	17.8		%	14.8		%
Gain on legal settlements	—			(76,575)
Income from operations	54,060			179,316
Interest expense	(94,111)			(44,106)
Foreign exchange gain	2,017			1,444
Loss on extinguishment of debt	(563)			—
Other income (expense), net	1,173			(5)
(Loss) income before income taxes	(37,424)			136,649
Income tax (benefit) provision	(8,609)			34,366
Net (loss) income	$	(28,815)		$	102,283
Non-GAAP financial measures*:
Adjusted EBITDA	$	141,180		$	193,915
Adjusted EBITDA as a percentage of net sales	11.0		%	12.4		%
* Refer to Non-GAAP Financial Measures for further discussion.

Net sales decreased $287.8 million, for the three months ended April 1, 2023 or 18.4% compared to the three months ended April 2, 2022 mainly due to lower volume across all reportable segments and the impact from the strategic divestiture of our coil coatings business in June 2022, partially offset by pricing actions to offset inflationary impacts.

Gross profit as a percentage of net sales was 22.0% for the three months ended April 1, 2023, compared to 21.3% for the three months ended April 2, 2022. This improvement was mainly due to materials cost deflation, partially offset by the effect of lower volume.

Selling, general and administrative expenses decreased $3.4 million, or 1.5%, for the three months ended April 1, 2023 mainly due to the impact from the strategic divestiture of our coil coatings business in June 2022.

Gain on legal settlements consists of a gain recognized in March 2022 of $76.6 million related to shareholder litigation.


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Interest expense increased by $50.0 million for the three months ended April 1, 2023. The following table sets forth the components of interest expense:


	Successor		Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Interest expense on outstanding borrowings(1)	$	80,179	$	32,329
Interest (income) expense attributable to interest rate swaps	(6,044)		10,073
Amortization of debt discount, debt issuance costs and purchase accounting fair value adjustment	19,768		1,640
Other	208		64
Total interest expense	$	94,111	$	44,106

(1)The incremental interest expense incurred for the three months ended April 1, 2023 compared to the three months ended April 2, 2022 is mainly a result of the additional financing obtained to consummate the Merger.

Loss on extinguishment of debt includes a loss totaling $0.6 million which included the write-off of associated unamortized debt discount and deferred financing costs in the amount of $6.8 million related to the repurchase of $21.7 million aggregate principal of our 6.125% senior notes recognized for the three months ended April 1, 2023.

Income tax (benefit) provision for the three months ended April 1, 2023 decreased mainly due to lower pre-tax earnings for the reasons discussed above.

Reportable Segment Results of Operations

The following table sets forth the continuing results of operations for our reportable segments:


	Successor		Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Net sales
Aperture Solutions	$	604,569	$	702,110
Surface Solutions	268,591		332,990
Shelter Solutions	405,928		531,738
Total net sales	$	1,279,088	$	1,566,838

Adjusted reportable segment EBITDA*
Aperture Solutions	$	64,793	$	82,379
Surface Solutions	26,307		56,472
Shelter Solutions	83,414		89,568
Corporate and Other	(47,792)		24,829
Depreciation and amortization	(72,662)		(73,932)
Income from operations	$	54,060	$	179,316
* Refer to Non-GAAP Financial Measures for further discussion.


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Aperture Solutions

The following table sets forth the continuing results of operations for the Aperture Solutions reportable segment:


	Successor			Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023			Three Months Ended April 2, 2022
Net sales	$	604,569		$	702,110
Adjusted reportable segment EBITDA*	64,793			82,379
% of net sales	10.7		%	11.7		%
Depreciation and amortization	$	35,925		$	35,130
* Refer to Non-GAAP Financial Measures for further discussion

Net sales decreased $97.5 million, or 13.9%, for the three months ended April 1, 2023 mainly due to a decrease in volume, partially offset by favorable pricing actions to offset inflationary impacts and support value differentiation.

Adjusted reportable segment EBITDA for the three months ended April 1, 2023 decreased $17.6 million mainly due to lower volume and manufacturing productivity net inefficiencies, partially offset by favorable pricing actions to offset inflationary impacts and support value differentiation.

Surface Solutions

The following table sets forth the continuing results of operations for the Surface Solutions reportable segment:


	Successor			Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023			Three Months Ended April 2, 2022
Net sales	$	268,591		$	332,990
Adjusted reportable segment EBITDA*	26,307			56,472
% of net sales	9.8		%	17.0		%
Depreciation and amortization	$	29,333		$	29,062
* Refer to Non-GAAP Financial Measures for further discussion

Net sales for the three months ended April 1, 2023 decreased $64.4 million, or 19.3%, mainly driven by a decrease in volume across both the siding and stone veneer product categories, as well as unfavorable price mix.

Adjusted reportable segment EBITDA for the three months ended April 1, 2023 decreased $30.2 million mainly due to lower volume and unfavorable price mix, net of inflation, partially offset by manufacturing productivity net efficiencies.

Shelter Solutions

The following table sets forth the continuing results of operations for the Shelter Solutions reportable segment:


	Successor			Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023			Three Months Ended April 2, 2022
Net sales	$	405,928		$	531,738
Adjusted reportable segment EBITDA*	83,414			89,568
% of net sales	20.5		%	16.8		%
Depreciation and amortization	$	5,800		$	8,168
* Refer to Non-GAAP Financial Measures for further discussion

Net sales for the three months ended April 1, 2023 decreased $125.8 million, or 23.7%, mainly due the impact from the strategic divestiture of our coil coatings business in June 2022, as well as lower volume and unfavorable price mix.


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Adjusted reportable segment EBITDA for the three months ended April 1, 2023 decreased $6.2 million mainly from the strategic divestiture of our coil coatings business in June 2022 and lower volume. This was partially offset by favorable price mix, net of inflation, due to materials cost deflation and manufacturing productivity net efficiencies.

Corporate and Other

The following table sets forth Corporate and other:


	Successor		Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Corporate costs	$	33,334	$	34,504
Strategic development and acquisition related costs	7,622		4,791
Asset impairments	—		368
Gain on legal settlements	—		(76,575)
Long-term incentive plan compensation	(2,355)		11,451
Employee separation and facility closure charges	8,822		304
Other	369		328
Total Corporate and other	$	47,792	$	(24,829)

Corporate costs for the three months ended April 1, 2023 decreased $1.2 million principally on lower compensation and personnel costs.

Depreciation and Amortization


	Successor		Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Total depreciation and amortization	$	72,662	$	73,932

Liquidity and Capital Resources

Our main liquidity and capital resource needs are payments to service our debt, ongoing operations and working capital requirements, capital expenditures and the cost of acquisitions. Our primary source of liquidity is cash generated from our continuing operations, as well as borrowings under our credit facilities. We believe that funds provided by these sources will be adequate to meet our liquidity and capital resource needs for at least the next 12 months under current operating conditions.

We may from time to time take steps to reduce our debt. These actions may include repurchases or opportunistic refinancing of debt. The amount of debt, if any, that may be repurchased or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our affiliates may also purchase our debt from time to time, through open market purchases or other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with the terms of such debt, and we would continue to reflect the debt as outstanding in our condensed consolidated balance sheets.


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The following table sets forth our total net liquidity position as of April 1, 2023:


(Amounts in thousands)	Amount
Cash and cash equivalents	$	379,231
Revolving credit facilities:
Asset-based lending facility(1)	850,000
Cash flow revolving facility	115,000
First-in-last-out tranche asset-based lending facility(1)	95,000
Total revolving credit facilities	1,060,000
Less:
Debt issued under the facilities	—
Letters of credit outstanding and priority payables	47,000
Net credit facility	1,013,000
Net liquidity	$	1,392,231

(1) Borrowing availability under the ABL Facilities is determined based on specified percentages of the value of eligible inventory, accounts receivable, less certain allowances and subject to certain other adjustments as set forth in the ABL Credit Agreement. Availability is also reduced by issuance of letters of credit.

Cash and cash equivalents excludes amounts held as restricted cash as of April 1, 2023 totaling $0.5 million.

Cash Flows


	Successor		Predecessor
(Amounts in thousands)	Three Months Ended April 1, 2023		Three Months Ended April 2, 2022
Net cash (used in) provided by operating activities	$	(110,571)	$	190,106
Net cash used in investing activities	(41,706)		(28,910)
Net cash flows used in financing activities	(22,000)		(13,500)

Net Cash (Used In) Provided by Operating Activities

Net cash provided by operating activities consists mainly of: (i) cash collections on credit sales to our customers, (ii) purchases of commodity based raw materials, (iii) labor and other employee-related expenditures, (iv) other non-labor costs, such as, among other items, supplies, insurance, advertising and marketing costs, (v) interest paid on our long-term debt, and (vi) payments for income taxes.

Net cash used in operating activities was $110.6 million, a decrease from the $190.1 million provided by operations in the prior year, resulted from a decrease in operating working capital mainly due to an increase in payments made to satisfy employee-related liabilities, including short-term and long-term incentive plan payouts, and lower earnings generation for the three months ended April 1, 2023 compared to the three months ended April 2, 2022.

Net Cash Used In Investing Activities

Our main uses of cash for investing activities are for payments for property and equipment and acquisitions of businesses.

Net cash used in investing activities was $41.7 million for the three months ended April 1, 2023 compared to $28.9 million used in investing activities for the three months ended April 2, 2022. The $12.8 million increase is mainly driven by additional capital expenditures for the three months ended April 1, 2023 compared to the three months ended April 2, 2022.

Net Cash Used In Financing Activities

Our main uses of cash for financing activities include activity to consummate the merger, repurchases and payments on long-term debt, distributions to owners, and payments for financing fees. Our main sources of cash from financing activities include the proceeds from issuances of debt and contributions from owners.


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Net cash used in financing activities was $22.0 million for the three months ended April 1, 2023 compared to $13.5 million used in financing activities for the three months ended April 2, 2022. This $8.5 million increase is mainly driven by the payment of $15.5 million for the repurchase of an aggregate principal amount of $21.7 million of our 6.125% Senior Notes during the three months ended April 1, 2023, partially offset by $3.3 million of payments related to the financing component of interest rate swaps during the three months ended April 2, 2022.

Contingent Liabilities and Commitments

Leases

We have leases for certain manufacturing, warehouse, distribution locations, offices, vehicles and equipment. As of April 1, 2023 the Company had total future lease payments of $512.3 million, with $58.9 million payable within 12 months.

Debt

We have certain long-term debt instruments outstanding. As of April 1, 2023 the Company had total future payments of $3.9 billion, with $29.0 million payable within 12 months. See Note 7 — Long-Term Debt in the Notes to the Condensed Consolidated Financial Statements for additional information.

Critical Accounting Estimates

There have been no material changes in our critical accounting policies and estimates during the three months ended April 1, 2023. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the Company’s critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in our exposure to market risk during the three months ended April 1, 2023. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the Company’s market risks.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of April 1, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures by a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of April 1, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level.

Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended April 1, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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CORNERSTONE BUILDING BRANDS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, “Condensed Consolidated Financial Statements”, Note 12 — Commitments and Contingencies, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and information provided elsewhere in this report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. Except for such additional information, we believe there have been no other material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

As of July 25, 2022, the Company’s common stock is no longer publicly traded either on a stock exchange or in the over-the-counter market.


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Item 6. Exhibits.

Index to Exhibits


Exhibit No.						Description
*10.1						Fourth Amendment to Cash Flow Credit Agreement, dated as of April 11, 2023, by and among the Company, the subsidiary guarantors party thereto, the several banks and other financial institutions party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.
*31.1						Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
*31.2						Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
**32.1						Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
**32.2						Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
*101.INS						Inline XBRL Instance Document
*101.SCH						Inline XBRL Taxonomy Extension Schema Document
*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF						Inline XBRL Taxonomy Definition Linkbase Document
*101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


			*			Filed herewith
			**			Furnished herewith


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CORNERSTONE BUILDING BRANDS, INC.

Date: May 5, 2023	By:	/s/ Jeffrey S. Lee
		Jeffrey S. Lee
		Executive Vice President and Chief Financial Officer


Date: May 5, 2023	By:	/s/ Wayne F. Irmiter
		Wayne F. Irmiter
		Senior Vice President and Chief Accounting Officer