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: ~~October~~April 3, ~~2020~~2021


☐			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)

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 ý No ¨

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	☐	Accelerated filer	ý
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

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock $0.01 par value per share	CNR	New York Stock Exchange

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value - ~~125,101,514~~125,708,451 shares as of ~~November 3, 2020.~~May 4, 2021.

TABLE OF CONTENTS


		PAGE
	Part I — Financial Information
Item 1.	Unaudited Consolidated Financial Statements	1
	Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020	1
	Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Nine~~ Months Ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020	2
	Consolidated Balance Sheets as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019~~2020	3
	Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020	4
	Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020	5
	Notes to Unaudited Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3129
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4341
Item 4.	Controls and Procedures	4442

	Part II — Other Information
Item 1.	Legal Proceedings	4543
Item 1A.	Risk Factors	4543
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4543
Item 6.	Exhibits	4644

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Sales	Sales	$	1,227,253	$	1,285,043	$	3,426,000	$	3,645,332	Sales		$	1,267,032	$	1,113,811
Cost of sales	Cost of sales	929,751		975,240		2,642,880		2,844,949		Cost of sales		1,007,303		882,924
Gross profit	Gross profit	297,502		309,803		783,120		800,383		Gross profit		259,729		230,887
Selling, general and administrative expenses	Selling, general and administrative expenses	137,250		154,034		436,575		466,368		Selling, general and administrative expenses		153,168		164,954
Intangible asset amortization	Intangible asset amortization	45,446		44,725		135,547		132,699		Intangible asset amortization		46,202		44,861
Restructuring and impairment charges, net	Restructuring and impairment charges, net	2,918		4,984		32,164		15,522		Restructuring and impairment charges, net		1,838		13,835
Strategic development and acquisition related costs	Strategic development and acquisition related costs	7,909		10,500		13,550		36,668		Strategic development and acquisition related costs		3,313		4,857
Goodwill impairment	Goodwill impairment	0		0		503,171		0		Goodwill impairment		0		503,171
Income (loss) from operations	Income (loss) from operations	103,979		95,560		(337,887)		149,126		Income (loss) from operations		55,208		(500,791)
Interest income	Interest income	328		155		1,007		491		Interest income		117		338
Interest expense	Interest expense	(51,519)		(56,549)		(158,738)		(173,134)		Interest expense		(56,499)		(54,835)
Foreign exchange gain (loss)		812		(616)		(1,300)		1,084
Foreign exchange loss										Foreign exchange loss		(26)		(4,137)
Other income (expense), net	Other income (expense), net	(23)		717		(25)		665		Other income (expense), net		337		(662)
Income (loss) before income taxes		53,577		39,267		(496,943)		(21,768)
Loss before income taxes										Loss before income taxes		(863)		(560,087)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	23,061		14,103		(12,285)		(4,448)		Provision (benefit) for income taxes		792		(18,014)
Net income (loss)		30,516		25,164		(484,658)		(17,320)
Net loss										Net loss		(1,655)		(542,073)
Net income allocated to participating securities	Net income allocated to participating securities	(488)		(374)		0		0		Net income allocated to participating securities		0		0
Net income (loss) applicable to common shares		$	30,028	$	24,790	$	(484,658)	$	(17,320)
Income (loss) per common share:
Net loss applicable to common shares										Net loss applicable to common shares		$	(1,655)	$	(542,073)
Loss per common share:										Loss per common share:
Basic	Basic	$	0.24	$	0.20	$	(3.86)	$	(0.14)	Basic		$	(0.01)	$	(4.30)
Diluted	Diluted	$	0.24	$	0.20	$	(3.86)	$	(0.14)	Diluted		$	(0.01)	$	(4.30)
Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:									Weighted average number of common shares outstanding:
Basic	Basic	125,100		125,557		125,655		125,526		Basic		125,506		126,093
Diluted	Diluted	125,289		125,558		125,655		125,526		Diluted		125,506		126,093

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Comprehensive income (loss):	Comprehensive income (loss):									Comprehensive income (loss):
Net income (loss)		$	30,516	$	25,164	$	(484,658)	$	(17,320)
Net loss										Net loss		$	(1,655)	$	(542,073)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign exchange translation gains (losses)	Foreign exchange translation gains (losses)	7,354		(1,862)		6,357		4,278		Foreign exchange translation gains (losses)		6,113		(9,563)
Unrealized gain (loss) on derivative instruments, net of income tax of $(426), $2,054, $12,788 and $9,267, respectively		194		(6,858)		(41,711)		(29,604)
Unrealized gain (loss) on derivative instruments, net of income tax of $(2,690) and $12,032, respectively										Unrealized gain (loss) on derivative instruments, net of income tax of $(2,690) and $12,032, respectively		9,137		(38,176)

Other comprehensive income (loss)	Other comprehensive income (loss)	7,548		(8,720)		(35,354)		(25,326)		Other comprehensive income (loss)		15,250		(47,739)
Comprehensive income (loss)	Comprehensive income (loss)	$	38,064	$	16,444	$	(520,012)	$	(42,646)	Comprehensive income (loss)		$	13,595	$	(589,812)

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


		October 3, 2020		December 31, 2019			April 3, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	627,603	$	98,386	Cash and cash equivalents	$	666,717	$	674,255
Restricted cash	Restricted cash	6,223		3,921		Restricted cash	6,223		6,223
Accounts receivable, less allowances of $13,411 and $9,962, respectively		578,684		491,740
Accounts receivable, less allowances of $14,427 and $13,313, respectively						Accounts receivable, less allowances of $14,427 and $13,313, respectively	601,476		554,649
Inventories, net	Inventories, net	408,897		439,194		Inventories, net	494,092		431,937
Income taxes receivable	Income taxes receivable	34,310		48,466		Income taxes receivable	31,403		39,379
Investments in debt and equity securities, at market	Investments in debt and equity securities, at market	1,917		3,776		Investments in debt and equity securities, at market	2,527		2,333
Prepaid expenses and other	Prepaid expenses and other	73,096		78,516		Prepaid expenses and other	84,127		77,751
Assets held for sale	Assets held for sale	5,087		1,750		Assets held for sale	3,909		4,644
Total current assets	Total current assets	1,735,817		1,165,749		Total current assets	1,890,474		1,791,171
Property, plant and equipment, less accumulated depreciation of $619,650 and $556,143, respectively		635,904		652,841
Property, plant and equipment, less accumulated depreciation of $670,072 and $644,308, respectively						Property, plant and equipment, less accumulated depreciation of $670,072 and $644,308, respectively	628,198		631,821
Lease right-of-use assets	Lease right-of-use assets	277,037		316,155		Lease right-of-use assets	260,424		264,107
Goodwill	Goodwill	1,189,992		1,669,594		Goodwill	1,195,983		1,194,729
Intangible assets, net	Intangible assets, net	1,623,133		1,740,700		Intangible assets, net	1,540,470		1,584,604
Deferred income taxes	Deferred income taxes	1,139		7,510		Deferred income taxes	2,411		1,867
Other assets, net	Other assets, net	11,959		11,797		Other assets, net	10,346		10,191
Total assets	Total assets	$	5,474,981	$	5,564,346	Total assets	$	5,528,306	$	5,478,490
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	25,600	$	25,600	Current portion of long-term debt	$	25,600	$	25,600
Accounts payable	Accounts payable	229,353		205,629		Accounts payable	260,930		211,441
Accrued compensation and benefits	Accrued compensation and benefits	78,269		92,130		Accrued compensation and benefits	73,962		81,548
Accrued interest	Accrued interest	32,001		19,070		Accrued interest	38,515		25,485
Accrued income taxes	Accrued income taxes	2,730		0		Accrued income taxes	5,650		5,060
Current portion of lease liabilities	Current portion of lease liabilities	69,408		72,428		Current portion of lease liabilities	69,042		70,125
Other accrued expenses	Other accrued expenses	258,890		233,687		Other accrued expenses	255,288		247,893
Total current liabilities	Total current liabilities	696,251		648,544		Total current liabilities	728,987		667,152
Long-term debt	Long-term debt	3,567,302		3,156,924		Long-term debt	3,559,339		3,563,429
Deferred income taxes	Deferred income taxes	244,468		291,987		Deferred income taxes	263,641		269,792
Long-term lease liabilities	Long-term lease liabilities	210,446		243,780		Long-term lease liabilities	194,672		198,875
Other long-term liabilities	Other long-term liabilities	336,224		287,793		Other long-term liabilities	324,020		337,437
Total long-term liabilities	Total long-term liabilities	4,358,440		3,980,484		Total long-term liabilities	4,341,672		4,369,533
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.01 par value; 200,000,000 authorized; 125,128,804 and 125,101,519 shares issued and outstanding at October 3, 2020, respectively; and 126,110,000 and 126,054,487 shares issued and outstanding at December 31, 2019, respectively		1,252		1,261
Common stock, $0.01 par value; 200,000,000 authorized; 125,807,655 and 125,676,292 shares issued and outstanding at April 3, 2021, respectively; and 125,425,931 and 125,400,599 shares issued and outstanding at December 31, 2020, respectively						Common stock, $0.01 par value; 200,000,000 authorized; 125,807,655 and 125,676,292 shares issued and outstanding at April 3, 2021, respectively; and 125,425,931 and 125,400,599 shares issued and outstanding at December 31, 2020, respectively	1,258		1,255
Additional paid-in capital	Additional paid-in capital	1,253,877		1,248,787		Additional paid-in capital	1,260,946		1,257,262
Accumulated deficit	Accumulated deficit	(766,565)		(281,229)		Accumulated deficit	(766,340)		(764,685)
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(67,752)		(32,398)		Accumulated other comprehensive loss, net	(36,267)		(51,517)
Treasury stock, at cost (27,285 and 55,513 shares at October 3, 2020 and December 31, 2019, respectively)		(522)		(1,103)
Treasury stock, at cost (131,363 and 25,332 shares at April 3, 2021 and December 31, 2020, respectively)						Treasury stock, at cost (131,363 and 25,332 shares at April 3, 2021 and December 31, 2020, respectively)	(1,950)		(510)
Total stockholders’ equity	Total stockholders’ equity	420,290		935,318		Total stockholders’ equity	457,647		441,805
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,474,981	$	5,564,346	Total liabilities and stockholders’ equity	$	5,528,306	$	5,478,490

See accompanying notes to consolidated financial statements.


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

		Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019			April 3, 2021		April 4, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(484,658)	$	(17,320)	Net loss	$	(1,655)	$	(542,073)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:					Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	212,413		191,485		Depreciation and amortization	72,615		69,769
Non-cash interest expense	Non-cash interest expense	6,948		6,233		Non-cash interest expense	2,314		2,274
Share-based compensation expense	Share-based compensation expense	12,568		10,613		Share-based compensation expense	3,302		3,387
Non-cash fair value premium on purchased inventory		0		16,249
Goodwill impairment	Goodwill impairment	503,171		0		Goodwill impairment	0		503,171
Asset impairment	Asset impairment	3,490		0		Asset impairment	493		3,079
Loss (gain) on asset sales, net		710		(335)
Provision for doubtful accounts		3,762		(492)

Provision for credit losses						Provision for credit losses	676		725
Deferred income taxes	Deferred income taxes	(27,052)		(45,192)		Deferred income taxes	(9,729)		(35,734)
Changes in operating assets and liabilities, net of effect of acquisitions:	Changes in operating assets and liabilities, net of effect of acquisitions:					Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	Accounts receivable	(84,309)		(138,329)		Accounts receivable	(47,157)		20,532
Inventories	Inventories	30,980		63,327		Inventories	(62,028)		(20,724)
Income taxes	Income taxes	16,886		1,256		Income taxes	7,976		18,212
Prepaid expenses and other	Prepaid expenses and other	6,246		(4,374)		Prepaid expenses and other	(7,755)		1,554
Accounts payable	Accounts payable	22,669		8,486		Accounts payable	49,424		12,461
Accrued expenses	Accrued expenses	12,920		(21,005)		Accrued expenses	8,597		(40,662)

Other, net	Other, net	132		(2,783)		Other, net	2,958		1,805
Net cash provided by operating activities		236,876		67,819
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	20,031		(2,224)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(41,841)		(179,184)		Acquisitions, net of cash acquired	(180)		(39,857)
Capital expenditures	Capital expenditures	(62,535)		(86,364)		Capital expenditures	(21,230)		(27,567)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	1,538		873		Proceeds from sale of property, plant and equipment	715		0
Net cash used in investing activities	Net cash used in investing activities	(102,838)		(264,675)		Net cash used in investing activities	(20,695)		(67,424)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from stock options exercised						Proceeds from stock options exercised	486		0
Proceeds from ABL facility						Proceeds from ABL facility	0		345,000

Proceeds from ABL facility		345,000		290,000
Payments on ABL facility		(415,000)		(120,000)
Proceeds from cash flow revolver	Proceeds from cash flow revolver	115,000		0		Proceeds from cash flow revolver	0		115,000
Payments on cash flow revolver		(115,000)		0

Payments on term loan	Payments on term loan	(19,215)		(12,810)		Payments on term loan	(6,404)		(6,405)
Proceeds from senior notes		500,000		0

Payments of financing costs		(6,905)		0

Payments related to tax withholding for share-based compensation	Payments related to tax withholding for share-based compensation	(478)		(231)		Payments related to tax withholding for share-based compensation	(1,541)		(327)
Purchases of treasury stock		(6,428)		0

Net cash provided by financing activities		396,974		156,959
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(7,459)		453,268
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	507		1,406		Effect of exchange rate changes on cash and cash equivalents	585		(2,302)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	531,519		(38,491)		Net increase (decrease) in cash, cash equivalents and restricted cash	(7,538)		381,318
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	102,307		147,607		Cash, cash equivalents and restricted cash at beginning of period	680,478		102,307
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	633,826	$	109,116	Cash, cash equivalents and restricted cash at end of period	$	672,940	$	483,625
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Taxes paid (refunded), net		$	(1,881)	$	47,881
Interest paid, net of amounts capitalized						Interest paid, net of amounts capitalized	$	40,913	$	36,931
Taxes paid, net						Taxes paid, net	$	1,949	$	392

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Fiscal Quarters Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Stockholders’ Equity
Shares Amount Shares Amount
Balance, July 4, 2020 125,122,988 $ 1,252 $ 1,249,852 $ (797,081) $ (75,300) (25,650) $ (511) $ 378,212
Treasury stock purchases — — — — — (1,635) (11) (11)
Issuance of restricted stock 5,816 — — — — — — —
Other comprehensive income — — — — 7,548 — — 7,548
Share-based compensation — — 4,025 — — — — 4,025
Net income — — — 30,516 — — — 30,516
Balance, October 3, 2020 125,128,804 $ 1,252 $ 1,253,877 $ (766,565) $ (67,752) (27,285) $ (522) $ 420,290
Balance, June 29, 2019 125,588,427 $ 1,256 $ 1,243,897 $ (308,323) $ (27,419) (69,315) $ (1,207) $ 908,204
Treasury stock purchases — — — — — (12,612) (64) (64)
Retirement of treasury shares (26,826) — (171) — — 26,826 171 —
Issuance of restricted stock 46,178 1 (1) — — — — —
Issuance of common stock for the Ply Gem merger 13,731 — 167 — — — — 167
Other comprehensive loss — — — — (8,720) — — (8,720)
Share-based compensation — — 3,134 — — — — 3,134
Net income — — — 25,164 — — — 25,164
Balance, September 28, 2019 125,621,510 $ 1,257 $ 1,247,026 $ (283,159) $ (36,139) (55,101) $ (1,100) $ 927,885

~~See accompanying notes to consolidated financial statements.~~


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

Fiscal Year to Date Periods		Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)		Treasury Stock					Stockholders’ Equity
		Shares	Amount								Shares			Amount				Common Stock						Additional Paid-In Capital			Retained Earnings (Deficit)				Accumulated Other Comprehensive Income (Loss)				Treasury Stock								Stockholders’ Equity
December 31, 2019		126,110,000	$	1,261			$	1,248,787				$	(281,229)	$	(32,398)	(55,513)					$	(1,103)			$	935,318
																							Shares			Amount			Additional Paid-In Capital						Retained Earnings (Deficit)				Accumulated Other Comprehensive Income (Loss)						Shares			Amount			Stockholders’ Equity
December 31, 2020																					December 31, 2020		125,425,931		$	1,255										(25,332)							$	(510)
Treasury stock purchases																					Treasury stock purchases		—		—			—						—				—				(111,868)					(1,541)			(1,541)
Retirement of treasury shares																					Retirement of treasury shares		(1,576)		0			(15)				—				—				1,576					15			0
Issuance of restricted stock																					Issuance of restricted stock		338,939		3			(3)				—				—				—					—			0

Stock options exercised																					Stock options exercised		44,361		—			486				—				—				—					—			486
Other comprehensive income																					Other comprehensive income		—		—			—				—				15,250				—					—			15,250
Deferred compensation obligation																					Deferred compensation obligation		—		0			(86)				—				—				4,261					86			0
Share-based compensation																					Share-based compensation		—		—			3,302				—				—				—					—			3,302

Net loss																					Net loss		—		—			—				(1,655)				—				—					—			(1,655)
Balance, April 3, 2021																					Balance, April 3, 2021		125,807,655		$	1,258		$		1,260,946			$	(766,340)			$	(36,267)			(131,363)					$	(1,950)		$	457,647

Balance, December 31, 2019																					Balance, December 31, 2019		126,110,000		$	1,261		$	1,248,787			$	(281,229)			$	(32,398)			(55,513)					$	(1,103)		$	935,318
Treasury stock purchases	Treasury stock purchases	—	—		—				—			—		(1,168,514)		(6,906)			(6,906)		Treasury stock purchases		—		—			—				—				—				(37,794)					(327)			(327)
Retirement of treasury shares	Retirement of treasury shares	(1,166,973)	(12)		(6,883)				—			—		1,166,973		6,895			—		Retirement of treasury shares		(38,206)		(1)			(328)				—				—				38,206					329			0
Issuance of restricted stock	Issuance of restricted stock	185,777	2		(2)				—			—		—		—			—		Issuance of restricted stock		95,851		1			(1)				—				—				—					—			0

Other comprehensive loss	Other comprehensive loss	—	—		—				—			(35,354)		—		—			(35,354)		Other comprehensive loss		—		—			—				—				(47,739)				—					—			(47,739)
Deferred compensation obligation	Deferred compensation obligation	—	1		(593)				—			—		29,769		592			—		Deferred compensation obligation		—		1			(593)				—				—				29,769					592			0
Share-based compensation	Share-based compensation	—	—		12,568				—			—		—		—			12,568		Share-based compensation		—		—			3,387				—				—				—					—			3,387
Cumulative effect of accounting change	Cumulative effect of accounting change	—	—		—				(678)			—		—		—			(678)		Cumulative effect of accounting change		—		—			—				(678)				—				—					—			(678)
Net loss	Net loss	—	—		—				(484,658)			—		—		—			(484,658)		Net loss		—		—			—				(542,073)				—				—					—			(542,073)
Balance, October 3, 2020		125,128,804	$	1,252	$	1,253,877			$	(766,565)		$	(67,752)	(27,285)		$	(522)		$	420,290
Balance, April 4, 2020																					Balance, April 4, 2020		126,167,645		$	1,262		$	1,251,252			$	(823,980)			$	(80,137)			(25,332)					$	(509)		$	347,888

Balance, December 31, 2018		125,583,159	$	1,256	$	1,237,056			$	(265,839)		$	(10,813)	(110,899)		$	(1,678)		$	959,982
Treasury stock purchases		—	—		—				—			—		(34,724)		(231)			(231)
Retirement of treasury shares		(84,810)	(1)		(722)				—			—		84,810		723			—
Issuance of restricted stock		109,430	2		(2)				—			—		—		—			—
Issuance of common stock for the Ply Gem merger		13,731	—		167				—			—		—		—			167

Other comprehensive loss		—	—		—				—			(25,326)		—		—			(25,326)
Deferred compensation obligation		—	—		(86)				—			—		5,712		86			—
Share-based compensation		—	—		10,613				—			—		—		—			10,613

Net loss		—	—		—				(17,320)			—		—		—			(17,320)
Balance, September 28, 2019		125,621,510	$	1,257	$	1,247,026			$	(283,159)		$	(36,139)	(55,101)		$	(1,100)		$	927,885

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~October~~April 3, ~~2020~~2021

(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements for Cornerstone Building Brands, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “Cornerstone,” ~~“NCI”,~~ “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present the Company’s financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, ~~2020~~2021 through ~~October~~April 3, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2020.~~

Certain reclassifications have been made to the prior period disaggregated revenue amounts in the notes to the consolidated financial statements to conform to the current presentation. The net effect of these reclassifications was not material to the consolidated financial statements (see disaggregated revenue table below).2021.

For additional information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (the “SEC”) on March ~~3, 2020.~~

On July 17, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ply Gem Parent, LLC (“Ply Gem”), and for certain limited purposes as set forth in the Merger Agreement, Clayton, Dubilier & Rice, LLC (“CD&R”), pursuant to which, at the closing of the merger, Ply Gem would be merged with and into NCI, with NCI continuing its existence as a corporation organized under the laws of the State of Delaware (the “Merger”). In connection with the Merger, 58,709,067 shares of NCI common stock were issued to the holders of all of the equity interests in Ply Gem (the “Stock Issuance”), representing approximately 47% of the total number of shares of NCI Common Stock outstanding following the consummation of the Merger on November 16, 2018. There are approximately 57,103 shares of NCI Common Stock of the original 58,709,067 that have not yet been issued pending holder identification and have been accrued as purchase consideration within other current liabilities in the consolidated balance sheet at October 3, 2020.4, 2021.

Reporting Periods

The Company’s current fiscal quarters are based on a four-four-five week calendar with periods ending on the Saturday of the last week in the quarter except that December 31st will always be the year-end date. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in thousands):


		October 3, 2020		December 31, 2019			April 3, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	627,603	$	98,386	Cash and cash equivalents	$	666,717	$	674,255
Restricted cash(1)	Restricted cash(1)	6,223		3,921		Restricted cash(1)	6,223		6,223
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	633,826	$	102,307	Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	672,940	$	680,478

(1)Restricted cash primarily relates to escrow balances held for an outstanding earn-out agreement and working capital and other indemnification agreements.

Accounts Receivables and Related Allowance

The Company reports accounts receivable net of the allowance for expected credit losses. Trade accounts receivable are the result of sales of vinyl windows, aluminum windows, vinyl siding, metal siding, injection molded products, metal building products, insulated metal panels, metal coating, ~~vinyl siding, metal siding, injection molded products, vinyl windows, aluminum windows,~~ and other products and services to customers throughout the United States and Canada and affiliated territories, including international builders who resell to end users. Sales are primarily denominated in U.S. dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process and we require payment prior to shipment for certain international shipments.

The Company establishes ~~reserves~~provision for ~~doubtful accounts~~expected credit losses based on ~~a customer by customer basis when we believe~~ the ~~required payment~~Company’s assessment of ~~specific~~the collectability of amounts owed ~~is unlikely~~ to ~~occur. Bad debt~~us by our customers. Such provisions are included in selling, general and administrative expenses. In establishing these reserves, 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 our customers. Our allowance for ~~doubtful accounts~~credit losses reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. ~~We determine past due status as of the contractual payment date.~~ Interest on delinquent accounts receivable is included in the trade accounts receivable balance and recognized as interest income when earned and collectability is reasonably assured. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance, all collection efforts have been exhausted, and/or any legal action taken by the Company has concluded.

The following table represents the rollforward of the ~~reserve~~allowance for ~~uncollectible accounts~~credit losses for the periods indicated (in thousands):


	~~Nine Months Ended~~
	~~October 3, 2020~~
~~Ending balance, December 31, 2019~~	$	~~9,962~~
~~Cumulative effect of accounting change(1)~~	~~678~~
~~Provision for expected credit losses~~	~~3,762~~
~~Amounts charged against allowance for credit losses, net of recoveries~~	~~(1,801)~~
~~Allowance for credit losses of acquired company at date of acquisition~~	~~810~~
~~Ending balance, October 3, 2020~~	$	~~13,411~~


	Three Months Ended
	April 3, 2021		April 4, 2020
Ending balance, prior period	$	13,313	$	9,962
Cumulative effect of accounting change(1)	0		678
Provision for expected credit losses	676		725
Amounts charged against allowance for credit losses, net of recoveries	438		(354)
Allowance for credit losses of acquired company at date of acquisition	0		810
Ending balance	$	14,427	$	11,821

(1)Cumulative effect of accounting change reflects the modified retrospective effect of adopting ASU 2016-13,, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments~~ ~~(See Note 2 —~~ ~~Accounting Pronouncements~~).Instruments.

Net Sales

~~The Company adopted Accounting Standards Update (“ASU”) No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ (“ASU 2014-09”), as of October 29, 2018. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards and GAAP. The core principle of this update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company enters into contracts that pertain to products, which are accounted for as separate performance obligations and are typically one year or less in duration. ~~The Company does~~Given the nature of the Company's sales arrangements, they do not require us to exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. The Company has elected to apply the practical expedient provided for in ASU No. 2014-09 and has not disclosed information regarding remaining performance obligations that have original expected durations of one year or less. Revenue is generally recognized when the product has shipped from our facility and control has transferred to the customer. For a portion of our business, when we process customer owned material, control is deemed to transfer to the customer as the processing is being completed.

~~Our~~The Company’s revenues are adjusted for variable consideration, which includes customer volume rebates and prompt payment discounts. ~~We measure~~The Company measures variable consideration by estimating expected outcomes using analysis and inputs based upon anticipated performance, historical data, and current and forecasted information. Customer returns are recorded as a reduction to sales on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Company generally estimates customer returns based upon the time lag that historically occurs between the sale date and the return date while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. Measurement of variable consideration is reviewed by management periodically and revenue is adjusted accordingly. We do not have significant financing components. The Company recognizes installation revenue, primarily within the stone veneer business, over the period for which the stone is installed, which is typically a very short duration.

Shipping and handling activities performed by us are considered activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.

In accordance with certain contractual arrangements, we receive payment from our customers in advance related to performance obligations that are to be satisfied in the future and recognize such payments as deferred revenue, primarily related to the ~~Company's~~Company’s weathertightness warranties (see Note 12 — Warranty).

A portion of the Company’s revenue, exclusively within the Commercial segment, includes multiple-element revenue arrangements due to multiple deliverables. Each deliverable is generally determined based on customer-specific manufacturing and delivery requirements. Because the separate deliverables have value to the customer on a stand-alone basis, they are typically considered separate units of accounting. A portion of the entire job order value is allocated to each unit of accounting. Revenue allocated to each deliverable is recognized upon shipment. The Company uses estimated selling price (“ESP”) based on underlying cost plus a reasonable margin to determine how to separate multiple-element revenue arrangements into separate units of accounting, and how to allocate the arrangement consideration among those separate units of accounting. The Company determines ESP based on normal pricing and discounting practices.

The following table presents disaggregated revenue disclosure details of net sales by segment (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Windows Net Sales Disaggregation:	Windows Net Sales Disaggregation:									Windows Net Sales Disaggregation:
Vinyl windows~~(1)~~	Vinyl windows~~(1)~~	$	465,472	$	473,202	$	1,283,337	$	1,334,747	Vinyl windows~~(1)~~		$	497,017	$	419,022
Aluminum windows~~(1)~~	Aluminum windows~~(1)~~	22,056		18,404		61,338		56,490		Aluminum windows~~(1)~~		20,280		19,476
Other~~(1)~~	Other~~(1)~~	13,786		12,732		33,364		43,342		Other~~(1)~~		9,966		9,952
Total	Total	$	501,314	$	504,338	$	1,378,039	$	1,434,579	Total		$	527,263	$	448,450

Siding Net Sales Disaggregation:	Siding Net Sales Disaggregation:									Siding Net Sales Disaggregation:
Vinyl siding	Vinyl siding	$	146,585	$	148,912	$	387,559	$	400,220	Vinyl siding		$	150,229	$	109,548
Metal	Metal	75,477		75,933		192,567		199,265		Metal		71,093		52,666
Injection molded	Injection molded	20,460		17,429		49,556		47,163		Injection molded		17,609		13,239
Stone	Stone	20,988		32,254		61,999		70,441		Stone		19,831		18,810
Other products & services(1)	Other products & services(1)	58,388		41,271		156,509		123,512		Other products & services(1)		57,629		46,780
Total	Total	$	321,898	$	315,799	$	848,190	$	840,601	Total		$	316,391	$	241,043

Commercial Net Sales Disaggregation:	Commercial Net Sales Disaggregation:									Commercial Net Sales Disaggregation:
Metal building products	Metal building products	$	281,339	$	320,028	$	842,863	$	914,623	Metal building products		$	299,938	$	292,436
Insulated metal panels	Insulated metal panels	89,088		109,322		260,410		332,403		Insulated metal panels		85,603		99,229
Metal coil coating	Metal coil coating	33,614		35,556		96,498		123,126		Metal coil coating		37,837		32,653
Total	Total	$	404,041	$	464,906	$	1,199,771	$	1,370,152	Total		$	423,378	$	424,318

Total Net Sales:	Total Net Sales:	$	1,227,253	$	1,285,043	$	3,426,000	$	3,645,332	Total Net Sales:		$	1,267,032	$	1,113,811

(1)~~Aluminum windows and other net sales for the three months ended September 28, 2019 includes $6.5 million and $1.4 million, respectively,~~Other products & services primarily consist of ~~net sales previously included in vinyl windows. Aluminum windows and other net sales for the nine months ended September 28, 2019 includes $16.8 million and $3.8 million, respectively,~~installation of ~~net sales previously included in vinyl windows.~~stone veneer products.

NOTE 2 — ACCOUNTING PRONOUNCEMENTS

Adopted ~~Accounting Pronouncements~~

~~In June 2016, the Financial Accounting Standards Board ("FASB") issued~~ ~~ASU 2016-13~~, ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~ This ASU requires an entity to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now incorporate forward-looking information based on expected losses to estimate credit losses. Effective January 1, 2020, the Company adopted this guidance on a modified retrospective basis, pursuant to which it recorded a $0.7 million adjustment to increase the opening balance of accumulated deficit as of January 1, 2020 for the impact of applying the new standard. The adjustment related to recording an incremental credit loss to the accounts receivable allowance for doubtful accounts at the beginning of the first period in which the accounting standard is effective. Additional credit loss disclosures are included in Note 1 — ~~Summary of Significant Accounting Policies~~.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement,~~ ~~which modifies disclosure requirements for fair value measurements under FASB Accounting Standards Codification ("ASC") 820,~~ ~~Fair Value Measurement.~~ ~~Effective January 1, 2020, the Company adopted this guidance. The application of ASU 2018-13 did not have a material effect on consolidated financial statements.~~

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans~~, which removes disclosures no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. Effective January 1, 2020, the Company adopted this guidance. The application of ASU 2018-14 did not have a material effect on consolidated financial statements.

~~Recent~~ Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ~~The~~Effective January 1, 2021, the Company ~~will be required to adopt this guidance in the annual and interim periods for our fiscal year ending December 31, 2021, with early adoption permitted. The Company is evaluating the impact of adopting~~adopted this guidance. The application of ASU 2019-12 did not have a material effect on the consolidated financial statements.

Recent Accounting Pronouncements

In March 2020, the FASB issued 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 ~~this ASU~~these ASUs are elective, apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform, and are effective as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of electing to apply the amendments in this guidance.

Additionally, there were various other accounting standards and interpretations issued that the Company has not yet been required to adopt, none of which is expected to have a material impact on the Company’s consolidated financial statements going forward.

NOTE 3 — ACQUISITIONS

~~Kleary~~2020 Acquisition

On March 2, 2020, the Company acquired 100% of the issued and outstanding shares of the common stock of Kleary Masonry, Inc. ~~("Kleary"~~(“Kleary”) for total consideration of $40.0 million, exclusive of the $2.0 million working capital adjustment that was finalized during the three months ended July 4, 2020. The transaction was financed with cash on hand and through borrowings under the Company’s asset-based revolving credit facility. Kleary primarily services residential customers with manufactured stone installations and commercial customers with manufactured wall installations in the Sacramento, California ~~area. Kleary's results are reported within the Siding business segment.~~

~~The acquisition of Kleary~~area, which strengthens the ~~Company's~~Company’s position as a market leader in stone veneer. ~~The Company accounted for~~Kleary’s results are reported within the ~~transaction as an acquisition in accordance with the provisions of ASC 805,~~ ~~Business Combinations, which results in a new valuation for the assets and liabilities of Kleary based upon fair values as of the closing date.~~

Siding segment.

The Company determined the fair value of the tangible and intangible assets and the liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values, as follows (in thousands):


Assets acquired:
Cash	$	143
Accounts receivable	~~7,235~~7,135
Inventories	670
Prepaid expenses and other current assets	277
Property, plant and equipment	1,042
Lease right of use assets	445
Intangible assets (trade names/customer relationships)	22,350
Goodwill	~~11,721~~12,539
~~Other assets~~	~~680~~
Total assets acquired	~~44,563~~44,601
Liabilities assumed:
Accounts payable	~~1,126~~1,149
Other accrued expenses	~~1,005~~1,020


Lease liabilities	339
Other long-term liabilities	109
Total liabilities assumed	~~2,579~~2,617
Net assets acquired	$	41,984

The ~~$11.7~~$12.5 million of goodwill from the Kleary acquisition was allocated to the Siding segment and ~~is expected to~~will be deductible for tax purposes. The goodwill is attributable to the workforce of the acquired business and the synergies expected to be realized.

~~During the three~~ The fair value of all assets acquired and ~~nine months ended October 3, 2020, the Company incurred $6.9 million and $8.1 million, respectively, of acquisition-related costs for Kleary, primarily~~ ~~consisting of a contingent earnout, which are recorded in strategic development and acquisition related costs in the Company’s consolidated statements of operations.~~

The final acquisition accounting allocation for the acquisition of Kleary remains subject to further adjustments. The specific accounts subject to ongoing acquisition accounting adjustments include accounts receivable, inventories, prepaid expenses and other current assets, goodwill, intangibles, accounts payable, accrued expenses, accrued warranties and other liabilities. Therefore, the measurement period remained open as of October 3, 2020, and the preliminary acquisition accounting allocation detailed above is subject to further adjustment. The Company anticipates completing these acquisition accounting adjustmentsliabilities assumed was finalized during the first quarter of ~~fiscal~~2021, which did not result in any adjustments during the quarter ended April 3, 2021.

Unaudited Pro Forma Financial Information

During the three and nine months ended October 3, 2020, Kleary contributed net sales of $13.3 million and $25.9 million, respectively, a net loss of $0.9 million and net income of $0.8 million, respectively, which has been included within the Company’s consolidated statement of operations. The following table provides unaudited supplemental pro forma results for Cornerstone ~~prepared in accordance with ASC 805,~~ for the three ~~and nine~~ months ended ~~October 3,~~April 4, 2020 ~~and September 28, 2019~~ as if the Kleary ~~and ESW (defined below)~~ acquisitions had occurred on January 1, ~~2019~~2020 (in thousands, except for per share data):

Three Months Ended Nine Months Ended
October 3,
2020 September 28,
2019 October 3,
2020 September 28,
2019
Net sales $ 1,227,253 $ 1,298,307 $ 3,434,358 $ 3,694,102
Net income (loss) applicable to common shares 30,516 25,164 (482,789) (19,843)
Net income (loss) per common share:
Basic $ 0.24 $ 0.20 $ (3.84) $ (0.16)
Diluted $ 0.24 $ 0.20 $ (3.84) $ (0.16)


	Three Months Ended
	April 4, 2020
Net sales	$	1,122,169
Net loss applicable to common shares	(540,870)
Net loss per common share:
Basic	$	(4.29)
Diluted	$	(4.29)

The unaudited supplemental pro forma financial information was prepared based on the historical information of Cornerstone ~~Environmental Stoneworks~~ and Kleary. The unaudited supplemental pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the ~~2 acquisitions~~acquisition or any integration costs. Unaudited pro forma balances are not necessarily indicative of operating results had the ~~Environmental Stoneworks and~~ Kleary ~~acquisitions~~acquisition occurred on January 1, ~~2019~~2020 or of future results.

~~Environmental Stoneworks~~

On January 12, 2019, the Company entered into a Unit Purchase Agreement (the “Purchase Agreement”) with Environmental Materials, LLC, a Delaware limited liability company (“ESW”), the Members of Environmental Materials, LLC (the “Sellers”) and Charles P. Gallagher and Wayne C. Kocourek, solely in their capacity as the Seller Representative (as defined in the Purchase Agreement), pursuant to which, on February 20, 2019, the Company’s wholly-owned subsidiary, Ply Gem Industries, Inc., purchased from the Sellers 100% of the outstanding limited liability company interests of ESW (the “Environmental Stoneworks Acquisition”) for total consideration of $182.6 million, subject to certain post-closing adjustments, for ESW. The transaction was financed through borrowings under the Company’s asset-based revolving credit facility.

The Environmental Stoneworks Acquisition, when combined with the Company’s existing stone businesses, positions the Company as a market leader in stone veneer. The Company accounted for the transaction as an acquisition in accordance with the provisions of ASC Topic 805, ~~Business Combinations, which results in a new valuation for the assets and liabilities of ESW based upon fair values as of the closing date.~~


~~Assets acquired:~~
~~Restricted cash~~	$	~~3,379~~
~~Accounts receivable~~	~~16,825~~
~~Inventories~~	~~13,062~~
~~Prepaid expenses and other current assets~~	~~3,677~~
~~Property, plant and equipment~~	~~14,295~~
~~Lease right of use assets~~	~~11,372~~
~~Intangible assets (trade names/customer relationships)~~	~~91,170~~
~~Goodwill~~	~~63,543~~
~~Deferred taxes~~	~~474~~
~~Other assets~~	~~157~~
~~Total assets acquired~~	~~217,954~~
~~Liabilities assumed:~~
~~Accounts payable~~	~~5,910~~
~~Other accrued expenses~~	~~14,666~~


~~Lease liabilities~~	~~11,365~~
~~Other long-term liabilities~~	~~3,450~~
~~Total liabilities assumed~~	~~35,391~~
~~Net assets acquired~~	$	~~182,563~~

The $63.5 million of goodwill was allocated to the Siding segment and is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of the acquired business and the synergies expected to be realized.

129

NOTE 4 — RESTRUCTURING

The Company has various initiatives and programs in place within its business units to reduce selling, general, and administrative expenses ("(“SG~~&A"~~&A”), manufacturing costs and to optimize the ~~Company's~~Company’s combined manufacturing footprint. During the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, the Company incurred restructuring charges of ~~$7.2~~$0.9 million, ~~$2.9~~$0.1 million and ~~$20.4~~$0.7 million in the Windows, Siding and Commercial segments, respectively, and ~~$1.8~~$0.1 million in restructuring charges at Corporate headquarters. Restructuring charges incurred to date since inception of the current restructuring initiatives began in 2019 are ~~$50.4~~$54.2 million. The following table summarizes our restructuring plan costs and charges related to the restructuring plans for the ~~period indicated, which are recorded in restructuring~~three months ended April 3, 2021 and ~~impairment charges in~~costs incurred to date since inception of the ~~Company’s consolidated statements of operations~~new initiatives and programs (in thousands):


		Three Months Ended		Nine Months Ended			Three Months Ended		Costs Incurred to Date
		October 3, 2020		October 3, 2020			April 3, 2021		(Since inception)
Severance	Severance	$	1,074	$	23,563	Severance	$	1,322	$	37,553
Asset impairments	Asset impairments	1,169		4,938		Asset impairments	493		8,361

Gain on sale of facilities, net						Gain on sale of facilities, net	0		(1,298)
Other restructuring costs	Other restructuring costs	675		3,820		Other restructuring costs	23		9,559
Total restructuring costs	Total restructuring costs	$	2,918	$	32,321	Total restructuring costs	$	1,838	$	54,175

For the ~~nine~~three months ended ~~October~~April 3, ~~2020, $32.1~~2021, the $1.8 million of restructuring costs are recorded within restructuring and impairment ~~costs and $0.2 million are recorded within cost of goods sold, in the Company’s consolidated statement of operations.~~costs. The asset impairments of ~~$4.9~~$0.5 million for the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 are comprised primarily of ~~equipment costs~~the write-off of ~~$3.4 million and right of use asset impairments of $1.5 million related predominantly to the closure of the Company's Ambridge, Pennsylvania Commercial facility.~~previously capitalized website design costs.

The following table summarizes our severance liability, included within other accrued expenses on the consolidated balance sheets, and cash payments made pursuant to the restructuring plans from inception through ~~October~~April 3, ~~2020~~2021 (in thousands):


		Windows		Siding		Commercial		Corporate		Total			Windows		Siding		Commercial		Corporate		Total
Balance, December 31, 2018	Balance, December 31, 2018	$	0	$	85	$	0	$	2,333	$	2,418	Balance, December 31, 2018	$	0	$	85	$	0	$	2,333	$	2,418
Costs incurred	Costs incurred	1,094		1,834		2,721		4,009		9,658		Costs incurred	1,094		1,834		2,721		4,009		9,658
Cash payments	Cash payments	(676)		(1,437)		(2,721)		(4,579)		(9,413)		Cash payments	(676)		(1,437)		(2,721)		(4,579)		(9,413)
Balance, December 31, 2019	Balance, December 31, 2019	$	418	$	482	$	0	$	1,763	$	2,663	Balance, December 31, 2019	$	418	$	482	$	0	$	1,763	$	2,663
Costs incurred	Costs incurred	3,389		2,367		16,413		1,394		23,563		Costs incurred	4,294		2,705		16,561		3,013		26,573
Cash payments	Cash payments	(3,368)		(2,169)		(14,314)		(1,394)		(21,245)		Cash payments	(4,406)		(2,352)		(14,570)		(4,346)		(25,674)
Balance, October 3, 2020		$	439	$	680	$	2,099	$	1,763	$	4,981
Balance, December 31, 2020												Balance, December 31, 2020	$	306	$	835	$	1,991	$	430	$	3,562
Costs incurred												Costs incurred	651		118		480		73		1,322
Cash payments												Cash payments	(427)		(644)		(774)		(73)		(1,918)
Balance, April 3, 2021												Balance, April 3, 2021	$	530	$	309	$	1,697	$	430	$	2,966

~~These severance liabilities are included within other accrued expenses on~~We expect to fully execute our plans over the ~~consolidated balance sheets.~~next 12 to 24 months and we may incur future additional restructuring charges associated with these plans.

NOTE 5 — GOODWILL

The Company’s goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in thousands):


		Windows		Siding		Commercial		Total			Windows		Siding		Commercial		Total
Balance, December 31, 2019	Balance, December 31, 2019	$	714,023	$	807,280	$	148,291	$	1,669,594	Balance, December 31, 2019	$	714,023	$	807,280	$	148,291	$	1,669,594
Goodwill recognized from Kleary Acquisition	Goodwill recognized from Kleary Acquisition	0		11,721		0		11,721		Goodwill recognized from Kleary Acquisition	0		12,539		0		12,539
Impairment(1)	Impairment(1)	(320,990)		(176,774)		(5,407)		(503,171)		Impairment(1)	(320,990)		(176,774)		(5,407)		(503,171)
Currency translation	Currency translation	1,885		7,081		0		8,966		Currency translation	3,991		10,000		0		13,991
Purchase accounting adjustments		0		2,882		0		2,882
Balance, October 3, 2020		$	394,918	$	652,190	$	142,884	$	1,189,992
Purchase accounting adjustments from prior year acquisitions										Purchase accounting adjustments from prior year acquisitions	0		1,776		0		1,776
Balance, December 31, 2020										Balance, December 31, 2020	$	397,024	$	654,821	$	142,884	$	1,194,729
Goodwill recognized from acquisition										Goodwill recognized from acquisition	0		122		0		122

Currency translation										Currency translation	648		484		0		1,132

Balance, April 3, 2021										Balance, April 3, 2021	$	397,672	$	655,427	$	142,884	$	1,195,983

~~The Company performs an annual~~(1)Goodwill impairment ~~assessment of goodwill and indefinite-lived intangibles. Additionally, we assess goodwill and indefinite-lived intangibles for impairment whenever events or changes in circumstances indicate that~~charges occurred during the fair values may be below the carrying values of such assets. The Company performs these annual and interim impairment tests at the following levels: Windows, Siding, Metal Coil Coating, Engineered Building Products, Metal Components, and Insulated Metal Panels. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of our assets and result in a non-cash impairment charge. Some factors considered important that could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant declines in stock price for a sustained period, and significant sustained negative industry or economic trends.

The fair value of the Company's reporting units is based on a blend of estimated discounted cash flows and publicly traded company multiples. A significant reduction in projected sales and earnings which would lead to a reduction in future cash flows could indicate potential impairment. The results from each of these models are then weighted and combined into a single estimate of fair value for the Company's reporting units. Estimated discounted cash flows are based on projected sales and related cost of sales. Publicly traded company multiples and acquisition multiples are derived from information on traded shares and analysis of recent acquisitions in the marketplace, respectively, for companies with operations similar to ours. The primary assumptions used in these various models include earnings multiples of acquisitions in a comparable industry, future cash flow estimates of each of the reporting units, weighted average cost of capital, working capital and capital expenditure requirements.

Asquarter ended April 4, 2020 as a result of ~~the~~a decline in the Company’s market valuation and near-term economic uncertainties related to the COVID-19 pandemic, during the first quarter of fiscal 2020, the Company determined that an interim goodwill impairment test was necessary. The Company determined that deterioration in discount rates and market multiples during the three months ended April 4, 2020 from the COVID-19 driven economic uncertainty when combined with lower forecasted discounted cash flows, decreased the fair values of the Company’s reporting units. The Company performed an impairment evaluation by comparing the fair market value of its reporting units, as determined using an equally weighted discounted cash flow model and market approach, to its carrying value. It was determined that the Siding, Windows and Metal Coil Coating reporting units' carrying value each exceeded their fair value. As a result of this analysis, the Company recorded a goodwill impairment charge of approximately $321.0 million for the Windows reporting unit, $176.8 million for the Siding reporting unit, and $5.4 million for the Metal Coil Coating reporting unit (which is within the Commercial segment). This non-cash charge does not affect the Company’s cash position, liquidity or debt covenant compliance, nor will it have any impact on future operations. However, there can be no assurance that: 1) valuation multiples will not decline, 2) discount rates will not increase, or 3) the earnings, book values or projected earnings and cash flows of the Company’s reporting units will not decline. The Company will continue to analyze changes to these assumptions in future periods. There were no additional impairment triggers identified during the nine months ended October 3, 2020. The Company will continue to perform its required annual goodwill impairment test during the fourth quarter and further declines in the Company's end markets could result in additional goodwill impairment charges.

~~In addition to ASC 350,~~ ~~Intangibles-goodwill and other, the Company evaluated its property and equipment and intangible assets for impairment during the first quarter of fiscal 2020 in accordance with ASC 360,~~ ~~Property, plant and equipment~~. This analysis was triggered by a decrease in projected cash flows due to the depressed construction market. The impairment test results did not indicate that an impairment existed at April 4, 2020 other than the $3.1 million included in restructuring and impairment charges, net, in the Company's consolidated statement of operations for the three months ended April 4, 2020. There were no additional impairment triggers identified during the nine months ended October 3, 2020.pandemic.

NOTE 6 — INVENTORIES

The components of inventory are as follows (in thousands):


		October 3, 2020		December 31, 2019			April 3, 2021		December 31, 2020
Raw materials	Raw materials	$	232,627	$	239,063	Raw materials	$	264,760	$	241,353
Work in process and finished goods	Work in process and finished goods	176,270		200,131		Work in process and finished goods	229,332		190,584
Total inventory	Total inventory	$	408,897	$	439,194	Total inventory	$	494,092	$	431,937

As of ~~October~~April 3, ~~2020,~~2021, the Company had inventory purchase commitments of ~~$21.2~~$115.9 million.

NOTE 7 — INTANGIBLES

The table that follows presents the major components of intangible assets as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019~~2020 (in thousands):. Intangible assets that are fully amortized are removed from the disclosures.


		Range of Life (Years)			Weighted Average Amortization Period (Years)	Cost		Accumulated Amortization		Net Carrying Value			Range of Life (Years)			Weighted Average Amortization Period (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of October 3, 2020
As of April 3, 2021												As of April 3, 2021
Amortized intangible assets:	Amortized intangible assets:											Amortized intangible assets:
Trademarks/Trade names	Trademarks/Trade names	5	–	15	8	$	248,021	$	(51,658)	$	196,363	Trademarks/Trade names	5	–	15	8	$	248,155	$	(57,767)	$	190,388
Customer lists and relationships	Customer lists and relationships	7	–	20	10	1,754,347		(327,577)		1,426,770		Customer lists and relationships	7	–	20	9	1,758,611		(408,529)		1,350,082
Total intangible assets	Total intangible assets				10	$	2,002,368	$	(379,235)	$	1,623,133	Total intangible assets				9	$	2,006,766	$	(466,296)	$	1,540,470

As of December 31, 2019
As of December 31, 2020												As of December 31, 2020
Amortized intangible assets:	Amortized intangible assets:											Amortized intangible assets:
Trademarks/Trade names	Trademarks/Trade names	5	–	15	9	$	252,942	$	(38,010)	$	214,932	Trademarks/Trade names	5	–	15	8	$	248,155	$	(51,722)	$	196,433
Customer lists and relationships	Customer lists and relationships	9	–	20	11	1,737,060		(211,292)		1,525,768		Customer lists and relationships	7	–	20	9	1,758,611		(370,440)		1,388,171
Total intangible assets	Total intangible assets				10	$	1,990,002	$	(249,302)	$	1,740,700	Total intangible assets				9	$	2,006,766	$	(422,162)	$	1,584,604

NOTE 8 — ASSETS HELD FOR SALE

We record assets held for sale at the lower of the carrying value or fair value less costs to sell. The following criteria are used to determine if property is held for sale: (i) management has the authority and commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell the property has been initiated; (iv) the sale of the property is probable within one year; (v) the property is being actively marketed at a reasonable sale price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made.

In determining the fair value of the assets less cost to sell, we consider factors including current sales prices for comparable assets in the area, recent market analysis studies, appraisals and any recent legitimate offers. If the estimated fair value less cost to sell of an asset is less than its current carrying value, the asset is written down to its estimated fair value less cost to sell. The total carrying value of assets held for sale was ~~$5.1~~$3.9 million and ~~$1.8~~$4.6 million as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Assets held for sale at ~~October~~April 3, ~~2020~~2021 are actively marketed for ~~sale or were under contract.~~

sale. During the three ~~and nine~~ months ended ~~October~~April 3, ~~2020,~~2021, the Company ~~reclassified certain facilities within~~completed the ~~Commercial segment that have a net book value~~sale of ~~$4.3 million to assets held for sale. Additionally, during the nine months ended October 3, 2020, the Company acquired~~ certain real property assets ~~of $0.8~~resulting in approximately $0.7 million ~~through its executive relocation program which are classified as held for sale as of October 3, 2020.~~

~~During~~in net proceeds and an immaterial loss from the three and nine months ended October 3, 2020, the Company sold certain real property assets with a net book value of $1.8 million which had previously been classified as held for sale. In connection with the sale, the Company recognized a net loss of $0.4 million which is included in Corporate restructuring and impairment charges, net, in the consolidated statements of operations for the three and nine months ended October 3, 2020.transaction.

Due to uncertainties in the estimation process, actual results could differ from the estimates used in our historical analysis. Our assumptions about property sales prices require significant judgment because the current market is highly sensitive to changes in economic conditions. We determined the estimated fair values of assets held for sale based on current market conditions and assumptions made by management, which may differ from actual results and may result in impairments if market conditions deteriorate. Certain assets held for sale are valued at fair value and are measured at fair value on a nonrecurring basis. Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset is less than carrying value. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value that approximates fair value. Assets held for sale, reported at fair value, less costs to sell, totaled $0.8 million as of October 3, 2020.

NOTE 9 — LEASES

The Company leases certain manufacturing, warehouse and distribution locations, vehicles and equipment, including fleet vehicles. Many of these leases have options to terminate prior to or extend beyond the end of the term. The exercise of the

majority of lease renewal options is at the Company’s sole discretion. Some lease agreements have variable ~~payment terms,~~payments, the majority of these are real estate agreements in which future increases in rent are based on an index. Lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company accounts for lease and non-lease components as a single lease component for all leases other than leases of durable tooling. The Company excludes leases with an initial term of 12 months or less from the consolidated balance sheets and recognizes related lease payments in the consolidated statements of operations on a straight-line basis over the lease term.

Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the reasonably expected holding period at commencement date. Few of the Company’s lease contracts provide a readily determinable implicit rate. For ~~lease~~these contracts, ~~without a readily determinable implicit rate,~~ an estimated incremental borrowing rate (“IBR”) is utilized, based on information available at the inception of the lease. The ~~IBR~~incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Accounting for leases may require judgment, including determining whether a contract contains a lease, the incremental borrowing rates to utilize for leases without a stated implicit rate, the reasonably certain holding period for a leased asset, and the allocation of consideration to lease and non-lease components. The allocation of the lease and non-lease components for leases of durable tooling is based on the Company’s best estimate of standalone price.

Weighted average information about the Company’s lease portfolio as of ~~October~~April 3, ~~2020~~2021 was as follows:


Weighted-average remaining lease term	5.5 years
Weighted-average IBR	~~6.08~~6.01	%

Operating lease costs were as follows (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Operating lease costs	Operating lease costs									Operating lease costs
Fixed lease costs	Fixed lease costs	$	21,220	$	23,903	$	78,183	$	77,125	Fixed lease costs		$	25,967	$	27,930
Variable lease costs(1)	Variable lease costs(1)	19,013		8,654		54,188		27,868		Variable lease costs(1)		24,726		19,588

(1) Includes short-term lease costs, which are immaterial.	(1) Includes short-term lease costs, which are immaterial.									(1) Includes short-term lease costs, which are immaterial.

Cash and non-cash activities were as follows (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:									Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	Operating cash flows for operating leases	$	24,853	$	23,463	$	80,241	$	66,936	Operating cash flows for operating leases		$	27,019	$	30,274

Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,070	$	47,236	$	18,940	$	372,269	Right-of-use assets obtained in exchange for new operating lease liabilities		$	5,704	$	4,261

Future minimum lease payments under non-cancelable leases as of ~~October~~April 3, ~~2020 were~~2021 are as follows (in thousands):


		Operating Leases			Operating Leases
2020 (excluding the nine months ended October 3, 2020)		$	17,730
2021		82,979
2021 (excluding the three months ended April 3, 2021)				2021 (excluding the three months ended April 3, 2021)	$	59,841
2022	2022	67,882		2022	72,420
2023	2023	42,451		2023	46,441
2024	2024	31,875		2024	35,189
2025				2025	28,257
Thereafter	Thereafter	88,848		Thereafter	69,702
Total future minimum lease payments	Total future minimum lease payments	331,765		Total future minimum lease payments	311,850
Less: interest	Less: interest	51,911		Less: interest	48,136
Present value of future minimum lease payments	Present value of future minimum lease payments	$	279,854	Present value of future minimum lease payments	$	263,714

As of October 3, 2020
As of April 3, 2021				As of April 3, 2021
Current portion of lease liabilities	Current portion of lease liabilities	$	69,408	Current portion of lease liabilities	$	69,042
Long-term portion of lease liabilities	Long-term portion of lease liabilities	210,446		Long-term portion of lease liabilities	194,672
Total	Total	$	279,854	Total	$	263,714

NOTE 10 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan, as amended (the “Incentive Plan”), is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock awards, stock appreciation rights, cash awards, phantom stock awards, restricted stock unit awards ~~("RSUs"~~(“RSUs”) and long-term incentive awards with performance conditions (“performance share units” or ~~"PSUs"~~“PSUs”). Awards are generally granted once per year, with the amounts and types of awards determined by the Compensation Committee of our Board of Directors (the “Committee”). In connection with the Merger (as defined herein) with Ply Gem Parent, LLC ("(“Ply ~~Gem"~~Gem”), on November 16, 2018 awards were granted to certain senior executives and key employees (the “Founders Awards”), which included stock options, RSUs, and PSUs. A portion of the Founders Awards was not granted under the Incentive Plan but was instead granted pursuant to a separate equity-based compensation plan, the Long-Term Incentive Plan consisting of award agreements for select Founders Awards. However, these awards were subject to the same terms and provisions as awards of the same type granted under the Incentive Plan.

As of ~~October~~April 3, ~~2020,~~2021, and for all periods presented, the Founders Awards and our share-based awards under the Incentive Plan have consisted of RSUs, PSUs and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment atthrough the end of a specified time period and typically vest in annual increments over three to five years or earlier upon death, disability or a change in control. ~~Restricted stock awards do not vest upon attainment of a specified retirement age, as provided by the agreements governing such awards. The vesting of our Performance Share Awards is described below.~~

As a general rule, option awards ~~terminate~~expire on the earlier of (i) 10 years from the date of grant, (ii) 60 days after termination of employment or service for a reason other than death, disability or retirement, or (iii) 180 days after death, disability or retirement. Awards are non-transferable except by disposition on death or to certain family members, trusts and other family entities as the Committee may approve. ~~Awards may be paid in cash, shares of our Common Stock or a combination, in lump sum or installments and currently or by deferred payment, all as determined by the Committee.~~

Our time-based restricted stock awards are typically subject to graded vesting over a service period, which is three to five years. Our performance-based and market-based restricted stock awards are typically subject to cliff vesting at the end of the service period, which is typically three years. Our share-based compensation arrangements are equity classified and we recognize compensation cost for these awards on a straight-line basis over the requisite service period for each award grant. In the case of performance-based awards, expense is recognized based upon management’s assessment of the probability that such performance conditions will be achieved. Certain of our awards provide for accelerated vesting upon a change of control or upon termination without cause or for good reason.

Vesting of the PSUs granted in the Founders Awards is contingent upon the achievement of synergies captured from the Merger and continued ~~employment~~employment. Based on achieved synergies during ~~a three-year performance~~the period ~~beginning on~~comprising the ~~grant date. At~~two fiscal years ended December 31, 2020, the ~~end of the performance period, the number of actual shares to be awarded varies between 0% and~~Founders Awards will vest at 200% of target ~~amounts.~~amounts, subject to continuing employment through the requisite service period ending on November 16, 2021. Vesting of the PSUs granted during the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020 isare contingent upon achievement of a cumulative three-year EBITDA growth target with an additional modifier based on total shareholder return. The grant-date fair value of the PSUs granted during the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020 ~~was~~were determined by a lattice model valuation. The PSUs vest pro rata if an executive’s employment terminates after 50% of the service period has passed and prior to the end of the performance period due to death, disability, or termination by the Company without cause or by the executive for good reason. If an executive’s employment terminates for any other reason prior to the end of the performance period, all outstanding unvested PSUs, whether earned or unearned, are forfeited and cancelled. If a change in control of the Company occurs, and the plan is not accepted by the successor entity, prior to the end of the performance period, the PSU payout is calculated and paid assuming that the maximum benefit had been achieved. If the plan is accepted, awards will continue to vest as RSUs with a double trigger acceleration upon termination by the Company without cause or by the executive for good reason. If an executive’s employment terminates due to death or disability while any of the restricted stock is unvested, then all of the unvested restricted stock shall become vested. If an executive’s employment is terminated by the Company without cause or by the executive for good reason, the unvested restricted stock is forfeited. If a change in control of the Company occurs, and the plan is not accepted by the successor entity, prior to the end of the performance period, the restricted stock fully vests. If the plan is accepted, awards will continue to vest with a double trigger acceleration upon termination by the Company without cause or by the executive for good reason. The fair value of the awards is based on the Company’s stock price as of the date of grant.Monte Carlo simulation.

Stock option awards

During the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019,~~April 4, 2020, we granted ~~1.1~~0.5 million and ~~0.4~~1.0 million stock options, respectively. The average grant date fair value of options granted during the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020 was $6.50 and ~~September 28, 2019 was $2.13 and $1.97~~$1.96 per share, respectively. There were NaN options with an intrinsic value of $0.1 million exercised during the three months ended April 3, 2021. NaN options were exercised during the ~~nine~~three months ended ~~October 3, 2020 and September 28, 2019.~~

April 4, 2020.

Restricted stock units and performance share units

Annual awards to our key employees generally have a three-year performance period. The fair value of RSUs awarded is based on the Company’s stock price as of the date of grant. During the ~~nine~~three months ended ~~October~~April 3, 2021, we granted RSUs to key employees with a fair value of $8.5 million representing approximately 0.6 million shares. During the three months ended April 4, 2020, we granted RSUs to key employees with a fair value of ~~$7.0~~$4.3 million, representing ~~approximately 1.4~~0.9 million shares. During the ~~nine~~three months ended ~~September 28, 2019, we granted RSUs to key employees with a fair value of $2.8 million, representing 0.5 million shares. During the nine months ended October~~April 3, ~~2020~~2021 and ~~September 28, 2019,~~April 4, 2020, we granted PSUs with a total fair value of approximately ~~$5.6~~$13.7 million and ~~$0.4~~$5.3 million, respectively, to key employees.

Share-based compensation expense

During the three ~~and nine~~ months ended ~~October~~April 3, 2021 and April 4, 2020, we recorded share-based compensation expense for all awards of ~~$4.0~~$3.3 million and ~~$12.6 million, respectively. During the three and nine months ended September 28, 2019, we recorded share-based compensation expense for all awards of $3.1 million and $10.6~~$3.4 million, respectively.

NOTE 11 — 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 earnings 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 (in thousands, except per share data):


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Numerator for Basic and Diluted Earnings Per Common Share	Numerator for Basic and Diluted Earnings Per Common Share									Numerator for Basic and Diluted Earnings Per Common Share
Net income (loss) applicable to common shares		$	30,028	$	24,790	$	(484,658)	$	(17,320)
Net loss applicable to common shares										Net loss applicable to common shares		$	(1,655)	$	(542,073)
Denominator for Basic and Diluted Earnings Per Common Share	Denominator for Basic and Diluted Earnings Per Common Share									Denominator for Basic and Diluted Earnings Per Common Share
Weighted average basic number of common shares outstanding	Weighted average basic number of common shares outstanding	125,100		125,557		125,655		125,526		Weighted average basic number of common shares outstanding		125,506		126,093
Common stock equivalents:	Common stock equivalents:									Common stock equivalents:
Employee stock options	Employee stock options	189		1		0		0		Employee stock options		0		0
PSUs and Performance Share Awards	PSUs and Performance Share Awards	0		0		0		0		PSUs and Performance Share Awards		0		0
Weighted average diluted number of common shares outstanding	Weighted average diluted number of common shares outstanding	125,289		125,558		125,655		125,526		Weighted average diluted number of common shares outstanding		125,506		126,093

Basic income (loss) per common share		$	0.24	$	0.20	$	(3.86)	$	(0.14)
Diluted income (loss) per common share		$	0.24	$	0.20	$	(3.86)	$	(0.14)
Basic loss per common share										Basic loss per common share		$	(0.01)	$	(4.30)
Diluted loss per common share										Diluted loss per common share		$	(0.01)	$	(4.30)

Incentive Plan securities excluded from dilution(1)	Incentive Plan securities excluded from dilution(1)	2,146		5,189		3,338		4,974		Incentive Plan securities excluded from dilution(1)		1,174		2,851

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

We calculate earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain nonforfeitable 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 fiscal periods presented are included in the computation of diluted earnings per common share if their effect was dilutive.

1814

NOTE 12 — WARRANTY

The Company ~~sells a number of products and~~ offers a number of ~~warranties.~~warranties associated with the products it sells. The specific terms and conditions of these warranties vary depending on the product sold. The ~~Company's~~Company’s warranty liabilities are undiscounted and adjusted for inflation based on third party actuarial estimates. Factors that affect the Company’s warranty liabilities include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. Warranties are normally limited to replacement or service of defective components for the original customer. Some warranties are transferable to subsequent owners and are generally limited to ten years from the date of manufacture or require pro-rata payments from the customer. A provision for estimated warranty costs is recorded based on historical experience and the Company periodically adjusts these provisions to reflect actual experience.Warranty costs are included within cost of goods sold. The Company assesses the adequacy of the recorded warranty claims and adjusts the amounts as necessary. Separately, upon the sale of a weathertightness warranty in the Commercial segment, the Company records the resulting revenue as deferred revenue, which is included in other accrued expenses and other long-term liabilities on the consolidated balance sheets depending on when the revenues are expected to be recognized.

The following table represents the rollforward of our accrued warranty obligation and deferred warranty revenue activity for the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020 (in thousands):


		Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019			April 3, 2021		April 4, 2020
Beginning balance	Beginning balance	$	216,173	$	134,515	Beginning balance	$	216,230	$	216,173
Acquisition	Acquisition	109		0		Acquisition	0		109
Purchase accounting adjustments		0		84,280

Warranties sold	Warranties sold	1,885		2,313		Warranties sold	644		662
Revenue recognized	Revenue recognized	(2,054)		(2,075)		Revenue recognized	(693)		(680)
Expense	Expense	23,257		22,006		Expense	8,827		9,051
Settlements	Settlements	(22,645)		(22,285)		Settlements	(8,138)		(9,507)
Ending balance	Ending balance	216,725		218,754		Ending balance	216,870		215,808
Less: current portion	Less: current portion	27,201		31,294		Less: current portion	24,617		26,920
Total, less current portion		$	189,524	$	187,460
Total warranty, less current portion						Total warranty, less current portion	$	192,253	$	188,888

The current portion of the warranty liabilities are recorded within other accrued expenses and the long-term portion of the warranty liabilities are recorded within other long-term liabilities in the Company’s consolidated balance sheets.

NOTE 13 — DEFINED BENEFIT PLANS

RCC Pension Plan — With the acquisition of Robertson-Ceco II Corporation (“RCC”) on April 7, 2006, we assumed a defined benefit plan (the “RCC Pension Plan”). Benefits under the RCC Pension Plan are primarily based on years of service and the employee’s compensation. The RCC Pension Plan is frozen and, therefore, employees do not accrue additional service benefits. Plan assets of the RCC Pension Plan are invested in broadly diversified portfolios of government obligations, mutual funds, stocks, bonds, fixed income securities and master limited partnerships.

CENTRIA Benefit Plans — As a result of the CENTRIA Acquisition on January 16, 2015, we assumed noncontributory defined benefit plans covering certain hourly employees (the “CENTRIA Benefit Plans”) and which are closed to new participants. Benefits under the CENTRIA Benefit Plans are calculated based on fixed amounts for each year of service rendered, although benefits accruals for one of the plans previously ceased. Plan assets of the CENTRIA Benefit Plans are invested in ~~broadly diversified portfolios of domestic and international equity mutual funds, bonds, mortgages and other~~fixed income funds. CENTRIA also sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses (the “OPEB Plans”). ~~During~~Currently, the ~~three months ended April 4, 2020, the Company closed its metal coil coating facility in Ambridge, Pennsylvania. The benefit plan associated with the Ambridge facility was frozen prior~~Company’s policy is to ~~the Company's acquisition of CENTRIA in fiscal 2015.~~

~~In addition to~~fund the CENTRIA Benefit Plans ~~CENTRIA contributes to a multi-employer plan, the Steelworkers Pension Trust. The~~as required by minimum required annual contribution to this plan is $0.3 million. The current contract expires on June 1, 2022. If we were to withdraw our participation from this multi-employer plan, CENTRIA may be required to pay a withdrawal liability representing an amount based on the underfunded statusfunding standards of the ~~plan. The plan is not significant to the Company’s consolidated financial statements.~~Internal Revenue Code.

Ply Gem Pension Plans — As a result of the Merger on November 16, 2018, we assumed the Ply Gem Group Pension Plan (the “Ply Gem Plan”) and the MW Manufacturers, Inc Retirement Plan (the “MW Plan”). The Ply Gem Plan was frozen during 1998, and no further increases in benefits for participants may occur as a result of increases in service years or compensation.

The MW Plan was frozen for salaried participants during 2004 and non-salaried participants during 2005. No additional participants may enter the plan, but increases in benefits for participants as a result of increase in service years or compensation will occur.

We refer to the RCC Pension Plan, the CENTRIA Benefit Plans, the Ply Gem Plan and the MW Plan collectively as the “Defined Benefit Plans” in this Note.

The following tables set forth the components of the net periodic benefit cost, before tax for the periods indicated (in thousands):


		Defined Benefit Plans										Defined Benefit Plans
		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Service cost	Service cost	$	11	$	11	$	34	$	32	Service cost		$	14	$	11
Interest cost	Interest cost	802		974		2,405		2,922		Interest cost		635		802
Expected return on assets	Expected return on assets	(1,398)		(1,234)		(4,193)		(3,701)		Expected return on assets		(1,360)		(1,398)
Amortization of prior service cost	Amortization of prior service cost	16		15		47		43		Amortization of prior service cost		16		16
Amortization of net actuarial loss	Amortization of net actuarial loss	753		704		2,256		2,112		Amortization of net actuarial loss		104		753
Net periodic benefit cost		$	184	$	470	$	549	$	1,408
Net periodic benefit cost (income)										Net periodic benefit cost (income)		$	(591)	$	184

		OPEB Plans										OPEB Plans
		Three Months Ended				Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019				April 3, 2021		April 4, 2020
Service cost	Service cost	$	4	$	6	$	13	$	17	Service cost		$	4	$	4
Interest cost	Interest cost	59		66		178		197		Interest cost		44		59

Amortization of net actuarial loss	Amortization of net actuarial loss	27		0		81		0		Amortization of net actuarial loss		18		27
Net periodic benefit cost	Net periodic benefit cost	$	90	$	72	$	272	$	214	Net periodic benefit cost		$	66	$	90

We expect to contribute ~~$4.4~~$3.2 million to the Defined Benefit Plans and ~~$0.8~~$0.7 million to OPEB Plans in the year ending December 31, ~~2020.~~2021. Our policy is to fund the CENTRIA Benefit Plans as required by minimum funding standards of the Internal Revenue Code. The contributions to the OPEB Plans by retirees vary from NaN to 25% of the total premiums paid.

NOTE 14 — LONG-TERM DEBT

On April 15, 2021, the Company amended its Cash Flow Credit Agreement and ABL Credit Agreement and fully redeemed the 8.00% Senior Notes due April 2026, the details of which are discussed in Note 21 — Subsequent Events. The following disclosures reflect the Company’s debt structure and agreements in place as of April 3, 2021.

Debt is comprised of the following (in thousands):


		October 3, 2020		December 31, 2019			April 3, 2021		December 31, 2020
Asset-based revolving credit facility due April 2023		$	0	$	70,000

Term loan facility due April 2025	Term loan facility due April 2025	2,504,372		2,523,587		Term loan facility due April 2025	$	2,491,563	$	2,497,967
Cash flow revolver due April 2023		0		0

8.00% senior notes due April 2026	8.00% senior notes due April 2026	645,000		645,000		8.00% senior notes due April 2026	645,000		645,000
6.125% senior notes due January 2029	6.125% senior notes due January 2029	500,000		0		6.125% senior notes due January 2029	500,000		500,000
Less: unamortized discounts and unamortized deferred financing costs(1)	Less: unamortized discounts and unamortized deferred financing costs(1)	(56,470)		(56,063)		Less: unamortized discounts and unamortized deferred financing costs(1)	(51,624)		(53,938)
Total long-term debt, net of unamortized discounts and unamortized deferred financing costs	Total long-term debt, net of unamortized discounts and unamortized deferred financing costs	3,592,902		3,182,524		Total long-term debt, net of unamortized discounts and unamortized deferred financing costs	3,584,939		3,589,029
Less: current portion of long-term debt	Less: current portion of long-term debt	25,600		25,600		Less: current portion of long-term debt	25,600		25,600
Total long-term debt, less current portion	Total long-term debt, less current portion	$	3,567,302	$	3,156,924	Total long-term debt, less current portion	$	3,559,339	$	3,563,429

(1)Includes the unamortized discounts ~~associated with the term loan facility~~ and ~~8.00 % senior notes due April 2026, and the~~ unamortized deferred financing costs associated with the term loan facility, the 8.00% senior notes due April 2026, and the 6.125% senior notes due January 2029. The unamortized deferred financing costs associated with the asset-based revolving credit facilities of ~~$1.9~~$1.5 million and ~~$2.4~~$1.7 million as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, are classified in other assets on the consolidated balance sheets.

2016

Term Loan Facility due April 2025 and Cash Flow Revolver due April 2023

On April 12, 2018, Ply Gem Midco entered into the Current Cash Flow Credit Agreement, which provides for (i) a term loan facility (the “Current Term Loan Facility”) in an original aggregate principal amount of $1,755.0 million, issued with a discount of 0.5%, and (ii) a cash flow-based revolving credit facility (the “Current Cash Flow Revolver” and together with the Term Loan Facility, the “Current Cash Flow Facilities”) of up to $115.0 million. The Current Term Loan Facility amortizes in nominal quarterly installments equal to 1 percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the Current Term Loan Facility on April 12, 2025. There are no amortization payments under the Current Cash Flow Revolver, and all borrowings under the Current Cash Flow Revolver mature on April 12, 2023.

On November 16, 2018, the Company entered into an incremental term loan facility in connection with the Merger, which increased the aggregate principal amount of the Current Term Loan Facility by $805.0 million. The proceeds of this incremental term loan facility were used to, among other things, (a) finance the Merger and to pay certain fees, premiums and expenses incurred in connection therewith, (b) repay in full amounts outstanding under the Pre-merger Term Loan Credit Agreement and the Pre-merger ABL Credit Agreement and (c) repay $325.0 million of borrowings outstanding under the ABL Facility. On November 16, 2018, in connection with the consummation of the Merger, NCI and Ply Gem Midco entered into a joinder agreement with respect to the Current Cash Flow Facilities, and the Company became the Borrower (as defined in the Current Cash Flow Credit Agreement) under the Current Cash Flow Facilities.

The Current Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a floor of 0.00%) plus an applicable margin of 3.75% per annum or (ii) an alternate base rate plus an applicable margin of 2.75% per annum. At ~~October~~April 3, ~~2020,~~2021, the interest rates on the Current Term Loan Facility were as follows:


	~~October~~April 3, ~~2020~~2021
Interest rate	3.9	%
Effective interest rate	6.51	%

The Company entered into certain interest rate swap agreements during 2019 to convert a portion of its variable rate debt to fixed. See Note 17 -— Fair Value of Financial Instruments and Fair Value Measurements.

Loans outstanding under the Current Cash Flow Revolver bear annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (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. Additionally, unused commitments under the Current 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. ~~At October 3, 2020,~~

Both the ~~weighted average interest rate on the Current Cash Flow Revolver was~~ ~~3.31%.~~

~~The~~ Current Term Loan Facility and Current 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.

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

•the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) 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. For 2019, no payments were required under the excess cash flow calculation.

The obligations under the Current Cash Flow Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by:

•a perfected security interest in substantially all tangible and intangible assets of the Company and each subsidiary guarantor (other than ABL Priority Collateral (as defined below)), including the capital stock of each direct material wholly-owned U.S. restricted subsidiary owned by the Company and each subsidiary guarantor, and 65% of the capital stock of any non-U.S. subsidiary held directly by the Company or any subsidiary guarantor, subject to certain exceptions (the “Cash Flow Priority Collateral”), which security interest will be senior to the security interest in the foregoing assets securing the Current ABL Facility; and

•a perfected security interest in the ABL Priority Collateral, which security interest will be junior to the security interest in the ABL Priority Collateral securing the Current ABL Facility.

2117

The Current Cash Flow Revolver 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.

ABL Facility due April 2023

On April 12, 2018, Ply Gem Midco entered into the Current ABL Credit Agreement, which provides for an asset-based revolving credit facility (the “Current ABL Facility”) of up to $360.0 million, consisting of (i) $285.0 million available to U.S. borrowers (subject to U.S. borrowing base availability) (the “ABL U.S. Facility”) and (ii) $75.0 million available to both U.S. borrowers and Canadian borrowers (subject to U.S. borrowing base and Canadian borrowing base availability) (the “ABL Canadian Facility”). The Company and, at their option, certain of their subsidiaries are the borrowers under the Current ABL Facility. All borrowings under the Current ABL Facility mature on April 12, 2023.

On October 15, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $36.0 million, which upsized the Current ABL Facility to $396.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $285.0 million to $313.5 million and (y) the ABL Canadian Facility being increased from $75.0 million to $82.5 million.

On November 16, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $215.0 million in connection with the Merger, which upsized the Current ABL Facility to $611.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $313.5 million to approximately $483.7 million and (y) the ABL Canadian Facility being increased from $82.5 million to approximately $127.3 million. On November 16, 2018, in connection with the consummation of the Merger, the Company and Ply Gem Midco entered into a joinder agreement with respect to the Current ABL Facility, and the Company became the Parent Borrower (as defined in the ABL Credit Agreement) under the Current ABL Facility.

Borrowing availability under the Current ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of eligible inventory, eligible accounts receivable and eligible credit card receivables, less certain reserves and subject to certain other adjustments as set forth in the Current ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings. As of ~~October~~April 3, ~~2020,~~2021, the Company had the following in relation to the Current ABL Facility (in thousands):


	~~October~~April 3, ~~2020~~2021
Excess availability	$	~~570,000~~570,978
Revolving loans outstanding	0
Letters of credit outstanding	~~36,500~~35,366

Loans outstanding under the Current ABL Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a LIBOR 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 Current 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. ~~At October 3, 2020, the weighted average interest rate on the Current ABL Facility was~~ ~~1.87%~~.

The obligations under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by:

•a perfected security interest in all present and after-acquired inventory, accounts receivable, deposit accounts, securities accounts, and any cash or other assets in such accounts and other related assets owned by the Company and the U.S. subsidiary guarantors and the proceeds of any of the foregoing, except to the extent such proceeds constitute Cash Flow Priority Collateral, and subject to certain exceptions (the “ABL Priority Collateral”), which security interest is senior to the security interest in the foregoing assets securing the Current Cash Flow Facilities; and

•a perfected security interest in the Cash Flow Priority Collateral, which security interest will be junior to the security interest in the Cash Flow Collateral securing the Current Cash Flow Facilities.

Additionally, the obligations of the Canadian borrowers under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned Canadian restricted subsidiary of the Canadian borrowers, subject to certain exceptions, and are secured by substantially all assets of the Canadian borrowers and the Canadian subsidiary guarantors, subject to certain exceptions.

2218

The Current 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 Current 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.

8.00% Senior Notes due April 2026

On April 12, 2018, Ply Gem Midco issued $645.0 million at a discount of 2.25% in aggregate principal amount of 8.00% Senior Notes due April 2026 (the “8.00% Senior Notes”). The 8.00% Senior Notes bear interest at 8.00% per annum and will mature on April 15, 2026. Interest is payable semi-annually in arrears on April 15 and October 15. The effective interest rate for the 8.00% Senior Notes was 8.64% as of ~~October~~April 3, ~~2020,~~2021, after considering each of the different interest expense components of this instrument, including the coupon payment and the deferred debt issuance costs.

On November 16, 2018, in connection with the consummation of the Merger, the Company entered into a supplemental indenture and assumed the obligations of Ply Gem Midco as issuer under the ~~Current Indenture.~~Indenture (as defined herein).

The 8.00% Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the Current ABL Facility on a joint and several basis with the Company or a subsidiary guarantor). The 8.00% Senior Notes are unsecured senior indebtedness and rank equally in right of payment with the Current Cash Flow Facilities and Current ABL Facility. The 8.00% Senior Notes are effectively subordinated to all of the Company’s secured debt, including the Current Cash Flow Facilities and Current ABL Facility, and are senior in right of payment to all subordinated obligations of the Company.

The Company may redeem the 8.00% Senior Notes in whole or in part at any time as set forth below:

•prior to April 15, 2021, the Company may redeem the 8.00% Senior Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date, plus the applicable make-whole premium;

•prior to April 15, 2021, the Company may redeem up to 40.0% of the original aggregate principal amount of the 8.00% Senior Notes with proceeds of certain equity offerings, at a redemption price of 108%, plus accrued and unpaid interest, if any, to but not including the redemption date; and

•on or after April 15, 2021, the Company may redeem the 8.00% Senior Notes at specified redemption prices starting at 104% and declining ratably to 100.0% by April 15, 2023, plus accrued and unpaid interest, if any, to but not including the redemption date.

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"~~Notes”). Proceeds from the 6.125% Senior Notes were used to repay outstanding amounts under the ~~Company's~~Company’s Current ABL Facility and Current Cash Flow Revolver. 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 commencing on January 15, 2021. The effective interest rate for the 6.125% Senior Notes was 6.33% as of April 3, 2021, after considering each of the different interest expense components of this instrument, including the coupon payment and the deferred debt issuance costs.

The 6.125% Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the Current ABL Facility on a joint and several basis with the Company or a subsidiary guarantor). 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 Company’s Term Loan Facility, Current Cash Flow Revolver and Current ABL Facility, and are senior in right of payment to future subordinated indebtedness of the Company.

The Company may redeem the 6.125% Senior Notes in whole or in part at any time as set forth below:

•prior to September 15, 2023, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date, plus the applicable make-whole premium;

•prior to September 15, 2023, up to 40% of the aggregate principal amount with the proceeds of certain equity offerings at a redemption price of 106.125% plus accrued and unpaid interest, if any, to but not including the redemption date;

•on or after September 15, 2023 and prior to September 15, 2024, at a price equal to 103.063% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date;

•on or after September 15, 2024 and prior to September 15, 2025, at a price equal to 101.531% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; and

•on or after September 15, 2025, at a price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date.

Debt Covenants

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. As of ~~October~~April 3, ~~2020,~~2021, the Company was in compliance with all covenants that were in effect on such date.

NOTE 15 — CD&R INVESTOR GROUP

On August 14, 2009, the Company entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the Company and Clayton, Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R Fund VIII”). In connection with the Investment Agreement and the Stockholders Agreement dated October 20, 2009 (the “Old Stockholders Agreement”), CD&R Fund VIII and CD&R Friends & Family Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R FF Fund” and, together with CD&R Fund VIII, the “CD&R Fund VIII Investor Group”) purchased convertible preferred stock of the Company, which was converted into shares of our common stock on May 14, 2013.

Ply Gem Holdings was acquired by CD&R Fund X and Atrium Intermediate Holdings, LLC, GGC BP Holdings, LLC and AIC Finance Partnership, L.P. (collectively, the “Golden Gate Investor Group”) and merged with Atrium on April 12, 2018.

On July 17, 2018, the Company entered into an Agreement and Plan of Merger (the ~~“Ply Gem-Atrium Merger”~~“Merger Agreement”) with Ply Gem, and for certain limited purposes as set forth in the Merger Agreement, Clayton, Dubilier & Rice, LLC (“CD&R”), pursuant to which, at the closing of the merger, Ply Gem would be merged with and into the Company, with the Company continuing its existence as a corporation organized under the laws of the State of Delaware (the “Merger”). The Merger was consummated on November 16, 2018 pursuant to the Merger Agreement.

Pursuant to the terms of the Merger Agreement, on November 16, 2018, the Company entered into (i) a stockholders agreement (the “New Stockholders Agreement”) between the Company, and each of the CD&R Fund VIII Investor Group, CD&R Pisces Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Pisces”, and together with the CD&R Fund VIII Investor Group, the “CD&R Investor Group”) and the Golden Gate Investor Group (together with the CD&R Investor Group, the “Investors”), pursuant to which the Company granted to the Investors certain governance, preemptive and subscription rights and (ii) a registration rights agreement (the “New Registration Rights Agreement”) between the Company and each of the Investors, pursuant to which the Company granted the Investors customary demand and piggyback registration rights, including rights to demand registrations and underwritten shelf registration statement offerings with respect to the shares of the Company’s Common Stock ~~that are~~ held by the Investors following the consummation of the Merger.

On August 25, 2020, the Company filed a shelf registration statement on Form S-3, declared effective by the SEC on September 2, 2020, registering the resale of shares of the Company’s Common Stock held by CD&R Pisces. The Company had previously registered the resale of shares of the Company’s Common Stock held by the CD&R Fund VIII Investor Group and the Golden Gate Investor Group.

Pursuant to the terms of the New Stockholders Agreement, the Company and the CD&R Fund VIII Investor Group terminated the Old Stockholders Agreement. Pursuant to the terms of the New Registration Rights Agreement, the Company and the CD&R Fund VIII Investor Group terminated the Registration Rights Agreement, dated as of October 20, 2009, ~~(the “Old Registration Rights Agreement”),~~ by and among the Company and the CD&R Fund VIII Investor Group.

As of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019,~~2020, the CD&R Investor Group owned approximately ~~49.5%~~49.3% and ~~49.1%~~49.4% of the outstanding shares of the Company’s Common Stock, respectively.

NOTE 16 — STOCK REPURCHASE PROGRAM

On October 10, 2017 and March 7, 2018, the Company announced that its Board of Directors authorized new stock repurchase programs for the repurchase of up to an aggregate of $50.0 million and an additional $50.0 million, respectively, of the Company’s outstanding Common Stock for a cumulative total of $100.0 million. Under these repurchase programs, the Company is authorized to repurchase shares, if at all, at times and in amounts that it deems appropriate in accordance with all applicable securities laws and regulations. Shares repurchased pursuant to the repurchase programs are usually retired. There is no time limit on the duration of the programs. Following repurchases made during the three months ended July 4, 2020, no authorized amount remained available under the program announced on October 10, 2017.

During the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020, ~~the Company repurchased 1.1 million shares for $6.4 million under the stock repurchase programs. There~~there were 0 stock repurchases under the stock repurchase ~~programs during the nine months ended September 28, 2019.~~programs. As of ~~October~~April 3, ~~2020,~~2021, $49.1 million remained available for stock repurchases under the program announced on March 7, 2018. The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and other factors, and may be suspended or discontinued at any time.

During the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019,~~April 4, 2020, the Company withheld approximately 0.1 million and NaN shares, respectively, of stock to satisfy minimum tax withholding obligations arising in connection with the vesting of stock awards, which are included in treasury stock purchases in the consolidated statements of stockholders’ equity.

During the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020, the Company cancelled approximately ~~1.2 million~~2000 and NaN shares ~~related to shares~~that had been previously withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of stock ~~awards~~awards. The cancellations resulted in 15000 and ~~shares repurchased under the stock repurchase programs, resulting in a $6.9~~$0.3 million ~~decrease~~decreases in both treasury stock and additional paid in ~~capital. During~~capital during the ~~nine~~three months ended ~~September 28, 2019, the Company cancelled 0.1 million shares related to shares withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of stock awards~~April 3, 2021 and ~~shares repurchased under the stock repurchase programs, resulting in a $0.7 million decrease in both treasury stock and additional paid in capital.~~April 4, 2020, respectively.

NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable ~~accounts payable~~ and ~~notes~~accounts payable approximate fair value as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, because of their relatively short maturities. The carrying amounts of the indebtedness under the Current ABL Facility and Current Cash Flow Revolver approximate fair value as the interest rates are variable and reflective of market rates. At ~~October~~April 3, ~~2020,~~2021, there were 0 borrowings outstanding under the Current ABL Facility and the Current Cash Flow Revolver. The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective period ends were (in thousands):


		October 3, 2020				December 31, 2019					April 3, 2021				December 31, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan Facility	Term Loan Facility	$	2,504,372	$	2,479,328	$	2,523,587	$	2,514,906	Term Loan Facility	$	2,491,563	$	2,487,203	$	2,497,967	$	2,485,477
8.00% Senior Notes	8.00% Senior Notes	645,000		675,638		645,000		670,800		8.00% Senior Notes	645,000		667,575		645,000		674,025
6.125% Senior Notes	6.125% Senior Notes	500,000		505,000		0		0		6.125% Senior Notes	500,000		531,250		500,000		530,000

The fair value of the term loan facility was based on recent trading activities of comparable market instruments, which are level 2 inputs and the fair values of the 8.00% and 6.125% senior notes were based on quoted prices in active markets for the identical liabilities, which are level 1 inputs.

Fair Value Measurements

ASC Subtopic 820-10, Fair Value Measurements and Disclosures, 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.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019.~~2020.

Money market: Money market funds have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.

Mutual funds: Mutual funds are valued at the closing price reported in the active market in which the mutual fund is traded.

~~Assets held for sale:~~ ~~Assets held for sale are valued based on current market conditions, prices of similar assets in similar condition and expected proceeds from the sale of the assets, representative of Level 3 inputs.~~

Deferred compensation plan liability: Deferred compensation plan liability is comprised of phantom investments in the deferred compensation plan and is valued at the closing price reported in the active markets in which the money market and mutual funds are traded.

Interest rate ~~swap~~swaps liability: Interest rate swap ~~liabilities are~~liability is based on cash flow hedge contracts that have fixed rate structures and are measured against market-based LIBOR yield curves. These interest rate swaps were classified within Level 2 of the fair

value hierarchy because they were valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.

Foreign currency hedges: The fair value of the foreign currency forward contracts are estimated using industry standard valuation models using market-based observable inputs, including spot rates, forward points, interest rates and volatility inputs (Level 2).

The following tables summarize information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019,~~2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):


		October 3, 2020									April 3, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Short-term investments in deferred compensation plan(1):	Short-term investments in deferred compensation plan(1):									Short-term investments in deferred compensation plan(1):
Money market	Money market	$	197	$	0	$	0	$	197	Money market	$	286	$	0	$	0	$	286
Mutual funds – Growth	Mutual funds – Growth	397		0		0		397		Mutual funds – Growth	564		0		0		564
Mutual funds – Blend	Mutual funds – Blend	890		0		0		890		Mutual funds – Blend	1,186		0		0		1,186
Mutual funds – Foreign blend	Mutual funds – Foreign blend	282		0		0		282		Mutual funds – Foreign blend	342		0		0		342
Mutual funds – Fixed income	Mutual funds – Fixed income	0		151		0		151		Mutual funds – Fixed income	0		149		0		149
Total short-term investments in deferred compensation plan(2)	Total short-term investments in deferred compensation plan(2)	1,766		151		0		1,917		Total short-term investments in deferred compensation plan(2)	2,378		149		0		2,527

Total assets	Total assets	$	1,766	$	151	$	0	$	1,917	Total assets	$	2,378	$	149	$	0	$	2,527

Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan liability(2)	Deferred compensation plan liability(2)	$	0	$	2,154	$	0	$	2,154	Deferred compensation plan liability(2)	$	0	$	2,567	$	0	$	2,567
Foreign currency hedges(3)										Foreign currency hedges(3)	0		678		0		678
Interest rate swap liability~~(3)~~(4)	Interest rate swap liability~~(3)~~(4)	0		83,304		0		83,304		Interest rate swap liability~~(3)~~(4)	0		63,903		0		63,903
Total liabilities	Total liabilities	$	0	$	85,458	$	0	$	85,458	Total liabilities	$	0	$	67,148	$	0	$	67,148


		December 31, 2019									December 31, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Short-term investments in deferred compensation plan(1):	Short-term investments in deferred compensation plan(1):									Short-term investments in deferred compensation plan(1):
Money market	Money market	$	2	$	0	$	0	$	2	Money market	$	349	$	0	$	0	$	349
Mutual funds – Growth	Mutual funds – Growth	1,044		0		0		1,044		Mutual funds – Growth	487		0		0		487
Mutual funds – Blend	Mutual funds – Blend	1,769		0		0		1,769		Mutual funds – Blend	1,006		0		0		1,006
Mutual funds – Foreign blend	Mutual funds – Foreign blend	572		0		0		572		Mutual funds – Foreign blend	338		0		0		338
Mutual funds – Fixed income	Mutual funds – Fixed income	0		389		0		389		Mutual funds – Fixed income	0		153		0		153
Total short-term investments in deferred compensation plan(2)	Total short-term investments in deferred compensation plan(2)	3,387		389		0		3,776		Total short-term investments in deferred compensation plan(2)	2,180		153		0		2,333
Foreign currency hedge(3)										Foreign currency hedge(3)	0		0		0		0
Total assets	Total assets	$	3,387	$	389	$	0	$	3,776	Total assets	$	2,180	$	153	$	0	$	2,333

Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan liability(2)	Deferred compensation plan liability(2)	$	0	$	3,847	$	0	$	3,847	Deferred compensation plan liability(2)	$	0	$	2,339	$	0	$	2,339
Interest rate swap liability(3)		0		29,988		0		29,988
Interest rate swap liability(4)										Interest rate swap liability(4)	0		75,770		0		75,770
Total liabilities	Total liabilities	$	0	$	33,835	$	0	$	33,835	Total liabilities	$	0	$	78,109	$	0	$	78,109

(1)~~Unrealized holding losses for the three months ended September 28, 2019 were $0.1 million.~~ Unrealized holding gains (losses) for the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020 ~~and September 28, 2019~~ were ~~$(0.7)~~$0.1 million and ~~$0.4~~$(0.8) million, respectively. These unrealized holding gains (losses) were substantially offset by changes in the deferred compensation plan liability.

(2)The Company records the short-term investments in deferred compensation plan within investments in debt and equity securities, at market, and the deferred compensation plan liability within accrued compensation and benefits on the consolidated balance sheets.

(3)In December 2020, the Company entered into forward contracts to hedge approximately $66.0 million of its 2021 non-functional currency inventory purchases. These forward contracts were established to protect the Company from variability in cash flows attributable to changes in the U.S. dollar relative to the Canadian dollar. As cash flow hedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The forward contracts are highly correlated to the changes in the U.S. dollar relative to the Canadian dollar. Unrealized gains and losses on these contracts are designated as effective or ineffective. The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive income or loss, while the ineffective portion of such gains or losses is recorded as a component of cost of goods sold. Future realized gains and losses in connection with each inventory purchase will be reclassified from accumulated other comprehensive income or loss to cost of goods sold. The gains and losses on the derivative contracts that are reclassified from accumulated other comprehensive income or loss to current period earnings are included in the line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings. During the three months ended April 3, 2021, the Company realized a loss of approximately $(0.1) million within cost of goods sold in the consolidated statement of operations based on these cash flow hedges. The changes in fair values of derivatives that have been designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income or loss and are reclassified into cost of goods sold in the same period the hedged item affects earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair value or cash flows of the underlying exposures being hedged. The changes in the fair value of derivatives that do not qualify as effective are immediately recognized in earnings.

(4)In May 2019, the Company entered into four-year interest rate swaps to mitigate variability in forecasted interest payments on $1,500.0 million of the Company’s term loan secured variable debt. The interest rate swaps effectively convert a portion of the floating rate interest ~~payments~~payment into a fixed rate interest payment. There are 3 interest rate swaps that cover $500.0

million of notional debt each and fix the interest rate at 5.918%, 5.906% and 5.907%, respectively. The Company designated the interest rate swaps as qualifying hedging instruments and accounts for these derivatives as cash flow hedges. The interest rate swap liability is included within other long-term liabilities on the consolidated balance sheets. See the discussion in Note 21 — Subsequent Events for changes to the swaps on April 15, 2021 in connection with the Company’s debt refinancing transactions.

NOTE 18 — INCOME TAXES

Under FASB ASC 740-270, Income Taxes - Interim Reporting, each interim period is considered an integral part of the annual period and tax expense is measured using an estimated annual effective tax rate. Estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on ~~evaluation~~evaluations of possible future events and transactions and may be subject to subsequent refinement or revision. The Company calculates its quarterly tax provision consistent with the guidance provided by ASC 740-270, whereby the Company forecasts its estimated annual effective tax rate then applies that rate to its year-to-date ordinary pre-tax book income (loss). In addition, the Company excludes jurisdictions with a projected loss for the year or the year-to-date ordinary loss where the Company cannot recognize a tax benefit from its estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections. In addition to the tax resulting from applying the estimated annual effective tax rate to pre-tax book income (loss), the Company includes certain items treated as discrete events to arrive at an estimated effective tax rate. Future changes in the forecasted annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense in future periods in accordance with ASC 740-270.

For the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, the ~~Company's~~Company’s estimated annual effective income tax of ordinary forecasted pre-tax book income ~~excluding the goodwill impairment~~ was approximately ~~40.0%~~30.6%, which varied from the statutory rate primarily due to state income tax expense, valuation allowances, and foreign income taxes. For the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, the effective tax rate was ~~2.5%~~91.8%, which varied from the annual effective tax rate due to ~~the following~~ discrete items recorded during the ~~period:~~period, including interest recorded on unrecognized tax benefits, adjustments to state income tax rates, and ~~goodwill impairment.~~stock compensation.

Valuation allowance

As of ~~October~~April 3, ~~2020,~~2021, the Company remains in a valuation allowance position, in the amount of ~~$11.3~~$11.9 million, against its deferred tax assets for certain state jurisdictions ~~for~~of certain entities as it is currently deemed “more likely than not” that the benefit of such net tax assets will not be utilized as the Company continues to be in a three-year cumulative loss position for these state jurisdictions. The Company will continue to monitor the positive and negative factors for these jurisdictions and make further changes to the valuation allowances as necessary.

Unrecognized tax benefits

Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, the Company believes that certain positions could be challenged by taxing authorities. The Company’s tax reserves reflect the difference between the tax benefit claimed on tax returns and the amount recognized in the consolidated financial statements. These reserves have been established based on management’s assessment as to potential exposure attributable to permanent differences ~~and~~as well as interest and penalties applicable to both permanent and temporary differences. The tax reserves are reviewed periodically and adjusted in light of changing facts and circumstances, such as progress of tax audits, lapse of applicable statutes of limitations and changes in tax law. The Company is currently under examination by various taxing authorities. During the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, the tax reserves increased by approximately ~~$0.6~~$0.2 million. The increase is primarily due to additional interest expense related to previously recorded unrecognized tax benefits.

The liability for unrecognized tax benefits as of ~~October~~April 3, ~~2020~~2021 was approximately ~~$12.5~~$11.9 million and is recorded in other long-term liabilities in the ~~accompanying~~ consolidated balance sheet.

CARES Act

~~In response to the COVID-19 pandemic,~~Under the Coronavirus Aid, Relief and Economic Security Act ("(“CARES ~~Act"~~Act”) that was signed into law on March 27, ~~2020. The CARES Act, among other things, includes tax provisions relating~~2020, the Company elected to ~~refundable payroll tax credits, deferment of~~defer employer side social security payments ~~net operating loss utilization and carryback periods, modifications to~~for approximately $19.9 million as of December 31, 2020, $10 million of which is recorded in current liabilities on the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). Specifically, the CARES Act amends IRC §163(j) for tax years 2019 and 2020. The CARES Act increases the 30% adjusted taxable income threshold to 50% and allows taxpayers to elect to use their 2019 adjusted taxable income as their adjusted taxable income in the 2020 §163(j) calculation. The combination of these two factors will allow the Company to deduct additional interest expense for income tax purposes that would have been previously disallowed. The Company continues to evaluate the impactconsolidated balance sheet. Approximately $10 million of the CARES Act on our financial position, results of operations, and cash flows. During July 2020, the Department of Treasury issued several Final and Proposed Regulations related to the Tax Cuts and Jobs Act, including those related to the §250 deduction, global intangible low-taxed income (“GILTI”)deferral will be paid by December 31, 2021 and the ~~§163(j) interest limitation. We are evaluating the impact of the Regulations on our income tax balances.~~remainder will be paid by December 31, 2022.

NOTE 19 — SEGMENT INFORMATION

Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and is evaluated on a regular basis by the chief operating decision maker to make decisions regarding the allocation of resources to the segment and assess the performance of the segment. The Company has 3 reportable segments: Windows, Siding and Commercial.

These operating segments follow the same accounting policies used for our consolidated financial statements. We evaluate a segment’s performance ~~based~~on a U.S. GAAP basis primarily upon operating income before corporate expenses.

Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment associated with our headquarters in Cary, North Carolina and office in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, restructuring charges, ~~acquisition~~acquisition-related costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology and strategic sourcing, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense and other income (expense).

The following table represents summary financial data attributable to the segments for the periods indicated (in thousands):

Three Months Ended Nine Months Ended
October 3,
2020 September 28,
2019 October 3,
2020 September 28,
2019
Net sales:
Windows $ 501,314 $ 504,338 $ 1,378,039 $ 1,434,579
Siding 321,898 315,799 848,190 840,601
Commercial 404,041 464,906 1,199,771 1,370,152
Total net sales $ 1,227,253 $ 1,285,043 $ 3,426,000 $ 3,645,332
Operating income (loss):
Windows $ 37,295 $ 34,446 $ (252,794) $ 62,039
Siding 45,313 37,063 (92,916) 51,346
Commercial 56,137 59,317 109,642 142,436
Corporate (34,766) (35,266) (101,819) (106,695)
Total operating income (loss) 103,979 95,560 (337,887) 149,126
Unallocated other expense, net (50,402) (56,293) (159,056) (170,894)
Income (loss) before taxes $ 53,577 $ 39,267 $ (496,943) $ (21,768)


							Three Months Ended
								April 3, 2021		April 4, 2020
Net sales:						Net sales:
Windows						Windows		$	527,263	$	448,450
Siding						Siding		316,391		241,043
Commercial						Commercial		423,378		424,318
Total net sales						Total net sales		$	1,267,032	$	1,113,811
Operating income (loss):						Operating income (loss):
Windows						Windows		$	29,362	$	(313,190)
Siding						Siding		27,528		(168,867)
Commercial						Commercial		41,585		16,841
Corporate						Corporate		(43,267)		(35,575)
Total operating income (loss)						Total operating income (loss)		55,208		(500,791)
Unallocated other expense, net						Unallocated other expense, net		(56,071)		(59,296)
Loss before taxes						Loss before taxes		$	(863)	$	(560,087)

		October 3, 2020		December 31, 2019				April 3, 2021		December 31, 2020
Total assets:	Total assets:					Total assets:
Windows	Windows	$	1,820,255	$	2,166,220	Windows		$	1,737,880	$	1,717,032
Siding	Siding	2,158,395		2,289,310		Siding		2,116,233		2,123,615
Commercial	Commercial	878,623		963,291		Commercial		918,886		890,380
Corporate	Corporate	617,708		145,525		Corporate		755,307		747,463
Total assets	Total assets	$	5,474,981	$	5,564,346	Total assets		$	5,528,306	$	5,478,490

2825

NOTE 20 — 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 and/or its subsidiaries become involved in various legal proceedings or other contingent matters arising from claims or potential ~~claims.~~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. Many of these insurance policies contain deductibles or self-insured retentions in amounts the Company deems prudent and for which the Company is responsible for payment. In determining the amount of self-insurance, it is the Company’s policy to self-insure those losses that are predictable, measurable and recurring in nature. The Company regularly reviews the status of ongoing proceedings and other contingent matters along with legal counsel. Liabilities for such items are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes 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.

Further, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no range of potential exposure may be reasonably estimated. Also, it is not possible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities, including lawsuits, and therefore no such estimate has been made as of April 3, 2021.

Environmental

The ~~Company's~~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 ~~our~~its employees and the end-users of ~~our~~its products; regulate the materials used ~~to manufacture our~~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 ~~Company~~ environmental permits can result in substantial fines or ~~corrective consent orders,~~penalties, injunctive relief, requirements to install pollution ~~control~~controls or other ~~environmental-related~~ equipment, and civil sanctions.

WeThe Company could be held liable for costs to investigate, remediate or otherwise address contamination at any real property ~~we have~~it has ever owned, operated or used as a disposal site, or at other sites where we or predecessors may have released hazardous materials. WeThe Company could incur fines, penalties or sanctions or be subject to third-party claims, including indemnification claims, for property damage, personal injury or otherwise as a result of violations of (or liabilities under) environmental, health and safety laws, or in connection with releases of hazardous or other materials.

~~One~~MW Manufacturers Inc. (“MW”), a subsidiary of ~~the Company’s subsidiaries~~Ply Gem Industries, Inc., entered into ana September 2011 Administrative Order on Consent ~~(the “Consent Order”)~~ with the ~~United States Environmental Protection Agency ("EPA"),~~EPA under the ~~Resource Conservation and Recovery Act ("RCRA")~~ Corrective Action Program ~~in September 2011~~ to address known releases of hazardous substances at ~~its~~MW’s Rocky Mount, Virginia ~~facility.~~property. A Phase I RCRA Facility Investigation ~~("RFI"~~(“RFI”) was submitted to the Virginia Department of Environmental Quality ~~("VDEQ"~~(“VDEQ”) in December 2015, and a Phase II RFI and the Human Health Risk Assessment and Baseline Ecological Risk Assessment were submitted in October 2018. A Limited Corrective Measures Study ~~("LCM"~~(“LCMS”) based on ~~these~~the investigations was ~~approved by~~submitted to the VDEQ for review and approval in ~~January 2020. Current estimates~~September 2019. The VDEQ concurred with the LCMS and prepared a Statement of ~~remaining costs~~Basis, which was published for ~~predicted assessment, remediation~~a 30-day public review and ~~monitoring activities as of October 3, 2020 are $4.5 million.~~comment in April 2021. The Company has recorded ~~approximately~~a liability of $4.5 million for this MW site, of which $1.0 million ~~of this environmental liability within~~is in other current ~~liabilities at October 3, 2020 and approximately $3.5 million within other long-term~~ liabilities in the Company’s consolidated balance ~~sheets at October~~sheet as of April 3, ~~2020.~~2021.

The EPA is investigating groundwater contamination at a Superfund site in York, Nebraska, referred to as the PCE/TCE Northeast Contamination Site (“PCE/TCE ~~Site"~~Site”). AKroy Building Products, Inc. (“KBP”), a subsidiary of ~~the Company~~Ply Gem Industries, Inc., has been ~~named~~identified as a potentially responsible party (“PRP”) ~~with respect to~~at the ~~PCE/TCE Site~~site and has liability for investigation and remediation costs associated with the contamination. InOn May 17, 2019, ~~the subsidiary~~KBP and an unrelated respondent, Kroy Industries, Inc., entered into an Administrative Settlement Agreement and Order on Consent with the EPA to conduct a Remedial Investigation/Feasibility Study ("(“RI/~~FS"~~FS”) of the PCE/TCE Site. A final RI/FS Work Plan was submitted to ~~the~~ EPA in November 2019 and approved in December 2019. RI Phase I field ~~work began~~sampling and mobile laboratory analysis was initiated in ~~February 2020 but was paused in March 2020~~Spring 2020. After a delay due to worsening conditions of the COVID-19 ~~pandemic.~~pandemic, Phase 2 of the R1 Phase field work is anticipated to resume in Q2 2021. The Company has recorded a liability of ~~$4.6~~$4.4 million within other ~~long-term~~current liabilities in its consolidated balance ~~sheets~~sheet as of ~~October~~April 3, ~~2020. We~~2021. The Company will adjust our remediation liability in future periods, if necessary, as the RI/FS progresses or if additional requirements are imposed. WeThe Company may be able to recover a portion of costs incurred in connection with the PCE/TCE Site from other potentially responsible parties, ~~although~~though there ~~are~~is no ~~assurances that~~assurance we ~~will~~would receive any funds.

Based on current information, the Company is not aware of any environmental compliance obligations, claims or investigations that will have a material adverse effect on its results of operations, cash flows or financial position except as

otherwise disclosed in the Company’s consolidated financial statements. However, there can be no guarantee that previously known or newly discovered matters will not result in material costs or liabilities.

Litigation

The Company believes it has valid defenses to the outstanding claims discussed below and will vigorously defend all such claims; however, litigation is subject to many uncertainties and there cannot be any assurance that the Company will ultimately

prevail or, in the event of an unfavorable outcome or settlement of litigation, that the ultimate liability would not be material and would not have a material adverse effect on the business, results of operations, cash flows or financial position of the Company.

In November 2018, Aurora Plastics, LLC (“Aurora”) initiated an arbitration demand against Atrium Windows and Doors, Inc., Atrium Extrusion Systems, Inc., and North Star Manufacturing (London) Ltd. (collectively, “Atrium”) pursuant to a Third Amended and Restated Vinyl Compound and Supply Agreement dated as of December 22, 2016. A settlement was reached in this case during the fourth quarter of 2019. The Company has a ~~$7.6~~$3.9 million liability ~~as of October 3, 2020~~ related to ~~this~~the settlement, of which ~~$3.6~~$2.3 million is ~~held within~~in other current liabilities ~~with the remaining in long-term liabilities~~ in the Company’s consolidated balance ~~sheets.~~sheet as of April 3, 2021.

On November 14, 2018, an individual stockholder, Gary D. Voigt, filed a putative class action Complaint in the Delaware Court of Chancery against Clayton Dubilier & Rice, LLC (“CD&R”), Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”), and certain directors of the Company. Voigt purports to assert claims on behalf of himself, on behalf of a class of other similarly situated stockholders of the Company, and derivatively on behalf of the Company, the nominal defendant. An Amended Complaint was filed on April 11, 2019. The Amended Complaint asserts claims for breach of fiduciary duty and unjust enrichment against CD&R Fund VIII and CD&R, and for breach of fiduciary duty against 12 director defendants in connection with the Merger. Defendants moved to dismiss the Amended Complaint and, on February 10, 2020, the court denied the motions except as to four of the director defendants. Voigt seeks damages in an amount to be determined at trial.

Other contingencies

The Company’s imports of fabricated structural steel (“FSS”) from its Mexican affiliate, Building Systems de Mexico S.A. de C.V. (“BSM”) were subject to antidumping (“AD”) and countervailing duty (“CVD”) tariff proceedings before the U.S. Department of Commerce (“DOC”) and the U.S. International Trade Commission (“USITC”). The proceedings were initiated in February 2019 by the American Institute of Steel Construction against FSS being imported into the USA from Mexico, Canada, and China. In 2019, the DOC issued preliminary tariff rates and in 2020 finalized CVD and AD tariff rates of 0% and 8.47%, respectively, for the Company’s imports of FSS from BSM. However, in February 2020, in a 3 to 2 vote, the USITC concluded there was no injury or threat of injury to the domestic FSS industry. In March 2020 the USITC opinion was published in the Federal Register, ceasing the ~~Company's~~Company’s requirement to pay the AD and CVD tariffs. The Company ~~has~~ received full reimbursement for the $4.1 million in tariffs previously deposited with United States Customs and Border Protection and recorded a reduction in costs of sales during the ~~three months~~fiscal year ended ~~October 3,~~December 31, 2020. This matter has been appealed and the Company will continue to vigorously advocate its position that its import of FSS from BSM should not be subject to any CVD or AD tariffs.

NOTE 21 — SUBSEQUENT EVENTS

Debt Refinancing

In connection with the debt refinancing transactions described below, we incurred costs of approximately $3.5 million during the three months ended April 3, 2021, of which $3.0 million are associated with the modification/extinguishment of the debt instruments that would not qualify for capitalization upon completion of the debt refinancing transactions on April 15, 2021. As such, these non-capitalizable costs are recorded in selling, general and administrative expenses in the consolidated statement of operations for the three months ended April 3, 2021.

Cash Flow Credit Agreement

On April 15, 2021, the Company entered into a Second Amendment to Cash Flow Credit Agreement (the “Second Amendment"), among the Company, the several banks and other financial institutions party thereto (the "Cash Flow Lenders") and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Cash Flow Agent”), which amended the Cash Flow Credit Agreement to, among other things:

•Terminate $92.0 million of commitments by Cash Flow Lenders under the Company’s cash flow-based revolving credit facility of up to $115.0 million, maturing on April 12, 2023 (the “Existing Cash Flow Revolver”) and;

•Replace such commitments with $92.0 million of extended cash flow-based revolving commitments, maturing on April 12, 2026 (the “Extended Cash Flow Revolver” and together with the Existing Cash Flow Revolver, the “Cash Flow Revolver”).

On April 15, 2021, the Company entered into (i) a Third Amendment to Cash Flow Credit Agreement (the “Third Amendment”), among the Company, the subsidiary guarantors parties thereto, the Cash Flow Lenders party thereto and the Cash Flow Agent and (ii) an Increase Supplement (the “Increase Supplement”), between the Company and JPMorgan Chase Bank, N.A., as the increasing lender. The Third Amendment amended the Cash Flow Credit Agreement to, among other things, refinance the Company’s term loan facility in an original aggregate principal amount of $1,755.0 million (the “Existing Term Loan Facility”) with Tranche B Term Loans in an aggregate principal amount of approximately $2,491.6 million, maturing on April 12, 2028. The Increase Supplement supplemented the Cash Flow Credit Agreement to, among other things, increase the aggregate principal amount of the Tranche B Term Loan Facility by approximately $108.4 million (the “Incremental Tranche B Term Loans”), for a total principal amount of $2,600.0 million (the “Tranche B Term Loan Facility” and together with the Cash Flow Revolver, the “Cash Flow Facilities”). Proceeds of the Incremental Tranche B Term Loans were used, together with cash on hand, (i) for the redemption of all of the Existing Notes (as defined below) (the “Senior Notes Redemption”) and (ii) to pay any fees and expenses incurred in connection with the extension and refinancing of the Company’s senior credit facilities and the Senior Notes Redemption.

ABL Credit Agreement

On April 15, 2021, the Company entered into Amendment No. 6 to the ABL Credit Agreement, by and among the Company, the subsidiary borrowers party thereto, the several banks and financial institutions party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent, which amended the ABL Credit Agreement in order to, among other things:

•Terminate the existing revolving commitments of each of the Extending ABL Credit Lenders (as defined in therein), originally maturing on April 12, 2023 (the “Existing ABL Commitments”); and

•Replace the Existing ABL Commitments with an extended revolving commitment of $611.0 million, maturing on April 12, 2026 (the “Extended ABL Commitments”).

Redemption of 8.00% Senior Notes

On April 15, 2021, the Company redeemed the outstanding $645 million aggregate principal amount of the 8.00% Senior Notes for $670.8 million using cash on hand and proceeds from the Incremental Tranche B Term Loans. The redemption is expected to result in a pre-tax loss on extinguishment of debt of $41.8 million during the three and six months ending July 3, 2021, comprising the make-whole premium of $25.8 million and the write-off of $16.0 million in unamortized deferred financing costs.

Interest Rate Swap Agreements

All the following interest rate swap transactions were completed in connection with the debt refinancing transactions on April 15, 2021. The Company ~~is subject~~terminated two swap contracts on an aggregate notional value of $1.0 billion. These contracts were due to other contingencies, including legal proceedings and 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. Product liability, environmental and other legal proceedings also include matters with respect to businesses previously owned.mature in July 2023. The Company ~~has used various substances~~entered into two swap contracts (not designated as cash flow hedges) in which the Company will receive a fixed amount from the counterparties to offset an existing swap contract maturing in July 2023 on a notional value of $500 million that was not terminated but was de-designated as a cash flow hedge. The Company also entered into two interest rate swap contracts maturing in April 2026 on an aggregate notional value of $1.5 billion associated with the Tranche B Term Loan Facility and will pay fixed rates to the counterparties. These contracts are designated as cash flow hedges.

Acquisition

On April 30, 2021, the Company acquired Prime Windows LLC (“Prime”). Prime serves residential new construction and repair and remodel markets with energy efficient vinyl window and door products from two manufacturing facilities in the United States, expanding our manufacturing capabilities and ~~manufacturing operations, which have been or may be deemed~~creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities. We are in the process of allocating the purchase price to identifiable assets and liabilities. The Company expects Prime’s results to be ~~hazardous or dangerous, and~~reported within the extent of its potential liability, if any, under environmental, product liability and workers’ compensation statutes, rules, regulations and case law is unclear. Further, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no range of potential exposure may be reasonably estimated. Also, it is not possible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities, including lawsuits, and therefore no such estimate has been made as of October 3, 2020.Windows segment.

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CORNERSTONE BUILDING BRANDS, INC.

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

The following information should be read in conjunction with the unaudited consolidated financial statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the audited 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, ~~2019.~~2020.

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 ~~information, including any earnings guidance, if applicable.~~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:

•industry cyclicality and seasonality and adverse weather conditions;

•challenging economic conditions affecting the nonresidential construction industry;

•downturns in the residential new construction and repair and remodeling end markets, or the economy or the availability of consumer credit;

•volatility in the United States (“U.S.”) economy and abroad, generally, and in the credit markets;

•the severity, duration and spread of the COVID-19 pandemic, as well as actions that may be taken by the Company or governmental authorities to contain COVID-19 or to treat its impact;

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

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

•the effects of manufacturing or assembly realignments;

•seasonality of the business and other external factors beyond our control;

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

•our ability to identify and develop relationships with a sufficient number of qualified suppliers and to avoid a significant interruption in our supply chains;

•retention and replacement of key personnel;

•enforcement and obsolescence of our intellectual property rights;

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

•changes in building codes and standards;

•competitive activity and pricing pressure in our industry;

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

•our ability to carry out our restructuring plans and to fully realize the expected cost savings;

•global climate change, including legal, regulatory or market responses thereto;

3129

•breaches of our information system security measures;

•damage to our computer infrastructure and software systems;

•necessary maintenance or replacements to our enterprise resource planning technologies;

•potential personal injury, property damage or product liability claims or other types of litigation;

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

•increases in labor costs, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers;

•significant changes in factors and assumptions used to measure certain of our defined benefit plan obligations and the effect of actual investment returns on pension assets;

•the cost and difficulty associated with integrating and combining acquired businesses;

•volatility of the Company’s stock price;

•substantial governance and other rights held by the Investors;

•the effect on our common stock price caused by transactions engaged in by the Investors, our directors or executives;

•our substantial indebtedness and our ability to incur substantially more indebtedness;

•limitations that our debt agreements place on our ability to engage in certain business and financial transactions;

•our ability to obtain financing on acceptable terms;

•downgrades of our credit ratings;

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

•other risks detailed under the caption “Risk Factors” in this Quarterly Report on Form 10-Q, and in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 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 ~~2019~~2020 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.

OVERVIEW

Cornerstone Building Brands, Inc. ~~(together with its subsidiaries, unless~~is the ~~context requires otherwise, the “Company,” “Cornerstone,” “we,” “us” or “our”) is a leading~~largest manufacturer of exterior building products in North America. The Company serves residential and commercial customers across new construction and the repair & remodel markets. Our mission is to be relentlessly committed to our customers and to create great building solutions that enable communities to grow and thrive.

We have developed and continue to implement a well-defined business strategy focused on (i) driving profitable growth in new and existing markets; (ii) leveraging operational excellence across our businesses; (iii) implementing a capital allocation framework balanced between a focus on opportunistic investment in high return initiatives and continued debt repayment; and (iv) operating every part of our business with an ongoing commitment to sustainability.

We believe that by focusing on operational excellence every day, creating a platform for future growth and investing in market-leading residential and commercial building brands, we will deliver unparalleled financial results. We design, engineer, manufacture, install and market external building products through our three operating ~~segments,~~segments: Windows, Siding, and Commercial.

Our manufacturing processes are vertically integrated, which we believe provides cost and competitive advantages. As the #1 manufacturer of vinyl windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines a diverse portfolio of products with an expansive national footprint that includes ~~approximately 20,000~~over 20,500 employees at manufacturing, distribution and office locations ~~throughout~~primarily in North America.

At Cornerstone Building Brands, corporate stewardship is a responsibility that is deeply embedded in our 75-year history. Our sustainable business practices have given us the staying power to make a real difference in countless cities and neighborhoods.

Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of material costs relative to other building materials, the level of residential and nonresidential construction activity, ~~roof~~ repair and retrofit demand and the availability and cost of financing for construction projects. Our sales normally are lower in the first and fourth fiscal quarters of each ~~fiscal~~ year compared to the second and third fiscal quarters because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

32Markets We Serve

~~The Company’s current fiscal quarters~~ur products are ~~based on a four-four-five week calendar with periods ending on~~available across several large and attractive end markets, including residential new construction, repair and remodel and low-rise non-residential construction. We believe that there are favorable underlying fundamental factors that will drive long-term growth across the ~~Saturday~~end markets in which we operate. We also believe that the ongoing COVID-19 pandemic, while still causing economic uncertainty worldwide, has driven strong demand for residential repair and remodel activity, residential new construction and select segments of the ~~last week~~low-rise non-residential construction market, such as distribution, warehouse, healthcare and educational facilities in suburban regions; however, the ~~quarter except for December 31st, which will always be the year-end date. Therefore, the financial results~~COVID-19 pandemic has also caused challenges in other areas of ~~certain fiscal quarters may not be comparable to prior fiscal quarters.~~

~~Kleary Acquisition~~

On March 2, 2020, the Company acquired 100% of the issued and outstanding shares of the common stock of Kleary Masonry, Inc. ("Kleary") for total consideration of $40.0 million. The transaction was financed with cash on hand and through borrowings under the Company’s asset-based revolving credit facility. Kleary primarily services residential customers with manufactured stone installationsnon-residential construction, most notably in retail and commercial ~~customers with manufactured wall installations~~office facilities in ~~the Sacramento, California area. Kleary's results are reported within the Siding~~densely populated urban centers, where we have minimal, if any, participation. We believe our business ~~segment.~~

is well-positioned to benefit from broader societal and population trends favoring suburban regions, as employment and living preferences shift towards such regions.

~~Environmental Stoneworks Acquisition~~

~~On January 12, 2019,~~Cornerstone Building Brands is deeply committed to the Company entered into a Unit Purchase Agreement (the “Purchase Agreement”) with Environmental Materials, LLC, a Delaware limited liability company (“ESW”), the Members of Environmental Materials, LLC (the “Sellers”)communities where our customers and ~~Charles P. Gallagher~~employees live, work and ~~Wayne C. Kocourek, solely~~play. We recognize that our customers are increasingly environmentally conscious in their ~~capacity~~purchasing behavior, and we believe our sustainable solutions favorably address these evolving consumer preferences. For example, certain products in our portfolio are high in recycled end content, virtually 100% recyclable at the end of their useful life and often manufactured to meet or exceed specified sustainability targets, such as ~~the Seller Representative (as defined in the Purchase Agreement), pursuant~~ENERGY STAR and LEED certifications. We recognize that efficient use of recycled materials helps to which, on February 20, 2019, the Company’s wholly-owned subsidiary, Ply Gem Industries, Inc., purchased from the Sellers 100% of the outstanding limited liability company interests of ESW (the “Environmental Stoneworks Acquisition”) for total consideration of $182.6 million, subjectconserve natural resources and reduces environmental impact, and we are committed to ~~post-closing adjustments. The transaction was financed through borrowings under the Company’s asset-based revolving credit facility.~~

driving these sustainable practices throughout our business.

COVID-19 Update

We experienced ~~a significant~~an overall decrease in customer demand across all our markets during ~~the second quarter of~~ 2020 ~~due to~~as the COVID-19 pandemic ~~mostly due to delays in construction activity driven by~~caused temporary closures of non-life sustaining ~~businesses. The continuing impact~~businesses delaying construction activity. Throughout this pandemic, the Company has been adhering to mandates and other guidance from local governments and health authorities as well as taken extraordinary measures and invested significantly in practices to protect the health and safety of ~~the pandemic on~~ our ~~future consolidated results of operations is uncertain,~~employees and ~~we expect net sales for~~our communities. During 2020, ~~to be lower as compared to 2019. As a result,~~ the Company quickly implemented a range of actions aimed at reducing costs and preserving liquidity. These actions included ~~the closure of our Ambridge, Pennsylvania Commercial facility and Corona, California Windows facility,~~plant closures, permanent workforce reductions, employee furloughs, a hiring freeze, a deferral of annual wage raises, and reducing discretionary and non-essential expenses, such as consulting expenses. Additionally, we reduced capital expenditures to focus on key strategic initiatives, such as automation, product innovation, and critical maintenance items. We believe our business model, our existing balances of domestic cash and cash equivalents, availability under our revolving credit facilities, currently anticipated operating cash flows, and overall liquidity will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve ~~months and positions us to manage our business through this crisis as it continues to unfold.~~months. We will continue to evaluate the nature and extent of the COVID-19 pandemic’s impact on our financial condition, results of operations and cash flows.

As of October 3, 2020, all manufacturing facilities were operational. Throughout this pandemic, the Company has been adhering to mandates and other guidance from local governments and health authorities, including the World Health Organization and the Centers for Disease Control and Prevention. The Company has taken extraordinary measures and invested significantly in practices to protect employees and reduce the risk of spreading the virus, while continuing to operate where permitted and to the extent possible. These actions include additional cleaning of our facilities, staggering crews, incorporating visual cues to reinforce social distancing, providing face coverings and gloves, as well as implementing daily health validation at our manufacturing and office facilities. The health and safety of our employees and our communities is our number one priority.

~~Ransomware attack~~

On August 9, 2020, we detected a ransomware attack impacting certain of its operational and information technology systems. Promptly upon its detection of the attack, we launched an investigation, notified law enforcement and engaged the services of specialized legal counsel and other incident response professionals. We were able to recover our critical operational data and business systems. The Company carries insurance, including cyber insurance, which is commensurate with its size and the nature of its operations. The incident did not have a material impact on its business, operations or financial condition.

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RESULTS OF OPERATIONS

The following table represents key results of operations on a consolidated basis for the periods indicated:


		Three Months Ended									Nine Months Ended										Three Months Ended
(Amounts in thousands)	(Amounts in thousands)	October 3, 2020			September 28, 2019			$ change	% change		October 3, 2020			September 28, 2019			$ change	% change		(Amounts in thousands)		April 3, 2021			April 4, 2020			$ change	% change
Net sales	Net sales	$	1,227,253		$	1,285,043		(57,790)	(4.5)	%	$	3,426,000		$	3,645,332		(219,332)	(6.0)	%	Net sales		$	1,267,032		$	1,113,811		153,221	13.8	%
Gross profit	Gross profit	297,502			309,803			(12,301)	(4.0)	%	783,120			800,383			(17,263)	(2.2)	%	Gross profit		259,729			230,887			28,842	12.5	%
% of net sales	% of net sales	24.2		%	24.1		%				22.9		%	22.0		%				% of net sales		20.5		%	20.7		%
Selling, general and administrative expenses	Selling, general and administrative expenses	137,250			154,034			(16,784)	(10.9)	%	436,575			466,368			(29,793)	(6.4)	%	Selling, general and administrative expenses		153,168			164,954			(11,786)	(7.1)	%
% of net sales	% of net sales	11.2		%	12.0		%				12.7		%	12.8		%				% of net sales		12.1		%	14.8		%
Restructuring and impairment charges, net	Restructuring and impairment charges, net	2,918			4,984			(2,066)	(41.5)	%	32,164			15,522			16,642	107.2	%	Restructuring and impairment charges, net		1,838			13,835			(11,997)	(86.7)	%
Strategic development and acquisition related costs	Strategic development and acquisition related costs	7,909			10,500			(2,591)	(24.7)	%	13,550			36,668			(23,118)	(63.0)	%	Strategic development and acquisition related costs		3,313			4,857			(1,544)	(31.8)	%
Interest expense	Interest expense	51,519			56,549			(5,030)	(8.9)	%	158,738			173,134			(14,396)	(8.3)	%	Interest expense		56,499			54,835			1,664	3.0	%
Net income (loss)		30,516			25,164			5,352	21.3	%	(484,658)			(17,320)			(467,338)	2,698.3	%
Net loss																				Net loss		(1,655)			(542,073)			540,418	(99.7)	%

Net sales - Consolidated net sales for the three ~~and nine~~ months ended ~~October~~April 3, ~~2020~~2021 ~~decreased~~increased by ~~approximately 4.5% and 6.0%, respectively, as~~approximately 13.8% as compared to the same period last year. ~~The decrease~~Approximately 9% of the increase was primarily ~~due to lower~~driven by strong demand ~~across each~~for residential products sold through the Windows and Siding segments, which made up 66.6% of ~~our business segments coupled with price effects from falling commodity costs~~total net sales for the quarter. Additionally, the Company realized favorable price/mix as a result of ~~the COVID-19 pandemic.~~several price increases that were announced in response to rising commodity costs and other inflationary impacts.

Gross profit % of net sales - The Company’s gross profit percentage was ~~24.2% and 22.9%~~20.5% for the ~~three and~~ ~~nine~~three months ended ~~October~~April 3, ~~2020, respectively,~~2021, which was 10a 20 basis ~~points and 90 basis points higher than~~point decline over the ~~three and~~ ~~nine~~three months ended ~~September 28, 2019~~April 4, 2020~~, respectively. Our~~. As a result of the quick pace of recovery experienced across many end-markets, there has been a rapid rise in raw materials and many other manufacturing input costs. While we have responded by remaining disciplined ~~focus on~~with price leadership, ~~aligning variable costs with volume, and structurally reducing fixed costs as part of cost savings initiatives, as well as lower raw material~~the timing delay between when costs were incurred and when the ~~main drivers~~price increase was realized compressed margins. Additionally, the pace and length of time we remain in an inflationary environment can have the effect of reducing gross profit ~~as a percentage~~margins. We remain focused on structurally improving our highly variable cost structure through cost-out initiatives. During the first quarter of ~~net sales results.~~2021, we have realized approximately $17 million of year over year cost structure improvements.

Selling, ~~general,~~general, and administrative expenses ~~- The Company’s~~decreased 7.1% during the three months ended April 3, 2021, compared to the three months ended April 4, 2020. Effective management of near-term costs coupled with structural cost savings initiatives executed in 2020 in response to the COVID-19 pandemic drove the lower selling, general, and administrative expenses ~~decreased 10.9% and 6.4%~~at April 3, 2021 as compared to April 4, 2020. Additionally, during the ~~three~~first quarter of 2021, we realized approximately $7 million of year over year savings from cost reduction initiatives.

Restructuring and impairment c~~nine~~harges, net ~~months ended October 3, 2020, respectively, compared to~~decreased $12.0 million during the ~~three and~~ ~~nine~~three months ended ~~September 28, 2019~~April 3, 2021, ~~respectively. The Company’s restructuring and impairment costs decreased $2.1 million and increased $16.6 million during the three and~~ ~~nine~~ ~~months ended October 3, 2020,~~ compared to the ~~three and~~ ~~nine~~three months ended ~~September 28, 2019~~April 4, 2020, ~~respectively,~~ primarily due to ~~timing~~completion of ~~severance costs as part of our ongoing efforts to rationalize~~ operational and organizational ~~structures and~~ actions taken in response to the COVID-19 pandemic.

Strategic development and acquisition ~~costs~~related costs decreased ~~$2.6~~$1.5 million during the three months ended April 3, 2021 compared to the three months ended April 4, 2020 as these activities have decreased.

Interest expense increased $1.7 million or 3.0% in the three months ended April 3, 2021 as compared to the three months ended April 4, 2020, primarily as a result of the $500 million bond offering completed in the third quarter of 2020 in order to preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic.

Consolidated provision (benefit) for income taxes was an expense of $0.8 million for the three months ended April 3, 2021 compared to a benefit of $18.0 million for the three months ended April 4, 2020. The effective tax rate for the three months ended April 3, 2021 was 91.8% compared to 3.2% for the three months ended April 4, 2020. The change in the effective tax rate was primarily driven by the improved financial results for the three months ended April 3, 2021 and ~~$23.1 million, respectively,~~the impact associated with the goodwill impairment recorded during the three ~~and nine~~ months ended ~~October~~April 4, 2020.

Net loss was $1.7 million or $0.01 per diluted share for the three months ended April 3, ~~2020~~2021. Effective execution of our priorities, which included maintaining cost discipline, strengthening price leadership, driving operational excellence and investing in growth opportunities delivered improved profitability in the first quarter of 2021 as compared to the same period ~~last year as our merger-related activities have decreased, with no acquisitions during~~in the ~~three months ended October 3, 2020.~~prior year.

Segment Results of Operations

We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC 280, Segment Reporting. We have

determined that we have three reportable segments, organized and managed principally by the different industry sectors they serve. While the segments often operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. We report all other business activities in Corporate and unallocated costs. Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment associated with our headquarters in Cary, North Carolina and office in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, restructuring charges, acquisition costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology and strategic sourcing, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense and other income (expense).

~~The~~One of the primary ~~measurement~~measurements used by management to measure the financial performance of each segment is Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), adjusted for the following items: income tax (benefit) expense; depreciation and amortization; interest expense, net; restructuring and impairment charges; acquisition costs; non-cash ~~charges of purchase price allocated to inventories;~~charges; goodwill impairment; share-based compensation expense; non-cash foreign exchange transaction/translation (income) loss; other non-cash items; and other items.

The presentation of segment results below includes a reconciliation of the changes for each segment reported in accordance with U.S. GAAP to a pro forma basis to allow investors and the Company to meaningfully evaluate the percentage change on a comparable basis from period to period. The pro forma financial information is based on the historical information of Cornerstone ~~Environmental Stoneworks~~ and ~~Kleary.~~Kleary Masonry, Inc. (“Kleary”), which the Company acquired on March 2, 2020. The pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the ~~two acquisitions~~Kleary acquisition or any integration costs. Pro forma balances are not necessarily indicative of operating results had the ~~Environmental Stoneworks and~~ Kleary ~~acquisitions~~acquisition occurred on January 1, ~~2019~~2020 or of future results.

See Note 19 — Segment Information in the notes to the unaudited consolidated financial statements for more information on our segments.

NON-GAAP FINANCIAL MEASURES

Set forth below are certain “non-GAAP financial measures” as defined under the Securities Exchange Act of 1934 and in accordance with Regulation G. Management believes the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the financial results between periods on a more comparable basis. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. We have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and provided in accordance with U.S. GAAP.

The following tables presents a comparison of net sales as reported to pro-forma ~~revenue~~net sales for Cornerstone as if the Kleary ~~and Environmental Stoneworks acquisitions~~acquisition had occurred on January 1, ~~2019:~~2020:

Three months ended October 3, 2020 Three months ended September 28, 2019
(Amounts in thousands) Reported Acquisitions Pro Forma Reported Acquisitions (1) Pro Forma
Net Sales
Windows $ 501,314 $ — $ 501,314 $ 504,338 $ — $ 504,338
Siding 321,898 — 321,898 315,799 13,264 329,063
Commercial 404,041 — 404,041 464,906 — 464,906
Total Net Sales $ 1,227,253 $ — $ 1,227,253 $ 1,285,043 $ 13,264 $ 1,298,307
Nine Months Ended October 3, 2020 Nine months ended September 28, 2019
Reported Acquisitions (1) Pro Forma Reported Acquisitions (2) Pro Forma
Net Sales
Windows $ 1,378,039 $ — $ 1,378,039 $ 1,434,579 $ — $ 1,434,579
Siding 848,190 8,358 856,548 840,601 48,903 889,504
Commercial 1,199,771 — 1,199,771 1,370,152 — 1,370,152
Total Net Sales $ 3,426,000 $ 8,358 $ 3,434,358 $ 3,645,332 $ 48,903 $ 3,694,235

~~(1)Acquisitions reflect the estimated impact for Kleary Masonry, Inc.~~

~~(2)Acquisitions reflect the estimated impact for Environmental Stoneworks and Kleary Masonry, Inc.~~


	Three months ended April 3, 2021						Three months ended April 4, 2020
(Amounts in thousands)	Reported		Acquisitions		Pro Forma		Reported		Acquisitions		Pro Forma
Net Sales
Windows	$	527,263	$	—	$	527,263	$	448,450	$	—	$	448,450
Siding	316,391		—		316,391		241,043		8,358		249,401
Commercial	423,378		—		423,378		424,318		—		424,318
Total Net Sales	$	1,267,032	$	—	$	1,267,032	$	1,113,811	$	8,358	$	1,122,169

3533

The following tables reconcile Adjusted EBITDA and pro forma Adjusted EBITDA to operating income (loss) for the periods indicated.


Consolidated	Consolidated													Consolidated

		Three Months Ended						Nine Months Ended							Three Months Ended
(Amounts in thousands)	(Amounts in thousands)	October 3, 2020			September 28, 2019			October 3, 2020			September 28, 2019			(Amounts in thousands)		April 3, 2021			April 4, 2020
Net sales														Net sales		$	1,267,032		$	1,113,811
Impact of Kleary acquisition(1)														Impact of Kleary acquisition(1)		—			8,358
Pro forma net sales														Pro forma net sales		$	1,267,032		$	1,122,169

Operating income (loss), GAAP	Operating income (loss), GAAP	$	103,979		$	95,560		$	(337,887)		$	149,126		Operating income (loss), GAAP		$	55,208		$	(500,791)
Restructuring and impairment charges, net	Restructuring and impairment charges, net	2,918			4,984			32,321			15,522			Restructuring and impairment charges, net		1,838			13,992
Strategic development and acquisition related costs	Strategic development and acquisition related costs	7,909			10,500			13,550			36,668			Strategic development and acquisition related costs		3,313			4,857
Goodwill impairment	Goodwill impairment	—			—			503,171			—			Goodwill impairment		—			503,171
Depreciation and amortization	Depreciation and amortization	71,933			64,009			212,413			191,485			Depreciation and amortization		72,615			69,769
Other (1)		6,588			5,709			25,089			31,883
Other (2)														Other (2)		6,174			5,213
Adjusted EBITDA	Adjusted EBITDA	193,327			180,762			448,657			424,684			Adjusted EBITDA		139,148			96,211

Impact of Environmental Stoneworks and Kleary acquisitions(2)		—			3,831			1,869			6,979
Impact of Kleary acquisition(1)														Impact of Kleary acquisition(1)		—			1,869
Pro Forma Adjusted EBITDA	Pro Forma Adjusted EBITDA	$	193,327		$	184,593		$	450,526		$	431,663		Pro Forma Adjusted EBITDA		$	139,148		$	98,080
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	15.8		%	14.2		%	13.1		%	11.7		%	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales		11.0		%	8.7		%

(1)Includes $4.0 million and $12.6 million of share based compensation expense for the three and nine months ended October 3, 2020, respectively, and $3.1 million and $10.6 million for the three and nine months ended September 28, 2019, respectively, as well as $2.6 million and $10.6 million of COVID-19 related costs for the three and nine months ended October 3, 2020, respectively.

~~(2)~~Reflects the net sales and Adjusted EBITDA of ~~Environmental Stoneworks~~Kleary for the period ~~January 1, 2019 to the acquisition date of February 20, 2019 and Kleary Masonry, Inc. for the periods January 1, 2019 to September 28, 2019 and~~ January 1, 2020 to March 1, 2020.

Windows
Three Months Ended Nine Months Ended
(Amounts in thousands) October 3,
2020 September 28,
2019 October 3,
2020 September 28,
2019
Net Sales $ 501,314 $ 504,338 $ 1,378,039 $ 1,434,579
Operating income (loss), GAAP $ 37,295 $ 34,446 $ (252,794) $ 62,039
Restructuring and impairment charges, net 1,539 505 7,189 1,526
Strategic development and acquisition related costs — 4,993 16 17,054
Goodwill impairment — — 320,990 —
Depreciation and amortization 30,644 23,778 90,679 72,603
Other 1,168 862 6,060 84
Adjusted EBITDA $ 70,646 $ 64,584 $ 172,140 $ 153,306
Adjusted EBITDA as a % of Net Sales 14.1 % 12.8 % 12.5 % 10.7 %

~~Net sales~~(2)Primarily includes $3.3 million and $3.4 million of share based compensation for the three months ended April 3, 2021 and April 4, 2020, respectively; $3.0 million in costs for the three months ended April 3, 2021 associated with debt refinancing transactions; and $(0.6) million and $1.2 million of COVID-19 related costs for the ~~nine~~three months ended ~~October~~April 3, 2021 and April 4, 2020, was 0.6% and 3.9% lower than the same period last year, respectively, due to the lower demand from the market impacts of the COVID-19 pandemic more than offsetting favorable price/mix from price increases implemented at the beginning of the year. While our business was deemed an essential activity, delays in construction activity driven by temporary closures of non-life sustaining businesses and stay-at-home orders occurred.respectively.

Operating income (loss) for the three months ended ~~October~~April 3, ~~2020 was $37.3~~2021 increased to $55.2 million ~~an increase~~ of ~~$2.9 million or 8.3%~~operating income as compared to an operating loss of $500.8 million in the three months ended ~~September 28, 2019,~~April 4, 2020 primarily ~~due to favorable price, net of raw material inflation of $7.7 million and improved manufacturing productivity from cost reduction initiatives offset by lower volume/demand~~ as a result of a goodwill impairment of $503.2 million in the ~~impact~~comparable period.

Adjusted EBITDA for the three months ended April 3, 2021 was $139.1 million or 11.0% of net sales, an improvement of 8.7% or 230 basis points from the pro forma period a year ago. The improvement was due to strong volumes in the residential end-markets of approximately $29 million, favorable SG&A of approximately $14 million primarily as a result of cost reduction actions taken in 2020 in response to the COVID-19 ~~pandemic. Operating loss~~pandemic, and net manufacturing efficiencies of $3 million, partially offset by unfavorable price/mix, net of inflation, as a result of rising commodity costs and other inflationary impacts. These results represent the eighth consecutive quarter of year over year Adjusted EBITDA margin expansion and record first quarter earnings for the Company.


Windows

	Three Months Ended
(Amounts in thousands)		April 3, 2021			April 4, 2020
Net Sales		$	527,263		$	448,450

Operating income (loss), GAAP		$	29,362		$	(313,190)
Restructuring and impairment charges, net		932			1,466
Strategic development and acquisition related costs		—			16
Goodwill impairment		—			320,990
Depreciation and amortization		30,798			29,853
Other		(87)			1,713
Adjusted EBITDA		$	61,005		$	40,848
Adjusted EBITDA as a % of Net Sales		11.6		%	9.1		%

Net sales for the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 was ~~$252.8~~17.6% higher than the same period in the prior year, due to strong demand from residential end markets of approximately 15% coupled with favorable price/mix as a result of increased prices in response to rising commodity costs and other inflationary impacts.

Operating income (loss) for the three months ended April 3, 2021 increased to $29.4 million ~~a decrease of $314.8 million~~operating income, as compared to an operating loss of $313.2 million for the ~~nine~~three months ended ~~September 28, 2019~~April 4, 2020, primarily due to a goodwill impairment in the ~~goodwill impairment.~~comparable period.

Adjusted EBITDA was ~~$70.6~~$61.0 million or ~~14.1~~11.6% as a percent of net sales, an improvement of ~~130~~250 basis points ~~better than~~over the three months ended ~~September 28, 2019,~~April 4, 2020, which is the ~~sixth~~eighth consecutive quarter of Adjusted EBITDA year over year margin expansion. ~~On a year-to-date basis, Adjusted EBITDA as a percent of net sales improved 180 basis points versus the same~~ ~~nine-month period last year.~~ Margin expansion over prior year was a result of the ~~quick~~volume leverage from increased demand and ~~effective management of near-term expenses and~~benefits from cost savings initiatives.

acceleration of our strategy to improve our highly variable cost structure, despite the challenges in our end-markets caused by the COVID-19 pandemic. Additionally, positive price and mix, net of inflation as a result of focused price discipline was a contributing factor.


Siding	Siding													Siding

		Three Months Ended						Nine Months Ended							Three Months Ended
(Amounts in thousands)	(Amounts in thousands)	October 3, 2020			September 28, 2019			October 3, 2020			September 28, 2019			(Amounts in thousands)		April 3, 2021			April 4, 2020
Net Sales	Net Sales	$	321,898		$	315,799		$	848,190		$	840,601		Net Sales		$	316,391		$	241,043
Pro Forma Net Sales		321,898			329,063			856,548			889,504
Impact of Kleary acquisition(1)														Impact of Kleary acquisition(1)		—			8,358
Pro forma net sales														Pro forma net sales		$	316,391		$	249,401

Operating income (loss), GAAP	Operating income (loss), GAAP	$	45,313		$	37,063		$	(92,916)		$	51,346		Operating income (loss), GAAP		$	27,528		$	(168,867)
Restructuring and impairment charges, net	Restructuring and impairment charges, net	(714)			2,531			2,901			8,162			Restructuring and impairment charges, net		141			1,091
Strategic development and acquisition related costs	Strategic development and acquisition related costs	7,139			—			8,115			—			Strategic development and acquisition related costs		323			21
Goodwill impairment	Goodwill impairment	—			—			176,774			—			Goodwill impairment		—			176,774
Depreciation and amortization	Depreciation and amortization	28,547			28,804			85,068			83,569			Depreciation and amortization		29,148			28,007
Other	Other	(1,191)			(313)			(841)			16,772			Other		(19)			(292)
Adjusted EBITDA	Adjusted EBITDA	79,094			68,085			179,101			159,849			Adjusted EBITDA		$	57,121		$	36,734

Impact of Environmental Stoneworks and Kleary acquisitions(1)		—			3,831			1,869			6,988
Impact of Kleary acquisition(1)														Impact of Kleary acquisition(1)		—			1,869
Pro Forma Adjusted EBITDA	Pro Forma Adjusted EBITDA	$	79,094		$	71,916		$	180,970		$	166,837		Pro Forma Adjusted EBITDA		$	57,121		$	38,603
Adjusted EBITDA as a % of Net Sales	Adjusted EBITDA as a % of Net Sales	24.6		%	21.6		%	21.1		%	19.0		%	Adjusted EBITDA as a % of Net Sales		18.1		%	15.2		%
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	24.6		%	21.9		%	21.1		%	18.8		%	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales		18.1		%	15.5		%

(1)Reflects the net sales and Adjusted EBITDA of ~~Environmental Stoneworks~~Kleary for the period ~~January 1, 2019 to the acquisition date of February 20, 2019 and Kleary Masonry, Inc. for the periods January 1, 2019 to September 28, 2019 and~~ January 1, 2020 to March 1, 2020.

~~Pro Forma~~ Net sales for the three ~~and nine~~ months ended ~~October~~April 3, ~~2020~~2021 was ~~2.2% and 3.7% lower~~26.9% higher than the pro forma net sales in the same period ~~last~~a year ~~respectively.~~ago. During the quarter, order momentum was strong as wholesale and retail demand outpaced prior year driving approximately 19% higher shipped volume ~~but was more than offset by price pressure from lower raw material inputs~~ and ~~shift~~favorable price/mix as a result of increased prices in ~~product mix. For the year-to-date period, delays in construction activity driven by temporary closures of non-life sustaining businesses~~response to rising commodity costs and ~~stay-at-home orders resulted in lower volume of approximately $25 million.~~other inflationary impacts.

Operating income (loss) for the three months ended ~~October~~April 3, ~~2020 was $49.3~~2021 increased to $27.5 million ~~an increase of $12.3 million or 33.1%~~operating income, as compared to an operating loss of $168.9 million for the three months ended ~~September 28, 2019~~April 4, 2020, primarily due to ~~improvements made to operating and SG&A costs as part of our cost initiatives, partially offset by impacts from lower volume. Operating loss for~~a goodwill impairment in the ~~nine~~ ~~months ended~~ ~~October 3, 2020~~ ~~was $88.9 million, a decrease of $140.3 million compared to the~~ ~~nine~~ ~~months ended~~ ~~September 28, 2019, primarily due to the goodwill impairment.~~comparable period.

~~Pro Forma~~ Adjusted EBITDA was ~~$79.1~~$57.1 million or ~~24.6~~18.1% as a percent of net sales, an improvement of ~~300~~260 basis points as compared to the ~~three months ended~~ ~~September 28, 2019. This was the~~ ~~sixth~~ ~~consecutive quarter of margin expansion. On a year-to-date basis, Pro Forma~~pro forma Adjusted EBITDA as a percent of pro forma net sales ~~improved 210 basis points versus~~for the ~~same~~ ~~nine~~three~~-month period last year.~~ months ended April 4, 2020. This was the eighth consecutive quarter of year over year margin expansion. Margin expansion over prior year was a result of the ~~quick~~volume leverage from increased demand and ~~effective management of near-term expenses~~benefits from cost savings initiatives, primarily in selling, general and acceleration of our strategy to improve our highly variable cost structure, despite the challenges in our end-markets caused by the COVID-19 pandemic. Additionally, positive price and mix, net of inflation as a result of lower raw material costs was a contributing factor.administrative expenses.

3735


Commercial	Commercial													Commercial

		Three Months Ended						Nine Months Ended							Three Months Ended
(Amounts in thousands)	(Amounts in thousands)	October 3, 2020			September 28, 2019			October 3, 2020			September 28, 2019			(Amounts in thousands)		April 3, 2021			April 4, 2020
Net Sales	Net Sales	$	404,041		$	464,906		$	1,199,771		$	1,370,152		Net Sales		$	423,378		$	424,318

Operating income, GAAP	Operating income, GAAP	$	56,137		$	59,317		$	109,642		$	142,436		Operating income, GAAP		$	41,585		$	16,841
Restructuring and impairment charges, net	Restructuring and impairment charges, net	1,358			802			20,427			1,967			Restructuring and impairment charges, net		672			11,705
Strategic development and acquisition related costs	Strategic development and acquisition related costs	(8)			238			(262)			6,493			Strategic development and acquisition related costs		58			(105)
Goodwill impairment	Goodwill impairment	—			—			5,407			—			Goodwill impairment		—			5,407
Depreciation and amortization	Depreciation and amortization	11,743			10,785			33,664			32,959			Depreciation and amortization		11,360			10,901
Other	Other	1,108			1,356			3,967			3,146			Other		(257)			1,227
Adjusted EBITDA	Adjusted EBITDA	$	70,338		$	72,498		$	172,845		$	187,001		Adjusted EBITDA		$	53,418		$	45,976
Adjusted EBITDA as a % of Net Sales	Adjusted EBITDA as a % of Net Sales	17.4		%	15.6		%	14.4		%	13.6		%	Adjusted EBITDA as a % of Net Sales		12.6		%	10.8		%

Net sales for the three ~~and nine~~ months ended ~~October~~April 3, ~~2020~~2021 of $423.4 million was ~~13.1% and 12.4% lower than~~essentially flat as compared to the same ~~time~~ period ~~last~~a year ~~respectively,~~ago due to unfavorable volume from three less ship days in the first quarter of 2021 as compared to ~~lower demand from delayed construction activity from~~ the ~~COVID-19 pandemic and related price effects from declining raw material~~first quarter of 2020 offset by favorable price/mix as a of result of increased prices in response to rising commodity costs and ~~shift in product mix.~~other inflationary impacts.

Operating income for the three months ended ~~October~~April 3, ~~2020~~2021 was ~~$56.1~~$41.6 million, ~~a decrease~~an increase of ~~$3.2~~$24.7 million or ~~5.4%~~146.9% compared to the three months ended ~~September 28, 2019~~April 4, 2020, ~~primarily due~~due to approximately $14.0 million of lower selling, general and administrative expenses, $11.0 million of lower restructuring and impairment charges, improved manufacturing efficiencies and structural cost, $5.0 million of a goodwill impairment incurred in the ~~executed cost reduction initiatives, facility rationalizations, organizational simplification~~comparable period offset by approximately $7.0 million of unfavorable price/mix, net of inflation and expense management while effectively managing price with declining steel costs, offsetting the unfavorable impact from a shift to less complex projects. Operating income for the nine months ended October 3, 2020 was $109.6 million, a decrease of $32.8 million or 23.0% compared to the nine months ended ~~September 28, 2019, primarily due to the impacts of the COVID-19 pandemic discussed above.~~lower volume.

Adjusted EBITDA was ~~$70.3~~$53.4 million or ~~17.4~~12.6% as a percent of net sales, an improvement of 180 basis points over the same period ~~last year.~~a year ago. This was the ~~sixth~~eighth consecutive quarter of year over year margin expansion. ~~On a year-to-date basis, Adjusted EBITDA margin improved 80 basis points.~~ Margin expansion over prior year was ~~a result of the quick~~primarily due to realized benefits from cost reduction initiatives and effective management of near-term expenses and acceleration of our strategy to improve our highly variable cost structure, despite the challenges in our end-markets caused by the COVID-19 pandemic, along with effective price management amid declining steel costs offsetting the unfavorable shifts in product mix of approximately $26 million. We have a broad and diversified set of product offerings that serve low rise non-residential applications, but demand for higher margin products weakened as customer capital spending was affected by the uncertainties related to the COVID-19 pandemic.manufacturing efficiencies.

Unallocated Operating Earnings (Losses), Interest, and Provision (Benefit) for Income Taxes


		Three Months Ended				Nine Months Ended					Three Months Ended
(Amounts in thousands)	(Amounts in thousands)	October 3, 2020		September 28, 2019		October 3, 2020		September 28, 2019		(Amounts in thousands)		April 3, 2021		April 4, 2020
Statement of operations data:	Statement of operations data:									Statement of operations data:
SG&A expenses	SG&A expenses	$	(33,988)	$	(29,996)	$	(96,122)	$	(93,411)	SG&A expenses		$	(40,334)	$	(30,650)
Acquisition related expenses	Acquisition related expenses	(778)		(5,270)		(5,697)		(13,284)		Acquisition related expenses		(2,933)		(4,925)
Operating loss	Operating loss	(34,766)		(35,266)		(101,819)		(106,695)		Operating loss		$	(43,267)	$	(35,575)
Interest expense		(51,519)		(56,549)		(158,738)		(173,134)
Interest income		328		155		1,007		491
Foreign exchange gain (loss)		812		(616)		(1,300)		1,084
Other income (expense), net		(23)		717		(25)		665
Income tax provision (benefit)		23,061		14,103		(12,285)		(4,448)

Unallocated operating losses include items that are not directly attributed to or allocated to our reporting segments. Such items include legal costs, corporate payroll, and unallocated finance and accounting expenses. The unallocated operating loss for the three months ended ~~October~~April 3, ~~2020 decreased~~2021 increased by ~~$0.5~~$7.7 million or ~~1.4%~~21.6% compared to the three months ended ~~September 28, 2019, and for the nine months ended October 3, 2020 decreased by $4.9 million or 4.6% compared~~April 4, 2020. The change is due primarily to the ~~nine months ended September 28, 2019. The change in both periods is due primarily to reductions in management incentive cost and workforce as well as management~~return of near-term expenses such as ~~various professional fees~~bonus and ~~legal costs as we managed the uncertainties of the COVID-19 pandemic. Unallocated~~commission costs. Unallocated operating loss includes ~~$4.0~~$3.3 million and ~~$12.6~~$3.4 million of share-based compensation expense for the three ~~and nine~~ months ended ~~October~~April 3, 2021 and April 4, 2020, respectively. ~~Share-based compensation expense was $3.1 million and $10.6 million for the three and nine months ended September 28, 2019, respectively.~~

~~Interest expense~~ decreased to $51.5 million for the three months ended October 3, 2020 and $158.7 million for the nine months ended October 3, 2020 compared to $56.5 million for the three months ended September 28, 2019 and $173.1 million for the nine months ended September 28, 2019. The interest expense decrease is primarily du~~e to declining interest rates in fiscal 2020 which impacted the floating rate Term Loan Facility.~~

~~Foreign exchange gain (loss)~~ for the three months ended October 3, 2020 was a $0.8 million gain compared to a loss of $0.6 million for the three months ended September 28, 2019 and for the nine months ended October 3, 2020 it was a $1.3 million loss compared to a gain of $1.1 million for the nine months ended September 28, 2019. Changes in both periods are due to exchange rate fluctuations in the Canadian dollar and Mexican peso relative to the U.S. dollar.

~~Consolidated provision (benefit) for income taxes~~ was an expense of $23.1 million for the three months ended October 3, 2020 compared to an expense of $14.1 million for the three months ended September 28, 2019 and a benefit of $12.3 million for the nine months ended October 3, 2020 compared to a benefit of $4.4 million for the nine months ended September 28, 2019. The effective tax rate for the three months ended October 3, 2020 was 43.0% compared to 35.9% for the three months ended September 28, 2019. The change in the effective tax rate was primarily driven by the continuing effects associated with the enactment of the CARES Act and the impact of COVID-19. The effective tax rate for the nine months ended October 3, 2020 was 2.5% compared to 20.4% for the nine months ended September 28, 2019. The change in the effective tax rate was primarily driven by the continuing effects associated with the enactment of the CARES Act and items relating to the goodwill impairment recorded during the nine months ended October 3, 2020.

3936

LIQUIDITY AND CAPITAL RESOURCES

General

Our principal source of funds is cash generated from operations, supplemented by borrowings against our asset-based lending and revolving credit facility. We typically invest our excess cash in various overnight investments that are issued or guaranteed by the U.S. federal government. Our cash, cash equivalents and restricted cash ~~increased~~decreased from ~~$102.3~~$680.5 million as of December 31, ~~2019~~2020 to ~~$633.8~~$672.9 million as of ~~October~~April 3, ~~2020.~~2021. The following table summarizes our consolidated cash flows for the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 and ~~September 28, 2019~~April 4, 2020 (in thousands):


		Nine Months Ended					Three Months Ended
		October 3, 2020		September 28, 2019			April 3, 2021		April 4, 2020
Net cash provided by operating activities		$	236,876	$	67,819
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	20,031	$	(2,224)
Net cash used in investing activities	Net cash used in investing activities	(102,838)		(264,675)		Net cash used in investing activities	(20,695)		(67,424)
Net cash provided by financing activities		396,974		156,959
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(7,459)		453,268
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	507		1,406		Effect of exchange rate changes on cash and cash equivalents	585		(2,302)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	531,519		(38,491)		Net increase (decrease) in cash, cash equivalents and restricted cash	(7,538)		381,318
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	102,307		147,607		Cash, cash equivalents and restricted cash at beginning of period	680,478		102,307
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	633,826	$	109,116	Cash, cash equivalents and restricted cash at end of period	$	672,940	$	483,625

Operating Activities

~~Our business is both seasonal and cyclical and~~The Company generated strong cash ~~flows from operating activities may fluctuate~~flow during the ~~year~~three months ended April 3, 2021, with cash flow from operations of $20.0 million, a cash generation improvement of $22.3 million over the three months ended April 4, 2020. The improvement was primarily driven by higher earnings in the period and ~~from year-to-year due to economic conditions. We rely on cash as well as short-term borrowings, when needed, to meet cyclical~~the amount and ~~seasonal increases~~timing of accrued sales and marketing and compensation-related expenses, partially offset by investments in working capital ~~needs. These needs generally rise during periods~~to support market demand.

The following table shows the impact of ~~increased economic activity or due to higher levels of inventory and accounts receivable. During economic slowdowns,~~ working capital ~~needs generally decrease as a result~~items on cash during the three months ended April 3, 2021 and April 4, 2020, respectively (in thousands):


	Three Months Ended
	April 3, 2021		April 4, 2020		$ Change
Net cash (used in) provided by:
Accounts receivable	$	(47,157)	$	20,532	$	(67,689)
Inventories	(62,028)		(20,724)		(41,304)
Accounts payable	49,424		12,461		36,963
Net cash (used in) provided by working capital items	$	(59,761)	$	12,269	$	(72,030)

The use of ~~the reduction of~~cash for working capital between periods was due to inventories and accounts ~~receivable. Working capital needs also fluctuate based on raw material prices.~~

~~Net~~receivable, partially offset by accounts payable. The decrease in cash provided by ~~operating activities was $236.9 million during the nine months ended October 3, 2020 compared to net cash provided by operati~~ng activities of $67.8 million for the nine months ended September 28, 2019. The change in cash flow provided by operations is due to improved earnings generation, accounts receivables collections, timing of payments on compensation accruals, seasonal trends in the timing of working capital, and effective working capital management to align with dynamic market conditions.

~~Net cash used in~~ accounts receivable and inventory was ~~$84.3 million for~~primarily driven by the ~~nine months ended October 3, 2020 compared to $138.3 million used~~rapid recovery in accounts receivable for the nine months ended September 28, 2019. The changes in accounts receivable period over period relates to seasonal trends in working capital and timing of collections and volume impactsresidential end-markets from the COVID-19 pandemic. ~~Our days sales outstanding as~~See the Consolidated Statements of ~~October 3, 2020 and September 28, 2019 were 41.3 days and 41.7 days, respectively.~~

ForCash Flows in the ~~nine months ended October 3, 2020, the change in cash flows relating to inventory was an increase of $31.0 million compared to an increase of $63.3 million~~unaudited consolidated financial statements for the nine months ended September 28, 2019. We experienced a $31.0 million cash flow increase in inventory from the Commercial segment primarily as a result of decreasing material costs. The remaining changes in inventory period over period relate to volume impacts from the COVID-19 pandemic. Our days inventory on-hand improved slightly to 39.7 days as of October 3, 2020 as compared to 44.8 days as of September 28, 2019.

Net cash provided by accounts payable for the nine months ended October 3, 2020 was $22.7 million compared to net cash provided by accounts payable of $8.5 million for the nine months ended September 28, 2019. Our vendor payments can significantly fluctuate based on the timing of disbursements, inventory purchases and vendor payment terms. Our days payable outstanding as of October 3, 2020 increased to 22.2 days from 21.5 days as of September 28, 2019.additional information.

Investing Activities

Net cash used in investing activities was ~~$102.8~~$20.7 million during the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 compared to ~~$264.7~~$67.4 million used in investing activities during the ~~nine~~three months ended ~~September 28, 2019.~~April 4, 2020. During the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, we paid approximately ~~$41.8~~$0.2 million ~~(net of cash acquired) for the acquisition of Kleary~~toward acquisitions and we used ~~$62.5~~$21.2 million for capital expenditures. In the ~~nine~~three months ended ~~September 28, 2019,~~April 4, 2020, we paid approximately ~~$179.2~~$39.9 million, net of cash acquired, for the acquisition of ~~ESW~~Kleary and used ~~$86.4~~$27.6 million for capital expenditures.

Financing Activities

Net cash ~~provided by~~used in financing activities was ~~$397.0~~$7.5 million induring the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 compared to ~~$157.0~~$453.3 million provided by financing activities in the ~~nine~~three months ended ~~September 28, 2019~~April 4, 2020. During the ~~nine~~three months ended ~~October~~April 3, 2021, we received $0.5 million of proceeds from stock options exercised, paid quarterly installments of $6.4 million on the Current Term Loan and used $1.5 million for the purchases of shares that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of share-based compensation.

During the three months ended April 4, 2020, we ~~issued $500.0 million in aggregate principal amount of 6.125% Senior Notes due January 2029 ("the 6.125% Senior Notes"),~~ borrowed $40.0 million on our Current ABL Facility to finance the acquisition of Kleary, borrowed an additional $305.0 million on our Current ABL Facility and ~~repaid all outstanding balances at the end of the third quarter, and borrowed and repaid~~ $115.0 million on our Current Cash Flow ~~Revolver. Proceeds~~Revolver to increase our cash position and preserve financial flexibility in light of the uncertainty in the global markets resulting from the ~~offering of the 6.125% Senior Notes were used to pay down the Current ABL Facility and Current Cash Flow Revolver balances. Additionally, we~~COVID-19 pandemic, paid $6.4 million on quarterly installments ~~of $19.2 million~~ on ~~the~~our Current Term Loan and used ~~$0.5~~$0.3 million for the purchases of shares that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of share-based ~~compensation~~compensation.

Debt

Below is a reconciliation of the Company’s net debt (in thousands) as of the dates indicated. Management considers net debt to be more representative of the Company’s financial position than total debt due to the amount of cash and ~~used $6.4~~cash equivalents held by the Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.


	April 3, 2021		December 31, 2020
Asset-based revolving credit facility due April 2023	$	—	$	—
Term loan facility due April 2025	2,491,563		2,497,967
Cash flow revolver due April 2023	—		—
8.00% senior notes due April 2026	645,000		645,000
6.125% senior notes due January 2029	500,000		500,000
Total Debt	3,636,563		3,642,967
Less: cash and cash equivalents	666,717		674,255
Net Debt	$	2,969,846	$	2,968,712

On April 15, 2021, the Company fully redeemed its $645 million aggregate principal amount of 8.00% Senior Notes due 2026 using available cash from the balance sheet and net proceeds from its extended and upsized senior term loan facility. The Company successfully upsized and extended the maturity of its $2,492 million senior term loan facility due 2025 in the form of $2,600 million in Tranche B term loans due April 12, 2028. Additionally, the Company amended and refinanced its senior cash flow based and asset-based revolving credit facilities, extending the maturities to ~~repurchase shares~~April 12, 2026.

In connection with the new Tranche B term loans, the Company also terminated its existing interest rate swaps and entered into two new swaps maturing in April 2026 on an aggregate notional value of ~~our outstanding common stock under our stock repurchase programs.~~

~~During the nine months ended September 28, 2019, we borrowed $290.0 million and repaid $120.0 million of that amount on our Current ABL Facility,~~$1.5 billion. The interest rate swaps effectively convert a portion of ~~which was used to finance~~ the acquisition of ESW, paid $12.8 million on quarterly installments on the Current Term Loan and used $0.2 million for the purchases of shares related to restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards and units.floating rate interest payment into a fixed rate interest payment.

~~We invest our excess cash in various overnight investments which are issued or guaranteed by the U.S. federal government.~~

~~Debt~~

~~Our outstanding indebtedness will mature in 2023 (Current ABL Facility and Current Cash Flow Revolver), 2025 (Current Term Loan Facility), 2026 (8.00% Senior Notes) and 2029 (6.125% Senior Notes).~~ We may not be successful in refinancing, extending the maturity or otherwise amending the terms of ~~such~~our outstanding indebtedness in the future because of market conditions, disruptions in the debt markets, our financial performance or other reasons. Furthermore, the terms of any refinancing, extension or amendment may not be as favorable as the current terms of our indebtedness. If we are not successful in refinancing our indebtedness or extending its maturity, we and our subsidiaries could face substantial liquidity problems and may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure our indebtedness. The Current Term Loan Facility provides for an aggregate principal amount of $2,560.0 million. We have also entered into certain interest rate swap agreements to reduce our variable interest rate risk.

The Current ABL Credit Agreement provides for an asset-based revolving credit facility which allows aggregate maximum borrowings by the ABL borrowers of up to $611.0 million. As set forth in the Current ABL Credit Agreement, extensions of credit under the Current ABL Facility are subject to a monthly borrowing base calculation that is based on specified percentages of the value of eligible inventory, eligible accounts receivable and eligible credit card receivables, less certain reserves and subject to certain other adjustments. Availability under the Current ABL Facility will be reduced by issuance of letters of credit as well as any borrowings outstanding thereunder.

~~As of October 3, 2020, we had an aggregate principal amount of $3,649.4 million of outstanding indebtedness, comprising, $2,504.4 million of borrowings under our Current Term Loan Facility,~~ $645.0 million of 8.00% Senior Notes outstanding and $500.0 million of 6.125% Senior Notes outstanding. Our excess availability under the Current ABL Facility was $570.0 million as of October 3, 2020. In addition, standby letters of credit totaling approximately $36.5 million were outstanding but undrawn under the ABL Facility.

For additional information, see Note 14 — Long-Term Debt ~~and~~, Note 17 — Fair Value of Financial Instruments and Fair Value ~~Measurement~~ Measurements and Note 21 — Subsequent Eventsin the notes to the unaudited consolidated financial statements.

~~Cash Flow~~Additional Liquidity Considerations

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short-term and long-term liquidity requirements, including payment of operating expenses and repayment of debt, we rely primarily on cash from operations. ~~Beyond cash generated from operations, $570.0 million is available with our~~The following table summarizes key liquidity measures under the Current ABL ~~Facility at October 3, 2020~~Credit Agreement and ~~we have an unrestricted cash balance of $627.6 million as of October 3, 2020. Our~~the Current Cash Flow ~~Revolver is fully available~~Credit Agreement in effect as of ~~October~~April 3, ~~2020.~~2021 and December 31, 2020 (in thousands):


	April 3, 2021		December 31, 2020
Asset-based revolving credit facility due April 2023	$	611,000	$	611,000
Eligible borrowing base	611,000		568,000
Less: borrowings	—		—
Less: LCs outstanding and priority payables	40,000		40,000
Net ABL availability	571,000		528,000

Plus: Cash flow revolver due April 2023	115,000		115,000
Plus: cash and cash equivalents	666,717		674,255
Total Liquidity	$	1,352,717	$	1,317,255

We expect to contribute ~~$4.4~~$3.2 million to the defined benefit plans and ~~$0.8~~$0.7 million to the postretirement medical and life insurance plans in the year ending December 31, ~~2020.~~2021.

On April 15, 2021, the Company fully redeemed its $645 million aggregate principal amount of 8.00% Senior Notes due 2026 using available cash from the balance sheet and net proceeds from its extended and upsized senior term loan facility, which reduced total liquidity. We expect that cash generated from operations and our availability under the ABL Credit Facility and Current Cash Flow Revolver will be sufficient to provide us the ability to fund our operations and to provide the increased working capital necessary to support our strategy and fund planned capital expenditures for fiscal ~~2020~~2021 and expansion when needed. The Company expects total capital expenditures to be approximately 2.0% to 2.5% of net sales during fiscal 2021.

Our corporate strategy evaluates potential acquisitions that would provide additional synergies in our Windows, Siding and Commercial segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.

From time to time, we have used available funds to repurchase shares of our common stock under our stock repurchase programs. On ~~October 10, 2017 and~~ March 7, 2018, we announced that our Board of Directors authorized a new stock repurchase ~~programs~~program for the repurchase of up to an aggregate of $50.0 million ~~and an additional $50.0 million, respectively,~~ of our outstanding Common ~~Stock for a cumulative total of $100.0 million.~~Stock. Under ~~these~~this repurchase programs, we are authorized to repurchase shares, if at all, at times and in amounts that we deem appropriate in accordance with all applicable securities laws and regulations. Shares repurchased are usually retired. There is no time limit on the duration of the ~~programs.~~program. During the ~~nine~~three months ended ~~October~~April 3, ~~2020, the Company repurchased 1.1 million shares for $6.4 million~~2021, there were no stock repurchases under the stock repurchase ~~programs.~~program. As of ~~October~~April 3, ~~2020,~~2021, approximately $49.1 million remained available for stock repurchases under the program announced on March 7, 2018. In addition to repurchases of shares of our common stock under our stock repurchase program, we also withhold shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of share-based compensation.

We may from time to time take steps to reduce our debt or otherwise improve our financial position. These actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, opportunistic refinancing of debt and raising additional capital. The amount of prepayments or the amount of debt that may be refinanced, repurchased or otherwise retired, if any, 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 the debt, and we would continue to reflect the debt as outstanding on our consolidated balance sheets.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of ~~October~~April 3, ~~2020,~~2021, we were not involved in any material unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

Our contractual obligations principally includes obligations associated with our outstanding indebtedness, operating lease obligations and inventory purchase commitments. Contractual obligations did not materially change during the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, except for debt activity as disclosed in Note 14 — Long-Term Debt in the notes to the unaudited consolidated financial statements and in Liquidity and Capital Resources — Financing Activities, and lease activity as disclosed in Note 9 — Leases in the notes to the unaudited consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies include those that pertain to ~~revenue recognition, insurance accruals, share-based compensation, income taxes,~~ accounting for acquisitions, intangible assets and ~~goodwill, allowance for doubtful accounts, inventory valuation, property, plant~~goodwill; warranty; and ~~equipment valuation and contingencies,~~income taxes, which are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~

~~We adopted ASU No. 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as of January 1,~~ 2020. ASU 2016-13 requires an entity to measure all expected credit losses for financial assets, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. See Note 2 — ~~Accounting Pronouncements~~ ~~in the notes to the unaudited consolidated financial statements for a description of the impact of the adoption of ASU 2016-13.~~

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 — Accounting Pronouncements in the notes to the unaudited consolidated financial statements for information on recent accounting pronouncements.

4240

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Windows and ~~Sidings~~Siding Businesses

We are subject to market risk with respect to the pricing of our principal raw materials, which include PVC resin, aluminum and glass. If prices of these raw materials were to increase dramatically, we may not be able to pass such increases on to our customers and, as a result, gross margins could decline significantly. We manage the exposure to commodity pricing risk by increasing our selling prices for corresponding material cost increases, continuing to diversify our product mix, strategic buying programs and vendor partnering. The average market price for PVC resin was estimated to have increased approximately ~~3.8%~~38.7% for the ~~nine~~three months ended ~~October~~April 3, ~~2020~~2021 compared to the ~~nine~~three months ended ~~September 28, 2019.~~April 4, 2020.

Commercial Business

We are subject to market risk exposure related to volatility in the price of steel. For the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, material costs (predominantly steel costs) constituted approximately ~~61%~~62% of our Commercial ~~segment's~~segment’s cost of sales. Our business is heavily dependent on the price and supply of steel. Our various products are fabricated from steel produced by mills to forms including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume® — coated coils (Galvalume® is a registered trademark of BIEC International, Inc.). The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Based on the cyclical nature of the steel industry, we expect steel prices will continue to be volatile.

With material costs (predominantly steel costs) accounting for approximately ~~61%~~62% of our Commercial segment's cost of sales for the ~~nine~~three months ended ~~October~~April 3, ~~2020,~~2021, a one percent change in the cost of steel could have resulted in a pre-tax impact on cost of sales of approximately ~~$5.5~~$2.1 million for our ~~nine~~three months ended ~~October~~April 3, ~~2020.~~2021. The impact to our financial results of operations of such an increase would be significantly dependent on the competitive environment and the costs of other alternative building products, which could impact our ability to pass on these higher costs.

Other Commodity Risks

In addition to market risk exposure related to the volatility in the price of steel, aluminum, PVC resin, and glass, we are subject to market risk exposure related to volatility in the price of natural gas. As a result, we occasionally enter into both index-priced and fixed-price contracts for the purchase of natural gas. We have evaluated these contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the criteria for characterization as a derivative instrument may be exempted from hedge accounting treatment as normal purchases and normal sales and, therefore, these forward contracts are not marked to market. At ~~October~~April 3, ~~2020,~~2021, all of our forward contracts for ~~the purchase of natural gas and aluminum~~commodities met the scope exemption for normal purchases and normal sales.

Interest Rates

We are subject to market risk exposure related to changes in interest rates on our Current Cash Flow Facilities and Current ABL Facility, which provides for borrowings of up to $2,675.0 million on the Current Cash Flow Facilities and up to $611.0 million on the Current ABL Facility. These instruments bear interest at an agreed upon percentage point spread from either the prime interest rate or LIBOR. Assuming the Current Cash Flow Revolver is fully drawn, each quarter point increase or decrease in the interest rate would change our interest expense by approximately $6.7 million per year for the Current Cash Flow Facilities. Assuming the Current ABL Facility is fully drawn, each quarter point increase or decrease in the interest rate would change our interest expense by approximately $1.5 million per year. The fair value of our term loan credit facility at ~~October~~April 3, ~~2020~~2021 and December 31, ~~2019~~2020 was approximately $~~2,479.3~~2,487.2 million and ~~$2,514.9~~$2,485.5 million, respectively, compared to a face value of approximately ~~$2,504.4~~$2,491.6 million and ~~$2,523.6~~$2,498.0 million, respectively. In May 2019, we entered into cash flow interest rate swap hedge contracts for $1.5 billion to mitigate the exposure risk of our floating interest rate debt. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate payment. ~~At October~~As of April 3, ~~2020,~~2021, our cash flow hedge contracts had a fair value liability of ~~$83.3~~$63.9 million and isare recorded as a non-current liability ~~as of October 3, 2020 in~~on our consolidated balance ~~sheets.~~sheet.

See Note 14 — Long-Term Debt and Note 21 - Subsequent Events in the notes to the unaudited consolidated financial statements for information on the material terms of our long-term debt.

~~Labor Force Risk~~

Our manufacturing process is highly engineered but involves manual assembly, fabrication, and manufacturing processes. We believe that our success depends upon our ability to employ, train, and retain qualified personnel with the ability to design, utilize and enhance these processes and our products. In addition, our ability to expand our operations depends in part on our ability to minimize labor inefficiencies and increase our labor force to meet the U.S. housing market demand. A significant increase in the wages paid by competing employers could result in a reduction of our labor force, increases in the wage rates that we must pay, or both. If either of these events were to occur, our cost structure could increase, our margins could decrease and any growth potential could be impaired. Historically, the Company has believed that the lag period between breaking ground on a new housing start and the utilization of our products on the exterior of a home is between 90 to 120 days.

Foreign Currency Exchange Rates

We are exposed to the effect of exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating revenue and expenses.

The functional currency for our Canada operations is the Canadian dollar. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other

comprehensive income (loss) in stockholders’ equity. The net foreign currency exchange gain (loss) included in net income (loss) for the three months ended April 3, 2021 and April 4, 2020 was $0.3 million and $(3.1) million, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the three months ended April 3, 2021 and April 4, 2020 was $6.1 million and $(9.6) million, respectively.

The functional currency for our Mexico operations is the U.S. dollar. Adjustments resulting from the re-measurement of the local currency financial statements into the U.S. dollar functional currency, which uses a combination of current and historical exchange rates, are included in net income (loss) in the current period. Net foreign currency re-measurement ~~gain (loss)~~loss was ~~insignificant for the three months ended October 3, 2020~~$0.3 million and ~~was $(0.1)~~$1.0 million for the three months ended ~~September 28, 2019. Net~~April 3, 2021 and April 4, 2020, respectively.

In December 2020, we entered into forward contracts with a financial institution through December 2021 for $66.0 million at a fixed Canadian dollar rate of 1.2726 to hedge primarily our future inventory purchases in Canada. In the future, we may enter into additional foreign currency ~~re-measurement gain (loss) was $(0.6) million and $0.4 million for~~hedging contracts, to further mitigate the ~~nine months ended October 3, 2020 and September 28, 2019, respectively.~~

~~The functional~~exposure risk of currency ~~for our Canada operations is~~fluctuation against the Canadian ~~dollar. Translation adjustments resulting from translating~~dollar and/or the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other comprehensive income (loss) in stockholders’ equity. The net foreign currency exchange gain (loss) included in net income for the three months ended October 3, 2020 and September 28, 2019 was $0.9 million and $(0.5) million, respectively. The net foreign currency exchange gain (loss) included in net income (loss) for the nine months ended October 3, 2020 and September 28, 2019 was $(0.5) million and $0.8 million, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the three months ended October 3, 2020 and September 28, 2019 was $7.4 million and $(1.9) million, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the nine months ended October 3, 2020 and September 28, 2019 was $6.4 million and $4.3 million, respectively.Mexican peso.

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 ~~October~~April 3, ~~2020.~~2021. 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 of 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 ~~October~~April 3, ~~2020,~~2021, 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 ~~October~~April 3, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4442

CORNERSTONE BUILDING BRANDS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, “Unaudited Consolidated Financial Statements”, Note 20 -— 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, ~~2019 and our Quarterly Reports on Form 10-Q for the quarterly periods ended~~ ~~April 4, 2020~~ ~~and~~ ~~July 4, 2020~~.2020. The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019, our Quarterly Reports on Form 10-Q for the quarterly periods ended April 4, 2020 and July 4,~~ 2020 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 material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019, other than as set forth in our Quarterly Reports on Form 10-Q for the quarterly periods ended April 4, 2020 and July 4,~~ 2020.

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

The following table shows our purchases of our Common Stock during the three months ended ~~October~~April 3, ~~2020:~~2021:

Period
(a)
Total Number of
Shares
Purchased(1)
(b)
Average Price
Paid per Share (c)
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs
(d)
Maximum Dollar
Value of
Shares that
May Yet be
Purchased Under
Publicly
Programs(2)
(in thousands)
July 5, 2020 to August 1, 2020 — $ — — $ 49,145
August 2, 2020 to August 29, 2020 1,235 6.89 — 49,145
August 30, 2020 to October 3, 2020 400 8.01 — 49,145
Total 1,635 7.16 —


Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Programs(2) (in thousands)
January 1, 2021 to January 30, 2021	1,576	$	9.28	—	$	49,145
January 31, 2021 to February 27, 2021	—	—		—	49,145
February 28, 2021 to April 3, 2021	110,292	13.84		—	49,145
Total	111,868	13.78		—

(1)The total number of shares purchased includes our Common Stock repurchased under the program described below as well as shares of restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of stock awards. The required withholding is calculated using the closing sales price on the previous business day prior to the vesting date as reported by the NYSE.

(2)On March 7, 2018, the Company announced that its Board of Directors authorized a stock repurchase program for up to an aggregate of $50.0 million of the Company’s Common Stock. Under this repurchase program, the Company is authorized to repurchase shares, if at all, at times and in amounts that we deem appropriate in accordance with all applicable securities laws and regulations. Shares repurchased are usually retired. There is no time limit on the duration of the program. As of ~~October~~April 3, ~~2020,~~2021, approximately $49.1 million remained available for stock repurchases under the program.

4543

Item 6. Exhibits.

Index to Exhibits


Exhibit No.						Description
~~4.1~~						Eighth Supplemental Indenture, dated as of September 24, 2020, among Cornerstone Building Brands, Inc., the subsidiary guarantors listed on the signature pages thereto and Wilmington Trust, National Association, as trustee ~~(filed as Exhibit 4.1 to~~ ~~Cornerstone's Current Report on~~ ~~Form 8-K dated September 24, 2020 and incorporated by reference he~~r e ~~in).~~
†10.110.1						Employment Agreement ~~effective September 21, 2020,~~entered into as of February 25, 2021, between Cornerstone Building Brands, Inc., its wholly-owned subsidiary, Ply Gem Industries, Inc., and ~~James F. Keppler.~~Alena S. Brenner
10.2						Second Amendment to Cash Flow Credit Agreement, dated as of April 15, 2021, by and among the Company, the several banks and other financial institutions party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K dated April 21, 2021 and incorporated by reference herein)
10.3						Third Amendment to Cash Flow Credit Agreement, dated as of April 15, 2021, 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 (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K dated April 21, 2021 and incorporated by reference herein)
10.4						Increase Supplement to Cash Flow Credit Agreement, dated as of April 15, 2021, between the Company and the increasing lender party thereto (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K dated April 21, 2021 and incorporated by reference herein)
10.5						Amendment No. 5 to ABL Credit Agreement, dated as of September 4, 2020, by and among the Company, the subsidiary borrowers party thereto, the lenders and issuing lenders party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent (filed as Exhibit 10.14 to the Company’s Current Report on Form 8-K dated April 21, 2021 and incorporated by reference herein)
10.6						Amendment No. 6 to ABL Credit Agreement, dated as of April 15, 2021, by and among Cornerstone Building Brands, Inc., the subsidiary borrowers party thereto, the several banks and other financial institutions party thereto party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent (filed as Exhibit 10.15 to the Company’s Current Report on Form 8-K dated April 21, 2021 and incorporated by reference herein)
*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
			†*			Management contracts or compensatory plans or arrangements

4644

SIGNATURE

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: ~~November 10, 2020~~May 11, 2021	By:	/s/ James S. Metcalf
		James S. Metcalf
		Chairman of the Board and Chief Executive Officer


Date: ~~November 10, 2020~~May 11, 2021	By:	/s/ Jeffrey S. Lee
		Jeffrey S. Lee
		Executive Vice President and Chief Financial Officer

4745


	Three months ended October 3, 2020						Three months ended September 28, 2019
(Amounts in thousands)	Reported		Acquisitions		Pro Forma		Reported		Acquisitions (1)		Pro Forma
Net Sales
Windows	$	501,314	$	—	$	501,314	$	504,338	$	—	$	504,338
Siding	321,898		—		321,898		315,799		13,264		329,063
Commercial	404,041		—		404,041		464,906		—		464,906
Total Net Sales	$	1,227,253	$	—	$	1,227,253	$	1,285,043	$	13,264	$	1,298,307

	Nine Months Ended October 3, 2020						Nine months ended September 28, 2019
	Reported		Acquisitions (1)		Pro Forma		Reported		Acquisitions (2)		Pro Forma
Net Sales
Windows	$	1,378,039	$	—	$	1,378,039	$	1,434,579	$	—	$	1,434,579
Siding	848,190		8,358		856,548		840,601		48,903		889,504
Commercial	1,199,771		—		1,199,771		1,370,152		—		1,370,152
Total Net Sales	$	3,426,000	$	8,358	$	3,434,358	$	3,645,332	$	48,903	$	3,694,235