UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended: ~~April 3,~~October 2, 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 - ~~125,708,451~~126,218,902 shares as of ~~May 4,~~November 2, 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 ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020	1
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020	2
	Consolidated Balance Sheets as of ~~April 3,~~October 2, 2021 and December 31, 2020	3
	Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020	4
	Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020	5
	Notes to Unaudited Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2937
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4150
Item 4.	Controls and Procedures	4251

	Part II — Other Information
Item 1.	Legal Proceedings	4352
Item 1A.	Risk Factors	4352
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4352
Item 6.	Exhibits	4453

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
April 3,
2021 April 4,
2020
Sales $ 1,267,032 $ 1,113,811
Cost of sales 1,007,303 882,924
Gross profit 259,729 230,887
Selling, general and administrative expenses 153,168 164,954
Intangible asset amortization 46,202 44,861
Restructuring and impairment charges, net 1,838 13,835
Strategic development and acquisition related costs 3,313 4,857
Goodwill impairment 0 503,171
Income (loss) from operations 55,208 (500,791)
Interest income 117 338
Interest expense (56,499) (54,835)
Foreign exchange loss (26) (4,137)
Other income (expense), net 337 (662)
Loss before income taxes (863) (560,087)
Provision (benefit) for income taxes 792 (18,014)
Net loss (1,655) (542,073)
Net income allocated to participating securities 0 0
Net loss applicable to common shares $ (1,655) $ (542,073)
Loss per common share:
Basic $ (0.01) $ (4.30)
Diluted $ (0.01) $ (4.30)
Weighted average number of common shares outstanding:
Basic 125,506 126,093
Diluted 125,506 126,093


	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Net sales	$	1,444,405	$	1,227,253	$	4,111,558	$	3,426,000
Cost of sales	1,134,909		929,751		3,230,605		2,642,880
Gross profit	309,496		297,502		880,953		783,120
Selling, general and administrative expenses	161,134		137,250		477,820		436,575
Intangible asset amortization	45,667		45,446		138,678		135,547
Restructuring and impairment charges, net	971		2,918		7,461		32,164
Strategic development and acquisition related costs	22,250		7,909		25,502		13,550
Gain on divestitures	(831,252)		—		(831,252)		—
Goodwill impairment	—		—		—		503,171
Income (loss) from operations	910,726		103,979		1,062,744		(337,887)
Interest income	71		328		211		1,007
Interest expense	(43,731)		(51,519)		(147,688)		(158,738)
Foreign exchange gain (loss)	(1,270)		812		(1,067)		(1,300)
Loss on extinguishment of debt	—		—		(42,234)		—
Other income (expense), net	337		(23)		1,167		(25)
Income (loss) before income taxes	866,133		53,577		873,133		(496,943)
Provision (benefit) for income taxes	245,598		23,061		245,326		(12,285)
Net income (loss)	620,535		30,516		627,807		(484,658)
Net income allocated to participating securities	(8,380)		(488)		(7,837)		—
Net income (loss) applicable to common shares	$	612,155	$	30,028	$	619,970	$	(484,658)
Income (loss) per common share:
Basic	$	4.85	$	0.24	$	4.93	$	(3.86)
Diluted	$	4.82	$	0.24	$	4.90	$	(3.86)
Weighted average number of common shares outstanding:
Basic	126,159		125,100		125,840		125,655
Diluted	127,079		125,289		126,602		125,655

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended
April 3,
2021 April 4,
2020
Comprehensive income (loss):
Net loss $ (1,655) $ (542,073)
Other comprehensive income (loss), net of tax:
Foreign exchange translation gains (losses) 6,113 (9,563)
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) 15,250 (47,739)
Comprehensive income (loss) $ 13,595 $ (589,812)


	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Comprehensive income (loss):
Net income (loss)	$	620,535	$	30,516	$	627,807	$	(484,658)
Other comprehensive income (loss), net of tax:
Foreign exchange translation gains (losses)	(6,787)		7,354		3,875		6,357
Unrealized gain (loss) on derivative instruments, net of income tax of $2,453, $(426), $654 and $12,788, respectively	4,658		194		8,780		(41,711)
Amount reclassified from Accumulated other comprehensive income (loss) into earnings	7,288		—		13,957		—

Other comprehensive income (loss)	5,159		7,548		26,612		(35,354)
Comprehensive income (loss)	$	625,694	$	38,064	$	654,419	$	(520,012)

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

April 3,
2021 December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 666,717 $ 674,255
Restricted cash 6,223 6,223
Accounts receivable, less allowances of $14,427 and $13,313, respectively 601,476 554,649
Inventories, net 494,092 431,937
Income taxes receivable 31,403 39,379
Investments in debt and equity securities, at market 2,527 2,333
Prepaid expenses and other 84,127 77,751
Assets held for sale 3,909 4,644
     Total current assets 1,890,474 1,791,171
Property, plant and equipment, less accumulated depreciation of $670,072 and $644,308, respectively 628,198 631,821
Lease right-of-use assets 260,424 264,107
Goodwill 1,195,983 1,194,729
Intangible assets, net 1,540,470 1,584,604
Deferred income taxes 2,411 1,867
Other assets, net 10,346 10,191
     Total assets $ 5,528,306 $ 5,478,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 25,600 $ 25,600
Accounts payable 260,930 211,441
Accrued compensation and benefits 73,962 81,548
Accrued interest 38,515 25,485
Accrued income taxes 5,650 5,060
Current portion of lease liabilities 69,042 70,125
Other accrued expenses 255,288 247,893
     Total current liabilities 728,987 667,152
Long-term debt 3,559,339 3,563,429
Deferred income taxes 263,641 269,792
Long-term lease liabilities 194,672 198,875
Other long-term liabilities 324,020 337,437
     Total long-term liabilities 4,341,672 4,369,533
Stockholders’ equity:
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 1,260,946 1,257,262
Accumulated deficit (766,340) (764,685)
Accumulated other comprehensive loss, net (36,267) (51,517)
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 457,647 441,805
     Total liabilities and stockholders’ equity $ 5,528,306 $ 5,478,490


	October 2, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	677,187	$	674,255
Restricted cash	2,211		6,223
Accounts receivable, less allowances of $11,176 and $13,313, respectively	645,298		554,649
Inventories, net	614,573		431,937
Income taxes receivable	11,611		39,379
Investments in debt and equity securities, at market	2,567		2,333
Prepaid expenses and other	119,234		77,751
Assets held for sale	3,909		4,644
Total current assets	2,076,590		1,791,171
Property, plant and equipment, less accumulated depreciation of $613,459 and $644,308, respectively	583,371		631,821
Lease right-of-use assets	278,316		264,107
Goodwill	1,326,411		1,194,729
Intangible assets, net	1,438,039		1,584,604
Deferred income taxes	2,109		1,867
Other assets, net	26,259		10,191
Total assets	$	5,731,095	$	5,478,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	26,000	$	25,600
Accounts payable	307,153		211,441
Accrued compensation and benefits	96,794		81,548
Accrued interest	12,722		25,485
Accrued income taxes	8,216		5,060
Current portion of lease liabilities	72,983		70,125
Other accrued expenses	294,074		247,893
Total current liabilities	817,942		667,152
Long-term debt	3,015,795		3,563,429
Deferred income taxes	248,544		269,792
Long-term lease liabilities	207,570		198,875
Other long-term liabilities	329,189		337,437
Total long-term liabilities	3,801,098		4,369,533
Stockholders’ equity:
Common stock, $0.01 par value; 200,000,000 authorized; 126,228,665 and 126,207,594 shares issued and outstanding at October 2, 2021, respectively; and 125,425,931 and 125,400,599 shares issued and outstanding at December 31, 2020, respectively	1,263		1,255
Additional paid-in capital	1,272,999		1,257,262
Accumulated deficit	(136,878)		(764,685)
Accumulated other comprehensive loss, net	(24,905)		(51,517)
Treasury stock, at cost (21,071 and 25,332 shares at October 2, 2021 and December 31, 2020, respectively)	(424)		(510)
Total stockholders’ equity	1,112,055		441,805
Total liabilities and stockholders’ equity	$	5,731,095	$	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)

		Three Months Ended					Nine Months Ended
		April 3, 2021		April 4, 2020			October 2, 2021		October 3, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(1,655)	$	(542,073)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss)						Net income (loss)	$	627,807	$	(484,658)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	72,615		69,769		Depreciation and amortization	216,956		212,413
Non-cash interest expense	Non-cash interest expense	2,314		2,274		Non-cash interest expense	19,857		6,948
Share-based compensation expense	Share-based compensation expense	3,302		3,387		Share-based compensation expense	16,946		12,568
Loss on extinguishment of debt						Loss on extinguishment of debt	42,234		—
Goodwill impairment	Goodwill impairment	0		503,171		Goodwill impairment	—		503,171
Asset impairment	Asset impairment	493		3,079		Asset impairment	4,091		3,490

Gain on divestitures						Gain on divestitures	(831,252)		—
Loss on sale of assets, net						Loss on sale of assets, net	—		710
Provision for credit losses	Provision for credit losses	676		725		Provision for credit losses	2,289		3,762
Deferred income taxes	Deferred income taxes	(9,729)		(35,734)		Deferred income taxes	(23,441)		(27,052)
Changes in operating assets and liabilities, net of effect of acquisitions:
Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:						Changes in operating assets and liabilities, net of effect of acquisitions and divestitures:
Accounts receivable	Accounts receivable	(47,157)		20,532		Accounts receivable	(137,424)		(84,309)
Inventories	Inventories	(62,028)		(20,724)		Inventories	(241,068)		30,980
Income taxes	Income taxes	7,976		18,212		Income taxes	27,768		16,886
Prepaid expenses and other	Prepaid expenses and other	(7,755)		1,554		Prepaid expenses and other	(41,355)		6,246
Accounts payable	Accounts payable	49,424		12,461		Accounts payable	100,402		22,669
Accrued expenses	Accrued expenses	8,597		(40,662)		Accrued expenses	31,554		12,920
Other, net	Other, net	2,958		1,805		Other, net	996		132
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	20,031		(2,224)		Net cash provided by (used in) operating activities	(183,640)		236,876
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	(180)		(39,857)		Acquisitions, net of cash acquired	(331,010)		(41,841)
Capital expenditures	Capital expenditures	(21,230)		(27,567)		Capital expenditures	(75,183)		(62,535)
Proceeds from divestitures, net of cash divested						Proceeds from divestitures, net of cash divested	1,187,307		—
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	715		0		Proceeds from sale of property, plant and equipment	4,615		1,538
Net cash used in investing activities		(20,695)		(67,424)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	785,729		(102,838)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from stock options exercised		486		0
Proceeds from ABL facility	Proceeds from ABL facility	0		345,000		Proceeds from ABL facility	190,000		345,000

Payments on ABL facility						Payments on ABL facility	(190,000)		(415,000)
Proceeds from cash flow revolver	Proceeds from cash flow revolver	0		115,000		Proceeds from cash flow revolver	—		115,000

Payments on cash flow revolver						Payments on cash flow revolver	—		(115,000)
Proceeds from term loan						Proceeds from term loan	108,438		—
Payments on term loan	Payments on term loan	(6,404)		(6,405)		Payments on term loan	(19,405)		(19,215)

Payments related to tax withholding for share-based compensation		(1,541)		(327)

Proceeds from senior notes						Proceeds from senior notes	—		500,000
Payments on senior notes						Payments on senior notes	(670,800)		—
Payments of financing costs						Payments of financing costs	(13,187)		(6,905)
Purchases of treasury stock						Purchases of treasury stock	—		(6,428)
Payments on derivative financing obligations						Payments on derivative financing obligations	(6,131)		—
Other						Other	(1,300)		(478)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(7,459)		453,268		Net cash provided by (used in) financing activities	(602,385)		396,974
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	585		(2,302)		Effect of exchange rate changes on cash and cash equivalents	(784)		507
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	(7,538)		381,318		Net increase (decrease) in cash, cash equivalents and restricted cash	(1,080)		531,519
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	680,478		102,307		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	$	672,940	$	483,625	Cash, cash equivalents and restricted cash at end of period	$	679,398	$	633,826
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	40,913	$	36,931	Interest paid, net of amounts capitalized	$	149,025	$	138,325
Taxes paid, net	Taxes paid, net	$	1,949	$	392	Taxes paid, net	$	232,755	$	(1,881)

See accompanying notes to consolidated financial statements.


CORNERSTONE BUILDING BRANDS, INC.	CORNERSTONE BUILDING BRANDS, INC.																			CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	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 Quarters																				Fiscal Quarters		Common Stock					Additional Paid-In Capital				Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)		Treasury Stock				Stockholders’ Equity
		Common Stock			Additional Paid-In Capital				Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)		Treasury Stock				Stockholders’ Equity				Shares			Amount								Shares			Amount
		Shares	Amount								Shares			Amount
December 31, 2020		125,425,931	$	1,255			$	1,257,262				$	(764,685)	$	(51,517)	(25,332)				$	(510)		$	441,805
Balance, July 3, 2021																				Balance, July 3, 2021		126,072,088			$	1,261			$	1,265,887				$	(757,413)	$	(30,064)	(21,071)		$	(424)	$	479,247
Treasury stock purchases	Treasury stock purchases	—	—		—				—			—		(111,868)		(1,541)		(1,541)		Treasury stock purchases		—			—		—				—			—		(88,330)		(1,320)		(1,320)
Retirement of treasury shares	Retirement of treasury shares	(1,576)	0		(15)				—			—		1,576		15		0		Retirement of treasury shares		(88,330)			(1)		(1,319)				—			—		88,330		1,320		—
Issuance of restricted stock	Issuance of restricted stock	338,939	3		(3)				—			—		—		—		0		Issuance of restricted stock		238,329			2		(2)				—			—		—		—		—

Stock options exercised	Stock options exercised	44,361	—		486				—			—		—		—		486		Stock options exercised		6,578			1		80				—			—		—		—		81
Other comprehensive income	Other comprehensive income	—	—		—				—			15,250		—		—		15,250		Other comprehensive income		—			—		—				—			5,159		—		—		5,159
Deferred compensation obligation		—	0		(86)				—			—		4,261		86		0

Share-based compensation	Share-based compensation	—	—		3,302				—			—		—		—		3,302		Share-based compensation		—			—		8,353				—			—		—		—		8,353

Net loss		—	—		—				(1,655)			—		—		—		(1,655)
Balance, April 3, 2021		125,807,655	$	1,258	$	1,260,946			$	(766,340)		$	(36,267)	(131,363)		$	(1,950)	$	457,647
Net income																				Net income		—			—		—				620,535			—		—		—		620,535
Balance, October 2, 2021																				Balance, October 2, 2021		126,228,665			$	1,263	$	1,272,999			$	(136,878)		$	(24,905)	(21,071)		$	(424)	$	1,112,055

Balance, December 31, 2019		126,110,000	$	1,261	$	1,248,787			$	(281,229)		$	(32,398)	(55,513)		$	(1,103)	$	935,318
Balance, July 4, 2020																				Balance, July 4, 2020		125,122,988			$	1,252	$	1,249,852			$	(797,081)		$	(75,300)	(25,650)		$	(511)	$	378,212
Treasury stock purchases	Treasury stock purchases	—	—		—				—			—		(37,794)		(327)		(327)		Treasury stock purchases		—			—		—				—			—		(1,635)		(11)		(11)
Retirement of treasury shares		(38,206)	(1)		(328)				—			—		38,206		329		0

Issuance of restricted stock	Issuance of restricted stock	95,851	1		(1)				—			—		—		—		0		Issuance of restricted stock		5,816			—		—				—			—		—		—		—

Other comprehensive loss		—	—		—				—			(47,739)		—		—		(47,739)
Deferred compensation obligation		—	1		(593)				—			—		29,769		592		0
Other comprehensive income																				Other comprehensive income		—			—		—				—			7,548		—		—		7,548

Share-based compensation	Share-based compensation	—	—		3,387				—			—		—		—		3,387		Share-based compensation		—			—		4,025				—			—		—		—		4,025
Cumulative effect of accounting change		—	—		—				(678)			—		—		—		(678)
Net loss		—	—		—				(542,073)			—		—		—		(542,073)
Balance, April 4, 2020		126,167,645	$	1,262	$	1,251,252			$	(823,980)		$	(80,137)	(25,332)		$	(509)	$	347,888

Net income																				Net income		—			—		—				30,516			—		—		—		30,516
Balance, October 3, 2020																				Balance, October 3, 2020		125,128,804			$	1,252	$	1,253,877			$	(766,565)		$	(67,752)	(27,285)		$	(522)	$	420,290

See accompanying notes to consolidated financial statements.


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In thousands, except share data)
(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
December 31, 2020	125,425,931	$	1,255	$	1,257,262	$	(764,685)	$	(51,517)	(25,332)	$	(510)	$	441,805
Treasury stock purchases	—	—		—		—		—		(200,198)	(2,861)		(2,861)
Retirement of treasury shares	(200,198)	(2)		(2,859)		—		—		200,198	2,861		—
Issuance of restricted stock	835,259	8		(8)		—		—		—	—		—
Issuance of common stock for the Ply Gem merger	15,220	—		185		—		—		—	—		185
Stock options exercised	152,453	2		1,559		—		—		—	—		1,561
Other comprehensive income	—	—		—		—		26,612		—	—		26,612
Deferred compensation obligation	—	—		(86)		—		—		4,261	86		—
Share-based compensation	—	—		16,946		—		—		—	—		16,946

Net income	—	—		—		627,807		—		—	—		627,807
Balance, October 2, 2021	126,228,665	$	1,263	$	1,272,999	$	(136,878)	$	(24,905)	(21,071)	$	(424)	$	1,112,055

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	—	—		—		—		—		(1,168,514)	(6,906)		(6,906)
Retirement of treasury shares	(1,166,973)	(12)		(6,883)		—		—		1,166,973	6,895		—
Issuance of restricted stock	185,777	2		(2)		—		—		—	—		—


Other comprehensive loss	—	—		—		—		(35,354)		—	—		(35,354)
Deferred compensation obligation	—	1		(593)		—		—		29,769	592		—
Share-based compensation	—	—		12,568		—		—		—	—		12,568
Cumulative effect of accounting change	—	—		—		(678)		—		—	—		(678)
Net loss	—	—		—		(484,658)		—		—	—		(484,658)
Balance, October 3, 2020	125,128,804	$	1,252	$	1,253,877	$	(766,565)	$	(67,752)	(27,285)	$	(522)	$	420,290

See accompanying notes to consolidated financial statements.

CORNERSTONE BUILDING BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~April 3,~~October 2, 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 Building Brands,” “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, 2021 through ~~April 3,~~October 2, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.

Certain reclassifications have been made to the prior period amounts in the consolidated financial statements to conform to the current presentation.

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, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 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):


		April 3, 2021		December 31, 2020			October 2, 2021		December 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	666,717	$	674,255	Cash and cash equivalents	$	677,187	$	674,255
Restricted cash(1)	Restricted cash(1)	6,223		6,223		Restricted cash(1)	2,211		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	$	672,940	$	680,478	Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	679,398	$	680,478

(1)Restricted cash primarily relates to escrow balances held for an outstanding earn-out agreement as of December 31, 2020 and ~~working capital and other~~ indemnification ~~agreements.~~agreements in both periods presented.

Accounts Receivables and Related Allowance

The Company reports accounts receivable net of ~~the~~an 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, 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 ~~provision~~provisions for expected credit losses based on the Company’s assessment of the collectability of amounts owed to 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 credit losses reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. 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 allowance for credit losses for the periods indicated (in thousands):

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


	Nine Months Ended
	October 2, 2021		October 3, 2020
Ending balance, prior period	$	13,313	$	9,962
Cumulative effect of accounting change(1)	—		678
Provision for expected credit losses	2,289		3,762
Amounts charged against allowance for credit losses, net of recoveries	(268)		(1,801)
Allowance for credit losses of acquired company at date of acquisition	—		810
Divestitures	(4,158)		—
Ending balance	$	11,176	$	13,411

(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.

Net Sales

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. Given the nature of the Company's sales arrangements, ~~they do~~we are not ~~require us~~required 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. 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.

The Company’s revenues are adjusted for variable consideration, which includes customer volume rebates and prompt payment discounts. 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 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			Three Months Ended						Nine Months Ended
			April 3, 2021			April 4, 2020			October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Windows Net Sales Disaggregation:	Windows Net Sales Disaggregation:							Windows Net Sales Disaggregation:
Vinyl windows	Vinyl windows		$	497,017		$	419,022	Vinyl windows	$	562,097	$	465,472	$	1,607,704	$	1,283,337
Aluminum windows	Aluminum windows		20,280			19,476		Aluminum windows	22,420		22,056		64,336		61,338
Other	Other		9,966			9,952		Other	11,969		13,786		31,453		33,364
Total	Total		$	527,263		$	448,450	Total	$	596,486	$	501,314	$	1,703,493	$	1,378,039

Siding Net Sales Disaggregation:	Siding Net Sales Disaggregation:							Siding Net Sales Disaggregation:
Vinyl siding	Vinyl siding		$	150,229		$	109,548	Vinyl siding	$	182,019	$	146,585	$	508,121	$	387,559
Metal	Metal		71,093			52,666		Metal	70,667		75,477		221,260		192,567
Injection molded	Injection molded		17,609			13,239		Injection molded	19,131		20,460		58,420		49,556
Stone	Stone		19,831			18,810		Stone	23,025		20,988		66,659		61,999
Other products & services(1)	Other products & services(1)		57,629			46,780		Other products & services(1)	63,028		58,388		181,988		156,509
Total	Total		$	316,391		$	241,043	Total	$	357,870	$	321,898	$	1,036,448	$	848,190

Commercial Net Sales Disaggregation:	Commercial Net Sales Disaggregation:							Commercial Net Sales Disaggregation:
Metal building products(2)	Metal building products(2)		$	299,938		$	292,436	Metal building products(2)	$	395,869	$	281,339	$	1,014,663	$	842,863
Insulated metal panels(3)	Insulated metal panels(3)		85,603			99,229		Insulated metal panels(3)	32,934		89,088		208,220		260,410
Metal coil coating	Metal coil coating		37,837			32,653		Metal coil coating	61,246		33,614		148,734		96,498
Total	Total		$	423,378		$	424,318	Total	$	490,049	$	404,041	$	1,371,617	$	1,199,771

Total Net Sales:	Total Net Sales:		$	1,267,032		$	1,113,811	Total Net Sales:	$	1,444,405	$	1,227,253	$	4,111,558	$	3,426,000

(1)Other products & services primarily consist of installation of stone veneer products.

(2)The Company’s roll-up sheet doors (“DBCI”) business is only included in the results of operations through August 17, 2021 as a result of divestiture. See Note 8 — Assets and Liabilities Held for Sale and Divestitures for more information.

(3)The Company’s insulated metal panels (“IMP”) business is only included in the results of operations through August 8, 2021 as a result of divestiture. See Note 8 — Assets and Liabilities Held for Sale and Divestitures for more information.

NOTE 2 — ACCOUNTING PRONOUNCEMENTS

Adopted 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. Effective January 1, 2021, the Company 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 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~~may be adopted as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of electing to apply the ~~amendments in this guidance.~~amendments.

NOTE 3 — ACQUISITIONS

2021 Acquisitions

Cascade Windows

On August 20, 2021, the Company completed its acquisition of Cascade Windows, Inc. (“Cascade Windows”) for $239.5 million in cash. Cascade Windows serves the residential new construction and repair and remodel markets with energy efficient vinyl window and door products from various manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through cash available on the balance sheet. The Company reports Cascade Windows’ results within the Windows segment.

The Company preliminarily 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	$	2,838
Accounts receivable	15,663
Other receivables	409
Inventories	15,644
Prepaid expenses and other current assets	1,538
Property, plant and equipment	15,561
Lease right of use assets	19,335

Goodwill	220,428
Other assets	500
Total assets acquired	291,916
Liabilities assumed:
Accounts payable	17,680
Accrued expenses	7,673
Deferred income taxes	2,491
Current portion of lease liability	247
Other current liabilities	215
Non-current portion of lease liabilities	19,926
Other long-term liabilities	4,220
Total liabilities assumed	52,452
Net assets acquired	$	239,464

The $220.4 million of goodwill was allocated to the Windows segment and is not deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to be realized.

During the three and nine months ended October 2, 2021, Cascade Windows contributed net sales of $19.0 million and a net loss of $0.6 million, which have been included within the Company’s consolidated statements of operations. During the three and nine months ended October 2, 2021, the Company incurred $1.9 million of acquisition-related costs for Cascade Windows, $1.2 million of which are recorded in strategic development and acquisition related costs in the Company’s consolidated statements of operations.

Due to the recent closing of the Cascade Windows transaction, the purchase price allocation is preliminary and will be finalized when valuations are complete and final assessment of the fair value of acquired assets and assumed liabilities are completed. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of accounts receivable, other receivables, inventories, prepaid expenses and other current assets, property, plant and equipment, lease right of use assets, goodwill, intangible assets, other assets, accounts payable, accrued expenses, other current liabilities, other long-term liabilities, lease liabilities, and deferred income taxes.

Prime Windows

On April 30, 2021, the Company acquired Prime Windows LLC (“Prime Windows”) for total consideration of $93.0 million, exclusive of a $2.0 million working capital adjustment which has not been finalized as of October 2, 2021. Prime Windows serves residential new construction and repair and remodel markets with energy efficient vinyl window and door products from 2 manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities. Prime Windows’ results are reported within the Windows segment.


Assets acquired:
Cash	$	997
Accounts receivable	5,500
Inventories	4,446
Prepaid expenses and other current assets	823
Property, plant and equipment	2,500
Lease right of use assets	2,787
Intangible assets (trade names/customer relationships)	51,600
Goodwill	32,069
Other assets	50
Total assets acquired	100,772
Liabilities assumed:
Accounts payable	1,676
Other accrued expenses	1,429

Lease liabilities	2,637

Total liabilities assumed	5,742
Net assets acquired	$	95,030

The $32.1 million of goodwill was allocated to the Windows segment and is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to be realized.

During the three and nine months ended October 2, 2021, Prime Windows contributed net sales of $20.9 million and $33.7 million, respectively, and net income of $0.8 million and $2.5 million, respectively, which have been included within the Company’s consolidated statements of operations. During the nine months ended October 2, 2021, the Company incurred $1.0 million of acquisition-related costs for Prime Windows, $0.7 million of which are recorded in strategic development and acquisition related costs in the Company’s consolidated statements of operations.

The purchase price allocation for the acquisition of Prime Windows remains subject to further adjustments, and the measurement period remained open as of October 2, 2021. The specific accounts subject to ongoing acquisition accounting adjustments include accounts receivable, inventories, prepaid expenses and other current assets, property, plant and equipment, lease right of use assets, intangibles, goodwill, accounts payable, other accrued expenses, accrued warranties and lease liabilities. The Company anticipates completing the acquisition accounting adjustments during the first quarter of fiscal 2022.

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”) 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, which strengthens the Company’s position as a market leader in stone veneer. Kleary’s results are reported within the 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	7,135
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	12,539

Total assets acquired	44,601
Liabilities assumed:
Accounts payable	1,149
Other accrued expenses	1,020


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

The $12.5 million of goodwill from the Kleary acquisition was allocated to the Siding segment and will be deductible for tax purposes. The goodwill is attributable to the workforce of the acquired business and the synergies expected to be realized. The fair value of all assets acquired and liabilities assumed was finalized during the first quarter of 2021.

Strategic development and acquisition related costs in the consolidated statements of operations for the nine months ended October 2, 2021 included a reduction of $4.2 million to the previously estimated accrual to reflect the final contingent earnout for the Kleary acquisition at approximately $5.4 million, which ~~did not result in any adjustments during the quarter ended April 3,~~was paid as of October 2, 2021.

Unaudited Pro Forma Financial Information

The following table provides unaudited supplemental pro forma results for ~~Cornerstone~~the Company for the three and nine months ended ~~April 4,~~October 2, 2021 and October 3, 2020 as if the Cascade Windows, Prime Windows and Kleary acquisitions had occurred on January 1, 2020 (in thousands, except for per share data):

~~Three Months Ended~~


	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Net sales	$	1,467,982	$	1,281,692	$	4,243,700	$	3,582,308
Net income (loss) applicable to common shares	609,695		32,053		618,073		(483,488)
Net income (loss) per common share:
Basic	$	4.83	$	0.26	$	4.91	$	(3.85)
Diluted	$	4.80	$	0.26	$	4.88	$	(3.85)

~~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~~the Company, Cascade Windows, Prime Windows 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 ~~acquisition~~acquisitions or any integration costs. Unaudited pro forma balances are not necessarily indicative of operating results had the Cascade Windows, Prime Windows and Kleary ~~acquisition~~acquisitions occurred on January 1, 2020 or of future results.

913

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”), manufacturing costs and to optimize the Company’s combined manufacturing footprint. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021, the Company incurred restructuring charges of ~~$0.9~~$1.2 million, ~~$0.1~~$0.3 million and ~~$0.7~~$5.7 million in the Windows, Siding and Commercial segments, respectively, and ~~$0.1~~$0.2 million in corporate restructuring ~~charges at Corporate headquarters.~~charges. Restructuring charges incurred to date since ~~inception of~~ the current restructuring initiatives began in 2019 are ~~$54.2~~$59.8 million. The following table summarizes ~~our restructuring plan~~the costs ~~and charges~~ related to ~~the~~those restructuring plans for the three and nine months ended ~~April 3,~~October 2, 2021 and costs incurred to date since inception of ~~the new~~those initiatives and programs (in thousands):


		Three Months Ended		Costs Incurred to Date			Three Months Ended		Nine Months Ended		Costs Incurred to Date
		April 3, 2021		(Since inception)			October 2, 2021		October 2, 2021		(Since inception)
Severance	Severance	$	1,322	$	37,553	Severance	$	646	$	3,125	$	39,356
Asset impairments	Asset impairments	493		8,361		Asset impairments	103		4,091		11,959
Gain on sale of facilities, net	Gain on sale of facilities, net	0		(1,298)		Gain on sale of facilities, net	—		—		(1,298)
Other restructuring costs	Other restructuring costs	23		9,559		Other restructuring costs	222		245		9,781
Total restructuring costs	Total restructuring costs	$	1,838	$	54,175	Total restructuring costs	$	971	$	7,461	$	59,798

For the three and nine months ended ~~April 3,~~October 2, 2021, ~~the $1.8 million~~total restructuring costs are recorded within restructuring and impairment ~~costs.~~costs in the consolidated statements of operations. The asset impairments of ~~$0.5~~$4.1 million for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 ~~are comprised~~ primarily ofincluded assets that were recorded at fair value less cost to sell, which was less than the assets’ carrying amount, and the write-off of previously capitalized ~~website design~~software development 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 ~~April 3,~~October 2, 2021 (in thousands):

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


	Windows		Siding		Commercial		Corporate		Total
Balance, December 31, 2018	$	—	$	85	$	—	$	2,333	$	2,418
Costs incurred	1,094		1,834		2,721		4,009		9,658
Cash payments	(676)		(1,437)		(2,721)		(4,579)		(9,413)
Balance, December 31, 2019	$	418	$	482	$	—	$	1,763	$	2,663
Costs incurred	4,294		2,705		16,561		3,013		26,573
Cash payments	(4,406)		(2,352)		(14,570)		(4,346)		(25,674)
Balance, December 31, 2020	$	306	$	835	$	1,991	$	430	$	3,562
Costs incurred	932		264		1,772		157		3,125
Cash payments	(1,196)		(933)		(2,241)		(587)		(4,957)
Balance, October 2, 2021	$	42	$	166	$	1,522	$	—	$	1,730

We expect to fully execute our ~~plans~~restructuring initiatives and programs over the 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
Balance, December 31, 2019 $ 714,023 $ 807,280 $ 148,291 $ 1,669,594
Goodwill recognized from Kleary Acquisition 0 12,539 0 12,539
Impairment(1)
(320,990) (176,774) (5,407) (503,171)
Currency translation 3,991 10,000 0 13,991
Purchase accounting adjustments from prior year acquisitions 0 1,776 0 1,776
Balance, December 31, 2020 $ 397,024 $ 654,821 $ 142,884 $ 1,194,729
Goodwill recognized from acquisition 0 122 0 122
Currency translation 648 484 0 1,132
Balance, April 3, 2021 $ 397,672 $ 655,427 $ 142,884 $ 1,195,983


	Windows		Siding		Commercial		Total
Balance, December 31, 2019	$	714,023	$	807,280	$	148,291	$	1,669,594
Goodwill recognized from acquisition	—		12,539		—		12,539
Impairment(1)	(320,990)		(176,774)		(5,407)		(503,171)
Currency translation	3,991		10,000		—		13,991
Purchase accounting adjustments from prior year acquisitions	—		1,776		—		1,776
Balance, December 31, 2020	$	397,024	$	654,821	$	142,884	$	1,194,729
Goodwill recognized from acquisitions	252,497		122		—		252,619
Divestiture	—		—		(121,464)		(121,464)


Currency translation	303		224		—		527

Balance, October 2, 2021	$	649,824	$	655,167	$	21,420	$	1,326,411

(1)Goodwill impairment charges occurred during the quarter ended April 4, 2020 as a result of a decline in the Company’s market valuation and near-term economic uncertainties related to the COVID-19 pandemic.

NOTE 6 — INVENTORIES

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

April 3, 2021 December 31, 2020
Raw materials $ 264,760 $ 241,353
Work in process and finished goods 229,332 190,584
Total inventory $ 494,092 $ 431,937


	October 2, 2021		December 31, 2020
Raw materials	$	373,034	$	241,353
Work in process and finished goods	241,539		190,584
Total inventory	$	614,573	$	431,937

As of ~~April 3,~~October 2, 2021, the Company had inventory purchase commitments of ~~$115.9~~$24.9 million.

NOTE 7 — INTANGIBLES

The table that follows presents the major components of intangible assets as of ~~April 3,~~October 2, 2021 and December 31, 2020 (in thousands). Intangible assets that are fully amortized ~~are~~have been 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 April 3, 2021
As of October 2, 2021												As of October 2, 2021
Amortized intangible assets:	Amortized intangible assets:											Amortized intangible assets:
Trademarks/Trade names		5	–	15	8	$	248,155	$	(57,767)	$	190,388
Trademarks/Trade names/Other												Trademarks/Trade names/Other	3	–	15	7	$	233,067	$	(69,885)	$	163,182
Customer lists and relationships	Customer lists and relationships	7	–	20	9	1,758,611		(408,529)		1,350,082		Customer lists and relationships	7	–	20	9	1,716,511		(441,654)		1,274,857
Total intangible assets	Total intangible assets				9	$	2,006,766	$	(466,296)	$	1,540,470	Total intangible assets				9	$	1,949,578	$	(511,539)	$	1,438,039

As of December 31, 2020	As of December 31, 2020											As of December 31, 2020
Amortized intangible assets:	Amortized intangible assets:											Amortized intangible assets:
Trademarks/Trade names		5	–	15	8	$	248,155	$	(51,722)	$	196,433
Trademarks/Trade names/Other												Trademarks/Trade names/Other	5	–	15	8	$	248,155	$	(51,722)	$	196,433
Customer lists and relationships	Customer lists and relationships	7	–	20	9	1,758,611		(370,440)		1,388,171		Customer lists and relationships	7	–	20	9	1,758,611		(370,440)		1,388,171
Total intangible assets	Total intangible assets				9	$	2,006,766	$	(422,162)	$	1,584,604	Total intangible assets				9	$	2,006,766	$	(422,162)	$	1,584,604

The Company expects to recognize amortization expense over the next five fiscal years as follows (in thousands):


2021 (excluding the nine months ended October 2, 2021)	$	45,517
2022	181,916
2023	181,904
2024	181,246
2025	181,136

NOTE 8 — ASSETS AND LIABILITIES HELD FOR SALE AND DIVESTITURES

~~We record~~On August 9, 2021, the Company completed the sale of its IMP business for cash proceeds of $1.0 billion. On August 18, 2021, the Company completed the sale of its DBCI business for cash proceeds of $168.9 million. The IMP and DBCI businesses were within the Company’s Commercial segment and their assets and liabilities were presented as held for sale as of July 3, 2021. For the three and nine months ended October 2, 2021, the Company recognized a pre-tax gain of $679.8 million for the IMP divestiture and $151.5 million for the DBCI divestiture, which are included in gain on divestitures in the consolidated statements of operations. As part of the consideration received for the sale of the IMP business, we entered into a short-term agreement to supply steel to Nucor for the IMP business and deferred approximately $15.5 million, which was recorded in other accrued expenses on the consolidated balance sheet, for the estimated fair value of this agreement (representing a Level 3 fair value measurement). The deferred revenue will be amortized into net sales on a straight-line basis over the term of the agreement, which terminates in December 2021. For the three and nine months ended October 2, 2021, we amortized $6.2 million to net sales related to this agreement. For the three and nine months ended October 2, 2021, the Company incurred $17.9 million and $21.3 million, respectively, of divestiture-related costs, which are recorded in strategic development and acquisition related costs in the Company’s consolidated statements of operations. The divested businesses did not represent strategic shifts that have a major effect on our operations and financial results, so they were not presented as discontinued operations.

The total carrying value of assets held for sale ~~at the lower~~was $3.9 million and $4.6 million as of ~~the carrying value or fair value less costs to sell. The following criteria are used to determine if property is~~October 2, 2021 and December 31, 2020, respectively. Assets 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 beingat October 2, 2021 are 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.~~

for sale. In determining the fair value of the real property 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 $3.9 million and $4.6 million as of April 3, 2021 and December 31, 2020, respectively. Assets held for sale at April 3, 2021 are actively marketed for sale. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021, the Company completed the sale of certain real property assets resulting in approximately ~~$0.7~~$4.6 million in net proceeds and an immaterial ~~loss~~losses from the ~~transaction.~~transactions.

~~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 real property 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.

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 payments, the majority of ~~these~~which are real estate agreements in which future increases in rent are based on an index. ~~Lease~~Our 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 the commencement ~~date.~~date of the leases. Few of the Company’s lease contracts provide a readily determinable implicit rate. ~~For these contracts,~~As such, an estimated incremental borrowing rate (“IBR”) is utilized, based on information available at the inception of the lease. The 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~~requires 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 ~~April 3,~~October 2, 2021 was as follows:


Weighted-average remaining lease term	~~5.5~~5.9 years
Weighted-average IBR	~~6.01~~5.82	%

Operating lease costs were as follows (in thousands):


		Three Months Ended			Three Months Ended						Nine Months Ended
			April 3, 2021			April 4, 2020			October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Operating lease costs	Operating lease costs							Operating lease costs
Fixed lease costs	Fixed lease costs		$	25,967		$	27,930	Fixed lease costs	$	26,117	$	21,220	$	79,342	$	78,183
Variable lease costs(1)	Variable lease costs(1)		24,726			19,588		Variable lease costs(1)	29,942		19,013		82,730		54,188

(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			Three Months Ended						Nine Months Ended
			April 3, 2021			April 4, 2020			October 2, 2021		October 3, 2020		October 2, 2021		October 3, 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		$	27,019		$	30,274	Operating cash flows for operating leases	$	24,994	$	24,853	$	74,734	$	80,241

Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities		$	5,704		$	4,261	Right-of-use assets obtained in exchange for new operating lease liabilities	$	23,267	$	2,070	$	40,782	$	18,940

Future minimum lease payments under non-cancelable leases as of ~~April 3,~~October 2, 2021 are as follows (in thousands):

Operating Leases
2021 (excluding the three months ended April 3, 2021) $ 59,841
2022 72,420
2023 46,441
2024 35,189
2025 28,257
Thereafter 69,702
Total future minimum lease payments 311,850
Less: interest 48,136
Present value of future minimum lease payments $ 263,714
As of April 3, 2021
Current portion of lease liabilities $ 69,042
Long-term portion of lease liabilities 194,672
Total $ 263,714


	Operating Leases
2021 (excluding the nine months ended October 2, 2021)	$	17,972
2022	81,817
2023	56,245
2024	43,479
2025	36,384
Thereafter	98,707
Total future minimum lease payments	334,604
Less: interest	54,051
Present value of future minimum lease payments	$	280,553

As of October 2, 2021
Current portion of lease liabilities	72,983
Long-term portion of lease liabilities	207,570
Total	$	280,553

NOTE 10 — SHARE-BASED COMPENSATION

Our 2003 Long-Term Stock Incentive Plan, as amended (the ~~“Incentive~~“2003 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”) and long-term incentive awards with performance conditions (“performance share units” or “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”), 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 2003 Incentive Plan but was instead granted pursuant to a separate equity-based compensation plan, the Long-Term Incentive ~~Plan consisting of~~Plan. These Founders Awards were subject to award agreements ~~for select Founders Awards. However, these awards were subject to~~with the same terms and provisions as awards of the same type granted under the 2003 Incentive Plan.

As of ~~April 3,~~October 2, 2021, and for all periods presented, the Founders Awards and our share-based awards granted under the 2003 Incentive Plan have consisted of RSUs, PSUs and stock ~~option grants,~~options, 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 through 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. As a general rule, stock option awards 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.

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 inas part of the Founders Awards is contingent upon the achievement of synergies captured from the Merger and continued employment. Based on achieved synergies during the period comprising the two fiscal years ended December 31, 2020, the Founders Awards will vest at 200% of target amounts, subject to continuing employment through the requisite service period ending on November 16, 2021. Vesting of the PSUs granted under the 2003 Incentive Plan during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 are 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~~values of the PSUs granted during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 were determined by a Monte Carlo ~~simulation.~~

simulations.

Stock option awards

During the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, we granted ~~0.5~~0.8 million and ~~1.0~~1.1 million stock options, respectively. The average grant date fair value of options granted during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 was ~~$6.50~~$7.38 and ~~$1.96~~$2.13 per share, respectively. There were ~~NaN~~0.2 million options with an intrinsic value of ~~$0.1~~$0.7 million exercised during the ~~three~~nine months ended ~~April 3, 2021. NaN~~October 2, 2021 and cash received from the options exercised was $1.6 million. No options were exercised during the ~~three~~nine months ended ~~April 4,~~October 3, 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021, we granted RSUs to key employees with a fair value of ~~$8.5~~$18.0 million representing approximately ~~0.6~~1.2 million shares. During the ~~three~~nine months ended ~~April 4,~~October 3, 2020, we granted RSUs to key employees with a fair value of ~~$4.3~~$7.0 million, representing ~~0.9~~1.4 million shares. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, we granted PSUs with a total fair value of approximately ~~$13.7~~$28.0 million and ~~$5.3~~$5.6 million, respectively, to key employees.

Share-based compensation expense

During the three and nine months ended ~~April~~October 2, 2021, we recorded share-based compensation expense for all awards of $8.4 million and $16.9 million, respectively. During the three and nine months ended October 3, ~~2021 and April 4,~~ 2020, we recorded share-based compensation expense for all awards of ~~$3.3~~$4.0 million and ~~$3.4~~$12.6 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			Three Months Ended						Nine Months Ended
			April 3, 2021			April 4, 2020			October 2, 2021		October 3, 2020		October 2, 2021		October 3, 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 loss applicable to common shares			$	(1,655)		$	(542,073)
Net income (loss) applicable to common shares								Net income (loss) applicable to common shares	$	612,155	$	30,028	$	619,970	$	(484,658)
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		125,506			126,093		Weighted average basic number of common shares outstanding	126,159		125,100		125,840		125,655
Common stock equivalents:	Common stock equivalents:							Common stock equivalents:
Employee stock options	Employee stock options		0			0		Employee stock options	920		189		762		—
PSUs and Performance Share Awards	PSUs and Performance Share Awards		0			0		PSUs and Performance Share Awards	—		—		—		—
Weighted average diluted number of common shares outstanding	Weighted average diluted number of common shares outstanding		125,506			126,093		Weighted average diluted number of common shares outstanding	127,079		125,289		126,602		125,655

Basic loss per common share			$	(0.01)		$	(4.30)
Diluted loss per common share			$	(0.01)		$	(4.30)
Basic income (loss) per common share								Basic income (loss) per common share	$	4.85	$	0.24	$	4.93	$	(3.86)
Diluted income (loss) per common share								Diluted income (loss) per common share	$	4.82	$	0.24	$	4.90	$	(3.86)

Incentive Plan securities excluded from dilution(1)	Incentive Plan securities excluded from dilution(1)		1,174			2,851		Incentive Plan securities excluded from dilution(1)	160		2,146		176		3,338

(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 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.

NOTE 12 — WARRANTY

The Company offers a number of warranties associated with the products it sells. The specific terms and conditions of these warranties vary depending on the product sold. The 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 (in thousands):


		Three Months Ended					Nine Months Ended
		April 3, 2021		April 4, 2020			October 2, 2021		October 3, 2020
Beginning balance	Beginning balance	$	216,230	$	216,173	Beginning balance	$	216,230	$	216,173
Acquisition		0		109

Acquisitions						Acquisitions	6,464		109
Divestiture						Divestiture	(2,245)		—
Warranties sold	Warranties sold	644		662		Warranties sold	1,597		1,885
Revenue recognized	Revenue recognized	(693)		(680)		Revenue recognized	(2,043)		(2,054)
Expense	Expense	8,827		9,051		Expense	22,856		23,257
Settlements	Settlements	(8,138)		(9,507)		Settlements	(23,978)		(22,645)
Ending balance	Ending balance	216,870		215,808		Ending balance	218,881		216,725
Less: current portion	Less: current portion	24,617		26,920		Less: current portion	29,523		27,201
Total warranty, less current portion	Total warranty, less current portion	$	192,253	$	188,888	Total warranty, less current portion	$	189,358	$	189,524

The current portion of the warranty liabilities ~~are~~is recorded within other accrued expenses and the long-term portion of the warranty liabilities ~~are~~is 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~~Coil Coating Benefit Plans — ~~As a result of the CENTRIA Acquisition on~~On January 16, 2015, we assumed noncontributory defined benefit plans covering certain hourly employees (the ~~“CENTRIA~~“Coil Coating Benefit Plans”) and which are closed to new participants. Benefits under the ~~CENTRIA~~Coil Coating 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~~Coil Coating Benefit Plans are invested in fixed income funds. ~~CENTRIA~~The Company also sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses (the “OPEB Plans”). Currently, the Company’s policy is to fund the ~~CENTRIA~~Coil Coating Benefit Plans as required by minimum funding standards of the 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~~Coil Coating Benefit Plans, the Ply Gem Plan and the MW Plan collectively as the “Defined Benefit Plans” in this Note.

1521

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

Defined Benefit Plans
Three Months Ended
April 3,
2021 April 4,
2020
Service cost $ 14 $ 11
Interest cost 635 802
Expected return on assets (1,360) (1,398)
Amortization of prior service cost 16 16
Amortization of net actuarial loss 104 753
Net periodic benefit cost (income) $ (591) $ 184
OPEB Plans
Three Months Ended
April 3,
2021 April 4,
2020
Service cost $ 4 $ 4
Interest cost 44 59
Amortization of net actuarial loss 18 27
Net periodic benefit cost $ 66 $ 90


	Defined Benefit Plans
	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Service cost	$	14	$	11	$	41	$	34
Interest cost	635		802		1,906		2,405
Expected return on assets	(1,360)		(1,398)		(4,079)		(4,193)
Amortization of prior service cost	17		16		49		47
Amortization of net actuarial loss	104		753		312		2,256
Net periodic benefit (income) cost	$	(590)	$	184	$	(1,771)	$	549

	OPEB Plans
	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Service cost	$	4	$	4	$	13	$	13
Interest cost	44		59		133		178


Amortization of net actuarial loss	18		27		53		81
Net periodic benefit cost	$	66	$	90	$	199	$	272

We expect to contribute $3.2 million to the Defined Benefit Plans and $0.7 million to OPEB Plans in the year ending December 31, 2021. Our policy is to fund the ~~CENTRIA~~Coil Coating Benefit Plans as required by minimum funding standards of the Internal Revenue Code. The contributions to the OPEB Plans by retirees vary from ~~NaN~~none 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):


		April 3, 2021		December 31, 2020			October 2, 2021		December 31, 2020

Term loan facility due April 2025		$	2,491,563	$	2,497,967
Term loan facility due April 2028						Term loan facility due April 2028	$	2,587,000	$	2,497,967

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
6.125% senior notes due January 2029	6.125% senior notes due January 2029	500,000		500,000		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)	(51,624)		(53,938)		Less: unamortized discounts and unamortized deferred financing costs(1)	(45,205)		(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	3,584,939		3,589,029		Total long-term debt, net of unamortized discounts and unamortized deferred financing costs	3,041,795		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	26,000		25,600
Total long-term debt, less current portion	Total long-term debt, less current portion	$	3,559,339	$	3,563,429	Total long-term debt, less current portion	$	3,015,795	$	3,563,429

(1)Includes the unamortized discounts and unamortized deferred financing costs associated with the term loan facility, the 8.00% senior notes due April 2026 (included in December 31, 2020 balance only as the notes were redeemed in full in April 2021), and the 6.125% senior notes due January 2029. The unamortized deferred financing costs associated with the asset-based and revolving credit facilities of ~~$1.5~~$1.4 million and $1.7 million as of ~~April 3,~~October 2, 2021 and December 31, 2020, respectively, are classified in other assets on the consolidated balance sheets.

Term Loan Facility due April ~~2025~~2028 and Cash Flow Revolver ~~due April 2023~~

On April 12, 2018, Ply Gem Midco entered into ~~the Current~~a Cash Flow Agreement (the "Current Cash Flow Credit ~~Agreement,~~Agreement"), which provides for (i) a term loan facility (the ~~“Current~~“Existing 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~~“Existing Cash Flow Revolver” and together with the Existing Term Loan Facility, the ~~“Current~~“Existing 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~~Existing 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~~Existing Cash Flow Facilities, and the Company became the Borrower (as defined in the Current Cash Flow Credit Agreement) under the ~~Current~~Existing Cash Flow Facilities.

On April 15, 2021, the Company entered into a Second Amendment to the Current 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 Current 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 “ Current Cash Flow Revolver”).

On April 15, 2021, the Company entered into (i) a Third Amendment to Current 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 Current Cash Flow Credit Agreement to, among other things, refinance the Existing Term Loan Facility in an original aggregate principal amount of $1,755.0 million 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 Current 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 “Current Term Loan Facility” and together with the Current Cash Flow Revolver, the “Current 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 8.00% Senior 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.

In connection with the Third Amendment and the Increase Supplement to the Current Cash Flow Credit Agreement, the Company incurred $24.8 million in financing costs of which $13.2 million was deferred and are being amortized using the effective interest method.

The Current Term Loan Facility amortizes in nominal quarterly one installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity. 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%~~0.50%) plus an applicable margin of ~~3.75%~~3.25% per annum or (ii) an alternate base rate plus an applicable margin of ~~2.75%~~2.25% per annum. At ~~April 3,~~October 2, 2021, the interest rates on the Current Term Loan Facility were as follows:


	~~April 3,~~October 2, 2021
Interest rate	~~3.9~~3.75	%
Effective interest rate	~~6.51~~4.02	%

The Company entered into certain interest rate swap agreements ~~during~~in 2019 and 2021 to effectively convert a portion of its variable rate debt to fixed. See Note 1715 — ~~Fair Value of Financial Instruments and Fair Value Measurements~~.Derivatives.

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. There are no amortization payments under the Current Cash Flow Revolver. 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.

Both 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 Current 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~~No payments were required in 2021 under the fiscal year 2020 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.

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~~2026

On April 12, 2018, Ply Gem Midco entered into ~~the Current~~an ABL Credit Agreement (the "Current ABL Credit Agreement"), which provides for an asset-based revolving credit facility (the ~~“Current~~“Existing 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~~Existing 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~~Existing 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~~Existing 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~~Existing ABL Facility, and the Company became the Parent Borrower (as defined in the ABL Credit Agreement) under the Existing ABL Facility.

On April 15, 2021, the Company entered into Amendment No. 6 to the Current ABL ~~Facility.~~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 “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 ~~April 3,~~October 2, 2021, the Company had the following in relation to the Current ABL Facility (in thousands):


	~~April 3,~~October 2, 2021
Excess availability	$	~~570,978~~564,442
Revolving loans outstanding	0—
Letters of credit outstanding	~~35,366~~40,925

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.

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.

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 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.

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 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”). Proceeds from the 6.125% Senior Notes were used to repay outstanding amounts under the 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,~~October 2, 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~~Current 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.

Redemption of 8.00% Senior Notes

On April 15, 2021, the Company redeemed the outstanding $645.0 million aggregate principal amount of the 8.00% Senior Notes due April 2026 (the “8.00% Senior Notes”) for $670.8 million using cash on hand and proceeds from the Incremental Tranche B Term Loans. The redemption resulted in a pre-tax loss on extinguishment of debt of $41.9 million during the nine months ended October 2, 2021, comprising a make-whole premium of $25.8 million and a write-off of $16.1 million in unamortized deferred financing costs.

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 ~~April 3,~~October 2, 2021, the Company was in compliance with all covenants that were in effect on such date.

NOTE 15 — DERIVATIVES

We utilize derivative instruments, including interest rate swap agreements and foreign currency hedging contracts, to manage our exposure to interest rate risk and currency fluctuations. We only hold such instruments for economic hedging purposes, not for speculative or trading purposes. Our derivative instruments are transacted only with highly rated institutions, which reduces our exposure to credit risk in the event of nonperformance.

Interest Rate Swaps

We are exposed to interest rate risk associated with fluctuations in interest rates on our floating-rate Current Term Loan Facility. The objective in using interest rate derivatives is to manage our exposure to interest rate movements. To accomplish this objective, we have entered into interest rate swap agreements as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

On a monthly basis, we net settle with our swap counterparties for the difference between the fixed rate specified in each swap agreement and the variable rate as applied to the notional amount of the swap.

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 Current Term Loan Facility. The interest rate swaps effectively converted a portion of the floating rate interest payment into a fixed rate interest payment. Three interest rate swaps each covered of notional amount of $500.0 million. The Company designated the interest rate swaps as qualifying hedging instruments and accounted for these derivatives as cash flow hedges.

As discussed in Note 14 — Long-Term Debt, the Company refinanced its Term Loan Facility. Contemporaneously with the refinancing on April 15, 2021, we completed a series of transactions to modify our interest rate swap positions as follows: (i) we de-designated all existing interest rate swaps as cash flow hedges; (ii) we terminated 2 existing interest rate swaps with a notional value of $500 million each; (iii) we entered into 2 receive-fixed interest rate swaps with a notional amount of $250 million each, which are designed to offset the terms of an existing, active interest rate swap with a notional amount of $500 million; and (iv) we entered into two pay-fixed interest rate swaps with a notional amount of $750 million each, effectively blending the liability position of our existing interest rate swap agreements into the new swaps and extending the term of our hedged position to April 2026.

The amount remaining in accumulated other comprehensive loss for the de-designated and terminated swaps as of October 2, 2021 was approximately $51.9 million and is being amortized as an increase to interest expense over the effective period of the original swap agreements.

The new receive-fixed interest rate swaps remain undesignated to economically offset the now undesignated existing, active swap. The new receive-fixed and the existing, active swaps mature on July 12, 2023. Cash settlements related to these receive-fixed interest rate swaps offset and are classified as operating activities in the consolidated statements of cash flows.

The new pay-fixed interest rate swaps also qualify as hybrid instruments in accordance with ASC 815, Derivatives and Hedging, consisting of a loan and an embedded at-market derivative that was designated as a cash flow hedge. The loan is accounted for at amortized cost over the life of the swap while the embedded at-market derivative is accounted for at fair value. The new swaps are indexed to one-month LIBOR and will be net settled on a monthly basis with the counterparty for the difference between the fixed rate of 2.0369% and 2.0340%, respectively, and the variable rate based upon one-month LIBOR (subject to a floor of 0.5%) as applied to the notional amount of the swaps. In connection with the transactions discussed above, no cash was exchanged between the Company and the counterparty. The liability of the terminated interest rate swaps as well as the inception value of the receive-fixed interest rate swap was blended into the new pay-fixed interest rate swap. The cash flows related to the portion treated as debt are classified as financing activities while the portion treated as an at-market derivative are classified as operating activities in the consolidated statements of cash flows.

The key terms of interest rate swaps are as follows (amounts in thousands):


			October 2, 2021			December 31, 2020
Effective Date	Fixed Rate Paid (Received)		Notional Amount		Status	Notional Amount		Status	Maturity Date
Entered into May 2019:
July 12, 2019	2.1570	%	$	—	Terminated	$	500,000	Active	July 12, 2023
July 12, 2019	2.1560	%	—		Terminated	500,000		Active	July 12, 2023
July 12, 2019	2.1680	%	500,000		Active	500,000		Active	July 12, 2023

Entered into April 2021:
April 15, 2021	2.0369	%	750,000		Active	0			April 15, 2026
April 15, 2021	2.0340	%	750,000		Active	0			April 15, 2026
April 15, 2021	(2.1680)	%	(250,000)		Active	0			July 12, 2023
April 15, 2021	(2.1680)	%	(250,000)		Active	0			July 12, 2023
			$	1,500,000		$	1,500,000

Our interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.

Foreign Currency Hedging Contracts

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. 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.

In the second quarter of 2021, the Company entered into forward contracts to hedge approximately $20.2 million of its 2022 non-functional currency inventory purchases. Similar to the December 2020 contracts described above, these 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. All of the Company’s foreign currency forward contracts are designated as qualifying hedging instruments and are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging.

During the three and nine months ended October 2, 2021, the Company realized a loss of approximately $0.3 million and $0.9 million, respectively, within cost of goods sold in the consolidated statements of operations based on the foreign currency forward contracts described above. 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. As of October 2, 2021, the Company had a hedge asset of approximately $0.2 million and a gain of approximately $0.2 million in accumulated other comprehensive loss on the consolidated balance sheets. No hedge liability or asset or deferred gain or loss in accumulated other comprehensive loss existed as of December 31, 2020 related to the forward contracts.

Fair Values of Derivatives on the Consolidated Balance Sheets

The fair values of our derivatives and their presentation on the consolidated balance sheets as of October 2, 2021 and December 31, 2020 were as follows (in thousands):


		October 2, 2021				December 31, 2020
		Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments	Financial statement line item
Interest rate swaps	Other assets(1)	$	17,140	$	—	$	—	$	—
	Other long-term liabilities(2)	—		17,140		—		—
Total		$	17,140	$	17,140	$	—	$	—

Derivatives designated as hedging instruments	Financial statement line item
Interest rate swaps	Other accrued expenses(3)	$	—	$	13,127	$	—	$	—
	Other long-term liabilities(4)	—		48,386		—		75,770
Foreign currency contracts	Other accrued expenses	—		—		—		—
	Other long-term liabilities	—		(202)		—		—
Total		$	—	$	61,311	$	—	$	75,770

(1)The balance as of October 2, 2021 of $17.1 million is related to receive-fixed interest rate swap for which the fair value option has been elected.

(2)The balance as of October 2, 2021 of $17.1 million is related to pay-fixed May 2019 active interest rate swap which has been de-designated as a cash flow hedge.

(3)The balance as of October 2, 2021 of $13.1 million is related to the financing component of the pay-fixed interest rate swaps.

(4)The balance as of October 2, 2021 includes $48.4 million related to the financing component of the pay-fixed interest rate swaps.

Effect of Derivatives on the Consolidated Statements of Operations

The effect of our derivatives and their presentation on the consolidated statements of operations for the three and nine months ended October 2, 2021 and October 3, 2020 were as follows (in thousands):


		Three Months Ended				Nine Months Ended
		October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Derivatives not designated as hedging instruments	Financial statement line item
Interest rate swaps	Interest expense(1)	$	7,288	$	—	$	13,957	$	—
Foreign currency contracts	Cost of sales	339		—		853		—

Derivatives designated as hedging instruments
Interest rate swaps	Interest expense	2,540		7,462		13,422		16,644
		$	10,167	$	7,462	$	28,232	$	16,644

(1)For the three and nine months ended October 2, 2021, the entire balance related to the reclassification from accumulated other comprehensive loss to interest expense is due to de-designation from hedge accounting of all May 2019 interest rate swaps.

NOTE 16 — 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 “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 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, by and among the Company and the CD&R Fund VIII Investor Group.

As of ~~April 3,~~October 2, 2021 and December 31, 2020, the CD&R Investor Group owned approximately ~~49.3%~~49.1% and 49.4% of the outstanding shares of the Company’s Common Stock, respectively.

NOTE 1617 — STOCK REPURCHASE PROGRAM

~~On October 10, 2017 and March 7, 2018, the~~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 on October 10, 2017 and March 7, 2018, 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021, ~~and April 4, 2020,~~ there were 0no stock repurchases under the stock repurchase programs. The Company repurchased 1.1 million shares for $6.4 million under the stock repurchase programs during the nine months ended October 3, 2020. As of ~~April 3,~~October 2, 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, the Company withheld approximately ~~0.1~~0.2 million and ~~NaN~~0.1 million 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, the Company cancelled approximately ~~2000~~0.2 million and ~~NaN~~1.2 million shares that had been previously withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of stock ~~awards.~~awards and shares repurchased under the stock repurchase programs. The cancellations resulted in ~~15000~~$2.9 million and ~~$0.3~~$6.9 million decreases in both treasury stock and additional paid in capital during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, respectively.

NOTE 1718 — 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 and accounts payable approximate fair value as of ~~April 3,~~October 2, 2021 and December 31, 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 ~~April 3,~~October 2, 2021, there ~~were 0~~ were no borrowings outstanding under the Current ABL Facility andno outstanding indebtedness under 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):


		April 3, 2021				December 31, 2020					October 2, 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	$	2,491,563	$	2,487,203	$	2,497,967	$	2,485,477	Term Loan Facility	$	2,587,000	$	2,578,929	$	2,497,967	$	2,485,477
8.00% Senior Notes	8.00% Senior Notes	645,000		667,575		645,000		674,025		8.00% Senior Notes	—		—		645,000		674,025
6.125% Senior Notes	6.125% Senior Notes	500,000		531,250		500,000		530,000		6.125% Senior Notes	500,000		527,500		500,000		530,000

The fair value of the ~~term loan facility~~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 ~~April 3,~~October 2, 2021 and December 31, 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.

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 swaps liability: Interest rate swap 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 ~~April 3,~~October 2, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):


		April 3, 2021									October 2, 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	$	286	$	0	$	0	$	286	Money market	$	37	$	—	$	—	$	37
Mutual funds – Growth	Mutual funds – Growth	564		0		0		564		Mutual funds – Growth	549		—		—		549
Mutual funds – Blend	Mutual funds – Blend	1,186		0		0		1,186		Mutual funds – Blend	1,380		—		—		1,380
Mutual funds – Foreign blend	Mutual funds – Foreign blend	342		0		0		342		Mutual funds – Foreign blend	450		—		—		450
Mutual funds – Fixed income	Mutual funds – Fixed income	0		149		0		149		Mutual funds – Fixed income	—		151		—		151
Total short-term investments in deferred compensation plan(2)	Total short-term investments in deferred compensation plan(2)	2,378		149		0		2,527		Total short-term investments in deferred compensation plan(2)	2,416		151		—		2,567
Interest rate swap assets(3)										Interest rate swap assets(3)	—		17,140		—		17,140
Total assets	Total assets	$	2,378	$	149	$	0	$	2,527	Total assets	$	2,416	$	17,291	$	—	$	19,707

Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan liability(2)	Deferred compensation plan liability(2)	$	0	$	2,567	$	0	$	2,567	Deferred compensation plan liability(2)	$	—	$	2,561	$	—	$	2,561
Foreign currency hedges(3)		0		678		0		678
Interest rate swap liability(4)		0		63,903		0		63,903
Foreign currency hedges										Foreign currency hedges	—		(202)		—		(202)
Interest rate swap liabilities(4)										Interest rate swap liabilities(4)	—		78,653		—		78,653
Total liabilities	Total liabilities	$	0	$	67,148	$	0	$	67,148	Total liabilities	$	—	$	81,012	$	—	$	81,012


		December 31, 2020									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	$	349	$	0	$	0	$	349	Money market	$	349	$	—	$	—	$	349
Mutual funds – Growth	Mutual funds – Growth	487		0		0		487		Mutual funds – Growth	487		—		—		487
Mutual funds – Blend	Mutual funds – Blend	1,006		0		0		1,006		Mutual funds – Blend	1,006		—		—		1,006
Mutual funds – Foreign blend	Mutual funds – Foreign blend	338		0		0		338		Mutual funds – Foreign blend	338		—		—		338
Mutual funds – Fixed income	Mutual funds – Fixed income	0		153		0		153		Mutual funds – Fixed income	—		153		—		153
Total short-term investments in deferred compensation plan(2)	Total short-term investments in deferred compensation plan(2)	2,180		153		0		2,333		Total short-term investments in deferred compensation plan(2)	2,180		153		—		2,333
Foreign currency hedge(3)		0		0		0		0

Total assets	Total assets	$	2,180	$	153	$	0	$	2,333	Total assets	$	2,180	$	153	$	—	$	2,333

Liabilities:	Liabilities:									Liabilities:
Deferred compensation plan liability(2)	Deferred compensation plan liability(2)	$	0	$	2,339	$	0	$	2,339	Deferred compensation plan liability(2)	$	—	$	2,339	$	—	$	2,339
Interest rate swap liability(4)		0		75,770		0		75,770
Interest rate swap liabilities										Interest rate swap liabilities	—		75,770		—		75,770
Total liabilities	Total liabilities	$	0	$	78,109	$	0	$	78,109	Total liabilities	$	—	$	78,109	$	—	$	78,109

(1)Unrealized holding gains (losses) for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 were ~~$0.1~~$0.2 million and ~~$(0.8)~~$(0.7) 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)The balance as of October 2, 2021 of $17.1 million is related to receive-fixed interest rate swaps for which the fair value option has been elected.

(4)The balance as of October 2, 2021 includes $61.5 million related to the financing component of pay-fixed interest rate swaps and $17.1 million related to pay-fixed May 2019 active interest rate swaps which have been de-designated as cash flow hedges.

~~(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 contractsfollowing table summarizes information regarding our liabilities that are ~~reclassified from accumulated other comprehensive income or loss~~measured at fair value on a nonrecurring basis as of October 2, 2021, segregated by level of the valuation inputs within the fair value hierarchy utilized 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.measure fair value (in thousands):


	October 2, 2021
	Level 1		Level 2		Level 3		Total
Liabilities:
Short-term steel supply agreement(1)	$	—	$	—	$	9,333	$	9,333
Total liabilities	$	—	$	—	$	9,333	$	9,333

(1)See Note 8 — Assets and Liabilities Held for Sale and Divestitures for more information. 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~~supply agreement was estimated using level 3 inputs, including broker quotes and the Company’s term loan secured variable debt. The interest rate swaps effectively convert a portion of the floating rate interest 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.~~steel procurement agreements.

NOTE 1819 — 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 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021, the Company’s estimated annual effective income tax rate of ordinary forecasted pre-tax book income was approximately ~~30.6%~~28.5%, which varied from the statutory rate primarily due to state income tax expense, valuation allowances, ~~and~~ foreign income ~~taxes.~~taxes, and divestitures. For the ~~three~~nine months ended ~~April 3,~~October 2, 2021, the effective tax rate was ~~91.8%~~28.1%, which varied from the annual effective tax rate due to discrete items recorded during the period, including interest recorded on unrecognized tax benefits, adjustments to state income tax rates, and stock compensation.

Valuation allowance

As of ~~April 3,~~October 2, 2021, the Company ~~remains~~remained in a valuation allowance position, in the amount of ~~$11.9~~$12.1 million, against its deferred tax assets for certain state jurisdictions of certain entities as it is currently deemed “~~more~~“more likely than ~~not~~”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 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 ~~three~~nine months ended ~~April 3,~~October 2, 2021, the tax reserves increased by approximately ~~$0.2~~$6.4 million. The increase is primarily due to a new uncertain tax benefit and additional interest expense related to previously recorded unrecognized tax benefits.

The liability for unrecognized tax benefits as of ~~April 3,~~October 2, 2021 was approximately ~~$11.9~~$18.1 million and is recorded in other long-term liabilities in the consolidated balance sheet.

CARES Act

Under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) that was signed into law on March 27, 2020, the Company elected to defer employer side social security payments for approximately $19.9 million as of December 31, 2020, $10 million of which is recorded in current liabilities on the consolidated balance sheet. Approximately $10 million of the deferral will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022.

NOTE 1920 — 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 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-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, loss on extinguishment of debt and other income (expense).

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

Three Months Ended
April 3,
2021 April 4,
2020
Net sales:
Windows $ 527,263 $ 448,450
Siding 316,391 241,043
Commercial 423,378 424,318
Total net sales $ 1,267,032 $ 1,113,811
Operating income (loss):
Windows $ 29,362 $ (313,190)
Siding 27,528 (168,867)
Commercial 41,585 16,841
Corporate (43,267) (35,575)
Total operating income (loss) 55,208 (500,791)
Unallocated other expense, net (56,071) (59,296)
Loss before taxes $ (863) $ (560,087)
April 3,
2021 December 31,
2020
Total assets:
Windows $ 1,737,880 $ 1,717,032
Siding 2,116,233 2,123,615
Commercial 918,886 890,380
Corporate 755,307 747,463
Total assets $ 5,528,306 $ 5,478,490


	Three Months Ended				Nine Months Ended
	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Net sales:
Windows	$	596,486	$	501,314	$	1,703,493	$	1,378,039
Siding	357,870		321,898		1,036,448		848,190
Commercial	490,049		404,041		1,371,617		1,199,771
Total net sales	$	1,444,405	$	1,227,253	$	4,111,558	$	3,426,000
Operating income (loss):
Windows	$	15,756	$	37,295	$	83,901	$	(252,794)
Siding	46,108		45,313		127,019		(92,916)
Commercial	908,458		56,137		1,003,373		109,642
Corporate	(59,596)		(34,766)		(151,549)		(101,819)
Total operating income (loss)	910,726		103,979		1,062,744		(337,887)
Unallocated other expense, net	(44,593)		(50,402)		(189,611)		(159,056)
Income (loss) before taxes	$	866,133	$	53,577	$	873,133	$	(496,943)

					October 2, 2021		December 31, 2020
Total assets:
Windows					$	2,076,604	$	1,717,032
Siding					2,120,543		2,123,615
Commercial					516,366		890,380
Corporate					1,017,582		747,463
Total assets					$	5,731,095	$	5,478,490

2533

NOTE 2021 — 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 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)~~self-insures) against these risks to the extent deemed prudent by its management and to the extent insurance is available. 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,~~October 2, 2021.

Environmental

The Company’s operations are subject to various federal, state, local and foreign environmental, health and safety laws. Among other things, these laws regulate the emissions or discharge of materials into the environment; govern the use, storage, treatment, disposal and management of hazardous substances and wastes; protect the health and safety of its employees and the end-users of its products; regulate the materials used in its products; and impose liability for the costs of investigating and remediating (as well as other damages resulting from) present and past releases of hazardous substances. Violations of these laws or of any conditions contained in environmental permits ~~can~~could result in substantial fines or penalties, injunctive relief, consent orders, requirements to install pollution controls or other abatement equipment, ~~and~~or civil sanctions.

The Company could be held liable for costs to investigate, remediate or otherwise address contamination at any real property it has ever owned, operated or used as a disposal site, or at other sites where we or predecessors may have released hazardous materials. The 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.

MW Manufacturers Inc. (“MW”), a subsidiary of Ply Gem Industries, Inc., entered into a September 2011 Administrative Order on Consent with the ~~EPA~~U.S. Environmental Protection Agency (“EPA”) under the Corrective Action Program to address known releases of hazardous substances at MW’s Rocky Mount, Virginia property. A Phase I RCRA Facility Investigation (“RFI”) was submitted to the Virginia Department of Environmental Quality (“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 ~~(“LCMS”)~~ based on the investigations was submitted to the VDEQ for review and approval in September 2019. ~~The VDEQ concurred with the LCMS and prepared a Statement~~Upon completion of ~~Basis, which was published for~~ a 30-day public ~~review~~comment period, the VDEQ issued its Final Decision and ~~comment in April~~Response to Comments approving a final remedy on May 19, 2021. The final remedy consists of continuing groundwater monitoring until the VDEQ’s corrective actions have been met; and implementing and complying with land use restrictions and institutional controls imposed by an environmental covenant. The Company has recorded a liability of $4.5 million for this MW site, of which $1.0 million is in other current liabilities in the Company’s consolidated balance sheet as of ~~April 3,~~October 2, 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”). Kroy Building Products, Inc. (“KBP”), a subsidiary of Ply Gem Industries, Inc., has been identified as a potentially responsible party ~~(“PRP”)~~ at the site and has liability for investigation and remediation costs associated with the contamination. On May 17, 2019, 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”) of the PCE/TCE Site. A final RI/FS Work Plan was ~~submitted to~~approved by EPA ~~in November 2019 and approved~~ in December 2019. NaN phases of RI ~~Phase I~~ field sampling have been completed through May 2021 and ~~mobile laboratory analysis was initiated in Spring 2020. After~~results are being analyzed to determine a ~~delay due to worsening conditions~~monitoring well plan and scope of ~~the COVID-19 pandemic, Phase 2 of the R1 Phase field work is anticipated to resume in Q2 2021.~~additional investigation. The Company has recorded a liability of $4.4 million within other current liabilities in its consolidated balance sheet as of ~~April 3,~~October 2, 2021. ~~The~~If necessary, the Company will adjust our remediation liability ~~in future periods,~~ if ~~necessary, as~~ the RI/FS ~~progresses~~scope materially changes or ifthe EPA imposes additional ~~requirements are imposed.~~investigative requirements. The Company may be able to recover a portion of costs incurred in connection with the PCE/TCE Site from other potentially responsible parties, though there is no assurance we 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 $3.9 million liability related to the settlement, of which $2.3 million is in other current liabilities in the Company’s consolidated balance sheet as of ~~April 3,~~October 2, 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~~purported 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~~asserted 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~~4 of the director defendants. Voigt ~~seeks~~sought damages in an amount to be determined at trial.

On August 25, 2021, the parties to the case filed a Stipulation of Compromise and Settlement (“Stipulation”) setting forth their agreement to settle the litigation. The Stipulation remains subject to court approval, and the court has scheduled a hearing to consider the Stipulation on January 19, 2022. The Stipulation provides for CD&R, CD&R Fund VIII, and the 8 director defendants to cause their respective insurers to pay a total of $100 million into an escrow account that will be used to pay escrow expenses, satisfy any fee and incentive amounts awarded by the court in favor of plaintiff and plaintiff’s counsel, and distribute the remaining funds to the Company. The Stipulation further provides that plaintiff’s counsel intends to seek attorneys’ fees and litigation expenses in an amount no greater than 23.5% of the $100 million payment by the insurers, and that any incentive award for the plaintiff will be paid solely from the amount of attorneys’ fees awarded.

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 requirement to pay the AD and CVD tariffs. The Company 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 fiscal year ended December 31, 2020. This matter was appealed and, on September 22, 2021, the U.S. Court of International Trade (“CIT”) issued an opinion upholding the USITC’s determination that there was no injury or threat of injury to the domestic FSS industry caused by the cumulated imports of FSS from Mexico, Canada, and China. The CIT decision is subject to further appeal to the U.S. Court of Appeals for the Federal Circuit and would have preclusive effect only with respect to the proceedings involving China, because the USITC’s determination as it applies to imports of FSS from Mexico has been appealed ~~and~~to a separate tribunal established pursuant to the ~~Company will continue to vigorously advocate its position that its import~~North American Free Trade Agreement. However, because the CIT decision addresses the USITC’s analysis of cumulated imports of FSS from ~~BSM should not~~Mexico, Canada, and China, the court’s opinion may be ~~subject~~persuasive in the appeal of the USITC’s determination as it applies to ~~any CVD or AD tariffs.~~imports of FSS from Mexico.

NOTE 2122 — 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,~~November 6, 2021, the Company entered into a ~~Second Amendment~~definitive agreement to ~~Cash Flow Credit Agreement (the “Second Amendment"~~acquire Union Corrugating Company Holdings, Inc. (“UCC”)~~, among~~. UCC provides metal roofing, roofing components and accessories from locations primarily in the Central and Eastern U.S. regions. 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 Agreementexpects to ~~among other things:~~

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, togetherfund this acquisition with cash on ~~hand, (i) for the redemption of all~~hand. The closing of the ~~Existing Notes (as defined below) (the “Senior Notes Redemption”)~~transaction is expected during the fourth quarter of 2021, subject to regulatory approval 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:~~customary closing conditions.

•~~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 terminated two swap contracts on an aggregate notional value of $1.0 billion. These contracts were due to mature in July 2023. The Company 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 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 reported within the Windows segment.

2836

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, 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 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~~ cyclicality;

•seasonality of the business and adverse weather conditions;

•challenging economic conditions affecting the ~~nonresidential construction industry;~~

•~~downturns in the~~ residential, ~~new construction~~non-residential and repair and remodeling ~~end markets,~~ construction industry and markets;

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

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

•increasing difficulty in credit or financing availability of consumers or builders;

•increase in inflationary activity;

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

•ability to successfully implement operational efficiency initiatives, including automation;

•ability to successfully integrate our acquired businesses;

•ability to attract and retain employees, including through various initiatives and actions;

•volatility in the United States (“U.S.”) ~~economy~~ and ~~abroad, generally,~~international economies 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 polyvinyl chloride (“PVC”) resin, glass, aluminum, and steel;~~

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

•~~retention and replacement of~~replace 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 and dispositions at favorable prices and terms;

•our ability to fund acquisitions using available liquidity;

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

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

•breaches of our information system security measures;

•damage to our computer infrastructure and software systems;

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

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

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

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

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

•ability to compete effectively against competitors with substitutable products;

•additional costs from new regulations which relate to the ~~cost~~utilization or manufacturing of our products or services;

•our ability to realize the anticipated benefits of acquisitions and ~~difficulty associated with integrating~~dispositions and ~~combining acquired businesses;~~to use the proceeds from dispositions;

•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, 2020 (the “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 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. is the largest manufacturer of exterior building products in North America. The Company serves residential and commercial customers across new construction and the repair &and 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 onon: (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~~attention 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: Windows, Siding, and Commercial.

Our manufacturing processes are vertically integrated, which we believe provides cost and competitive advantages. As the #1leading 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 over ~~20,500~~20,000 employees at manufacturing, distribution and office locations primarily in North America.

At Cornerstone Building Brands, corporate stewardship is a responsibility that is deeply embedded in our ~~75-year history. Our~~culture. We believe that our sustainable business practices ~~have given~~will provide 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, repair and ~~retrofit~~remodel 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 year compared to the second and third fiscal quarters because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

Acquisitions and Divestitures

Our portfolio optimization is rooted in our core growth strategy and leverages areas where we have a competitive advantage resulting in a more focused and optimized business portfolio, strengthening our market position and financial flexibility. To deliver long-term value, we must participate in categories where meaningful growth exists. We believe this approach will enhance Cornerstone Building Brands’ value proposition, fueling both growth and value creation. Sustainable value creation is important because it allows us to deliver shareholder returns while establishing a foundation to support our long-term growth aspirations.

On April 30, 2021, the Company acquired Prime Windows LLC (“Prime Windows”) for total consideration of $93.0 million, exclusive of a $2.0 million working capital adjustment which has not been finalized as of October 2, 2021. This acquisition was funded through borrowings under the Company’s existing credit facilities. Prime Windows’ results are reported within the Windows segment as of the acquisition date. On August 20, 2021, the Company completed its acquisition of Cascade Windows, Inc. (“Cascade Windows”) for $239.5 million in cash. This acquisition was funded through cash available on the balance sheet. The Company reports Cascade Windows’ results within the Windows segment as of the acquisition date.

On August 9, 2021, the Company completed the sale of its IMP business for cash proceeds of $1.0 billion. On August 18, 2021, the Company completed the sale of its DBCI business for cash proceeds of $168.9 million. The Company previously reported the results of the IMP and DBCI businesses within the Commercial segment.

Markets We Serve

OurOur products are 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 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 low-rise non-residential construction market, such as distribution, warehouse, healthcare and educational facilities in suburban ~~regions; however,~~regions. However, the COVID-19 pandemic has also caused challenges in other areas of non-residential construction, most notably in retail and commercial office facilities in densely populated urban centers, where we have minimal ~~if any,~~ participation. We believe our business is well-positioned to benefit from broader societal and population trends favoring suburban regions, as employment and living preferences shift ~~towards~~toward such regions.

Cornerstone Building Brands is deeply committed to the communities where our customers and employees live, work and play. We recognize that our customers are increasingly environmentally conscious in their purchasing behavior, and we ~~believe our~~aim to offer sustainable solutions ~~favorably~~to 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 windows with ENERGY STAR and LEED certifications. We recognize that efficient use of recycled materials helps to conserve natural resources and reduces environmental impact, and we are committed to ~~driving~~offering these sustainable ~~practices throughout~~products to our ~~business.~~customers.

~~COVID-19 Update~~

We experienced an overall decrease in customer demand across all our markets during 2020 as the COVID-19 pandemic caused temporary closures of non-life sustaining 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 our employees and our communities. During 2020, the Company quickly implemented a range of actions aimed at reducing costs and preserving liquidity. These actions included 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. 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.

3139

RESULTS OF OPERATIONS

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


		Three Months Ended				Three Months Ended											Nine Months Ended
(Amounts in thousands)	(Amounts in thousands)		April 3, 2021				April 4, 2020			$ change	% change		(Amounts in thousands)	October 2, 2021			October 3, 2020			$ change	% change		October 2, 2021			October 3, 2020			$ change	% change
Net sales	Net sales		$	1,267,032			$	1,113,811		153,221	13.8	%	Net sales	$	1,444,405		$	1,227,253		217,152	17.7	%	$	4,111,558		$	3,426,000		685,558	20.0	%
Gross profit	Gross profit		259,729				230,887			28,842	12.5	%	Gross profit	309,496			297,502			11,994	4.0	%	880,953			783,120			97,833	12.5	%
% of net sales	% of net sales		20.5		%		20.7		%				% of net sales	21.4		%	24.2		%				21.4		%	22.9		%
Selling, general and administrative expenses	Selling, general and administrative expenses		153,168				164,954			(11,786)	(7.1)	%	Selling, general and administrative expenses	161,134			137,250			23,884	17.4	%	477,820			436,575			41,245	9.4	%
% of net sales	% of net sales		12.1		%		14.8		%				% of net sales	11.2		%	11.2		%				11.6		%	12.7		%
Restructuring and impairment charges, net	Restructuring and impairment charges, net		1,838				13,835			(11,997)	(86.7)	%	Restructuring and impairment charges, net	971			2,918			(1,947)	(66.7)	%	7,461			32,164			(24,703)	(76.8)	%
Strategic development and acquisition related costs	Strategic development and acquisition related costs		3,313				4,857			(1,544)	(31.8)	%	Strategic development and acquisition related costs	22,250			7,909			14,341	181.3	%	25,502			13,550			11,952	88.2	%
Interest expense	Interest expense		56,499				54,835			1,664	3.0	%	Interest expense	43,731			51,519			(7,788)	(15.1)	%	147,688			158,738			(11,050)	(7.0)	%
Net loss			(1,655)				(542,073)			540,418	(99.7)	%
Net income (loss)													Net income (loss)	620,535			30,516			590,019	1933.5	%	627,807			(484,658)			1,112,465	(229.5)	%

Net ~~sales~~sales - Consolidated net sales for the three and nine months ended ~~April 3,~~October 2, 2021 increased by ~~approximately 13.8% a~~sapproximately 17.7% and 20.0%, respectively, as compared to the same period last year. ~~Approximately 9% of the increase~~The net sales growth was primarily driven by ~~strong demand for residential products sold through the Windows and Siding~~price actions across all segments ~~which made up 66.6% of total net sales for the quarter. Additionally, the Company realized favorable price/mix as a result of several price increases that were announced~~ in response to rising commodity costs and other inflationary impacts. Demand for our products during the quarter was strong relative to prior year. Limited raw materials from our suppliers, primarily steel and PVC resin, and labor shortages constrained operations and shipments. As a result, volume for the quarter was essentially flat compared to the same periods in the prior year.

For the nine months ended October 2, 2021, net sales grew 20.0% compared to the same period last year with approximately 15% of the increase driven by our Windows and Siding segments serving the new home construction and repair and remodel end-markets with the remaining 5% increase coming from the Commercial segment.

~~Gross~~Gross profit % of net sales- The Company’s gross profit ~~percentage~~percentage was ~~20.5%~~21.4% for both the three and nine months ended ~~April 3,~~October 2, 2021, which was a 20280 and 150 basis point decline over thethree and nine months ended ~~April 4,~~October 3, 2020,. respectively. 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 with~~ price ~~leadership, the timing delay between when costs were incurred and when the price increase was realized compressed margins. Additionally,~~disciplined, the pace and length of time we remain in an inflationary environment can have the effect of reducing gross profit margins. We remain focused on structurally improving our highly variable cost structure with cost savings initiatives. Also contributing to the lower gross profit as a % of net sales are manufacturing inefficiencies incurred as a result of operating in an environment limited by shortages in the supply of raw materials and labor. We continue to manage through ~~cost-out initiatives. During the first quarter of 2021,~~this environment with a focus on serving our customers. Additionally, we have ~~realized approximately $17 million of year over year cost structure improvements.~~taken actions to improve recruiting and retention.

Selling ~~general,~~, general, and administrative ~~expenses~~expenses ~~decreased 7.1%~~increased 17.4% and 9.4% during the three and nine months ended ~~April 3,~~October 2, 2021, respectively, compared to the three and nine months ended ~~April 4,~~October 3, 2020. ~~Effective management~~The increase was primarily driven by return of near-term costs, ~~coupled with structural cost savings initiatives executed in 2020 in response~~such as variable compensation, IT and professional services, to ~~the COVID-19 pandemic drove the lower~~support market recovery and further growth. Additionally, selling, general, and administrative expenses at ~~April~~October 3, ~~2021 as compared~~2020 included near-term cost savings initiatives executed in response to ~~April 4, 2020. Additionally, during~~ the ~~first quarter of 2021, we realized approximately $7 million of year over year savings from cost reduction initiatives.~~COVID-19 pandemic.

Restructuring and impairment charges, net decreased ~~$12.0~~$1.9 million d~~uring~~and $24.7 million during the three and nine months ended ~~April 3,~~October 2, 2021,, respectively, compared to the three and nine months ended ~~April 4,~~October 3, 2020,, primarily due to completion of operational and organizational actions taken in response to the COVID-19 pandemic.

Strategic development and acquisition related c~~osts~~costs ~~decreased $1.5~~increased $14.3 million and $12.0 million during the three and ~~three~~nine months ended ~~April 3,~~October 2, 2021, respectively, compared to the three and nine months ended ~~April 4,~~October 3, 2020, asdue to the timing of these activities, ~~have decreased.~~primarily related to the IMP divestiture.

~~Interest~~Interest expense ~~increased $1.7~~decreased $7.8 million or ~~3.0%~~15.1% and $11.1 million or 7.0% in the three and nine months ended ~~April 3,~~October 2, 2021, respectively, as compared to the three and nine months ended ~~April 4,~~October 3, 2020, primarily as a result of the ~~$500~~redemption of the $645 million ~~bond offering completed in~~8.00% Senior Notes coupled with the ~~third quarter~~refinancing of ~~2020 in order to preserve financial flexibility in light of uncertainty in~~ the ~~global markets resulting from the COVID-19 pandemic.~~Current Term Loan Facility.

Consolidated provision (benefit) for income taxes was ~~an expense~~a provision of ~~$0.8~~$245.6 million and $245.3 million for the three and nine months ended ~~April 3,~~October 2, 2021, respectively, compared to a provision $23.1 million and a benefit of ~~$18.0~~$12.3 million for the three and nine months ended ~~April 4, 2020.~~October 3, 2020, respectively. The effective tax rate for the three and nine months ended ~~April 3,~~

October 2, 2021 was ~~91.8%~~28.4% and 28.1%, respectively, compared to ~~3.2%~~43.0% and 2.5% for the three and nine months ended ~~April 4, 2020.~~October 3, 2020, respectively. The change in the effective tax rate was primarily driven by the divestitures and improved financial results for the three and nine months ended ~~April 3,~~October 2, 2021, and the impact associated with the goodwill impairment recorded during the three months ended April 4, 2020.

Net ~~loss~~income (loss) was ~~$1.7~~$620.5 million or ~~$0.01~~$4.82 per diluted share and $627.8 million or $4.90 per diluted share for the three and nine months ended ~~April 3, 2021. Effective execution~~October 2, 2021, respectively.

We continue to experience positive momentum from residential single-family and repair and remodel end-markets due to demand and elevated backlog levels. Single family housing starts increased approximately 24% and 29% over 2020 and 2019, respectively, on a year-to-date basis. We expect starts activity to remain strong for the near to medium-term outlook. Repair and remodel market demand is at historic levels, and is expected to grow for the next couple of ~~our priorities, which included maintaining cost discipline, strengthening price leadership, driving operational excellence and investing in growth opportunities delivered improved profitability~~years. Additionally, we are experiencing historic backlog levels from the improving non-residential end-markets as well, particularly for component products. Non-residential starts typically lag residential starts by 18 to 24 months. Additionally, particularly over the last eight months, the Architecture Billings Index (“ABI”), an indicator for non-residential activity, continues to be among the highest levels ever reported in the ~~first quarter of 2021 as compared~~immediate post-recession periods that have been captured throughout the index’s history. As a result, we expect non-residential market activity to ~~the same period~~remain healthy in ~~the prior year.~~2022.

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, loss on extinguishment of debt and other income (expense).

One of the primary measurements used by management to measure the financial performance of each segment is Adjusted ~~EBITDA.~~EBITDA, a non-GAAP financial measure. 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; gain on divestitures, non-cash 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 ~~and~~Building Brands, which includes historical information of Kleary Masonry, Inc. (“Kleary”), which the Company acquired on March 2, ~~2020.~~2020; Prime Windows LLC (“Prime Windows”), which the Company acquired on April 30, 2021; Cascade Windows, Inc. (“Cascade Windows”), which the Company acquired on August 20, 2021; and the insulated metals panels (“IMP”) and the roll-up sheet doors (“DBCI”) businesses, which the Company divested on August 9, 2021 and August 18, 2021, respectively. 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 Kleary, ~~acquisition~~Prime Windows and Cascade Windows acquisitions; or any integration ~~costs.~~costs; and from the IMP and DBCI divestitures. Pro forma balances are not necessarily indicative of operating results had the Kleary, ~~acquisition~~Prime Windows and Cascade Windows acquisitions and the IMP and DBCI divestitures occurred on January 1, 2020 or of future results.

See Note 1920 — 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.~~1934. 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~~present a comparison of net sales as reported to ~~pro-forma~~pro forma net sales for Cornerstone Building Brands as if the Cascade Windows, Prime Windows and Kleary ~~acquisition~~acquisitions, and IMP and DBCI divestitures had each occurred on January 1, ~~2020:~~2020 rather than the respective date referenced above for each transaction:

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


	Three Months Ended October 2, 2021						Three Months Ended October 3, 2020
(Amounts in thousands)	Reported		Acquisitions and Divestitures		Pro Forma		Reported		Acquisitions and Divestitures		Pro Forma
Net Sales
Windows	$	596,486	$	23,577	$	620,063	$	501,314	$	54,439	$	555,753
Siding	357,870		—		357,870		321,898		—		321,898
Commercial	490,049		(39,970)		450,079		404,041		(93,655)		310,386
Total Net Sales	$	1,444,405	$	(16,393)	$	1,428,012	$	1,227,253	$	(39,216)	$	1,188,037

	Nine Months Ended October 2, 2021						Nine Months Ended October 3, 2020
	Reported		Acquisitions and Divestitures		Pro Forma		Reported		Acquisitions and Divestitures		Pro Forma
Net Sales
Windows	$	1,703,493	$	132,142	$	1,835,635	$	1,378,039	$	147,950	$	1,525,989
Siding	1,036,448		—		1,036,448		848,190		8,358		856,548
Commercial	1,371,617		(231,347)		1,140,270		1,199,771		(281,729)		918,042
Total Net Sales	$	4,111,558	$	(99,205)	$	4,012,353	$	3,426,000	$	(125,421)	$	3,300,579

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					Three Months Ended								Nine Months Ended
(Amounts in thousands)	(Amounts in thousands)			April 3, 2021				April 4, 2020			(Amounts in thousands)	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Net sales	Net sales			$	1,267,032			$	1,113,811		Net sales	$	1,444,405		$	1,227,253		$	4,111,558		$	3,426,000
Impact of Kleary acquisition(1)				—				8,358
Impact of acquisitions and divestitures(1)											Impact of acquisitions and divestitures(1)	(16,393)			(39,216)			(99,205)			(125,421)
Pro forma net sales	Pro forma net sales			$	1,267,032			$	1,122,169		Pro forma net sales	$	1,428,012		$	1,188,037		$	4,012,353		$	3,300,579

Operating income (loss), GAAP	Operating income (loss), GAAP			$	55,208			$	(500,791)		Operating income (loss), GAAP	$	910,726		$	103,979		$	1,062,744		$	(337,887)
Restructuring and impairment charges, net	Restructuring and impairment charges, net			1,838				13,992			Restructuring and impairment charges, net	971			2,918			7,461			32,321
Strategic development and acquisition related costs	Strategic development and acquisition related costs			3,313				4,857			Strategic development and acquisition related costs	22,250			7,909			25,502			13,550
Gain on divestitures											Gain on divestitures	(831,252)			—			(831,252)			—
Goodwill impairment	Goodwill impairment			—				503,171			Goodwill impairment	—			—			—			503,171
Depreciation and amortization	Depreciation and amortization			72,615				69,769			Depreciation and amortization	71,055			71,933			216,956			212,413
Other (2)	Other (2)			6,174				5,213			Other (2)	9,547			6,588			30,337			25,089
Adjusted EBITDA	Adjusted EBITDA			139,148				96,211			Adjusted EBITDA	183,297			193,327			511,748			448,657

Impact of Kleary acquisition(1)				—				1,869
Impact of acquisitions and divestitures(1)											Impact of acquisitions and divestitures(1)	(1,710)			(17,884)			(7,953)			(41,091)
Pro Forma Adjusted EBITDA	Pro Forma Adjusted EBITDA			$	139,148			$	98,080		Pro Forma Adjusted EBITDA	$	181,587		$	175,443		$	503,795		$	407,566
Adjusted EBITDA as a % of Net Sales											Adjusted EBITDA as a % of Net Sales	12.7		%	15.8		%	12.4		%	13.1		%
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales			11.0		%		8.7		%	Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	12.7		%	14.8		%	12.6		%	12.3		%

(1)Reflects the acquisition impact from January 1, 2020 of the net sales and Adjusted EBITDA of Kleary ~~for~~through March 1, 2020, Prime Windows through April 29, 2021 and Cascade Windows through August 19, 2021; and reflects the ~~period~~impact from January 1, 2020 ~~to March 1, 2020.~~of the divestitures of IMP and DBCI through the divestiture dates of August 9, 2021 and August 18, 2021, respectively.

(2)Primarily includes ~~$3.3~~$8.4 million and ~~$3.4~~$16.9 million of ~~share based~~share-based compensation for the three and nine months ended ~~April~~October 2, 2021, respectively, and $4.0 million and $12.6 million for the three and nine months ended October 3, ~~2021 and April 4,~~ 2020, respectively; ~~$3.0~~$11.6 million in costs for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 associated with debt refinancing transactions; and ~~$(0.6) million and $1.2 million of~~ COVID-19 related costs of $0.0 million and $(0.4) million for the three and nine months ended ~~April~~October 2, 2021, respectively, and $2.6 million and $10.6 million for the three and nine months ended October 3, ~~2021 and April 4,~~ 2020, respectively.

Operating income (loss) for the three months ended ~~April 3,~~October 2, 2021 increased to ~~$55.2~~$910.7 million as compared to $104.0 million for the three months ended October 3, 2020, primarily due to the gain on the sales of ~~operating~~the IMP and DBCI businesses of $831.3 million. Disciplined price actions more than offset inflationary impacts by approximately $69 million and were partially reduced by manufacturing inefficiencies experienced as a result of raw material constraints and labor shortages and higher SG&A expense primarily driven by return of near-term costs. Restructuring and impairment charges were also lower versus prior year periods. Strategic development charges were higher than prior year periods due primarily to the IMP divestiture. Operating income for the nine months ended October 2, 2021 increased to $1,062.7 million as compared to an operating loss of ~~$500.8~~$337.9 million in the ~~three~~nine months ended ~~April 4,~~October 3, 2020 primarily as a result of athe gain on the sales of the IMP and DBCI businesses of $831.3 million and goodwill impairment of $503.2 million in the comparable period.

Pro forma Adjusted EBITDA for the three months ended ~~April 3,~~October 2, 2021 was ~~$139.1~~$181.6 million or ~~11.0%~~12.7% of pro forma net sales, ~~an improvement~~a decrease of ~~8.7% or 230~~210 basis points from the pro forma period a year ago. On a year-to-date basis, pro forma Adjusted EBITDA as a percentage of pro forma net sales increased 30 basis points versus the comparable period. The improvement was ~~due to~~driven by strong ~~volumes in the~~ residential ~~end-markets of approximately $29 million, favorable SG&A of approximately $14 million primarily~~demand and price actions offsetting inflationary impacts partially reduced by manufacturing inefficiencies, as a result of ~~cost reduction actions taken in~~the challenges brought on by supply chain disruptions and labor constraints and higher SG&A costs.


Windows

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Net Sales	$	596,486		$	501,314		$	1,703,493		$	1,378,039
Impact of acquisitions(1)	23,577			54,439			132,142			147,950
Pro forma net sales	$	620,063		$	555,753		$	1,835,635		$	1,525,989

Operating income (loss), GAAP	$	15,756		$	37,295		$	83,901		$	(252,794)
Restructuring and impairment charges, net	258			1,539			1,213			7,189
Strategic development and acquisition related costs	831			—			2,145			16
Goodwill impairment	—			—			—			320,990
Depreciation and amortization	34,876			30,644			97,848			90,679
Other	38			1,168			(36)			6,060
Adjusted EBITDA	$	51,759		$	70,646		$	185,071		$	172,140

Impact of acquisitions(1)	1,588			7,499			15,315			17,097
Pro Forma Adjusted EBITDA	$	53,347		$	78,145		$	200,386		$	189,237
Adjusted EBITDA as a % of Net Sales	8.7		%	14.1		%	10.9		%	12.5		%
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	8.6		%	14.1		%	10.9		%	12.4		%

(1)Reflects the impact from January 1, 2020 ~~in response to~~of the ~~COVID-19 pandemic,~~net sales 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~~of Prime Windows through April 29, 2021 and ~~record first quarter earnings for the Company.~~Cascade Windows through August 19, 2021.

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 %

Pro

~~Net~~ forma net sales for the three and nine months ended ~~April 3,~~October 2, 2021 ~~was 17.6%~~were 11.6% and 20.3% higher, respectively, than pro forma net sales in the same ~~period in the prior~~periods a year ~~due to strong demand from residential end markets of approximately 15% coupled with favorable price/mix as a result of increased prices~~ago. Disciplined price actions in response to rising commodity costs and other inflationary ~~impacts.~~

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

~~Adjusted EBITDA~~ ~~was $61.0 million or 11.6% as a percent of net sales, an improvement of 250 basis points over the~~ ~~three~~ ~~months ended~~ April 4, 2020, which is the eighth consecutive quarter of Adjusted EBITDA year over year margin expansion. Margin expansion over prior year was a result of the volume leverage from increased demand and benefits from cost savings initiatives.

Siding
Three Months Ended
(Amounts in thousands) April 3,
2021 April 4,
2020
Net Sales $ 316,391 $ 241,043
Impact of Kleary acquisition(1)
— 8,358
Pro forma net sales $ 316,391 $ 249,401
Operating income (loss), GAAP $ 27,528 $ (168,867)
Restructuring and impairment charges, net 141 1,091
Strategic development and acquisition related costs 323 21
Goodwill impairment — 176,774
Depreciation and amortization 29,148 28,007
Other (19) (292)
Adjusted EBITDA $ 57,121 $ 36,734
Impact of Kleary acquisition(1)
— 1,869
Pro Forma Adjusted EBITDA $ 57,121 $ 38,603
Adjusted EBITDA as a % of Net Sales 18.1 % 15.2 %
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales 18.1 % 15.5 %

~~(1)Reflects the net sales and Adjusted EBITDA of Kleary for the period January 1, 2020 to March 1, 2020.~~

~~Net sales~~ ~~for the three months ended April 3, 2021 was 26.9% higher than the~~ pro forma net sales inas compared to the same ~~period a year ago. During~~periods last year. Supply chain disruptions and constraints caused by labor shortages impacted volumes. As such, volumes were slightly favorable compared to the third quarter order momentum was strong as wholesale and retail demand outpaced prior year driving approximately 19% higher shipped volume and favorable price/mix as a result of increased prices in response to rising commodity costs and other inflationary impacts.2020.

Operating income (loss) for the three months ended ~~April~~October 2, 2021 decreased to $15.8 million of operating income as compared to operating income of $37.3 million for the three months ended October 3, 2020, primarily due to manufacturing inefficiencies associated with supply chain disruptions and labor shortages. Positive price mix net of inflation of $8 million was partially offset by higher SG&A costs of $6 million. Operating income for the nine months ended October 2, 2021 increased to ~~$27.5~~$83.9 million ~~operating income,~~ as compared to an operating loss of ~~$168.9~~$252.8 million for the nine months ended October 3, 2020, primarily due to a

goodwill impairment in the nine months ended October 3, 2020. Excluding the goodwill impairment, operating income improved $15.7 million or approximately 23% as a result of strong shipments in the first half of the year of $56 million coupled with positive price mix net of inflation, which more than offset the manufacturing impacts from supply chain disruptions and higher costs to serve our customers.

Pro forma Adjusted EBITDA for the three months ended October 2, 2021 was $53.3 million or 8.6% of pro forma net sales, a decrease of 550 basis points from the pro forma period a year ago. Pro forma Adjusted EBITDA decreased 31.7% over the prior year quarter, primarily due to manufacturing inefficiencies discussed above. On a year-to-date basis, pro forma net sales increased 20.3%, and pro forma Adjusted EBITDA increased 5.9%.


Siding

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Net Sales	$	357,870		$	321,898		$	1,036,448		$	848,190
Impact of acquisition(1)	—			—			—			8,358
Pro forma net sales	$	357,870		$	321,898		$	1,036,448		$	856,548

Operating income (loss), GAAP	$	46,108		$	45,313		$	127,019		$	(92,916)
Restructuring and impairment charges, net	133			(714)			287			2,901
Strategic development and acquisition related costs	(50)			7,139			(2,894)			8,115
Goodwill impairment	—			—			—			176,774
Depreciation and amortization	29,084			28,547			87,441			85,068
Other	(45)			(1,191)			(64)			(841)
Adjusted EBITDA	75,230			79,094			$	211,789		$	179,101

Impact of acquisition(1)	—			—			—			1,869
Pro Forma Adjusted EBITDA	$	75,230		$	79,094		$	211,789		$	180,970
Adjusted EBITDA as a % of Net Sales	21.0		%	24.6		%	20.4		%	21.1		%
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	21.0		%	24.6		%	20.4		%	21.1		%

(1)Reflects the impact of net sales and Adjusted EBITDA of Kleary from January 1, 2020 through March 1, 2020.

Net sales for the three and nine months ended October 2, 2021 were 11.2% and 22.2% higher than the net sales in the same periods a year ago. For the quarter, price/mix of $62 million more than offset lower volume due to raw material and labor constraints during the quarter. On a year-to-date basis, the rapid recovery of residential demand contributed 6.4% of the favorable increase, while disciplined price actions needed to offset inflationary raw material costs resulted in favorable price/mix of approximately 14% versus prior year.

Operating income (loss) for the three months ended October 2, 2021 increased to $46.1 million of operating income, as compared to operating income of $45.3 million for the three months ended ~~April 4,~~October 3, 2020,, primarily due to $13 million of positive price mix net of inflation, partially offset by lower volumes and return of near-term costs in SG&A of $5 million. Lower volumes were a direct result of raw material and labor constraints during the quarter. Operating income for the nine months ended October 2, 2021 increased to $127.0 million, as compared to an operating loss of $92.9 million for the nine months ended October 3, 2020, primarily due to a goodwill impairment in the comparable period. Excluding the goodwill impairment, operating income increased 51.5% primarily due to disciplined price actions net of inflation of $30 million, favorable volume of $18 million and lower strategic development costs, offsetting higher costs in SG&A.

Adjusted ~~EBITDA~~EBITDA for the three months ended October 2, 2021 was ~~$57.1~~$75.2 million or ~~18.1% as a percent~~21.0% of net sales, ~~an improvement~~a decrease of ~~260~~4.9%, primarily due to lower volume as mentioned above, increased manufacturing costs to serve customers and inefficiencies from supply chain and labor disruptions coupled with the return of near-term costs in SG&A. Offsetting these increased costs was positive price mix net of inflation of 16.1%. On a year-to-date basis, ~~points as compared to the pro forma Adjusted EBITDA as a percent of~~ pro forma net sales ~~for the~~ ~~three~~ ~~months ended~~ ~~April 4, 2020. This was the eighth consecutive quarter of year over year~~increased 21.0% and Adjusted EBITDA margin expansion. Margin expansion over prior year was a result of the volume leverage from increased demand and benefits from cost savings initiatives, primarily in selling, general and administrative expenses.decreased 70 basis points.

3544


Commercial	Commercial		Commercial

		Three Months Ended					Three Months Ended								Nine Months Ended
(Amounts in thousands)	(Amounts in thousands)			April 3, 2021				April 4, 2020			(Amounts in thousands)	October 2, 2021			October 3, 2020			October 2, 2021			October 3, 2020
Net Sales	Net Sales			$	423,378			$	424,318		Net Sales	$	490,049		$	404,041		$	1,371,617		$	1,199,771
Impact of divestitures(1)											Impact of divestitures(1)	(39,970)			(93,655)			(231,347)			(281,729)
Pro forma net sales											Pro forma net sales	$	450,079		$	310,386		$	1,140,270		$	918,042

Operating income, GAAP	Operating income, GAAP			$	41,585			$	16,841		Operating income, GAAP	$	908,458		$	56,137		$	1,003,373		$	109,642
Restructuring and impairment charges, net	Restructuring and impairment charges, net			672				11,705			Restructuring and impairment charges, net	2,673			1,358			5,719			20,427
Strategic development and acquisition related costs	Strategic development and acquisition related costs			58				(105)			Strategic development and acquisition related costs	2,263			(8)			3,095			(262)
Gain on divestitures											Gain on divestitures	(831,252)			—			(831,252)			—
Goodwill impairment	Goodwill impairment			—				5,407			Goodwill impairment	—			—			—			5,407
Depreciation and amortization	Depreciation and amortization			11,360				10,901			Depreciation and amortization	7,012			11,743			29,015			33,664
Other	Other			(257)				1,227			Other	396			1,108			524			3,967
Adjusted EBITDA	Adjusted EBITDA			$	53,418			$	45,976		Adjusted EBITDA	89,550			70,338			210,474			172,845

Impact of divestitures(1)											Impact of divestitures(1)	(3,298)			(25,383)			(23,268)			(60,057)
Pro Forma Adjusted EBITDA											Pro Forma Adjusted EBITDA	$	86,252		$	44,955		$	187,206		$	112,788
Adjusted EBITDA as a % of Net Sales	Adjusted EBITDA as a % of Net Sales			12.6		%		10.8		%	Adjusted EBITDA as a % of Net Sales	18.3		%	17.4		%	15.3		%	14.4		%
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales											Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales	19.2		%	14.5		%	16.4		%	12.3		%

(1)Reflects the net adjustments of IMP and DBCI from January 1, 2020 through the divestiture dates of August 9, 2021 and August 18, 2021, respectively.

~~Net~~Pro forma net sales for the three and nine months ended ~~April 3,~~October 2, 2021 ~~of $423.4 million was essentially flat as compared to~~were 45.0% and 24.2% higher than the same period a year ago, ~~due to unfavorable volume~~respectively, driven by disciplined price actions to mitigate rising steel costs of approximately 42.7% and 23.0%, respectively. Additionally, higher volumes that resulted from ~~three less ship days in the first quarter of 2021 as compared~~recovering demand contributed to the ~~first quarter of 2020 offset by favorable price/mix as a of result of increased prices in response to rising commodity costs and other inflationary impacts.~~increase.

Operating income for the three months ended ~~April 3,~~October 2, 2021 ~~was $41.6~~increased $852.3 million ~~an increase of $24.7 million or 146.9%~~ compared to the three months ended ~~April 4,~~October 3, 2020,~~, d~~ue primarily due to ~~approximately $14.0~~the gain on the sales of the IMP and DBCI businesses as a result of strategic portfolio optimization actions to accelerate long-term value creation. Excluding the gain on the sales, operating income of $77.2 million increased 37.5% from the realization of ~~lower selling, general~~price actions taken to offset rising steel and ~~administrative expenses, $11.0~~other manufacturing costs coupled with higher volume from positive end-market demand, offsetting return of near-term costs and manufacturing inefficiencies as a result of supply constraints. Operating income for the nine months ended October 2, 2021 increased $893.7 million ~~of lower restructuring~~compared to the nine months ended October 3, 2020. Excluding the gain on divestitures and ~~impairment charges, improved manufacturing efficiencies and structural cost, $5.0 million of a~~the goodwill impairment incurred in the comparable period ~~offset by approximately $7.0 million of unfavorable price/~~in the prior year, operating income increased 49.6% primarily due to favorable price mix net of ~~inflation and lower volume.~~inflation.

Pro forma Adjusted ~~EBITDA~~EBITDA for the three months ended October 2, 2021 was ~~$53.4~~$86.3 million or ~~12.6% as a percent~~19.2% of net sales, an improvement of ~~180~~470 basis points ~~over~~from the same period a year ag~~o. This was the eighth consecutive quarter of year over year margin expansion. Margin expansion over prior year was~~o primarily due to ~~realized benefits from cost reduction initiatives~~favorable price mix net of commodity and other inflation impacts of $49 million, partially offset by manufacturing ~~efficiencies.~~inefficiencies caused by material constraints and higher SG&A costs together totaling $16 million. On a year-to-date basis, pro forma net sales increased 24.2%, and pro forma Adjusted EBITDA increased 66.0%.

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


		Three Months Ended			Three Months Ended						Nine Months Ended
(Amounts in thousands)	(Amounts in thousands)		April 3, 2021			April 4, 2020		(Amounts in thousands)	October 2, 2021		October 3, 2020		October 2, 2021		October 3, 2020
Statement of operations data:
Statements of operations data:								Statements of operations data:
SG&A expenses	SG&A expenses		$	(40,334)		$	(30,650)	SG&A expenses	$	(40,390)	$	(33,988)	$	(128,393)	$	(96,122)
Acquisition related expenses			(2,933)			(4,925)
Strategic development and acquisition related costs								Strategic development and acquisition related costs	(19,206)		(778)		(23,156)		(5,697)
Operating loss	Operating loss		$	(43,267)		$	(35,575)	Operating loss	(59,596)		(34,766)		$	(151,549)	$	(101,819)

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 ~~April 3,~~October 2, 2021 increased by ~~$7.7~~$24.8 million or ~~21.6%~~71.4% compared to the three months ended ~~April 4,~~October 3, 2020, and the unallocated operating loss for the nine months ended October 2, 2021 increased by $49.7 million or 48.8% compared to the nine months ended October 3, 2020. The change is primarily due ~~primarily~~ to the increase in strategic development divestiture related expenses as well as debt issuance costs and the return of near-term expenses such as bonus and commission costs. Unallocated operating loss includes ~~$3.3~~$8.4 million and ~~$3.4~~$4.0 million of share-based compensation expense for the three months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, respectively, and $16.9 million and $12.6 million for the nine months ended October 2, 2021 and October 3, 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

General

Our ongoing principal source of funds is cash generated from operations, supplemented by borrowings against our asset-based lending and revolving credit ~~facility.~~facility, as necessary. 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 decreased from $680.5 million as of December 31, 2020 to ~~$672.9~~$679.4 million as of ~~April 3,~~October 2, 2021. The following table summarizes our consolidated cash flows for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020 (in thousands):


		Three Months Ended					Nine Months Ended
		April 3, 2021		April 4, 2020			October 2, 2021		October 3, 2020
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	$	20,031	$	(2,224)	Net cash provided by (used in) operating activities	$	(183,640)	$	236,876
Net cash used in investing activities		(20,695)		(67,424)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	785,729		(102,838)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(7,459)		453,268		Net cash provided by (used in) financing activities	(602,385)		396,974
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	585		(2,302)		Effect of exchange rate changes on cash and cash equivalents	(784)		507
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	(7,538)		381,318		Net increase (decrease) in cash, cash equivalents and restricted cash	(1,080)		531,519
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	680,478		102,307		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	$	672,940	$	483,625	Cash, cash equivalents and restricted cash at end of period	$	679,398	$	633,826

Operating Activities

The Company ~~generated strong~~used cash ~~flow~~in operating activities during the ~~three~~nine months ended ~~April 3,~~October 2, 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 the amount and timing of accrued sales and marketing and compensation-related expenses, ~~partially offset~~ ~~by investments~~to invest in working capital items to support strong market demand.

The following table shows the impact of working capital items on cash during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 and ~~April 4,~~October 3, 2020, respectively (in thousands):


		Three Months Ended							Nine Months Ended
		April 3, 2021		April 4, 2020		$ Change			October 2, 2021		October 3, 2020		$ Change
Net cash (used in) provided by:	Net cash (used in) provided by:							Net cash (used in) provided by:
Accounts receivable	Accounts receivable	$	(47,157)	$	20,532	$	(67,689)	Accounts receivable	$	(137,424)	$	(84,309)	$	(53,115)
Inventories	Inventories	(62,028)		(20,724)		(41,304)		Inventories	(241,068)		30,980		(272,048)
Accounts payable	Accounts payable	49,424		12,461		36,963		Accounts payable	100,402		22,669		77,733
Net cash (used in) provided by working capital items	Net cash (used in) provided by working capital items	$	(59,761)	$	12,269	$	(72,030)	Net cash (used in) provided by working capital items	$	(278,090)	$	(30,660)	$	(247,430)

The use of cash for working capital between periods was ~~due to inventories and accounts receivable, partially offset by accounts payable. The decrease in cash provided by accounts receivable and inventory was primarily~~ driven by investments in net working capital to support the ~~rapid recovery in residential end-markets~~strong demand environment and increased inventory valuations from ~~the COVID-19 pandemic.~~rising commodity costs and other inflationary aspects. See the Consolidated Statements of Cash Flows in the unaudited consolidated financial statements for additional information.

Investing Activities

Net cash ~~used in~~provided by investing activities was ~~$20.7~~$785.7 million during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 compared to ~~$67.4~~$102.8 million used in investing activities during the ~~three~~nine months ended ~~April 4,~~October 3, 2020. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021, we paid approximately ~~$0.2~~$331.0 million toward acquisitions, primarily for acquisitions of Cascade Windows and wePrime Windows, received proceeds of $1,187.3 million from the divestitures of our insulated metal panels and roll-up sheet doors businesses, and used ~~$21.2~~$75.2 million for capital expenditures. In the ~~three~~nine months ended ~~April 4,~~October 3, 2020, we paid approximately ~~$39.9~~$41.8 million, net of cash acquired, for the acquisition of Kleary and used ~~$27.6~~$62.5 million for capital expenditures.

Financing Activities

Net cash used in financing activities was ~~$7.5~~$602.4 million during the ~~three~~nine months ended ~~April 3,~~October 2, 2021 compared to ~~$453.3~~$397.0 million provided by financing activities in the ~~three~~nine months ended ~~April 4, 2020~~.October 3, 2020. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021, we ~~received $0.5~~increased our Current Term Loan Facility by $108.4 million, ~~of proceeds from stock options exercised,~~borrowed and then repaid $190.0 million on our Current ABL Facility, paid $670.8 million to redeem the 8.00% Senior Notes and paid quarterly installments of ~~$6.4~~$19.4 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.~~Facility.

During the ~~three~~nine months ended ~~April 4,~~October 3, 2020, we issued $500.0 million in aggregate principal amount of 6.125% Senior Notes due January 2029, borrowed $40.0 million on our ~~Current~~Existing ABL Facility to finance the acquisition of Kleary, borrowed an additional $305.0 million on our ~~Current~~Existing ABL Facility and repaid all outstanding balances at the end of the third quarter of 2020, and borrowed and paid $115.0 million on our ~~Current~~Existing Cash Flow Revolver ~~to increase our cash position and preserve financial flexibility in light~~balances. Additionally, we paid quarterly installments of ~~the uncertainty in the global markets resulting from the COVID-19 pandemic, paid $6.4~~$19.2 million on ~~quarterly installments on our Current~~the Existing Term Loan and used ~~$0.3~~$6.4 million ~~for the purchases~~to repurchase shares of ~~shares that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of share-based compensation.~~our outstanding common stock under our stock repurchase programs.

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 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


	October 2, 2021		December 31, 2020
Asset-based revolving credit facility due April 2026	$	—	$	—
Term loan facility due April 2028	2,587,000		2,497,967
Cash flow revolver due April 2026	—		—
8.00% senior notes due April 2026	—		645,000
6.125% senior notes due January 2029	500,000		500,000
Total Debt	3,087,000		3,642,967
Less: Cash and cash equivalents	677,187		674,255
Net Debt	$	2,409,813	$	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 April 12, 2026.

In connection with the new Tranche B term loans, the Company also terminated ~~its existing~~two interest rate swaps and entered into two new swaps maturing in April 2026 on an aggregate notional value of $1.5 billion. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate interest payment.

We may not be successful in refinancing, extending the maturity or otherwise amending the terms of 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.

For additional information, see Note 14 — Long-Term Debt, and Note 1715 — ~~Fair Value of Financial Instruments and Fair Value Measurements~~ ~~and Note 21 —~~ ~~Subsequent Events~~Derivatives in the notes to the unaudited consolidated financial statements.

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. The following table summarizes key liquidity measures under the Current ABL Credit Agreement and the Current Cash Flow Credit Agreement in effect as of ~~April 3,~~October 2, 2021 and December 31, 2020 (in thousands):


		April 3, 2021		December 31, 2020			October 2, 2021		December 31, 2020
Asset-based revolving credit facility due April 2023		$	611,000	$	611,000
Asset-based revolving credit facility due April 2026						Asset-based revolving credit facility due April 2026	$	611,000	$	611,000
Eligible borrowing base	Eligible borrowing base	611,000		568,000		Eligible borrowing base	611,000		568,000
Less: borrowings		—		—
Less: Borrowings						Less: Borrowings	—		—
Less: LCs outstanding and priority payables	Less: LCs outstanding and priority payables	40,000		40,000		Less: LCs outstanding and priority payables	47,000		40,000
Net ABL availability	Net ABL availability	571,000		528,000		Net ABL availability	564,000		528,000

Plus: Cash flow revolver due April 2023		115,000		115,000
Plus: cash and cash equivalents		666,717		674,255
Plus: Cash flow revolver due April 2026						Plus: Cash flow revolver due April 2026	115,000		115,000
Plus: Cash and cash equivalents						Plus: Cash and cash equivalents	677,187		674,255
Total Liquidity	Total Liquidity	$	1,352,717	$	1,317,255	Total Liquidity	$	1,356,187	$	1,317,255

We expect to contribute $3.2 million to the defined benefit plans and $0.7 million to the postretirement medical and life insurance plans in the year ending December 31, 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 2021 and expansion when needed. The Company expects total capital expenditures to be ~~approximately 2.0% to 2.5% of net sales~~between $90 million and $110 million during fiscal 2021.

~~Our corporate~~Consistent with our growth strategy, ~~evaluates~~we evaluate 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.

On April 30, 2021, the Company acquired Prime Windows. 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 creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities.

On August 20, 2021, the Company acquired Cascade Windows. Cascade Windows serves the residential new construction and repair and remodel markets with energy efficient vinyl window and door products from various manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded with cash available on the balance sheet.

On November 6, 2021, the Company entered into a definitive agreement to acquire Union Corrugating Company Holdings, Inc. (“UCC”). UCC provides metal roofing, roofing components and accessories from locations primarily in the Central and Eastern U.S. regions. The Company expects to fund this acquisition with cash on hand. The closing of the transaction is expected during the fourth quarter of 2021, subject to regulatory approval and other customary closing conditions.

We also evaluate from time-to-time possible dispositions of assets or businesses when such assets or businesses are no longer core to our operations and do not fit into our long-term strategy. On August 9, 2021, the Company completed the sale of its insulated metal panels (“IMP”) business to Nucor Insulated Panel Group Inc. and certain of its subsidiaries (collectively, “Nucor”) in a cash transaction for $1 billion. The IMP transaction includes products sold under the Metl-Span and CENTRIA brands. On August 18, 2021, the Company completed the sale of its roll-up sheet doors business to Janus International Group, Inc. (“Janus”) in a cash transaction for $169 million. The roll-up sheet doors transaction includes products sold under the DBCI brand.

From time to time, we have used available funds to repurchase shares of our common stock under our stock repurchase programs. On March 7, 2018, we announced that our Board of Directors authorized a new stock repurchase program for the repurchase of up to an aggregate of $50.0 million of our outstanding Common Stock. Under this repurchase ~~programs,~~program, 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 program. During the ~~three~~nine months ended ~~April 3,~~October 2, 2021, there were no stock repurchases under the stock repurchase program. As of ~~April 3,~~October 2, 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 ~~April 3,~~October 2, 2021, we were not involved in any material unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

Our contractual obligations principally ~~includes~~include obligations associated with our outstanding indebtedness, operating lease obligations and inventory purchase commitments. Contractual obligations did not materially change during the ~~three~~nine months ended ~~April 3,~~October 2, 2021, except for debt ~~activity~~related activities 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 accounting for acquisitions, intangible assets and goodwill; warranty; and income taxes, which are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

RECENT ACCOUNTING PRONOUNCEMENTS

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

4049

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Prices for our raw material inputs 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.

Windows and 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 ~~38.7%~~59.8% for the ~~three~~nine months ended ~~April 3,~~October 2, 2021 compared to the ~~three~~nine months ended ~~April 4,~~October 3, 2020.

Commercial Business

We are subject to market risk exposure principally related to volatility in the price of steel. For the ~~three~~nine months ended ~~April 3,~~October 2, 2021, material costs (predominantly steel costs) constituted approximately ~~62%~~66% of our Commercial 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 ~~62%~~66% of our Commercial segment's cost of sales for the ~~three~~nine months ended ~~April 3,~~October 2, 2021, a one percent change in the cost of steel could have resulted in a pre-tax impact on cost of sales of approximately ~~$2.1~~$6.9 million for our ~~three~~nine months ended ~~April 3,~~October 2, 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 ~~April 3,~~October 2, 2021, all of our forward contracts for 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~~$2,715.0 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~~LIBOR or ~~LIBOR.~~an alternate base rate. 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~~$6.8 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 ~~April 3,~~October 2, 2021 and December 31, 2020 was approximately $~~2,487.2~~2,578.9 million and $2,485.5 million, respectively, compared to a face value of approximately ~~$2,491.6~~$2,587.0 million and $2,498.0 million, respectively. In ~~May 2019,~~April 2021, 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. As of ~~April 3,~~October 2, 2021, our cash flow hedge contracts had a fair value liability of ~~$63.9~~$61.5 million with $13.1 million recorded in accrued expenses and ~~are~~the remainder recorded as a non-current liability on our consolidated balance sheet.

See Note 14 — Long-Term Debt and Note 2115 ~~- Subsequent Events~~— Derivatives in the notes to the unaudited consolidated financial statements for information on the material terms of our long-term ~~debt.~~debt and interest rate swaps.

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)~~loss included in net income (loss) for the three and nine months ended ~~April 3,~~October 2, 2021 ~~and April 4, 2020~~ was ~~$0.3~~$(0.9) million and ~~$(3.1)~~$(0.6) million, respectively; and $0.9 million and $(0.5) million for the three and nine months ended October 3, 2020, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the three and nine months ended ~~April 3,~~October 2, 2021 ~~and April 4, 2020~~ was ~~$6.1~~$(6.8) million and ~~$(9.6)~~$3.9 million, respectively; and was $7.4 million and $6.4 million for the three and nine months ended October 3, 2020, 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 loss was ~~$0.3~~$(0.4) million and ~~$1.0~~$(0.5) million for the three and nine months ended ~~April~~October 2, 2021, respectively; and insignificant and $(0.6) million for the three and nine months ended October 3, ~~2021 and April 4,~~ 2020, respectively.

~~In December 2020, we~~We have entered into currency forward contracts with a financial institution through ~~December 2021 for $66.0 million at a fixed Canadian dollar rate of 1.2726~~May 2022 to hedge primarily ~~our future~~ inventory purchases in ~~Canada.~~Canada of approximately $57.5 million in the aggregate at fixed USD/CAD rates ranging from 1.2120 to 1.2726. In the future, we may enter into additional ~~foreign~~ currency hedging contracts, to further mitigate the exposure risk of currency fluctuation against the Canadian dollar and/or the Mexican peso. See Note 15 — Derivatives in the notes to the unaudited consolidated financial statements for information on our currency hedges.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~April 3,~~October 2, 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 ~~April 3,~~October 2, 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

We are currently in the process of assessing the internal controls of Cascade Windows Inc. (“Cascade Windows”) and Prime Windows LLC (“Prime Windows”) as part of the post-close integration process. Cascade Windows and Prime Windows have been excluded from our assessment of internal control over financial reporting as of October 2, 2021. The total assets and revenues excluded from management’s assessment represent 3.0% and 1.3%, respectively, of the consolidated financial statements as of and for the nine months ended October 2, 2021.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~April 3,~~October 2, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

4251

CORNERSTONE BUILDING BRANDS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

See Part I, Item 1, “Unaudited Consolidated Financial Statements”, Note 2021 — 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, 2020. The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 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. We are providing the following information regarding changes that have occurred to our previously disclosed risk factors. 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, 2020.

The U.S. government’s pending rules and regulations concerning mandatory COVID-19 vaccination could materially and adversely affect our business, financial condition and results of operations.

On September 9, 2021, President Biden announced that he has directed the Occupational Safety and Health Administration (“OSHA”) to develop an Emergency Temporary Standard (“ETS”) mandating either the full vaccination against COVID-19 or weekly testing of employees for employers with 100 or more employees. OSHA issued the ETS on November 4, 2021, requiring covered employers to comply with the vaccine mandate beginning with January 4, 2022 or face substantial penalties for non-compliance. Additional, more protective vaccine mandates may be announced by the state or local jurisdictions in which our businesses operate. We are currently reviewing its provisions and potential impacts on us. Further, our suppliers may be subject to, or voluntarily impose, vaccine mandates, which could result in disruptions in our business and supply chain. It is currently not possible to predict with certainty the impact the executive order, the OSHA ETS, and other vaccine mandates will have on our workforce. Additional vaccine mandates may be announced in jurisdictions in which we operate. Our implementation of any of these or other requirements may result in employee attrition, including attrition of critically skilled workforce, and difficulty securing future workforce needs, which could have a material adverse effect on our business, financial condition, and results of operations.

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 ~~April 3,~~October 2, 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)
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 —


Period	(a) Total Number of Shares Purchased(1)	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of the Publicly Announced Program	(d) Maximum Dollar Value of Shares that May Yet be Purchased Under the Publicly Announced Program(2) (in thousands)
July 4, 2021 to July 31, 2021	—	$	—	—	$	49,145
August 1, 2021 to August 28, 2021	88,380	14.94		—	49,145
August 29, 2021 to October 2, 2021	—	—		—	49,145
Total	88,380	14.94		—

(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 April 3,~~At October 2, 2021, approximately $49.1 million remained available for stock repurchases under the program.

4352

Item 6. Exhibits.

Index to Exhibits


Exhibit No.						Description
*†10.1						~~Employment~~Retirement Agreement ~~entered into as of February 25, 2021,~~ between Cornerstone Building Brands, Inc.~~, its wholly-owned subsidiary, Ply Gem Industries, Inc.,~~ and ~~Alena~~James S. ~~Brenner~~Metcalf, dated September 20, 2021
*†10.2						~~Second Amendment to Cash Flow Credit~~Employment 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~~Inc, 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~~Rose Lee, dated ~~April 21,~~August 3, 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

4453

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: ~~May 11,~~November 9, 2021	By:	/s/ ~~James S. Metcalf~~Rose Lee
		~~James S. Metcalf~~Rose Lee
		~~Chairman of the Board~~President and Chief Executive Officer


Date: ~~May 11,~~November 9, 2021	By:	/s/ Jeffrey S. Lee
		Jeffrey S. Lee
		Executive Vice President, ~~and~~ Chief Financial Officer and Chief Accounting Officer

4554


	Operating Leases
2021 (excluding the three months ended April 3, 2021)	$	59,841
2022	72,420
2023	46,441
2024	35,189
2025	28,257
Thereafter	69,702
Total future minimum lease payments	311,850
Less: interest	48,136
Present value of future minimum lease payments	$	263,714

As of April 3, 2021
Current portion of lease liabilities	$	69,042
Long-term portion of lease liabilities	194,672
Total	$	263,714


	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