FORWARD LOOKING STATEMENTS

This Annual 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”~~“will,” “target” or other similar words. We have based our forward-looking statements on ~~our~~ management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking ~~information, including any earnings guidance, if applicable.~~statements or information. 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 ~~the~~ actual results to differ materially from those projected. These risks, uncertainties and other factors include, but are not limited to:

•industry cyclicality and seasonality and adverse weather conditions;

•challenging economic conditions affecting the nonresidential construction industry;

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

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

~~changes in laws~~•our ability to successfully develop new products or ~~regulations;~~improve existing products;

•the effects of ~~certain~~manufacturing or assembly realignments;

•seasonality of the business and other external ~~domestic or international~~ factors ~~that we may not be able to control, including war, civil conflict, terrorism, natural disasters and public health issues;~~beyond our control;

~~our ability to obtain financing on acceptable terms;~~

~~recognition of goodwill or asset impairment charges;~~

•commodity price volatility and/or limited availability of raw materials, including steel, PVC resin, glass and aluminum;

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

•retention and replacement of key personnel;

•enforcement and obsolescence of our intellectual property rights;

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

•changes in building codes and standards;

•competitive activity and pricing pressure in our industry;

~~volatility of the Company’s stock price;~~

•our ability to make strategic acquisitions accretive to earnings;

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

~~volatility in energy prices;~~

~~the adoption of~~•global climate change, ~~legislation;~~including legal, regulatory or market responses thereto;

•breaches of our information system security measures;

•damage to our ~~major information management~~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 ~~tariffs~~actual investment returns on ~~steel imports;~~pension assets;

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

•volatility of the ~~businesses of NCI and Ply Gem;~~Company’s stock price;

~~potential write-downs or write-offs, restructuring and impairment or other charges required in connection with the Merger;~~

•substantial governance and other rights held by the ~~Investors (as defined below);~~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 Part I, Item 1A of this report.

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 Item 1A of this report. 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.

PART I

Item 1. Business.

General

~~NCI~~Cornerstone Building ~~Systems,~~Brands, Inc. (together with its subsidiaries, unless the context requires otherwise, the “Company,” ~~“NCI,~~“Cornerstone,” “we,” “us” or “our”) is ~~one~~a leading North American integrated manufacturer of ~~North America’s largest integrated manufacturers~~external building products for the commercial, residential, and ~~marketers~~repair and remodel construction industries. We design, engineer, and manufacture external building products through our three operating segments, Commercial, Siding, and Windows.

In our Commercial segment, we design, engineer, manufacture and distribute extensive lines of metal products for the nonresidential construction ~~industry. Of the approximate $295 billion nonresidential construction industry, we primarily serve the low-rise nonresidential construction~~ market (five stories or less) which, according to Dodge Data & Analytics (“Dodge”), represented approximately 87% of the total nonresidential construction industry during our fiscal year 2018. Our broad range of products are used primarily in new construction and in repair and retrofit activities, mostly in North America.

~~We design, engineer, manufacture and market what we believe is one of the most comprehensive lines of metal components and engineered building systems in the industry, with~~under multiple brand names through a reputation for high quality and superior engineering and design. We go to market with well-recognized brands, which allow us to compete effectively within a broad range of end-user markets including industrial, commercial, institutional and agricultural. Our service versatility allows us to support the varying needs of our diverse customer base, which includes general contractors and sub-contractors, developers, manufacturers, distributors and a currentnationwide network of ~~approximately 3,200 affiliated builders across North America in our Engineered Building Systems~~plants and distribution centers. We offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs. Our Commercial segment ~~over 1,000 dealer partners for our insulated metal panel (“IMP”) products and approximately 5,500 architects. We~~ also ~~provide~~provides metal coil coating services for commercial and construction applications, servicing both internal and external customers. We sell our products for both new construction and repair and retrofit applications.

~~As of October 28, 2018, we operated 36 manufacturing facilities located~~In our Siding segment, our principal products include vinyl siding and skirting, steel siding, vinyl and aluminum soffit, aluminum trim coil, aluminum gutter coil, aluminum gutters, aluminum and steel roofing accessories, cellular PVC trim and mouldings, J-channels, wide crown molding, window and door trim, F-channels, H-molds, fascia, undersill trims, outside/inside corner posts, rain removal systems, injection molded designer accents such as shakes, shingles, scallops, shutters, vents and mounts, vinyl fence, vinyl railing, and stone veneer in ~~the United States, Mexico and Canada, with additional sales and distribution offices throughout~~ the United States and Canada. ~~Our broad geographic footprint, along with~~The breadth of our ~~hub-and-spoke distribution system, allows~~product lines and our multiple brand and price point strategy enable us to ~~efficiently supply a broad range~~target multiple distribution channels (wholesale and specialty distributors, retailers and manufactured housing) and end users (new construction and home repair and remodeling).

In our Windows segment, our principal products include vinyl, aluminum-clad vinyl, aluminum, wood and clad-wood windows and patio doors and steel, wood, and fiberglass entry doors that serve both the new construction and the home repair and remodeling sectors in the United States and Canada. We continue introducing new products to the portfolio which allow us to enter or further penetrate new distribution channels and customers. The breadth of ~~customers with high-quality customer service~~our product lines and ~~reliable deliveries.~~our multiple price point strategy enable us to target multiple distribution channels (wholesale and specialty distributors, retailers and manufactured housing) and end user markets (new construction and home repair and remodeling).

~~The Company~~NCI Building Systems, Inc. ("NCI") was founded in 1984 and reincorporated in Delaware in 1991. In 1998, we acquired Metal Building Components, Inc. (“MBCI”) and ~~doubled our revenue base. As a result of the acquisition of MBCI,~~ we became the largest domestic manufacturer of nonresidential metal components. In 2006, we acquired Robertson-Ceco II Corporation (“RCC”) which operates the Ceco Building Systems, Star Building Systems and Robertson Building Systems divisions and iswas a leader in the metal buildings industry. The RCC acquisition created an organization with greater product and geographic diversification, a stronger customer base and a more extensive distribution network than either company had individually, prior to the acquisition.

Since 2011, we ~~have~~ executed on a strategy to become the leading provider of ~~IMP~~Insulated Metal Panels ("IMP") products in North America through our acquisitions of Metl-Span LLC (‘‘Metl-Span’’) in 2012 and CENTRIA, a Pennsylvania general partnership (‘‘CENTRIA’’), in 2015. ~~We believe the IMP market remains underpenetrated in North America.~~ IMP products possess several physical and cost-effective attributes, such as energy efficiency, that make them compelling alternatives to competing building materials, in particular due to the adoption of stricter standards and codes by numerous states in the United States that are expected to increase the use of IMP products in construction projects. Given these factors, we believe that growth within the IMP market will continue to outpace the broader metal building sector and the nonresidential construction industry as a whole.

The engineered building systems, metal components, insulated metal panels and metal coil coating businesses, and the construction industry in general, are seasonal in nature. Sales normally are lower in the first half of each fiscal year compared to the second half of each fiscal year because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

The nonresidential construction industry is highly sensitive to national and regional macroeconomic conditions. One of the primary challenges we face is that the United States economy is slowly recovering from a recession and a period of relatively low nonresidential construction activity, which began in the third quarter of 2008 and reduced demand for our products and adversely affected our business. In addition, the tightening of credit in financial markets over the same period adversely affected the ability of our customers to obtain financing for construction projects. As a result, we experienced a decrease in orders and cancellations of orders for our products.

Current market estimates continue to show uneven activity across the nonresidential construction markets. According to Dodge, low-rise nonresidential construction starts, as measured in square feet and comprising buildings of up to five stories, were down as much as approximately 7% in our fiscal 2018 as compared to our fiscal 2017. However, Dodge typically revises initial reported figures, and we expect this metric will be revised upwards over time. Leading indicators for low-rise, nonresidential construction activity indicate positive momentum into fiscal 2019.

The leading indicators that we follow and that typically have the most meaningful correlation to nonresidential low-rise construction starts are the American Institute of Architects’ (“AIA”) Architecture Mixed Use Index, Dodge residential single family starts and the Conference Board Leading Economic Index (“LEI”). Historically, there has been a very high correlation

to the Dodge low-rise nonresidential starts when the three leading indicators are combined and then seasonally adjusted. The combined forward projection of these metrics, based on a 9 to 14-month historical lag for each metric, indicates low single digit growth for new low-rise nonresidential construction starts in fiscal 2019.

On October 20, 2009, we completed a financial restructuring that resulted in a change of control of the Company. As part of the restructuring, Clayton, Dubilier & Rice Fund VIII, L.P. and CD&R Friends & Family Fund VIII, L.P. (together, the “CD&R Fund VIII Investment Group”), purchased an aggregate of 250,000 shares of a newly created class of our convertible preferred stock, designated the Series B Cumulative Convertible Participating Preferred Stock (the “Convertible Preferred Stock,” and shares thereof, the “Preferred Shares”), then representing approximately 68.4% of the voting power and Common Stock of the Company on an as-converted basis (the “Equity Investment”). On May 14, 2013, the CD&R Fund VIII Investment Group delivered a formal notice requesting the conversion of all of their Preferred Shares into shares of our Common Stock (the “Conversion”). In connection with the Conversion request, we issued the CD&R Fund VIII Investment Group 54,136,817 shares of our Common Stock, representing 72.4% of the Common Stock of the Company then outstanding. Under the terms of the Preferred Shares, no consideration was required to be paid by the CD&R Fund VIII Investment Group to the Company in connection with the Conversion of the Preferred Shares. As a result of the Conversion, the CD&R Fund VIII Investment Group no longer have rights to dividends or default dividends as specified in the Certificate of Designations for the Convertible Preferred Stock. The Conversion eliminated all the outstanding Convertible Preferred Stock and increased stockholders’ equity by nearly $620.0 million.

On June 22, 2012, we completed the acquisition of Metl-Span (the “Metl-Span Acquisition”) acquiring all of its outstanding membership interests for approximately $145.7 million in cash, which included $4.7 million of cash acquired. Upon the closing of the Metl-Span Acquisition, Metl-Span became a direct, wholly-owned subsidiary of NCI Group, Inc. Metl-Span’s operations are conducted through NCI Group, Inc. and its results are included in the results of our Metal Components Segment. The Metl-Span Acquisition strengthened our position as a leading fully integrated supplier to the nonresidential building products industry in North America, providing our customers a comprehensive suite of building products.

On January 16, 2015, NCI Group, Inc., a wholly-owned subsidiary of the Company, and Steelbuilding.com, LLC, a wholly owned subsidiary of NCI Group, Inc., completed the acquisition of CENTRIA (the “CENTRIA Acquisition”), pursuant to the terms of the Interest Purchase Agreement, dated November 7, 2014 (“Interest Purchase Agreement”) with SMST Management Corp., a Pennsylvania corporation, Riverfront Capital Fund, a Pennsylvania limited partnership, and CENTRIA. NCI acquired all of the general partnership interests of CENTRIA in exchange for $255.8 million in cash, including cash acquired of $8.7 million. The purchase price was subject to a post-closing adjustment to net working capital as provided in the Interest Purchase Agreement, which we settled during the first quarter of fiscal 2016 for additional cash consideration of approximately $2.1 million payable to the seller, which approximated the amount we previously accrued. The purchase price was funded through the issuance of $250.0 million of new indebtedness.

On February 8, 2018, the Company entered into a Term Loan Credit Agreement (the “Pre-merger Term Loan Credit Agreement”) which provided for a term loan credit facility in an original aggregate principal amount of $415.0 million (the “Pre-merger Term Loan Credit Facility”). Proceeds from borrowings under the Pre-merger Term Loan Credit Facility were used, together with cash on hand, (i) to refinance the existing term loan credit agreement, (ii) to redeem and repay the existing 8.25% senior notes due 2023 and (iii) to pay any fees, premiums and expenses incurred in connection with the refinancing. The term loans under the Pre-merger Term Loan Credit Agreement would have matured on February 7, 2025 and, prior to such date, would have amortized in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum.

On February 8, 2018, the subsidiaries of the Company, NCI Group, Inc. and Robertson-Ceco II Corporation, and the Company as a guarantor, entered into an ABL Credit Agreement (the “Pre-merger ABL Credit Agreement”). The Pre-merger ABL Credit Agreement provided for an asset-based revolving credit facility (the “Pre-merger ABL Credit Facility”) which allowed aggregate maximum borrowings by the ABL borrowers of up to $150 million, letters of credit of up to $30 million and up to $20 million for swingline borrowings. Borrowing availability is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of accounts receivable, eligible credit card receivables and eligible inventory, less certain reserves and subject to certain other adjustments. Availability is reduced by issuance of letters of credit as well as any borrowings. All borrowings under the Pre-merger ABL Credit Facility would have matured on February 8, 2023.

At a Special Meeting of the shareholders of NCI held on November 15, 2018 (the “Special Shareholder Meeting”), NCI’s shareholders approved (i) the Agreement and Plan of Merger (the “Merger Agreement”) among NCI, Ply Gem Parent, LLC (“Ply Gem”), and for certain limited purposes set forth in the Merger Agreement, Clayton, Dubilier & Rice, LLC, a Delaware limited liability company, pursuant to which, at the closing of the merger, Ply Gem was 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”) and (ii) the issuance in the Merger of 58,709,067 shares of NCI common stock, par value $0.01 per share (the “NCI Common Stock”) in the aggregate, on a pro rata basis, to the holders of all of the equity interests in Ply Gem (the “Stock Issuance”). ~~NCI’s~~

~~shareholders also approved the three additional proposals described in the Company’s proxy statement relating to the Special Shareholder Meeting.~~ 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 Clayton, Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R Fund VIII”), CD&R Friends & Family Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R FF Fund VIII”, and together with CD&R Fund VIII, 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 CD&R Fund VIII and CD&R FF Fund VIII, individually, the “CD&R Investors,” and collectively, the “CD&R Investor Group”), Atrium Intermediate Holdings, LLC, a Delaware limited liability company (“Atrium”), GGC BP Holdings, LLC, a Delaware limited liability company (“GGC”), and AIC Finance Partnership, L.P., a Cayman Islands exempted limited partnership (“AIC”, and together with Atrium and GGC, each individually, a “Golden Gate Investor,” and collectively, the “Golden Gate Investor Group,” and 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”) with 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 NCI Common Stock that are held by the Investors following the consummation of the Merger.

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

On November 16, 2018, in connection with the consummation of the Merger, the Company assumed (i) the obligations of the company formerly known as Ply Gem Midco, Inc. (“Ply Gem Midco”), a subsidiary of Ply Gem immediately prior to the consummation of the Merger, as borrower under the Current Cash Flow Credit Agreement, (ii) the obligations of Ply Gem Midco as parent borrower under the Current ABL Credit Agreement and (iii) the obligations of Ply Gem Midco as issuer under the Current Indenture (each as defined and further described in ~~Item~~"Item 7, Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations)~~Operations").

On January 12, 2019, the Company entered into a Unit Purchase Agreement (the “Purchase Agreement”) with Environmental Materials, LLC, a Delaware limited liability company (“Environmental Stoneworks” or “ESW”), the Members of Environmental Materials, LLC (the “Sellers”) and Charles P. Gallagher and Wayne C. Kocourek, solely in their capacity as the Seller Representative (as defined in the Purchase Agreement), pursuant to which, on February 20, 2019, the Company’s wholly-owned subsidiary, Ply Gem Industries, Inc., purchased from the Sellers 100% of the outstanding limited liability company interests of Environmental Stoneworks (the “Environmental Stoneworks Acquisition”). The transaction was financed through borrowings under the Company’s asset-based revolving credit facility. The Environmental Stoneworks Acquisition, when combined with the Company’s existing stone businesses, positions the Company as a market leader in stone veneer.

For additional discussion of the Company’s debt following the Merger, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our principal offices are located at 5020 Weston Parkway, Suite 400, Cary, North Carolina 27513, and our telephone number is ~~(888) 975-9436.~~(866) 419-0042.

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC”). Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, along with any amendments to those reports, are available free of charge at our corporate website at http://~~www.ncibuildingsystems.com~~www.cornerstonebuildingbrands.com as soon as practicable after such material is electronically filed with, or furnished to the SEC. In addition, our website includes other items related to corporate governance matters, including our corporate governance guidelines, charters of various committees of our ~~board~~Board of ~~directors~~Directors and the code of business conduct and ethics applicable to our employees, officers and directors. You may obtain copies of these documents, free of charge, from our corporate website. However, the information on our website is not incorporated by reference into this Form 10-K.

~~Operating~~ Segments

On February 22, 2018, the Company announced changes to NCI’s reportable business segments, effective January 28, 2018 for the first quarter of fiscal 2018, to align with changes in how the Company manages its business, reviews operating performance and allocates resources. During the first quarter of fiscal 2018, the Company began reporting results under four reportable segments, which are Engineered Building Systems, Metal Components, Insulated Metal Panels and Metal Coil Coating. Previously, operating results for the Insulated Metal Panel product line were included in the Metal Components segment. In addition, CENTRIA’s coil coating operations, which had been included in the Metal Components segment since the Company’s acquisition of CENTRIA in January 2015, are reported within the Metal Coil Coating segment for all periods presented herein. On August 6, 2018, NCI filed a Current Report on Form 8-K to update the segment disclosure reflecting the change inOur operating segments ~~on a retrospective basis in its Annual Report for the year ended October 29, 2017.~~

~~Prior to the Merger our operating segments operated~~operate primarily in the ~~nonresidential~~commercial, residential, and repair and remodeling construction ~~market.~~markets. Sales and earnings are influenced by general economic conditions, commodity prices and the level of construction activity.

Commercial

Products

In our Commercial segment, we design, engineer, manufacture and distribute extensive lines of metal products for the nonresidential construction ~~activity,~~market under multiple brand names through a nationwide network of plants and distribution centers. We offer a number of advantages over traditional construction alternatives, including shorter construction time, more efficient use of materials, lower construction costs, greater ease of expansion and lower maintenance costs. Our Commercial segment also provides metal ~~roof~~coil coating services for commercial and construction applications, servicing both internal and external customers. We sell our products for both new construction and repair and retrofit ~~demand~~applications.

Coil Coatings – Our complete line of coating finishes includes Epoxies, Acrylics, Polyesters, Silicone Modified Polyesters (SMP), Flurocarbons (PVDF), and Plastisol for light-gauge and heavy-gauge steel coil applications. As one of the ~~availability~~largest coil coaters in the country, Metal Coaters specializes in the toll processing of customer-owned light gauge metal to deliver coil coating solutions throughout the United States. Metal Prep is one of the largest providers of pre-painted Hot Rolled Steel in the United States and ~~terms~~provides heavy gauge coil coating solutions to the construction industry. We sell our products and processes principally to original equipment manufacturer customers who utilize pre-painted metal, including other manufacturers of ~~financing available~~engineered building systems and metal components. Our customer base also includes steel mills, metal service centers and painted coil distributors who in-turn supply various manufacturers of engineered building systems, metal components, lighting fixtures, ceiling grids, water heaters, appliances and other manufactured products.

Doors – From steel curtain roll-up and self-storage doors to complete hallway systems, our products are fabricated to meet or exceed operational requirements with little to no maintenance. Our doors are used across the country in freight terminals, commercial buildings, self-storage facilities, and more. Commercial grade steel curtain roll-up doors, self-storage doors, and hallway systems are sold directly to contractors and other customers under the brand “Doors and Buildings Components” (“DBCI”).

Insulated Metal Panels – Insulated Metal Panels act simultaneously as exterior wall, insulation, and finished interior wall, offering protection over the lifespan of a building. Insulated metal panels are panels consisting of rigid foam encased between two sheets of coated metal in a variety of modules, lengths and reveal combinations and are increasingly desirable because of their energy efficiency, noise reduction and aesthetic qualities. We design, manufacture, sell and distribute insulated metal panels for ~~construction. Our operating segments are vertically integrated~~use in various architectural, commercial, industrial and ~~benefit from using similar basic raw materials. The manufacturing~~cold storage end market applications under the brand names “Metl-Span” and ~~distribution activities of our segments are effectively~~“CENTRIA”.

~~coupled through the use of our nationwide hub-and-spoke manufacturing and distribution system, which supports and enhances our vertical integration.~~

~~Engineered~~Metal Building ~~Systems.~~

~~Products.~~ ~~Engineered~~Systems – Metal building systems consist of engineered structural members and panels that are fabricated and roll-formed in a factory. These systems are custom designed and engineered to meet project requirements and then shipped to a construction site complete and ready for assembly with no additional field welding required. Engineered building systems manufacturers design an integrated system that meets applicable building code and designated end use requirements. These systems consist of primary structural framing, secondary structural members (purlins and girts) and metal roof and wall systems or conventional wall materials manufactured by others, such as masonry and concrete tilt-up panels.

~~Engineered building systems typically consist of three systems:~~

~~Primary structural framing.~~ Primary structural framing, fabricated from heavy-gauge plate steel, supports the secondary structural framing, roof, walls and all externally applied loads. Through the primary framing, the force of all applied loads is structurally transferred to the foundation.

~~Secondary structural framing.~~ Secondary structural framing is designed to strengthen the primary structural framing and efficiently transfer applied loads from the roof and walls to the primary structural framing. Secondary structural framing consists of medium-gauge, roll-formed steel components called purlins and girts. Purlins are attached to the primary frame to support the roof. Girts are attached to the primary frame to support the walls.

~~Metal roof and wall systems.~~ Metal roof and wall systems not only lock out the weather but may also contribute to the structural integrity of the overall building system. Roof and wall panels are fabricated from light-gauge, roll-formed steel in many architectural configurations.

~~Accessory components complete the engineered building system. These components include doors, windows, specialty trims, gutters and interior partitions.~~

~~The following characteristics of engineered building systems distinguish them from other methods of construction:~~

~~Shorter construction time.~~ In many instances, it takes less time to construct an engineered building than other building types. In addition, because most of the work is done in the factory, the likelihood of weather interruptions is reduced.

~~More efficient material utilization.~~ ~~The larger engineered building systems manufacturers use computer-aided analysis and design to fabricate structural members with high strength-to-weight ratios, minimizing raw materials costs.~~

~~Lower construction costs.~~ The in-plant manufacture of engineered building systems, coupled with automation, allows the substitution of less expensive factory labor for much of the skilled on-site construction labor otherwise required for traditional building methods.

~~Greater ease of expansion.~~ Engineered building systems can be modified quickly and economically before, during or after the building is completed to accommodate all types of expansion. Typically, an engineered building system can be expanded by removing the end or side walls, erecting new framework and adding matching wall and roof panels.

~~Lower maintenance costs.~~ Unlike wood, metal is not susceptible to deterioration from cracking, rotting or insect damage. Furthermore, factory-applied roof and siding panel coatings resist cracking, peeling, chipping, chalking and fading.

~~Environmentally friendly.~~ Our buildings utilize between 30% and 60% recycled content and our roofing and siding utilize painted surfaces with high reflectance and emissivity, which help conserve energy and reduce operating costs.

~~Manufacturing.~~ ~~As of October 28, 2018, we operated seven facilities for manufacturing and distributing engineered building systems throughout the United States and in Monterrey, Mexico.~~

After we receive an order, our engineers design the engineered building system to meet the customer’s requirements and to satisfy applicable building codes and zoning requirements. To expedite this process, we use computer-aided design and engineering systems to generate engineering and erection drawings and a bill of materials for the manufacture of the engineered building system. From time to time, depending on our volume, we outsource portions of our drafting requirements to third parties.

Once the specifications and designs of the customer’s project have been finalized, the manufacturing of frames and other building systems begins at one of our frame manufacturing facilities. Fabrication of the primary structural framing consists of a process in which steel plates are punched and sheared and then routed through an automatic welding machine and sent through further fitting and welding processes. The secondary structural framing and the covering system are roll-formed steel products that are manufactured at our full manufacturing facilities as well as our components plants.

Upon completion of the manufacturing process, structural framing members and metal roof and wall systems are shipped to the job site for assembly. Since on-site construction is performed by an unaffiliated, independent general contractor, usually one

of our authorized builders, we generally are not responsible for claims by end users or owners attributable to faulty on-site construction. The time elapsed between our receipt of an order and shipment of a completed building system has typically ranged from six to twelve weeks, although delivery varies depending on engineering and drafting requirements and the length of the permitting process.

~~Sales, Marketing and Customers.~~ We are one of the largest domestic suppliers of engineered building systems. We design, engineer, manufacture and market engineered building systems and self-storage building systems for all nonresidential markets including commercial, industrial, agricultural, governmental and community.

Throughout the twentieth century, the applications of metal buildings have significantly evolved from small, portable structures that prospered during World War II into fully customizable building solutions spanning virtually every commercial low-rise end-use market.

We believe the cost of an engineered building system, excluding the cost of the land, generally represents approximately 15% to 20% of the total cost of constructing a building, which includes such elements as labor, plumbing, electricity, heating and air conditioning systems, installation and interior finish. Technological advances in products and materials, as well as significant improvements in engineering and design techniques, have led to the development of structural systems that are compatible with more traditional construction materials. Architects and designers now often combine an engineered building system with masonry, concrete, glass and wood exterior facades to meet the aesthetic requirements of end users while preserving the inherent characteristics of engineered building systems. As a result, the uses for engineered building systems now include office buildings, showrooms, retail shopping centers, banks, schools, places of worship, warehouses, factories, distribution centers, government buildings and community centers for which aesthetics and architectural features are important considerations of the end users. In addition, advances in our products such as insulated steel panel systems for roof and wall applications give buildings the desired balance of strength, thermal efficiency and aesthetic attractiveness.

We sell engineered building systems to builders, general contractors, developers and end users nationwide under the brand names “Metallic,” “Mid-West Steel Building Company,” “A & S,” “All American,” “Mesco,” “Star,” “Ceco,” “Robertson,” “Garco,” “Heritage” and “SteelBuilding.com.” We market engineered building systems through an in-house sales force to affiliated builder networks of approximately 3,200 builders. We also sell engineered building systems via direct sale to owners and end users as well as through private label companies. In addition to a traditional business-to-business channel, we sell small custom-engineered metal buildings through two other consumer-oriented marketing channels targeting end-use purchasers and small general contractors. We sell through Heritage Building Systems (“Heritage”), which is a direct-response, phone-based sales organization, and Steelbuilding.com, which allows customers to design, price and buy small metal buildings online. During fiscal 2018, our largest customer for Engineered Building Systems accounted for less than 1% of our total consolidated sales and external sales of our Engineered Building Systems segment accounted for 37.8% of total consolidated sales for the fiscal year.

The majority of our sales of engineered building systems are made through our authorized builder networks. We enter into an authorized builder agreement with independent general contractors that market our products and services to users. These agreements generally grant the builder the non-exclusive right to market our products in a specified territory. Generally, the agreement is cancelable by either party with between 30 and 60 days’ notice. The agreement does not prohibit the builder from marketing engineered building systems of other manufacturers. In some cases, we may defray a portion of the builder’s advertising costs and provide volume purchasing and other pricing incentives to encourage those businesses to deal exclusively or principally with us. The builder is required to maintain a place of business in its designated territory, provide a sales organization, conduct periodic advertising programs and perform construction, warranty and other services for customers and potential customers. An authorized builder usually is hired by an end-user to erect an engineered building system on the customer’s site and provide general contracting, subcontracting and/or other services related to the completion of the project. We sell our products to the builder, which generally includes the price of the building as a part of its overall construction contract with its customer. ~~We rely upon maintaining a satisfactory business relationship for continuing job orders from our authorized builders.~~

Metal ~~Components.~~

~~Products.~~Roofing and Wall Systems - Metal ~~components include metal roof~~roofing and wall systems, metal partitions, metal trim, doors and other related accessories. These products are used in new construction and in repair and retrofit applications for industrial, commercial, institutional, agricultural and rural uses. Metal components are used in a wide variety of construction applications, including purlins and girts, roofing, standing seam roofing, walls, doors, trim and other parts of traditional buildings, as well as in architectural applications and engineered building systems. ~~Although precise market data is limited, we estimate the metal components market, including~~We sell roofing applications, to be a multi-billion dollar market. We believe that metal products have gained and continue to gain a greater share of new construction and repair and retrofit markets due to increasing acceptance and recognition of the benefits of metal products in building applications.

~~Our metal components consist of individual components, including secondary structural framing, metal roof~~ and wall systems directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and ~~associated metal trims.~~other customers under the brand names “MBCI”, “American Building Components” (“ABC”), and “Metal Depots.” We sell directly to contractors or end users for use in the building industry, including the construction of metal buildings. We also stock and market metal component parts for use in the maintenance and repair of existing buildings.

Specific component products we manufacture include metal roof and wall systems, purlins, girts, partitions, header panels and related trim and screws. ~~We are continually developing and marketing new products such as our Soundwall~~™~~, Nu-Roof~~™ system and Energy Star cool roofing. We believe we offer the widest selection of metal components in the building industry. We custom produce purlins and girts for our customers and offer one of the widest selections of sizes and profiles in the United States. Metal roof and wall systems protect the rest of the structure and the contents of the building from the weather. They may also contribute to the structural integrity of the building.

~~Metal roofing systems have several advantages over conventional roofing systems, including the following:~~

~~Lower life cycle cost.~~ The total cost over the life of metal roofing systems is lower than that of conventional roofing systems for both new construction and retrofit roofing. For new construction, the cost of installing metal roofing is greater than the cost of conventional roofing. However, the longer life and lower maintenance costs of metal roofing make the cost more attractive. For retrofit roofing, although installation costs are higher for metal roofing due to the need for a sloping support system, over time the lower ongoing costs more than offset the initial cost.

~~Increased longevity.~~ Metal roofing systems generally last for a minimum of 20 years without requiring major maintenance or replacement. This compares to five to ten years for conventional roofs. The cost of leaks and roof failures associated with conventional roofing can be very high, including damage to building interiors and disruption of the functional usefulness of the building. Metal roofing prolongs the intervals between costly and time-consuming repair work.

~~Attractive aesthetics and design flexibility.~~ Metal roofing systems allow architects and builders to integrate colors and geometric design into the roofing of new and existing buildings, providing an increasingly fashionable means of enhancing a building’s aesthetics. Conventional roofing material is generally tar paper or a gravel surface, and building designers tend to conceal roofs made with these materials.

Our metal roofing products are attractive and durable. We use standing seam roof technology to replace traditional built-up and single-ply roofs as well as to provide a distinctive look to new construction.

~~Manufacturing.~~ ~~As of October 28, 2018, we operated 14 facilities to manufacture metal components for the nonresidential construction industry, including three facilities for our door operations.~~

Metal component products are roll-formed or fabricated at each plant using roll-formers and other metal working equipment. In roll-forming, pre-finished coils of steel are unwound and passed through a series of progressive forming rolls that form the steel into various profiles of medium-gauge structural shapes and light-gauge roof and wall panels.

~~Sales, Marketing and Customers.~~ We are one of the largest domestic suppliers of metal components to the nonresidential building industry. We design, manufacture, sell and distribute one of the widest selections of components for a variety of new construction applications as well as for repair and retrofit uses.

We manufacture and design metal roofing systems for sales to regional metal building manufacturers, general contractors and subcontractors. We believe we have the broadest line of standing seam roofing products in the building industry. In addition, we have granted 21 non-exclusive, on-going license agreements to 18 companies, both domestic and international, relating to our standing seam roof technology.

These licenses, for a fee, are provided with MBCI’s technical know-how relating to the marketing, sales, testing, engineering, estimating, manufacturing and installation of the licensed product. The licensees buy their own roll forming equipment to manufacture the roof panels and typically buy accessories for the licensed roof system from MBCI.

We estimate that metal roofing currently accounts for less than 10% of total roofing material volume. However, metal roofing accounts for a significant portion of the overall metal components market. As a result, we believe that significant opportunities exist for metal roofing, with its advantages over conventional roofing materials, to increase its overall share of this market.

We sell metal components directly to regional manufacturers, contractors, subcontractors, distributors, lumberyards, cooperative buying groups and other customers under the brand names “MBCI”, “American Building Components” (“ABC”), “Eco-ficient” and “Metal Depots.” In addition to metal roofing systems, we manufacture roll-up doors and sell interior and exterior walk doors for use in the self-storage industry and other metal buildings. Roll-up doors, interior and exterior doors, interior partitions and walls, header panels and trim are sold directly to contractors and other customers under the brand “Doors and Buildings Components” (“DBCI”). These components also are produced for integration into self-storage and engineered building systems sold by us. In addition to a traditional business-to-business channel, we sell components through Metal Depots, which has eight retail stores throughout the United States and specifically targets end-use consumers and small general contractors.

We market our components products primarily within six market segments: commercial/industrial, architectural, standing seam roof systems, agricultural, residential and cold storage. Customers include small, medium and large contractors, specialty roofers, regional fabricators, regional engineered building fabricators, post frame contractors, material resellers and end users. ~~Commercial~~

Raw materials and ~~industrial businesses, including self-storage, are heavy users~~suppliers

The principal raw material used in manufacturing of our metal components and ~~metal buildings systems.~~engineered building systems is steel which we purchase from multiple steel producers. Our various products are fabricated from steel produced by mills including bars, plates, structural shapes, hot-rolled coils and galvanized or Galvalume®-coated coils (Galvalume® is a registered trademark of BIEC International, Inc.).

The price and supply of steel impacts our business. 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, currency fluctuations, 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.

~~Standing seam roof and architectural customers~~Although we have ~~emerged as an important part~~the ability to purchase steel from a number of suppliers, a production cutback by one or more of our ~~customer base. As metal buildings become a more acceptable building alternative and aesthetics become an increasingly important consideration for end users of metal buildings,~~current suppliers could create challenges in meeting delivery schedules to our customers. Because we ~~believe that architects will participate more~~have periodically adjusted our contract prices, particularly in the ~~design and purchase decisions and will use metal components~~engineered building systems segment, we have generally been able to ~~a greater extent. Wood frame builders also purchase~~pass increases in our ~~metal components~~raw material costs through ~~distributors, lumberyards, cooperative buying groups and chain stores for various uses, including agricultural buildings.~~

Our metal components sales operations are organized into geographic regions. Each region is headed by a general sales manager supported by individual regional sales managers. Each local sales office is staffed by a direct sales force responsible for contacting customers and architects and a sales coordinator who supervises the sales process from the time the order is received until it is shipped and invoiced. The regional and local focusto our customers. We normally do not maintain an inventory of steel in excess of our ~~customers requires extensive knowledge~~current production requirements. However, from time to time, we may purchase steel in advance of ~~local business conditions. During fiscal 2018, our largest customer for Metal Components accounted for less than 1% of our total consolidated sales~~announced steel price increases.

Competition

We and ~~external sales of our Metal Components segment accounted for 30.6% of total consolidated sales for the fiscal year.~~

~~Insulated Metal Panels.~~

~~Products.~~ Insulated metal panels are panels consisting of rigid foam encased between two sheets of coated metal in a variety of modules, lengths and reveal combinations which are used in architectural, commercial, industrial and cold storage market applications.

~~Manufacturing.~~ ~~As of October 28, 2018, we operated eight facilities (seven in the United States and one in Canada) to manufacture IMP products.~~

~~Sales, Marketing and Customers.~~ We design, manufacture, sell and distribute insulated metal panels for use in various Architectural, Commercial, Industrial and Cold Storage end-market applications under the brand names "Metl-Span" and "CENTRIA".

One of our strategic objectives and a major part of our “green” initiative is to expand our IMP product lines, which are increasingly desirable because of their energy efficiency, noise reduction and aesthetic qualities. Our IMP product line manufacturing facilities in the United States and Canada provide the nonresidential building products market with cost-effective and energy efficient insulated metal wall and roof panels.

Our “green” initiative enables us to capitalize on increasing consumer preferences for environmentally-friendly construction. We believe this will allow us to further service the needs of our existing customer base and to gain new customers.

As with components products, our IMP product lines service each of our six market segments: commercial/industrial, architectural, standing seam roof systems, agricultural, residential and cold storage.

During fiscal 2018, the largest customer of our Insulated Metal Panels segment accounted for less than 2% of our total consolidated sales and external sales of our Insulated Metal Panels segment represented 21.2% of total consolidated sales for the fiscal year.

~~Metal Coil Coating.~~

~~Products.~~ Metal coil coating consists of cleaning, treating and painting various flat-rolled metals, in coil form, as well as slitting and/or embossing the metal, before the metal is fabricated for use by various industrial users. Light gauge and heavy gauge metal coils that are painted, either for decorative or corrosion protection purposes, are utilized in the building industry byother manufacturers of metal components and engineered building ~~systems. In addition, these painted metal coils are utilized by manufacturers~~systems compete in the building industry with all other alternative methods of ~~other products,~~building construction such as ~~water heaters, lighting fixtures, ceiling grids, HVAC~~tilt-wall, concrete and ~~appliances. We clean, treat~~wood, single-ply and ~~coat both heavy gauge (hot-rolled) and light gauge metal coils for our other operating segments and for third-party customers, who utilize them in a variety~~built up, all of applications, including construction products, heating and air conditioning systems, water heaters, lighting fixtures, ceiling grids, office furniture, appliances and other products. We provide toll coating services under which the customer provides the metal coil and we provide only the coil coating service. We also provide a painted metal package under which we sell both the metal coil and the coil coating service together.

~~We believe that pre-painted metal coils provide manufacturers with a higher quality, environmentally cleaner and~~may be perceived as more ~~cost-effective solution to operating their own in-house painting operations. Pre-painted metal coils also offer manufacturers the opportunity to produce a broader and~~traditional, more aesthetically pleasing ~~range of~~or having other advantages over our products.

~~Manufacturing.~~ ~~As of October 28, 2018, we operated seven metal coil coating facilities located~~In addition, competition in the ~~United States. Two of our facilities coat hot-rolled, heavy gauge metal coils and five of our facilities coat light gauge metal coils.~~

Our coil coating processes have multiple stages. In the first stage, the metal surface is cleaned, and a chemical pretreatment is applied. The pretreatment is designed to promote adhesion of the paint system and enhance the corrosion resistance of the metal. After the pretreatment stage, a paint system is roll-applied to the metal surface, then baked at a high temperature to cure the coating and achieve a set of physical properties that not only make the metal more attractive, but also allows it to be formed into a manufactured product, all while maintaining the integrity of the paint system so that it can endure the final end use

requirements. After the coating system has been cured, the metal substrate is rewound into a finished metal coil and packaged for shipment. Slitting and embossing processes can also be performed on the finished coil in accordance with customer specifications, prior to shipment.

~~Sales, Marketing and Customers.~~ ~~We process metal coils to supply substantially all the coating requirements of our own~~ metal components and engineered building systems ~~operating segments.~~market of the building industry is intense. We ~~also process~~believe it is based primarily on:

•quality;

•service;

•on-time delivery;

•ability to provide added value in the design and engineering of buildings;

•price;

•speed of construction; and

•personal relationships with customers.

We compete with a number of other manufacturers of metal ~~coils~~components, metal coil coaters, and engineered building systems for the building industry, including Nucor, Bluescope, Mueller, Kingspan, and Central States. Many of these competitors operate on a regional basis. We have two primary nationwide competitors in the engineered building systems market and three primary nationwide competitors in the metal components market. However, the metal components market is more fragmented than the engineered building systems market.

As of December 31, 2019, we operated 37 manufacturing facilities located in the United States, Mexico and Canada, with additional sales and distribution offices throughout the United States and Canada. These facilities are used primarily for the manufacturing of metal components and engineered building systems for the building industry. We believe this broad geographic distribution gives us an advantage over our metal components and engineered building systems competitors because major elements of a customer’s decision are the speed and cost of delivery from the manufacturing facility to ~~supply external~~the product’s ultimate destination. We operate a fleet of trucks to deliver our products to our customers in a more timely manner than most of our competitors.

Intellectual property

We have a number of ~~different industries.~~United States patents, pending patent applications and other proprietary rights, including those relating to metal roofing systems, metal overhead doors, our pier and header system, our Long Bay® System and our building estimating and design system. The patents on our Long Bay® System expire in 2021. We also have several registered trademarks and pending registrations in the United States.

Seasonality

The Commercial business, and the construction industry in general, are seasonal in nature. Sales normally are lower in the first half of each fiscal year compared to the second half of each fiscal year because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.

Backlog

At December 31, 2019 and December 31, 2018, the total backlog of orders, consisting of Engineered Building Systems’ and IMP orders, for our products was $608.0 million and $528.8 million, respectively. Job orders included in backlog are generally cancelable by customers at any time for any reason; however, cancellation charges may be assessed. Occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. We ~~market~~anticipate that less than 23% of this backlog will extend beyond one year.

Siding

Products

In our ~~metal~~Siding segment, our principal products include vinyl siding and skirting, steel siding, vinyl and aluminum soffit, aluminum trim coil, ~~coating products~~aluminum gutter coil, fabricated aluminum gutters, aluminum and ~~processes under~~steel roofing accessories, cellular PVC trim and mouldings, J-channels, wide crown molding, window and door trim, F-channels, H-molds, fascia, undersill trims, outside/inside corner posts, rain removal systems, injection molded designer accents such as shakes, shingles, scallops, shutters, vents and mounts, vinyl fence, vinyl railing, and stone veneer in the ~~brand names “Metal Coaters”~~United States and ~~“Metal Prep”. Each of our metal coil coating facilities has an independent sales staff.~~

Canada. We sell our siding and accessories under our Variform®, Napco®, Mastic® Home Exteriors, Mitten®, Ply Gem/Cellwood®, and Durabuilt® brand names and under the Georgia-Pacific brand name through a private label program. Our cellular PVC Trim products are sold under our Ply Gem® Trim and ~~processes principally~~Mouldings brand name. Our vinyl fencing and railing products are sold under the Ply Gem brand name. Our stone veneer products are sold under our Environmental Stoneworks, Canyon Stone and Ply Gem Stone brand names. Our gutter protection products are sold under our Leaf Relief®, Leaf Relief® Snap Tight, Leaf Smart® and Leaf Logic® brand names. The breadth of our product lines shown below and our multiple brand and price point strategy enable us to ~~original equipment manufacturer customers~~target multiple distribution channels (wholesale and specialty distributors, retailers and manufactured housing) and end users (new construction and home repair and remodeling).

Mastic® Home Exteriors

Variform®

Napco®

Cellwood ®

Durabuilt®

Georgia Pacific

Mitten®

Ply Gem Fence/Rail

Ply Gem® Stone

Canyon Stone

Ply Gem® Trim and Mouldings

Environmental Stone Works (1)

Specialty/Super-Premium

Cedar Discovery®

Structure®

Home Insulation System^TM

Heritage Cedar®™
Climaforce™

Cedar Select®
American Essence™

Cedar Dimensions™

670 Series™ Hand Split
650 Series™ Shingle Siding
660 Series™ Round Cut Siding
800 Series Insulated Siding

Cedar Spectrum™Caliber™ High Performance Insulated Siding

Sentry Variegated Siding
Mitten 8' Rough Sawn
Shake

Fieldstone Tuscan
Fieldstone Shadow
Ledgestone
Cut Cobblestone
Cobblestone
Ridgestone
Riverstone Brick
Cascade Ledge
True Stack
Manorstone

Canyon Ledge
Castle
Cathedral
Classic
Cobblestone
Country Ledge
Fieldstone
Limestone
Manchester
River Rock
Timber Lodge
Tuscan Field Stone
Southern Ledge
Strip Ledge
Brick

Amargosa
Chiseled
Clipstone
Durata
EZ Column
Bugnato
Coral Stone
Grezzo
Imperial Panel
Luxor Panel
MArquis
Prairie
Prostack
Ripiano
Rocca
Sabia
Stepp Stone
Thin Brick
Tivoli
Travertine
True Stack
Cascade
Castle
Cathedral
Chisel Rock
Coastal Ledge
Cobble
Cut Stone
European Castle
Fieldstone
French Country
Hackett
Ledgestone
Limestone
Manor
Mountain Edge
River Rosk
Rubble
Rustic Ledge
Southern Ledgestone
Stripstone
Teton
Timber Ledge
Tuscan LEdge
Weatheredge

Premium

Quest®
Barkwood®
Liberty Elite®
Board + Batten
Designer Series™
Carvedwood 44®
Western Extreme®

Vortex Extreme™
Board & Batten
Camden Pointe®

American Splendor®
American Accents
Board & Batten™

Dimensions®
Board & Batten

480 Series™

Board & Batten

Sentry
Southern Beaded

Woodland Select™

Trim Boards
Corners
Post Wraps
Mouldings
Beadboard
Skirtboard Sheets
J-Notch Trim
Post Accents

Standard

Ovation™
Charleston Beaded®

Nottingham®
Ashton Heights®
Victoria Harbor®

American Herald®
American Tradition
American 76 Beaded®

Progressions®
Colonial Beaded

440 Series™
450 Series™ Beaded

Forest Ridge®
Shadow Ridge®
Castle Ridge®
Somerset™ Coastal

Highland Oregon Pride

Ply Gem®

Economy

Mill Creek®
Eclipse™

Contractors Choice®

American Comfort®

410 Series™

Vision Pro®
Chatham Ridge®
Parkside®
Oakside®

Entree

(1)The Environmental Stoneworks product line was integrated in 2019 with the February 2019 acquisition of Environmental Stoneworks.

Customers and distribution

We have a multi-channel distribution network that serves both the new construction and the home repair and remodeling sectors, which exhibit different, often counter-balancing, demand characteristics. In conjunction with our multiple brand and price point strategy, we believe our multi-channel distribution strategy enables us to increase our sales and sector penetration

while minimizing channel conflict. We believe our strategy reduces our dependence on any one channel, which provides us with a greater ability to sustain our financial performance through economic fluctuations.

We sell our siding and accessories to specialty distributors (one-step distribution) and to wholesale distributors (two-step distribution). Our specialty distributors sell directly to remodeling contractors and builders. Our wholesale distributors sell to retail home centers and lumberyards who, ~~utilize pre-painted metal, including other manufacturers~~in turn, sell to remodeling contractors, builders and consumers. In the specialty channel, we have developed an extensive network of ~~engineered~~approximately 800 independent distributors, serving over 22,000 contractors and builders nationwide. We are well-positioned in this channel as many of these distributors are both the largest and leading consolidators in the industry. In the wholesale channel, we are the sole supplier of vinyl siding and accessories to BlueLinx (formerly a distribution operation of the Georgia-Pacific Corporation), one of the largest building ~~systems~~products distributors in the United States. Through BlueLinx, our Georgia-Pacific private label vinyl siding products are sold at major retail home centers, lumberyards and ~~metal components.~~manufactured housing manufacturers. A portion of our siding and accessories is also sold directly to home improvement centers. Our growing customer base of fencing and railing consists of fabricators, distributors, retail home centers and lumberyards. Our customer base of stone veneer products consists of distributors, lumberyards and retailers.We also ~~includes steel mills, metal service~~sell to builders and contractors with a distinct turnkey model that provides product and installation services. In Canada, our complete offering of vinyl siding, accessories, trim, and moldings, along with Ply Gem manufactured and third party sourced complimentary products are primarily distributed through our 18 Mitten branch locations, to retail home centers and ~~painted coil distributors who in-turn supply various~~lumberyards, and new construction and remodeling contractors.

Production and facilities

Vinyl siding, skirting, soffit and accessories are manufactured in our Martinsburg, West Virginia, Jasper, Tennessee, Stuarts Draft, Virginia, Kearney, Missouri, and Paris, Ontario facilities, while all metal products are produced in our Sidney, Ohio facility. The majority of our injection molded products such as shakes, shingles, scallops, shutters, vents and mounts are manufactured in our Gaffney, South Carolina facility. The cellular polyvinyl chloride ("PVC") trim and mouldings products are manufactured in St. Marys, West Virginia. The vinyl, metal, and injected molded plants have sufficient capacity to support planned levels of sales growth for the foreseeable future. Our fencing and railing products are currently manufactured at our York, Nebraska facility. The fencing and railing plants have sufficient capacity to support our planned sales growth for the foreseeable future. Our stone veneer products are manufactured at our Olathe, Kansas, Denver, Colorado, Mabletown, Georgia, Orwigsburg, Pennsylvania, Selingsgrove, Pennsylvania, North Branch, Minnesota and St. George, Utah facilities. Our manufacturing facilities are among the safest in all of North America with three of them having received the highest federal and/or state OSHA safety award and rating.

Raw materials and suppliers

PVC resin and aluminum are major components in the production of our siding, fencing, and stone products. PVC resin and aluminum are commodity products and are available from both domestic and international suppliers. We are one of the largest consumers of PVC resin in North America and we continue to leverage our purchasing power on this key raw material. Changes in PVC resin and aluminum prices have a direct impact on our cost of products sold. Historically, we have been able to pass on the price increases to our customers. The results of operations for individual quarters can be negatively impacted by a delay between the time of raw material cost increases and price increases that we implement in our products, or conversely can be positively impacted by a delay between the time of a raw material price decrease and competitive pricing moves that we implement accordingly.

Competition

We compete with other national and regional manufacturers of ~~engineered building systems, metal components, lighting fixtures, ceiling grids, water heaters, appliances~~vinyl siding, aluminum, cellular PVC, fencing, and stone products. We believe we are currently the largest manufacturer of vinyl siding in North America. Our vinyl siding competitors include CertainTeed, Alside, Royal Building Products and smaller regional competitors. Our aluminum accessories competitors include Rollex, Euramax, Gentek and other smaller regional competitors. Significant growth in vinyl fencing and railing has attracted many new entrants, and the sector today is fragmented with numerous competitors including U.S. Fence, Homeland, Westech, Bufftech, and Azek. Our cellular PVC trim and moulding competitors include Azek, Inteplast, Kommerling (KOMA), Wolfpac (Versatex), Tapco (Kleer), CertainTeed and Royal Building Products. Our stone veneer competitors include Boral (Cultured Stone and Eldorado Stone), Coronado Stone and smaller regional competitors. Our stone competitive advantage is that we provide a full, turnkey solution including manufacturing, distribution and installation services direct to builders and general contractors. We also compete on product quality, breadth of product offering, sales and service support. In addition to competition from other vinyl siding, fencing and stone products, our products face competition from alternative materials, such as wood, metal, fiber cement and masonry. Increases in competition from other exterior building products manufacturers and alternative building materials could cause us to lose customers and lead to net sales decreases.

Intellectual property

We possess a wide array of intellectual property rights, including patents, trademarks, tradenames, licenses, proprietary technology and know-how and other proprietary rights. In connection with the marketing of our products, we generally obtain trademark protection for our brand names in the Siding segment. Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not become generic. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use. We license the Georgia-Pacific trademark for our Georgia-Pacific private label vinyl siding products sold through BlueLinx. While we do not believe the Siding segment is dependent on any one of our trademarks, we believe that our trademarks are important to the development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.

Seasonality

Markets for our products in the Siding segment are seasonal and can be affected by inclement weather conditions. Historically, our business has experienced increased sales in the second and third quarters of the year due to increased construction during those periods. Because a portion of our overhead and expenses are fixed throughout the year, our operating profits tend to be lower in the first and fourth quarters. Inclement weather conditions can affect the timing of when our products are applied or installed, causing delayed profit margins when such conditions exist.

We generally carry increased working capital during the first half of a fiscal year to support those months where customer demand exceeds production capacity. We believe that this is typical within the siding industry.

Backlog

Our Siding segment had a backlog of approximately $66.0 million at December 31, 2019. We expect to fill 100% of the orders during 2020 that were included in our backlog at December 31, 2019.

Windows

Products

In our Windows segment, our principal products include vinyl, aluminum-clad vinyl, aluminum, wood and clad-wood windows and patio doors and steel, wood, and fiberglass entry doors that serve both the new construction and the home repair and remodeling sectors in the United States and Canada. Our products in our Windows segment are sold under the Ply Gem® Windows, Simonton® Windows, Great Lakes® Window, Atrium Windows, American Craftsman, Silver Line, North Star, Tru Bilt and Ply Gem® Canada brands. We continue introducing new products to the portfolio which allow us to enter or further penetrate new distribution channels and customers. The breadth of our product lines shown below and our multiple price point strategy enable us to target multiple distribution channels (wholesale and specialty distributors, retailers and manufactured housing) and end user markets (new construction and home repair and remodeling).

Ply Gem U.S. Windows

Great Lakes Window

Ply Gem Canada

Simonton

Atrium

North Star

Tru Bilt

Silver Line

American Craftsman

New Construction

Replacement

New Construction & Replacement

New Construction

Replacement

New Construction

Replacement

New Construction & Replacement

Replacement

Specialty/Super-Premium

Mira® Premium Series

EcoSMART

Design Architectural Series
Signature Series

Stormbreaker Plus

VantagePointe^TM 6500

8900

Premium

Mira® Premium Series

Premium Series

Comfort Smart

Comfort Series
Design Series
Enviro Series

ProFinish® Brickmould 600

Reflections® 5500

Daylight Max^TM

Lumera^TM

Madeira

Impressions 9800

VantagePointe^TM 6400

450

8700

1000 Series

Custom Door Series

Standard

Pro Series
Classic

Pro Series

Harbor Light

Classic Series
Vista Series

Brickmould 300
ProFinish® Contractor
ProFinish® Master

VantagePointe^TM 6100

VantagePointe^TM 6200

VantagePointe^TM 6600

ClearValue

Verona

Reflections® 5050

Reflections® 5300

130
150

8300

V3 (70) Series
V3 (3000) Series
V3 (8600/8700/8800) Series
V3 (5800) Series

70 (70) Series
70 (3000) Series
70 (8600/8700/8800) Series
70 (5800) Series
70 (2900) Series

Economy

Builder Series
1500

Contractor Series

ProFinish® Builder

Asure^TM

5700

8050

V1 (1200) Series
V1 (2000/2100/2200) Series
V1 (2900) Series
V1 (5500/5700) Series

50 (1200) Series
50 (2000/2100/2200) Series
50 (5500/5700) Series

Customers and distribution

We have a multi-channel distribution and product strategy that enables us to serve both the new construction and the home repair and remodeling markets. By offering this broad product offering and industry leading service, we are able to meet the local needs of our customers on a national scale. This strategy has enabled our customer base (existing and new) to simplify their supply chain by consolidating window suppliers. Our "good, better, best" product and price point strategy allows us to increase our sales and sector penetration while minimizing channel conflict. This strategy reduces our dependence on any one channel, providing us with a greater ability to sustain our financial performance through economic fluctuations.

The new construction product lines are sold for use in new residential and light commercial construction through a highly diversified customer base, which includes independent building material dealers, regional/national lumberyard chains, builder direct/OEMs and retail home centers. Our repair and remodeling window products are primarily sold through independent home improvement dealers, one-step distributors, and big box retail outlets. Dealers typically market directly to homeowners or contractors in connection with remodeling requirements while distributors concentrate on local independent retailers.

In Canada, sales of product lines for new construction are predominantly made through direct sales to builders and contractors, while sales for repair and remodeling are made primarily through retail lumberyards, independent home improvement dealers and direct to consumers through our supply and install services.Ply Gem Canada products are distributed through twelve Ply Gem Canada distribution centers.

Production and facilities

Our window and door products leverage a network of vertically integrated production and distribution facilities located in Virginia, Ohio, North Carolina, Georgia, Texas, California, Washington, West Virginia, Illinois, New Jersey, Ontario, Canada and Alberta, Canada. Our window manufacturing facilities have benefited from our continued investment and commitment to product development and product quality combined with increasing integration of best practices across our product offerings. In 2010, we began producing vinyl compound for our west coast facilities which improved our operating efficiency and resulted in lower production cost for these items. We continued making upgrades to the automation of our production lines.

While market conditions will dictate future capacity requirements, we have the ability to increase capacity in a cost effective manner by expanding production shifts and lines. Significant housing demand increases to historical levels may require additional capital investment in certain geographical areas to meet this increased demand. Any capacity increase may, however, initially be offset by labor inefficiencies or difficulties obtaining the appropriate labor force. Ongoing capital investments will focus on new product introductions and simplification, production automation, equipment maintenance and cost reductions.

Raw materials and suppliers

PVC compound, wood, aluminum and glass are major components in the production of our window and door products. ~~During fiscal 2018,~~These products are commodity products available from both domestic and international suppliers. Historically, changes in PVC compound, aluminum billet, glass and wood cutstock prices have had the most significant impact on our material cost of products sold in our Windows segment. We are one of the largest ~~customer~~consumers of PVC resin in North America and we continue to leverage our purchasing power on this key raw material. The PVC resin compound that is used in our window lineal production is produced internally. The leveraging of our ~~Metal Coil Coating segment accounted for approximately 1%~~PVC resin buying power and our PVC resin compounding capabilities benefits all of our ~~total~~window companies. Our window plants have consolidated glass purchases to take advantage of strategic sourcing savings opportunities. In addition, we have continued to vertically integrate aluminum extrusion in our window plants.

Competition

The window and patio door sector remains fragmented, comprised primarily of local and regional manufacturers with limited product offerings. The sector’s competitors in the United States include national brands, such as Jeld-Wen, Pella, MI Home Products and Andersen, and other regional brands, including Weathershield and others. Competitors in Canada include Jeld-Wen, All Weather, Durabuilt, Vinylbilt and numerous regional brands. We generally compete on service, product performance, product offering, sales and ~~external sales~~support. We believe all of our ~~Metal Coil Coating~~products are competitively priced and that we are one of the only manufacturers to serve all end markets and price points.

Intellectual property

We possess a wide array of intellectual property rights, including patents, trademarks, tradenames, licenses, proprietary technology and know-how and other proprietary rights. In connection with the marketing of our products, we generally obtain trademark protection for our brand names in the Windows segment. Depending on the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained and they have not become generic. Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use. While we do not believe the Windows segment ~~represented 10.4%~~is dependent on any one of ~~total consolidated~~our trademarks, we believe that our trademarks are important to the Windows segment and the development and conduct of our business as well as the marketing of our products. We vigorously protect all of our intellectual property rights.

Seasonality

Markets for our products in the Windows segment are seasonal and can be affected by inclement weather conditions. Historically, our business has experienced increased sales ~~for~~in the ~~fiscal year.~~second and third quarters of the year due to increased construction during those periods. Accordingly, our working capital is typically higher in the second and third quarters as well. Because much of our overhead and expense are fixed throughout the year, our operating profits tend to be lower in the first and fourth quarters. Inclement weather conditions can affect the timing of when our products are applied or installed, causing lower profit margins when such conditions exist.

Because we have successfully implemented lean manufacturing techniques and many of our windows and doors are made to order, inventories in our Windows segment do not change significantly with seasonal demand.

Backlog

Our Windows segment had a backlog of approximately $100.9 million at December 31, 2019. We expect to fill 100% of the orders during 2020 that were included in our backlog at December 31, 2019.

Business Strategy

Cornerstone Building Brands is relentlessly committed to our customers and to creating great building solutions that enable communities to grow and thrive. By focusing on operational excellence every day, creating a platform for future growth and investing in market-leading residential and commercial building brands, we deliver unparalleled financial results. We ~~intend~~want to play an essential role in our communities where people live, work and play to enable those communities to grow and thrive.

The Company's strategy has several primary elements:

Profitable Growth.The Company intends to expand into new and existing markets by leveraging its customer relationships and full portfolio of leading products. We believe we have a meaningful opportunity for organic growth through product line extension, innovation of new systems and cross selling of products to deepen penetration across our ~~business, enhance~~customer channels. Using a highly collaborative selling approach, the Company intends to grow in attractive market sectors, emphasizing those spaces that are highly fragmented, demand high service and value the reliability and efficiency offered by Cornerstone Building Brand products.

Operational Excellence.Cornerstone Building Brands operates with a relentless drive for exceptional results and a passion for superior execution. The Company embraces a continuous improvement culture that is charged with increasing efficiency, optimizing costs, eliminating waste, encouraging organizational agility and building greater brand equity to fuel growth. This requires the Company’s ongoing commitment to attract, retain and develop the best talent. This also includes making investments in automation within our ~~market position~~manufacturing facilities, transforming the way work gets done, and ~~increase our sales and profitability by focusing on the implementation of a number of key initiatives that~~deploying capital in ways we believe will ~~help us grow and reduce costs. Our current strategy focuses primarily on organic initiatives, but also considers~~drive the ~~use of opportunistic acquisitions~~greatest returns for our shareholders over the long-term.

Capital Deployment to ~~achieve our growth objectives:~~

~~Corporate-Wide Initiatives.~~ We will continue our focus on leveraging technology, automation and supply chain efficiencies to be one of the lowest cost producers, reduce engineering, selling, general and administrative (“ESG&A”) expenses and improve plant utilization through expanded use of our integrated business model and facility re-alignment. To further distinguish the value of our products and services, our manufacturing platform has been reorganized into a single, integrated organization, to rapidly incorporate the benefits of lean manufacturing best practices and efficiencies across all of our facilities.

~~Engineered Building Systems Segment.~~ ~~We intend to enhance the performance of our differentiated brands by aligning our operations to achieve the best total value building solution, delivered complete and on-time, every time. We are~~Drive Shareholder Value.The Company is intently focused on providing ~~industry leading cycle times, service~~the highest returns for shareholders through its capital allocation framework, which includes: (1) investing in the core business through capital expenditures and ~~quality, while improving customer satisfaction.~~

~~Metal Components Segment.~~ ~~We intend~~other organic growth initiatives; (2) pursuing strategic acquisitions to ~~maintain our leading positions in these~~broaden its portfolio and capabilities across the residential and commercial markets, ~~and seek opportunities to profitably expand our customer base by providing industry leading customer service.~~

~~Insulated Metal Panels Segment.~~ ~~We intend to drive growth in sales of high-margin IMP product lines through all legacy commercial channels.~~

~~Metal Coil Coating Segment.~~ ~~Through diversification of our external customer base and national footprint, we plan to grow non-construction sales as~~with a ~~supply chain partner to national manufacturers. We will continue to leverage efficiency improvements to be one of the lowest cost producers.~~

~~The combination of NCI and Ply Gem, headquartered in Cary, NC, establishes a leading~~focus on adjacent exterior building products ~~manufacturer with a broad range~~and related services; and (3) targeting long-term net debt leverage of ~~products~~2.0x to ~~residential and commercial customers for both new construction and repair & remodel. With a portfolio~~2.5x. As part of ~~key products which includes windows, doors, siding, metal wall and roof systems, engineered commercial buildings, insulated metal panels, stone and other adjacent products,~~this framework, the Company ~~has more than 20,000 employees across 80 manufacturing, distribution and office locations throughout North America.~~may also restructure, reposition or divest underperforming product lines or assets.

Restructuring

We continue to execute on our plans to improve cost efficiency through the optimization of our combined manufacturing plant footprint and the elimination of certain fixed and indirect ~~ESG~~SG&A costs. During the fiscal year ended ~~October 28, 2018,~~December 31, 2019, we incurred restructuring charges of $1.5 million, including $1.3 million, $1.3 million and $0.1 million in the Engineered Building Systems, Insulated Metal Panels and Corporate segments, respectively, partially offset by a net gain of $1.2 million on sales of facilities in our Metal Components segment. Restructuring charges are recorded for these plans as they become estimable and probable.$18.1 million. See Note 5 — Restructuring in the notes to the consolidated financial statements for additional information.

~~Raw Materials~~

The principal raw material used in manufacturing of our metal components and engineered building systems is steel which we purchase from multiple steel producers. Our various products are fabricated from steel produced by mills including bars, plates, structural shapes, hot-rolled coils and galvanized or Galvalume®-coated coils (Galvalume® is a registered trademark of BIEC International, Inc.).

Our raw materials on hand increased to $205.9 million at October 28, 2018 from $150.9 million at October 29, 2017 due to rising input costs and to support higher levels of business activity in fiscal 2018.

Although we have the ability to purchase steel from a number of suppliers, a production cutback by one or more of our current suppliers could create challenges in meeting delivery schedules to our customers. Because we have periodically adjusted our contract prices, particularly in the engineered building systems segment, we have generally been able to pass increases in our raw material costs through to our customers. We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. For additional information about the risks of our raw material supply and pricing, see “Item 1A. Risk Factors” and Item 7A. Quantitative and Qualitative Disclosures About Market Risk — Steel Prices.”

~~Backlog~~

At October 28, 2018 and October 29, 2017, the total backlog of orders, consisting of Engineered Building Systems’ and IMP orders, for our products we believe to be firm was $557.0 million and $545.6 million, respectively. Job orders included in backlog are generally cancelable by customers at any time for any reason; however, cancellation charges may be assessed. Occasionally, orders in the backlog are not completed and shipped for reasons that include changes in the requirements of the customers and the inability of customers to obtain necessary financing or zoning variances. We anticipate that less than 16% of this backlog will extend beyond one year.

~~Competition~~

We and other manufacturers of metal components and engineered building systems compete in the building industry with all other alternative methods of building construction such as tilt-wall, concrete and wood, single-ply and built up, all of which may be perceived as more traditional, more aesthetically pleasing or having other advantages over our products.

~~In addition, competition in the metal components and engineered building systems market of the building industry is intense. We believe it is based primarily on:~~

~~quality;~~

~~service;~~

~~on-time delivery;~~

~~ability to provide added value in the design and engineering of buildings;~~

~~price;~~

~~speed of construction; and~~

~~personal relationships with customers.~~

We compete with a number of other manufacturers of metal components and engineered building systems for the building industry, ranging from small local firms to large national firms. Many of these competitors operate on a regional basis. We have two primary nationwide competitors in the engineered building systems market and three primary nationwide competitors in the metal components market. However, the metal components market is more fragmented than the engineered building systems market.

As of October 28, 2018, we operated 36 manufacturing facilities located in the United States, Mexico and Canada, with additional sales and distribution offices throughout the United States and Canada. These facilities are used primarily for the manufacturing of metal components and engineered building systems for the building industry. We believe this broad geographic distribution gives us an advantage over our metal components and engineered building systems competitors because major elements of a customer’s decision are the speed and cost of delivery from the manufacturing facility to the product’s ultimate destination. We operate a fleet of trucks to deliver our products to our customers in a more timely manner than most of our competitors.

We compete with a number of other providers of metal coil coating services to manufacturers of metal components and engineered building systems for the building industry, ranging from small local firms to large national firms. Most of these competitors operate on a regional basis. Competition in the metal coil coating industry is intense and is based primarily on quality, service, delivery and price.

Consolidation

Over the last several years, there has been a consolidation of competitors within the industries of the ~~Engineered Building Systems, Metal Components, Insulated Metal Panels~~engineered building systems, metal components, insulated metal panels, metal coil coating, and ~~Metal Coil Coating segments,~~windows, which include many small local and regional firms. We believe that these industries will continue to consolidate, driven by the needs of manufacturers to increase anticipated long-term manufacturing capacity, achieve greater process integration, add geographic diversity to meet customers’ product and delivery needs, improve production efficiency and manage costs. The vinyl siding industry has already largely consolidated with four companies comprising approximately 90% of the market. When beneficial to our long-term goals and strategy, we have sought to consolidate our business operations with other companies. The resulting synergies from these consolidation efforts have allowed us to reduce costs while continuing to serve our customers’ needs. For more information, see “Acquisitions” below.

In addition to the consolidation of competitors within the industries of the engineered building systems, metal components and metal coil coating segments, in recent years there has been consolidation between those industries and steel producers. Several of our competitors have been acquired by steel producers, and further similar acquisitions are possible. For a discussion of the possible effects on us of such consolidations, see “Item 1A. Risk Factors.”

Acquisitions

We have a history of making strategic acquisitions within our industry, including the Metl-Span Acquisition, the CENTRIA Acquisition, the Merger and the ~~Merger,~~ESW Acquisition, and we regularly evaluate growth opportunities both through acquisitions and internal investment. We believe that there remain opportunities for growth through consolidation in the ~~metal buildings~~Commercial, Siding and ~~components~~Windows segments, and our goal is to continue to grow organically and through opportunistic strategic ~~acquisitions.~~acquisitions that meet our strict criteria.

Consistent with our growth strategy, we frequently engage in discussions with potential sellers regarding the possible purchase by us of businesses, assets and operations that are strategic and complementary to our existing operations. Such assets and operations include engineered building systems and metal components, but may also include assets that are closely related to, or intertwined with, these business lines, and enable us to leverage our asset base, knowledge base and skill sets. Such acquisition efforts may involve participation by us in processes that have been made public, involve a number of potential buyers and are commonly referred to as “auction” processes, as well as situations in which we believe we are the only party or one of the very limited number of potential buyers in negotiations with the potential seller. These acquisition efforts often involve assets that, if acquired, would have a material effect on our financial condition and results of operations.

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.

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, transfer or sell assets, make acquisitions and engage in mergers. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt.”

Environmental Matters, Health and Safety Matters

~~The operation of our business is~~Our operations are subject to ~~stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operator of manufacturing facilities, we must comply with these laws and regulations at the~~various federal, state, local and ~~tribal levels. These~~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 ~~regulations~~management of hazardous substances and wastes, protect the health and safety of our employees and the end-users of our products, regulate the materials used in our 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 ~~impact~~result in substantial fines or ~~restrict our business activities in many ways, such as:~~penalties, injunctive relief, requirements to install pollution or other controls or equipment, and civil sanctions.

~~requiring investigative~~We could be held liable for costs to investigate, remediate or ~~remedial action to mitigate~~otherwise address contamination at any real property we have ever owned, operated or ~~contain certain environmental conditions that~~used as a disposal site, or at other sites where we or predecessors may have ~~been historically~~released hazardous materials. We could incur fines, penalties or sanctions or be subject to third-party claims, including indemnification claims, for property damage, personal injury or otherwise ~~caused by our operations~~as a result of violations of (or liabilities under) environmental, health and safety laws, or ~~practices, or by former owners or operators at properties we have acquired; or~~

~~restricting the operations~~in connection with releases of ~~facilities found to be out of compliance with environmental laws and regulations, permits~~hazardous or other ~~legal authorizations issued pursuant to such~~materials.

Changes in or new interpretations of existing laws, regulations or ~~regulations.~~

~~The trend in environmental regulation is to place more restrictions and requirements on activities that potentially impact human health and welfare~~enforcement policies, the discovery of previously unknown contamination, or the environment. As a result, there can be no assurance as to the amount or timing of future expenditures for environmental compliance or corrective actions, and actual future expenditures may differ from what we presently anticipate. However, we strategically anticipate future regulatory requirements that might be imposed and plan accordingly to meet and maintain compliance. We do so with the goal of minimizing the associated costs of compliance without affecting our ability to comply.

~~Failure to comply with environmental laws and regulations may trigger a variety of administrative, civil or criminal enforcement actions, including the assessment of monetary penalties,~~ the imposition of ~~investigative~~other environmental liabilities or ~~remedial requirements,~~obligations in the future including additional investigation, remediation or other obligations with respect to our products or business activities or the ~~issuance~~imposition of ~~orders limiting current~~new permit requirements may lead to additional costs that could have a material adverse effect on our business, financial condition or ~~future~~results of operations. ~~Certain~~

Compliance with federal, state, local and foreign environmental, ~~statutes impose strict, joint~~health and ~~several liability for costs required~~safety laws requires us to ~~clean up~~incur capital expenditures and ~~restore sites where hazardous substances or industrial wastes have been mismanaged~~

or otherwise released. Moreover, neighboring landowners or other third parties may file claims for personal injury and property damage allegedly caused by the release of substances or contaminants into the environment.

increases our operating costs. We do not believe that compliance with ~~federal, state, local or tribal~~ environmental, health and safety laws, including existing requirements to investigate and ~~regulations~~remediate contamination, will have a material adverse effect on our business, financial position or results of operations. In addition, we believe that the various environmental compliance activities we are presently engaged in are not expected to materially interrupt or diminish our operational ability to manufacture our products. We cannot assure, however, that future events, such as changes in existing laws or regulations, the promulgation of new laws or regulations, or the development or discovery of new facts or conditions related to our operations will not cause us to incur significant costs.manufacturing processes.

The following are representative environmental, health and safety requirements relating to our ~~business:~~operations:

Air Emissions. Our operations are subject to the federal Clean Air Act ~~Amendments of 1990, or CAAA,~~ and comparable state ~~laws and regulations.~~laws. These laws ~~and regulations~~ govern emissions of air pollutants from industrial stationary sources, ~~(such~~such as our manufacturing ~~facilities)~~facilities, and impose various permitting, air pollution control, emissions monitoring, recordkeeping and reporting requirements. Such laws ~~and regulations~~ may require us to obtain pre-approval for constructing or modifying our facilities in ways that have the potential to produce new or increased air ~~emissions;~~emissions, obtain and comply with operating permits that limit air emissions or ~~restrict~~ certain operating ~~parameters;~~parameters, or employ best available control technologies to reduce or minimize emissions from our facilities.

~~Our failure to comply with these requirements could subject us to monetary penalties, injunctions, restrictions on operations, or potential administrative, civil or criminal enforcement actions.~~ We may be required to ~~incur certain capital expenditures in the future for~~purchase air pollution control equipment in ~~conjunction~~order to comply with ~~obtaining~~air emissions laws.

Greenhouse Gases. Concern over the effects of global climate change has led to federal, state and ~~complying with pre-construction authorizations~~international legislative and regulatory efforts to limit greenhouse gas, or ~~operating permits. We~~GHG, emissions. While GHG regulations do not ~~believe that~~currently affect our ~~operations will be materially adversely affected by such requirements.~~

~~Greenhouse Gases.~~ ~~More~~facilities, more stringent federal, regional, state and foreign laws and regulations relating to global climate change and ~~greenhouse gases, or GHGs,~~GHG emissions may be adopted in the ~~future~~future. These laws and regulations could impact our facilities, raw material suppliers, the transportation and distribution of our products, and our ~~customers,~~customers’ businesses, which could reduce demand for our products or cause us to incur additional capital, operating ~~costs~~ or ~~reduced~~other costs. Until the timing, scope and extent of any future legislation or regulation becomes known, we cannot predict its effect on our business. In addition, global climate change may increase the frequency or intensity of extreme weather events, such as storms, floods, extreme temperatures and other events that could affect our facilities, raw material suppliers, the transportation and distribution of our products, and demand for our products.

On December 15, 2009, the federal Environmental Protection Agency, or EPA, published its findings that emissions of carbon dioxide, methane, and other GHGs present an endangerment to public health, the economy and the environment because emissions of such gases, according to the EPA, contribute to the warming of the earth’s atmosphere and other climate changes. These findings allowed the EPA to adopt and implement regulations and permit programs that would restrict emissions of GHGs under existing provisions of the federal CAAA.

The EPA adopted regulations that would require a reduction in emissions of GHGs and could trigger permit review for GHGs produced from certain industrial stationary sources. In June 2010, the EPA adopted the Prevention of Significant Deterioration (“PSD”) and Title V Greenhouse Gas Tailoring Rule, which phases in permitting requirements for stationary sources of GHGs beginning January 2, 2011. This rule “tailors” these permitting programs to apply to certain significant stationary sources of GHG emissions in using a multistep process, with the largest sources first subjected to permitting. In June 2014, the Supreme Court restricted applicability of the Tailoring Rule to GHG-emitting stationary sources that also emit conventional non-GHG National Ambient Air Quality Standard criteria pollutants at levels greater than PSD and Title V threshold amounts.

Although it is not possible to accurately predict how new GHG rules and policies would impact our business, any new federal, regional or state restrictions on emissions of carbon dioxide or other GHGs that may be imposed in areas where we conduct business could result in increased compliance costs or additional operating restrictions. Such restrictions could potentially make our products more expensive and reduce their demand.

Hazardous and Solid Industrial Waste. Our operations generate industrial solid wastes, including some hazardous wastes that are subject to the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws. RCRA imposes requirements for the handling, storage, treatment and disposal of hazardous waste. Industrial wastes we generate in our manufacturing processes, such as ~~paint waste, spent solvents and~~ used chemicals, may be regulated as hazardous waste, although RCRA has provisions to exempt some of our wastes from classification as hazardous waste. However, our non-hazardous or exempted industrial wastes are still regulated under state law or the less stringent industrial solid waste requirements of RCRA.

RCRA Corrective Action Program. Certain facilities may be subject to the Corrective Action Program under the Solid Waste Disposal Act, as amended by RCRA, and the Hazardous and Solid Waste Amendments (Corrective Action Program). The Corrective Action Program is designed to ensure that certain facilities subject to RCRA have investigated and remediated releases of hazardous substances at their property.

MW Manufacturers Inc. (MW), a subsidiary of Ply Gem Industries, Inc., entered into a September 2011 Administrative Order on Consent with the 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. We ~~do not believe that~~have recorded a liability of $4.5 million for this MW site within other long-term liabilities in our ~~operations will be materially adversely affected by such requirements.~~consolidated balance sheets as of December 31, 2019.

~~Site Remediation.~~CERCLA. The Comprehensive Environmental Response, Compensation and Liability Act, ~~of 1980,~~or CERCLA (commonly known as ~~amended, or CERCLA,~~Superfund), and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons responsible for ~~the release~~releases of hazardous substances into the environment. ~~Such classes of persons~~These include the current and past owners or operators of sites where a hazardous ~~substance was~~substances were released, and companies that disposed or arranged for disposal of hazardous substances at off-site locations such as landfills. ~~During our normal operations, we use materials and generate industrial solid wastes that fall within the definition of a “hazardous substance.”~~

CERCLA authorizes the EPA and, in ~~some~~certain cases, third parties to take actions in response to threats to the public health and welfare or the environment and to seek to recover from the responsible parties the costs incurred for remedial cleanup activities or other corrective actions. Under CERCLA, we could be subject to joint and several liability for the full or partial costs of cleaning up and restoring sites where hazardous substances historically generated by us have been released; damages to natural resources; and the costs of risk assessment studies and contamination containment measures.remediation costs.

We currently own or lease, and historically owned or leased, numerous properties that ~~for many decades~~ have ~~been used for~~extensive histories of industrial ~~manufacturing~~ operations. Hazardous substances ~~or industrial wastes~~ may have been ~~mismanaged, disposed of or~~ released on, under or ~~under the~~from these properties, ~~owned or leased by us,~~ or on, under or ~~under~~from other locations where ~~such~~hazardous wastes have been ~~transported for disposal. In addition, some~~disposed. Some of these properties have been owned or operated by third parties ~~or previous owners whose management, disposal or release of~~who may have released hazardous substances ~~or wastes were not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws.~~

~~Under such laws,~~for which we could have liability. We could be required ~~to remove hazardous substances or previously disposed of industrial wastes (including wastes disposed by prior owners or operators);~~ to investigate or remediate contaminated property, ~~(including contaminated soil and groundwater, whether from prior owners or operators or other historic activities or releases); or~~ perform remedial closure activities, or assess and remediate volatile chemical vapors migrating from soil or groundwater into overlying buildings. Our liability for investigating and remediating contamination could be joint and several and could include damages for impacts to ~~limit~~natural resources.

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 EPA in November 2019 and approved in December 2019. RI Phase I field work is scheduled to be conducted in 2020. We have recorded a liability of $4.6 million for the PCE/TCE Site within other long-term liabilities in our consolidated balance sheets as of December 31, 2019. We will adjust our remediation liability in future periods, if necessary, as the RI/FS progresses or ~~prevent future contamination. Moreover, neighboring landowners and~~if additional requirements are imposed. We may be able to recover a portion of costs incurred in connection with the PCE/TCE Site from other ~~affected~~ parties, ~~may file claims for personal injury and property damage allegedly caused by the release of hazardous substances into the environment.~~though there is no assurance we would receive any funds.

Wastewater Discharges. Our operations are subject to the federal Water Pollution Control Act, ~~of 1972, as amended,~~ also known as the Clean Water Act, or CWA, and analogous state ~~laws and regulations.~~laws. These laws ~~and regulations~~ impose requirements and strict controls regarding the discharge of pollutants from industrial activity into waters of the United States. Such laws ~~and regulations~~ may require that we ~~obtain and~~ comply with ~~categorical industrial~~stormwater runoff and wastewater discharge standards ~~and pretreatment~~ or ~~discharge~~obtain permits ~~containing limits on various water pollutant discharge parameters.~~

~~Our failure~~limiting our discharges of pollutants. Failure to comply with CWA requirements could subject us to monetary penalties, injunctions, restrictions on operations, and ~~potential,~~ administrative ~~civil~~ or ~~criminal~~civil enforcement actions. We may be required to incur certain capital expenditures in the future for wastewater discharge or stormwater runoff treatment technology ~~relating~~ to ~~maintaining compliance~~comply with wastewater permits and water quality standards. Any unauthorized release of pollutants to waters of the United States from our facilities could result in administrative, civil or criminal penalties as well as associated corrective action obligations. We do not believe that our operations will be materially adversely affected by these requirements.

Employee Health and Safety. We are subject to ~~the requirements of~~ the Occupational Safety and Health Act, or OSHA, and comparable state laws that regulate the protection of the health and safety of our workers. ~~In addition, the OSHA hazard communication standard requires that information about hazardous materials used or produced by our operations be maintained~~Among other things, we are required to maintain and ismake available to our employees, state and local government authorities, and ~~citizens. We do not expect that~~others information about hazardous materials used or produced by our ~~operations will be materially adversely affected by these requirements.~~operations.

Zoning and Building Code Requirements

The engineered building systems and components we manufacture must meet zoning, building code and uplift requirements adopted by local governmental agencies. We believe that our products are in substantial compliance with applicable zoning, code and uplift requirements. Compliance does not have a material adverse effect on our business.

~~Patents, Licenses and Proprietary Rights~~

We have a number of United States patents, pending patent applications and other proprietary rights, including those relating to metal roofing systems, metal overhead doors, our pier and header system, our Long Bay® System and our building estimating and design system. The patents on our Long Bay® System expire in 2021. We also have several registered trademarks and pending registrations in the United States.

Research and Development Costs

Total expenditures for research and development were $14.2 million, $3.5 million ~~$4.3 million~~ and ~~$3.7~~$4.3 million for fiscal years 2019, 2018 ~~2017~~ and ~~2016,~~2017, respectively. We incur research and development costs to develop new products, improve existing products and improve safety factors of our ~~products in the metal components segment. These products include building and roofing systems, insulated panels, clips, purlins and fasteners.~~products.

Employees

As of ~~October 28, 2018,~~December 31, 2019, we have approximately ~~5,300~~20,100 employees, of whom approximately ~~4,100~~17,200 are manufacturing and engineering personnel. We regard our employee relations as satisfactory. Approximately ~~13%~~12% of our workforce ~~including the employees at our subsidiary in Mexico,~~ are represented by a collective bargaining agreement or ~~union. As of~~union, which primarily includes the ~~date of the consummation of the Merger, Ply Gem employed approximately 15,600~~ employees ~~across 39 facilities~~at our subsidiary in Mexico, our plant in Calgary, Alberta and our North ~~America.~~

Brunswick, New Jersey plant.

Item 1A. Risk Factors.

Risks related to our ~~business~~industry and economic and market conditions

Our industry is cyclical and highly sensitive to macroeconomic conditions. ~~Our industry is currently experiencing a prolonged downturn which, if sustained, will~~Negative economic events including, but not limited to, recessions, lower consumer confidence, high interest rates, inflation, and lower new construction home starts may materially and adversely affect the outlook for our business, liquidity and results of operations.

The ~~nonresidential~~ construction industry is highly sensitive to national and regional macroeconomic conditions. ~~The United States and global economies are currently undergoing a period of unprecedented volatility, which is having an adverse effect on our business.~~

Current market estimates continue to show uneven activity across the nonresidential construction markets. According to Dodge Data & Analytics, Inc. ("Dodge"), low-rise nonresidential construction starts, as measured in square feet and comprising buildings of up to five stories, were down as much as approximately 7%5% in our fiscal ~~2018~~2019 as compared to our fiscal ~~2017. However, Dodge typically revises initial reported figures,~~2018.

In addition to commercial and residential market indicators, we ~~expect this metric may be revised upwards over time. Leading indicators~~also depend to a significant extent upon the levels of home repair and remodeling and new construction spending for ~~low-rise, nonresidential construction activity indicate positive momentum into 2019.~~

~~The leading indicators that we follow~~our residential businesses, which declined significantly beginning in 2008 and ~~that typically have~~continued through 2013 with recovery commencing in 2014. Housing levels in 2019 remained slightly lower relative to historical averages, despite the ~~most meaningful correlation to nonresidential low-rise construction starts~~recovery the last few years, and are ~~the AIA Architecture Mixed Use Index, Dodge Residential single family starts~~affected by such factors as interest rates, inflation, consumer confidence, unemployment and the ~~LEI. Historically, there has been~~availability of consumer credit.

Our performance is also dependent upon consumers having the ability to finance home repair and remodeling projects and/or the purchase of new homes. The ability of consumers to finance these purchases is affected by such factors as new and existing home prices, homeowners’ equity values, interest rates and home foreclosures, which in turn could result in a ~~very high correlation~~tightening of lending standards by financial institutions and reduce the ability of some consumers to finance home purchases or repair and remodeling expenditures. Trends such as declining home values, increased home foreclosures and tightening of credit standards by lending institutions, negatively impacted the ~~Dodge low-rise nonresidential starts when~~home repair and remodeling and the ~~three leading indicators are combined and then seasonally adjusted. The combined forward projection~~new construction sectors during the recession which began in 2008. Despite the recent abatement of these ~~metrics, based on a 9 to 14-month historical lag for each metric, indicates low single digit growth for new low-rise nonresidential construction starts in 2019, with the majority~~negative market factors, any recurrence or worsening of ~~that growth occurring in the second half of~~these items may adversely affect our ~~fiscal year.~~financial condition and operating results.

~~However, continued~~Historically, any uncertainty about current economic conditions has had a negative effect on our business, and will continue to pose a risk to our business as our customers may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for our products. Other factors that could influence demand include fuel and other energy costs, conditions in the nonresidential real estate markets, labor and healthcare costs, access to credit, tariffs, and other macroeconomic factors. From time to time, our industry has also been adversely affected in various parts of the country by declines in nonresidential construction starts, including but not limited to, high vacancy rates, changes in tax laws affecting the real estate industry, high interest rates and the unavailability of financing. Sales of our products may be adversely affected by continued weakness in demand for our products within particular customer groups, or a continued decline in the general construction industry or particular geographic regions. These and other economic factors could have a material adverse effect on demand for our products and on our financial condition and operating results.

We cannot predict the timing or severity of any future economic or industry ~~downturns.~~downturns or adverse weather conditions. A prolonged economic downturn or negative weather patterns, particularly in states where many of our sales are made, would have a material adverse effect on our results of operations and financial ~~condition, including potential asset impairments.~~condition.

~~The ongoing uncertainty~~Uncertainty and volatility in the financial markets and ~~the state of the~~ worldwide economic ~~recovery~~conditions may adversely affect our operating results.

The markets in which we compete are sensitive to general business and economic conditions in the United States and worldwide, including availability of credit, interest rates, fluctuations in capital, credit and mortgage markets and business and consumer confidence. Additionally, political issues in the United States resulting in discord, conflict or lack of compromise between the legislative and executive branches of the U.S. government may affect the national debt, debt ceiling limit, tax reform or federal government budget, which could in turn adversely affect our results of operations. Adverse developments in global financial markets and general business and economic conditions, including through recession, downturn or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows, including our ability and the ability of our customers and suppliers to access capital. There was a significant decline in economic growth, both in the United States and worldwide, that began in the second half of 2007 and continued through 2009. In addition, volatility and disruption in the capital markets during that period reached unprecedented levels, with stock markets falling dramatically and credit becoming very expensive or unavailable to many companies without regard to those companies’ underlying financial strength. ~~Although there have been some indications of stabilization in the general economy and certain industries and markets in which we operate, there~~There can be no guarantee that any improvement in these areas will continue or be sustained.

~~Changes in legislation, regulation~~

Risks related to our business

An inability to successfully develop new products or improve existing products could negatively impact our ability to attract new customers and/or retain existing customers, including our significant customers.

Our success depends on meeting consumer needs and ~~government policy may have a material effect on the Company’s business in the future.~~

While it is not possible to predict whether and when any such changes will occur, changes at the local, state or federal level could significantly impact the Company’s business. For example, the Company’s business activity levels are heavily influenced by the U.S. domestic economy andanticipating changes in ~~administration policies may result~~consumer preferences with successful new products and product improvements. We aim to introduce products and new or improved production processes proactively to offset obsolescence and decreases in ~~changes in tax rates and/or prevailing interest rates, which could either stimulate or contract activity levels in~~sales of existing products. While we devote significant focus to the ~~domestic economy. More specifically, the Company has had a production facility in Mexico for approximately 20 years and purchases a material amount~~development of ~~manufactured~~new products, ~~from this~~

subsidiary. For example, in fiscal 2018, the Company imported approximately $75 million of metal building products from the Company’s Mexican subsidiary. Specific legislative and regulatory proposals discussed during and after the election that could have a material impact on us include, but are not limited to, certain modifications to international trade policy. Any such changes, if unmitigated by changes in our supply chain, may make it more difficult and/or more expensive for us and, thus, could have a material adverse effect on the Company’s results of operations and limit our growth.

~~Our business may be impacted by external factors that~~ we may not be ~~able~~successful in product development and our new products may not be commercially successful. In addition, it is possible that competitors may improve their products more rapidly or effectively, which could adversely affect our sales. Furthermore, market demand may decline as a result of consumer preferences trending away from our categories or trending down within our brands or product categories, which could adversely impact our results of operations, cash flows and financial condition.

Our Windows and Siding segments depend on a core group of significant customers for a substantial portion of net sales and we expect this to ~~control.~~

~~War, civil conflict, terrorism, natural disasters and public health issues including domestic~~continue for the foreseeable future. The loss of, or ~~international pandemic have caused and~~a significant adverse change in our relationships with our largest customers, or loss of market position of any major customer, whether because of an inability to successfully develop new products or improve existing products, or otherwise, could cause ~~damage~~a material decrease in net sales. The loss of, or ~~disruption~~a reduction in orders from, any significant customers, losses arising from customers’ disputes regarding shipments, fees, merchandise condition or performance or related matters, or an inability to ~~domestic or international commerce by creating economic or political uncertainties. Additionally,~~collect accounts receivable from any ~~volatility in the financial markets~~major customer could ~~negatively~~adversely impact our ~~business. These events~~net income and cash flow. In addition, revenue from customers that have accounted for significant revenue in past periods, individually or as a group, may not continue, or if continued, may not reach or exceed historical levels in any period.

Manufacturing or assembly realignments may result in a decrease in our short-term earnings, until the expected cost reductions are achieved, due to the costs of implementation.

We continually review our manufacturing and assembly operations and sourcing capabilities. Effects of periodic manufacturing realignment, cost savings programs, and labor ramp-up costs could result in a decrease in ~~demand for~~ our ~~products, make it difficult~~ short-term earnings until the expected cost reductions are achieved and/or ~~impossible to deliver orders to customers or receive materials from suppliers, affect~~production volumes stabilize. Such programs may include the ~~availability or pricing~~consolidation and integration of ~~energy sources or result in other severe consequences that may or~~facilities, functions, systems and procedures. Such actions may not be ~~predictable. As a result, our business, financial condition~~accomplished as quickly as anticipated and ~~results of operations could be materially adversely affected.~~

~~We may have future capital needs and~~the expected cost reductions may not be ~~able to obtain additional financing on acceptable terms.~~

Although we believe that our current cash position and the additional committed funding available under the Current ABL Credit Facility and the Current Cash Flow Revolver is sufficient for our current operations, any reductions in our available borrowing capacity,achieved or our inability to renew or replace our debt facilities, when required or when business conditions warrant, could have a material adverse effect on our business, financial condition and results of operations. The economic conditions, credit market conditions and economic climate affecting our industry, as well as other factors, may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit generally, economic conditions and financial, business and other factors, many of which are beyond our control. The market conditions and the macroeconomic conditions that affect our industry could have a material adverse effect on our ability to secure financing on favorable terms, if at all.

We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under the indebtedness outstanding from time to time. Furthermore, if financing is not available when needed, or is available on unfavorable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution.sustained.

Our ability to access future financing also may be dependent on regulatory restrictions applicable to banks and other institutions subject to U.S. federal banking regulations, even if the market would otherwise be willing to provide such financing.

We have obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002. Fulfilling these obligations is expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations.

We completed our initial public offering in fiscal 1992. As a public company, we are subject to the reporting and corporate governance requirements, New York Stock Exchange (“NYSE”) listing standards and the Sarbanes-Oxley Act of 2002 that apply to issuers of listed equity, which imposes certain compliance costs and obligations upon us. Being a public company entails higher auditing, accounting and legal fees and expenses, investor relations expenses, directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses, than for a non-public company.

In addition, changes in regulatory requirements, such as the reporting requirements relating to conflict minerals originating in the Democratic Republic of Congo or adjoining countries included in the Dodd-Frank Act, or evolving interpretations of existing regulatory requirements, may result in increased compliance cost, capital expenditures and other financial obligations that could adversely affect our business ~~or financial results.~~

~~We may recognize goodwill or other intangible asset impairment charges.~~

Future triggering events, such as declines in our cash flow projections, may cause impairments of our goodwill or intangible assets based on factors such as our stock price, projected cash flows, assumptions used, control premiums or other variables.

For example, we completed our annual impairment assessment of goodwill and indefinite lived intangibles in the fourth quarter of fiscal 2017 and recorded a $6.0 million impairment charge related to the goodwill associated with a reporting unit within the Metal Coil Coating segment.

~~Our businesses are seasonal, and our results of operations during our first two fiscal quarters~~ may be adversely affected by weather ~~conditions.~~conditions and other external factors beyond our control.

~~The engineered building systems, metal components and metal coil coating businesses, and the construction industry in general,~~Markets for our products are seasonal and can be affected by inclement weather conditions. Historically, our business has experienced increased sales in ~~nature. Sales normally~~the second and third quarters of the year due to increased construction during those periods. Because much of our overhead and operating expenses are spread ratably throughout the year, our operating profits tend to be lower in the first ~~half of each fiscal year compared to the second half of the fiscal year because of unfavorable weather conditions for construction~~ and ~~typical business planning cycles affecting construction. This seasonality adversely affects our results of operations for the first two fiscal~~fourth quarters. ~~Prolonged severe~~Inclement weather conditions can ~~delay~~affect the timing of when our products are applied or installed, causing reduced profit margins when such conditions exist. For example, unseasonably cold weather or extraordinary amounts of rainfall may decrease construction ~~projects~~activity.

Further, other external factors beyond our control could cause disruptions at any of our facilities, including maintenance outages; prolonged power failures or reductions; a breakdown, failure or substandard performance of any equipment or other operational problems; disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads; fires, floods, hurricanes, earthquakes or other catastrophic disasters; pandemics, such as Coronavirus; or an act of terrorism. Any prolonged disruption in operations at any of our facilities could cause a significant loss in production. As a result, we could incur significantly higher costs and ~~otherwise~~longer lead times associated with distributing our products to customers during the time that it takes for us to reopen or replace a damaged facility, which could cause our customers to purchase from our competitors either temporarily or permanently. If any of these events were to occur, it could adversely affect our ~~business.~~business, financial condition, cash flows and results of operations

Price volatility and supply constraints ~~in the steel market~~for raw materials could prevent us from meeting delivery schedules to our customers or reduce our profit margins.

Our business is heavily dependent on the price and supply of ~~steel. The~~raw materials including steel, ~~industry is highly cyclical in nature,~~PVC resin, aluminum and ~~steel~~glass. Raw material prices have been volatile in recent years and may remain volatile in the future. ~~Steel~~Raw material prices are influenced by numerous factors beyond our control, including general economic conditions domestically and internationally, currency fluctuations, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, tariffs, import duties and other trade restrictions. ~~Given~~For example, in 2018, the ~~level~~Trump administration implemented new tariffs on imports of steel ~~industry consolidation,~~and aluminum into the ~~anticipated additional domestic market capacity, generally low inventories in the industry and slow economic recovery, a~~United States.

A sudden increase in demand for steel, PVC resin, aluminum or glass could affect our ability to purchase ~~steel~~such raw materials and result in rapidly increasing ~~steel~~ prices.

We ~~normally do not maintain an inventory of steel~~have historically been able to substantially pass on significant cost increases in ~~excess of~~raw materials through price increases to our ~~current production requirements. However, from time to time,~~customers, however we may purchase steel in advance of announced steel price increases. In addition, it is our current practice to purchase all steel inventory that has been ordered but is not in our possession. If demand for our products declines, our inventory may increase. We can give you no assurance that steel will remain available, that prices will not continue to be volatile or that we will be able to purchase steel on favorable or commercially reasonable terms. While most of our sales contracts have escalation clauses that allow us, under certain circumstances, to pass along all or a portion of increases in the price of steel after the date of the contract but prior to delivery, we may, for competitive or other reasons, not be able to ~~pass such price increases along. If~~do so in the future. Further, if the available supply of ~~steel~~any of the raw materials we use declines, we could experience ~~price increases that we are not able to pass on to our customers,~~ a deterioration of service from our suppliers or interruptions or delays that may cause us not to meet delivery schedules to our customers. Any of these problems could adversely affect our results of operations and financial condition. ~~For more information about~~We can give you no assurance that steel, ~~pricing trends~~PVC resin, aluminum or glass will remain available, that prices will not continue to be volatile or that we will be able to purchase these raw materials on favorable or commercially reasonable terms.

Further, we use energy in ~~recent years, see “Item 1. Business — Raw Materials”~~the manufacturing and ~~“Item 7A. Quantitative~~transportation of our products. In particular, our manufacturing plants use considerable amounts of electricity and ~~Qualitative Disclosures about Market Risk — Steel Prices.”~~natural gas. Consequently, our operating costs typically increase if energy costs rise. During periods of higher energy costs, we may not be able to recover our operating cost increases through price increases without reducing demand for our products. To the extent we are not able to recover these cost increases through price increases or otherwise, our profitability and cash flow will be adversely impacted. We partially hedge our exposure to higher prices through fixed forward positions.

We rely on third-party suppliers for materials in addition to steel, PVC resin, aluminum and glass, and if we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if there is a significant interruption in our supply chains, our business and results of operations could be adversely affected.

In addition to steel, PVC resin, aluminum and glass, our operations require other raw materials from third-party suppliers. We generally have multiple sources of supply for our raw materials, however, in some cases, materials are provided by a single supplier. The loss of, or substantial decrease in the availability of, products from our suppliers, or the loss of a key supplier, could adversely impact our financial condition and results of operations. In addition, supply interruptions could arise from shortages of raw materials, labor disputes or weather conditions affecting products or shipments or other factors beyond our control. Short- and long-term disruptions in our supply chain would result in a need to maintain higher inventory levels as we replace similar product, a higher cost of product and ultimately a decrease in our revenues and profitability. To the extent our suppliers experience disruptions, there is a risk for delivery delays, production delays, production issues or delivery of non-conforming products by our suppliers. Even where these risks do not materialize, we may incur costs as we prepare contingency plans to address such risks. In addition, disruptions in transportation lines could delay our receipt of raw materials. If our supply of raw materials is disrupted or our delivery times extended, our results of operations and financial condition could be materially adversely affected. Furthermore, some of our third-party suppliers may not be able to handle commodity cost volatility or changing volumes while still performing up to our specifications. Short-term changes in the cost of these materials, some of which are subject to significant fluctuations, are sometimes, but not always passed on to our customers. Our inability to pass on material price increases to our customers could adversely impact our financial condition, operating results and cash flows.

Failure to retain or replace key personnel could hurt our operations.

Our success depends to a significant degree upon the efforts, contributions and abilities of our senior management, plant managers and other highly skilled personnel, including our sales executives. These executives and managers have many accumulated years of experience in our industry and have developed personal relationships with our customers that are important to our business. If we do not retain the services of our key personnel or if we fail to adequately plan for the succession of such individuals, our customer relationships, results of operations and financial condition may be adversely affected.

If we are unable to enforce our intellectual property rights, or if such intellectual property rights become obsolete, our competitive position could be adversely affected.

As a company that manufactures and markets branded products, we rely heavily on trademark and service mark protection to protect our brands. We ~~utilize~~also have issued patents and rely on trade secret and copyright protection for certain of our technologies. These protections may not adequately safeguard our intellectual property and we may incur significant costs to defend our intellectual property rights, which may harm our operating results. There is a ~~variety of~~risk that third parties, including our current competitors, will infringe on our intellectual property rights, in which case we would have to defend these rights. There is also a risk that third parties, including our ~~services.~~ current competitors, will claim that our products infringe on their intellectual property rights. These third parties may bring infringement claims against us or our customers, which may harm our operating results.

We also rely on third party license agreements for certain trademarks and technologies we employ. There is a risk that third parties may modify or terminate such licenses, which may harm our operating results. While these license agreements generally provide that the licensors will indemnify us, subject to certain limitations, for certain infringement liabilities, our ability to seek indemnification from the respective licensors is limited by various factors, including the financial condition of the licensor as well as by the terms and limits of such indemnities or obligations. As a result, there can be no assurance that we could receive any indemnification from licensors, and any related infringement liabilities, costs or penalties could have a ~~number~~material adverse effect on our financial condition and results of United States copyrights, patents, foreign patents, pending patent and copyright applications and other proprietary rights, including those relating to metal roofing systems, metal overhead doors, our pier and header system, our Long Bay® System and our building estimating and design system. CENTRIA also has a number of U.S. patents, including for its composite joinery apparatus. We and CENTRIA also have a number of registered trademarks and pending registrations in the United States. In addition, CENTRIA has exclusively licensed certain metal building cladding technology from Proclad Enterprises Ltd., which, under certain circumstances, may be converted to a non-exclusive license. We view this portfolio of owned and licensed process and design technologies as one of our competitive strengths. We may not be able to successfully preserve these intellectual property rights in the future and these rights could be invalidated, circumvented, or challenged.operations.

There can be no assurance that the efforts we have taken to protect our proprietary rights will be sufficient or effective, that any pending or future patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not develop or patent similar or superior technologies, products or services, or that our patents, trademarks and other intellectual property will not be challenged, invalidated, misappropriated or infringed by others. If we are unable to protect and maintain our intellectual property rights, ~~including those acquired from CENTRIA,~~ or if there are any successful intellectual property challenges or infringement proceedings against us, ~~including in connection with intellectual property of CENTRIA,~~ our business and revenue could be materially and adversely affected.

We may also be subject to future claims and legal proceedings regarding alleged infringement by us of the patents, trademarks and other intellectual property rights of third parties. If there is a claim against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, and we are unable to obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely or cost-efficient basis, our business and competitive position may be adversely affected.

~~We incur costs to comply with environmental laws and have liabilities for environmental investigations, cleanups and claims.~~

During the normal operation of our manufacturing facilities, we emit and discharge pollutants into the environment, handle and use hazardous substances, and generate and dispose of industrial wastes. We also own and operate, or have in the past owned and operated, real and leased property that has been historically used for industrial purposes. We incur costs and liabilities to comply with environmental laws and regulations that apply to our operations and properties. We maycould incur significant ~~additional~~ costs as ~~those laws~~a result of compliance with, violations of or liabilities under applicable environmental, health and regulations, or their enforcement, change in the future; or if we discover a release of hazardous substances, industrial wastes or other contamination into the environment, historical or otherwise, caused by our manufacturing operations or historical predecessors.safety laws.

Our ~~manufacturing facilities~~operations are subject to ~~stringent and complex~~various federal, state, local and ~~tribal~~foreign environmental, health and safety laws. Among other things, these laws ~~and regulations. These include (i)~~regulate the ~~federal Clean Air Act and comparable state laws and regulations that impose requirements related to air emissions; (ii)~~emission or discharge of materials into the ~~federal Clean Water Act and comparable state laws and regulations that impose requirements related to wastewater and stormwater discharges; (iii)~~environment, govern the ~~federal Resource Conservation and Recovery Act and comparable state laws that impose requirements for the~~use, storage, treatment, ~~handling~~disposal and ~~disposal~~management of ~~industrial~~hazardous substances and wastes, ~~from~~protect the health and safety of our ~~facilities;~~employees and ~~(iv)~~ the ~~Comprehensive Environmental Response, Compensation~~end-users of our products, regulate the materials used in our products and ~~Liability Act of 1980 and comparable state laws that~~ impose liability for the ~~investigation~~costs of investigating and ~~cleanup~~remediating, and other damages resulting from, present and past releases of hazardous ~~substances~~substances. Violations of these laws or ~~industrial wastes that may have been released~~of any conditions contained in environmental permits can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit revocations and facility shutdowns. We could be held liable for the costs to investigate, remediate or otherwise address contamination at ~~properties currently or previously owned or operated by us, or at locations where~~any real property we have ~~sent industrial waste~~ever owned, operated or used as a disposal site or other sites at which we or predecessors released hazardous materials. We also could incur fines, penalties or sanctions or be subject to third-party claims, including indemnification claims, for ~~disposal.~~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. In addition, changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, including additional investigation, remediation or other obligations with respect to our products or business activities or the imposition of new permit requirements, may lead to additional costs that could have a material adverse effect on our business, financial condition or results of operations.

~~Failure~~Changes in building codes and standards could increase the cost of our products, lower the demand for our products, or otherwise adversely affect our business.

Our products and markets are subject to ~~comply~~extensive and complex local, state, federal, and foreign statutes, ordinances, rules, and regulations. These mandates, including building design and safety and construction standards and zoning requirements, affect the cost, selection, and quality requirements of building components like windows and siding.

These statutes, ordinances, rules, and regulations often provide broad discretion to governmental authorities as to the types and quality specifications of products used in new residential and non-residential construction and home renovations and improvement projects, and governmental authorities can impose different standards. Compliance with these ~~laws~~standards and changes in such statutes, ordinances, rules, and regulations may ~~trigger~~increase the costs of manufacturing our products or may reduce the demand for certain of our products in the affected geographical areas or product markets. Conversely, a ~~variety~~decrease in product safety standards could reduce demand for our more modern products if less expensive alternatives that did not meet higher standards became available for use in that market. All or any of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties; the imposition of investigative or remedial requirements; personal injury, property or natural resource damages claims; and the issuance of orders limiting current or future operations. For more information about thethese changes could have a material adverse effect ~~of environmental laws and regulations~~ on our business, ~~see “Item 1. Business - Environmental Matters.”~~financial condition, and results of operations.

The industries in which we operate are highly competitive.

We compete with all other alternative methods of building construction, which may be viewed as more traditional, more aesthetically pleasing or having other advantages over our products. In addition, competition in the ~~metal components and metal buildings~~construction markets of the building industry ~~and in the metal coil coating segment~~ is intense. It is based primarily ~~on:~~

on quality;

service;

on-time ~~delivery;~~

delivery and project completion; ability to provide added value in the design and engineering of buildings;

price;

~~speed of construction in buildings~~ and ~~components; and~~

personal relationships with customers.

WeIn our Commercial segment, we compete with a number of other manufacturers of metal components and engineered building systems and providers of coil coating services ranging from small local firms to large national firms. In addition, we and other manufacturers of metal components and engineered building systems compete with alternative methods of building construction. If these alternative building methods compete successfully against us, such competition could adversely affect us.

In addition, several of our competitors have been acquired by steel producers. Competitors owned by steel producers may have a competitive advantage on raw materials that we do not enjoy. Steel producers may prioritize deliveries of raw materials to such competitors or provide them with more favorable pricing, both of which could enable them to offer products to customers at lower prices or accelerated delivery schedules.

~~Our stock price has been~~

In our Siding and Windows segments, we compete with other national and regional manufacturers of exterior building products. Some of these companies are larger and have greater financial resources than we do. Accordingly, these competitors may ~~continue~~be better equipped to ~~be volatile.~~

~~The trading price of our Common Stock has fluctuated in the past and is subject to significant fluctuations in response to the following factors, some of which are beyond our control:~~

~~variations in quarterly operating results;~~

~~deviations in our earnings from publicly disclosed forward-looking guidance;~~

~~variability in our revenues;~~

withstand changes in ~~earnings estimates by analysts;~~

~~our announcements of significant contracts, acquisitions, strategic partnerships or joint ventures;~~

~~general~~ conditions in the industries in which we operate and may have significantly greater operating and financial flexibility than we do. Competitors could take a greater share of sales and cause us to lose business from our customers. Additionally, our products face competition from alternative materials, such as wood, metal, ~~components~~fiber cement, masonry and ~~engineered~~composites in siding, and wood, composites and fiberglass in windows. An increase in competition from other exterior building ~~systems industries;~~products manufacturers and alternative building materials could cause us to lose our customers and lead to net sales decreases.

~~uncertainty about current global economic conditions;~~

~~sales of our Common Stock by our significant stockholders;~~

~~fluctuations in stock market price~~We face risks related to past and ~~volume; and~~

~~other general economic conditions.~~

During fiscal 2018, our stock price on the NYSE ranged from a high of $23.35 per share to a low of $12.30 per share. In recent years, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies in industries similar to ours. Some of these fluctuations have been unrelated to the operating performance of the affected companies. These market fluctuations may decrease the market price of our Common Stock in the future.

~~Acquisitions may be unsuccessful if we incorrectly predict operating results or are unable to identify and complete~~ future acquisitions ~~and integrate acquired assets or businesses.~~that could adversely affect our results of operations.

We have a history of expansion through acquisitions, and we believe that if our industry continues to consolidate, our future success may depend, in part, on our ability to successfully complete acquisitions. Growing through acquisitions and managing that growth will require us to continue to invest in operational, financial and management information systems and to attract, retain, motivate and effectively manage our employees. Pursuing and integrating acquisitions involves a number of risks, including:

•the risk of incorrect assumptions or estimates regarding the future results of the acquired business or expected cost reductions or other synergies expected to be realized as a result of acquiring the business;

•diversion of management’s attention from existing operations;

•unexpected losses of key employees, customers and suppliers of the acquired business;

•integrating the financial, technological and management standards, processes, procedures and controls of the acquired business with those of our existing operations; ~~and~~

•increasing the scope, geographic diversity and complexity of our ~~operations.~~operations; and

~~Although~~•potential litigation or other claims arising from the ~~majority of our growth strategy is organic in nature, if we do pursue opportunistic acquisitions, we~~acquisition.

We can provide no assurance that we will be successful in identifying or completing any future acquisitions or that any businesses or assets that we

are able to acquire will be successfully integrated into our existing business. ~~We cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the trading prices of our common stock.~~

~~Acquisitions subject us to numerous risks that could adversely affect our results of operations.~~

If we pursue further acquisitions, depending on conditions in the acquisition market, it may be difficult or impossible for us to identify businesses or operations for acquisition, or we may not be able to make acquisitions on terms that we consider economically acceptable. Even if we are able to identify suitable acquisition opportunities, our acquisition strategy depends upon, among other things, our ability to obtain financing and, in some cases, regulatory approvals, including under the Hart-Scott-Rodino Act.

~~Our~~The incurrence of additional debt, contingent liabilities and expenses in connection with any future acquisitions could have a material adverse effect on our financial condition and results of operations. ~~Furthermore,~~Further, we cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the trading price of our financial position and results of operations may fluctuate significantly from period to period based on whether significant acquisitions are completed in particular periods. Competition for acquisitions is intense and may increase the cost of, or cause us to refrain from, completing acquisitions. Common Stock.

In addition, we may be subject to claims arising from the operations of businesses from periods prior to the dates we acquired them. These claims or liabilities could be significant. Our ability to seek indemnification from the former owners for these claims or liabilities is limited by various factors, including the specific limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy such claims or liabilities. If we are unable to ~~consummate~~enforce any ~~acquisition once announced and~~indemnification rights we may have against the former owners or if the former owners are unable to satisfy their obligations for any reason, including because of their current financial position, or if we do not have any right to indemnification, we could be held liable for ~~termination fees.~~the costs or obligations associated with such claims or liabilities, which could adversely affect our operating performance

Restructuring our operations may harm our profitability, financial condition and results of operations. Our ability to fully achieve the estimated cost savings is uncertain.

We have developed plans to improve cost efficiency and optimize our combined manufacturing plant footprint considering our recent acquisitions and restructuring efforts. Future charges related to the plans may harm our profitability in the periods incurred. Additionally, if we were to incur unexpected charges related to the plans, our financial condition and results of operations may suffer.

Implementation of these plans carry significant risks, including:

•actual or perceived disruption of service or reduction in service levels to our customers;

•failure to preserve supplier relationships and distribution, sales and other important relationships and to resolve conflicts that may ~~arise~~arise;

•potential adverse effects on our internal control environment and an inability to preserve adequate internal controls;

•diversion of management attention from ongoing business activities and other strategic objectives; and

•failure to maintain employee morale and retain key employees.

Because of these and other factors, we cannot predict whether we will fully realize the cost savings from these plans. If we do not fully realize the expected cost savings from these plans, our business and results of operations may be negatively affected. Also, if we were to experience any adverse changes to our business, additional restructuring activities may be required in the future.

~~Volatility in energy prices may impact our operating costs, and we~~We may be ~~unable~~significantly affected by global climate change or by legal, regulatory or market responses to ~~pass any resulting increases~~global climate change.

Concern over the effects of global climate change has led to ~~our customers in~~federal, state and international legislative and regulatory efforts to limit greenhouse gas, or GHG, emissions. In the ~~form of higher prices for our products.~~

~~Volatility in energy prices may increase our operating costs and may reduce our profitability and cash flows if we are unable~~past, the United States Congress has considered various bills to ~~pass any resulting increases to our customers. We use energy in~~regulate GHG emissions. Though the manufacture and transport of our products. In particular, our manufacturing plants use considerable amounts of electricity and natural gas. Consequently, our operating costs typically increase if energy costs rise. During periods of higher energy costs, we maylegislation did not ~~be able to recover our operating cost increases through price increases without reducing demand for our products. To~~become law, the extent we are not able to recover these cost increases through price increases or otherwise, our profitability and cash flow will be adversely impacted. We partially hedge our exposure to higher prices via fixed forward positions.

~~The adoption of~~U.S. Congress could pass climate change legislation in the future. In addition, in the past, the United States Environmental Protection Agency, or ~~regulations restricting~~EPA, took steps to regulate GHG emissions, ~~of greenhouse gases could increase our operating costs or reduce demand for our products.~~

though at this time the EPA is not actively regulating GHG emissions. More stringent federal, regional, state and foreign laws and regulations relating to global climate change and ~~greenhouse gases, or GHGs,~~GHG emissions may be adopted in the ~~future~~future. These laws and regulations could impact our facilities, raw material suppliers, the transportation and distribution of our products, and our customers, ~~which~~and could reduce demand for our products or cause us to incur additional capital, operating ~~costs~~ or ~~reduced~~other costs. Until the timing, scope and extent of any future legislation or regulation becomes known, we cannot predict its effect on our business. In addition, global climate change may increase the frequency or intensity of extreme weather events, such as storms, floods, heat waves, and other events that could affect our facilities and demand for our products.

On December 15, 2009, the federal Environmental Protection Agency, or EPA, published its findings that emissions of carbon dioxide, methane, and other GHGs present an endangerment to public health, the economy and the environment because emissions of such gases, according to the EPA, contribute to the warming We are mindful of the ~~earth’s atmosphere~~harmful effects of global climate change and ~~other climate changes. These findings allowed the EPA~~are taking steps to ~~adopt and implement regulations and permit programs that would restrict emissions of GHGs under existing provisions of the federal CAA.~~

~~Although it is not possible to accurately predict how new~~minimize our GHG rules and policy would impact our business, any new federal, regional or state restrictions on emissions of carbon dioxide or other GHGs that may be imposed in areas where we conduct business could result in increased compliance costs or additional operating restrictions. Such restrictions could potentially make our products more expensive and reduce their demand.emissions.

Breaches of our information system security measures could disrupt our internal operations.

We are dependent upon information technology for the distribution of information internally and also to our customers and suppliers. This information technology is subject to theft, damage or interruption from a variety of sources, including but not limited to malicious computer viruses, security breaches and defects in design. ~~Various measures~~Purchase of our products may involve the transmission and/or storage of data, including in certain instances customers’ business and personally identifiable information. Thus, maintaining the security of computers, computer networks and data storage resources is a critical issue for us and our customers, as security breaches could result in vulnerabilities and loss of and/or unauthorized access to confidential information. We have ~~been implemented~~in the past faced, and may in the future face attempts by hackers, cybercriminals or others with authorized access to ~~manage~~ our ~~risks related~~systems to misappropriate our proprietary information ~~system~~ and ~~network~~technology, interrupt our business, and/or gain unauthorized access to confidential information. The reliability and security of our information technology infrastructure and software, and our ability to expand and continually update technologies in response to our changing needs is critical to our business. To the extent that any disruptions ~~but~~or security breaches result in a ~~system failure~~loss or ~~breach~~damage to our data, it could cause harm to our reputation or brand. This could lead some customers to stop purchasing our products and reduce or delay future purchases of our products or the use of competing products; lead to state or federal enforcement action, which could result in fines, penalties and/or other liabilities and which may cause us to incur legal fees and costs; and/or result in additional costs associated with responding to a cyberattack. Increased regulation regarding cyber security may increase our costs of compliance, including fines and penalties, as well as costs of cyber security audits. Any of these ~~measures~~actions could ~~negatively~~materially adversely impact our ~~operations~~business and ~~financial results.~~results of operations.

We have invested in industry appropriate protections and monitoring practices of our data and information technology to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. There can be no assurance, however, that our efforts will prevent breakdowns or breaches to our third party providers’ databases or systems that could adversely affect our business.

Damage to our computer infrastructure and software systems could harm our business.

The unavailability of any of our primary information management systems for any significant period of time could have an adverse effect on our operations. In particular, our ability to deliver products to our customers when needed, collect our receivables and manage inventory levels successfully largely depend on the efficient operation of our computer hardware and software systems. Through information management systems, we provide inventory availability to our sales and operating personnel, improve customer service through better order and product reference data and monitor operating results. Difficulties associated with upgrades, installations of major software or hardware, and integration with new systems could lead to business interruptions that could harm our reputation, increase our operating costs and decrease our profitability. In addition, these systems are vulnerable to, among other things, damage or interruption from power loss, computer system and network failures, loss of telecommunications services, operator negligence, physical and electronic loss of data, or security breaches and computer viruses.

We have contracted with third-party service providers that provide us with redundant data center services in the event that our major information management systems are damaged. The backup data centers and other protective measures we take could prove to be inadequate. Our inability to restore data completely and accurately could lead to inaccurate and/or untimely filings of our periodic reports with the SEC, tax filings with the Internal Revenue Service (“IRS”) or other required filings, all of which could have a significant negative impact on our corporate reputation and could negatively impact our stock price or result in fines or penalties that could impact our financial results.

Our enterprise resource planning technologies will require maintenance or replacement in order to allow us to continue to operate and manage critical aspects of our business.

We rely heavily on enterprise resource planning technologies (“ERP Systems”) from third parties in order to operate and manage critical internal functions of our business, including accounting, order management, procurement, and transactional entry and approval. Certain of our ERP Systems are no longer supported by their vendor, are reaching the end of their useful life or are in need of significant updates to adequately perform the functions we require. We have limited access to support for older software versions and may be unable to repair the hardware required to run certain ERP Systems on a timely basis due to the unavailability of replacement parts. In addition, we face operational vulnerabilities due to limited access to software patches and software updates on any software that is no longer supported by their vendor. We are planning hardware and software upgrades to our ERP Systems and are in discussions with third-party vendors regarding system updates.

If our ERP Systems become unavailable due to extended outages or interruptions, or because they are no longer available on commercially reasonable terms, our operational efficiency could be harmed and we may face increased replacement costs. We may also face extended recovery time in the event of a system failure due to lack of resources to troubleshoot and resolve such issues. Our ability to manage our operations could be interrupted and our order management processes and customer support functions could be impaired until equivalent services are identified, obtained and implemented on commercially reasonable terms, all of which could adversely affect our business, results of operations and financial condition.

~~Our operations are subject~~We risk liabilities and losses due to ~~hazards that may cause~~ personal injury, or property damage ~~thereby subjecting us to liabilities and possible losses,~~or product liability claims, which may not be covered by insurance.

Our workers are subject to the usual hazards associated with work in manufacturing environments. Operating hazards can cause personal injury and loss of life, as well as damage to or destruction of business personal property, and possible environmental impairment. We are subject to either deductible or self-insured retention (SIR) amounts, per claim or occurrence, under our Property/Casualty insurance programs, as well as an individual stop-loss limit per claim under our group medical insurance plan. We maintain insurance coverage to transfer risk, with aggregate and per-occurrence limits and deductible or retention levels that we believe are consistent with industry practice. The transfer of risk through insurance cannot guarantee that coverage will be available for every loss or liability that we may incur in our operations.

Exposures that could create insured (or uninsured) liabilities are difficult to assess and quantify due to unknown factors, including but not limited to injury frequency and severity, natural disasters, terrorism threats, third-party liability, and claims

that are incurred but not reported (“IBNR”). Although we engage third-party actuarial professionals to assist us in determining our probable future loss exposure, it is possible that claims or costs could exceed our estimates or our insurance limits, or could be uninsurable. In such instances we might be required to use working capital to satisfy these losses rather than to maintain or expand our operations, which could materially and adversely affect our operating results and our financial condition.

~~Due~~Further, we face an inherent business risk of exposure to product liability claims, including class action claims and warranties, in the ~~international nature~~event that the use of any of our ~~business,~~products results in personal injury or property damage. In the event that any of our products are defective or prove to be defective, among other things, we may be responsible for damages related to any defective products and may be required to cease production, recall or redesign such products. Because of the long useful life of our products, it is possible that latent defects might not appear for several years. Any insurance we maintain may not continue to be available on acceptable terms or such coverage may not be adequate for liabilities actually incurred. Further, any claim or product discontinuance, recall or redesign could ~~be adversely affected by violations of certain laws.~~result in adverse publicity against us, which could cause sales to decline, or increase warranty costs.

We face risks related to our international operations.

In addition to the United States, we operate our business in Canada and Mexico and make sales in certain other jurisdictions. ~~The policies~~Our operations in Canada generated approximately 7.0% of our ~~business mandate compliance~~revenues in 2019. As such, our net sales, earnings and cash flow are exposed to risk from changes in foreign exchange rates, which can be difficult to mitigate. Depending on the direction of changes relative to the U.S. dollar, Canadian dollar values can increase or decrease the reported values of our net assets and results of operations. We hedge this foreign currency exposure by evaluating the usage of certain derivative instruments which hedge certain, but not all, underlying economic exposures

Our international operations require us to comply with certain U.S. and international laws, such as import/export laws and regulations, anti-boycott laws, economic sanctions, laws and regulations, the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws. We operate in parts of the world, including Mexico, that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot provide assurance that our internal controls and procedures will always prevent reckless or criminal acts by our employees or agents, or that the operations of acquired businesses will have been conducted in accordance with our policies and applicable regulations. If we are found to be liable for violations of these laws (either due to our own acts, out of inadvertence or due to the acts or inadvertence of others), we could suffer criminal or civil penalties or other sanctions, including limitations on our ability to conduct our business, which could have a material and adverse effect on our results of operations, financial condition and cash flows.

~~Recently enacted tariffs on steel imports~~Increases in labor costs, potential labor disputes, union organizing activity and work stoppages at ourfacilities or the facilities of our suppliers could delay or impede our production,reduce sales of our products and increase our costs.

Our financial performance is affected by the availability of qualified personnel and the cost of labor. As of December 31, 2019, approximately 12% of our employees were represented by labor unions. We are subject to the risk that strikes or other types of conflicts with personnel may arise or that we may become a subject of union organizing activity. Furthermore, some of our direct and indirect suppliers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these suppliers could result in ~~increased steel prices~~slowdowns or closures of facilities where components of our products are manufactured. Any interruption in the production or delivery of our products could reduce sales of our products and increase our costs. Our ability to attract and retain qualified manufacturing personnel to operate our manufacturing plants efficiently is critical to our financial performance. Any labor shortage will create operating inefficiencies that could adversely ~~affect~~impact our financial performance.

Significant changes in factors and assumptions used to measure our defined benefit plan obligations, actual investment returns on pension assets and other factors could negatively impact our operating results and cash flows.

The recognition of ~~operations.~~

~~In 2018,~~costs and liabilities associated with our pension plans for financial reporting purposes is affected by assumptions made by management and used by actuaries engaged by us to calculate the ~~Trump administration implemented new tariffs on imports~~benefit obligations and the expenses recognized for these plans. The inputs used in developing the required estimates are calculated using a number of ~~steel into the United States. As the implementation~~assumptions, which represent management’s best estimate of ~~tariffs is ongoing, more tariffs may be added in~~ the future. The ~~new tariffs may provide domestic steel producers~~assumptions that have the ~~flexibility~~most significant impact on reported results are the discount rate, the estimated long-term return on plan assets for the funded plans, retirement rates, and mortality rates. These assumptions are generally updated annually.

In recent years, the declining interest rates and changes to ~~increase their prices, at least to a level where their products would still be priced below foreign competitors once~~mortality assumptions have negatively impacted the tariffs are taken into account. The new tariffs could result in both increased steel prices and a decreased available supply of steel. We may not be able to pass such price increases on to our customers and may not be able to secure adequate alternative sources of steel on a timely basis. Either of these occurrences could adversely affect our results of operations and financial condition.

~~Risks related to the Ply Gem business~~

~~On November 16, 2018, the date we consummated the Merger, the businesses and operations of Ply Gem became part~~funded status of our ~~operations~~pension plans. In addition, volatile asset performance, most notably since 2008, has also negatively impacted the funded status of our pension plans. Funding requirements for our pension plans may become more significant. If our cash flows and ~~will~~capital resources are insufficient to fund our pension plan obligations, we could be ~~reflected in~~forced to reduce or delay investments and capital expenditures, seek additional capital, or restructure or refinance our consolidated financial results from that day forward. The businesses of Ply Gem and NCI are subject to substantially similar risks and uncertainties and, as a result, Ply Gem’s businesses are and will be subject to many of the risks described above. For additional information about risks related to Ply Gem’s business, see “Other Risk Factors of Ply Gem” set forth in the Company’s Proxy Statement relating to the Special Shareholder Meeting, filed with the SEC on October 17, 2018.indebtedness.

Risks related to the Merger

~~Combining~~Fully integrating Ply Gem’s business following the ~~businesses of NCI and Ply Gem~~Merger may be more difficult, costly and time-consuming than expected, which may adversely affect ~~the Company’s~~our results of operations and ~~negatively affect~~ the value of ~~NCI common stock.~~our Common Stock.

~~The~~While the Company’s ~~Management is~~management has made progress in ~~the process of~~ integrating ~~NCI’s and~~ Ply Gem’s ~~respective businesses.~~business with our pre-Merger business, integration efforts are still underway. The combination of two independent businesses is a complex, costly and time-consuming process and the Company’s management may face significant, ongoing challenges in implementing such integration, many of which may be beyond the control of management, including, without limitation:

latent impacts resulting from the diversion of NCI’s and Ply Gem’s respective management teams’ attention from ongoing business concerns as a result of the devotion of management’s attention to the Merger and performance shortfalls at one or both of the companies;

~~ongoing diversion of the attention of management from the operation of the Company’s business as a result of the intended business separations;~~

•difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;

•the possibility of faulty assumptions underlying expectations regarding the integration process;

•unanticipated issues in integrating accounting, information technology, communications programs, financial procedures and operations, and other systems, procedures and policies;

•difficulties in managing a larger surviving corporation, addressing differences in business culture and retaining key personnel;

•unanticipated changes in applicable laws and regulations;

•coordinating geographically separate organizations; and

•unforeseen expenses or delays associated with the Merger.

Some of these factors ~~will be~~are outside of the control of the Company, and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in ~~the amount of expected~~ revenue, ~~that~~which could materially impact the business, financial conditions and results of operations of the ~~combined business.~~Company. The integration process ~~and other disruptions resulting from the Merger~~ may also adversely affect the Company’s relationships with employees, suppliers, customers, distributors, licensors and others with whom ~~NCI and Ply Gem have~~the pre-Merger businesses had business or other ~~dealings,~~dealings.

Risks related to our Common Stock and ~~difficulties~~significant stockholders

Our stock price has been and may continue to be volatile.

The trading price of our Common Stock has fluctuated in ~~integrating~~ the ~~businesses~~past and is subject to significant fluctuations in response to the following factors, some of ~~NCI~~which are beyond our control:

•variations in quarterly operating results;

•deviations in our earnings from publicly disclosed forward-looking guidance;

•variability in our revenues;

•changes in earnings estimates by analysts;

•our announcements of significant contracts, acquisitions, strategic partnerships or joint ventures;

•uncertainty about current global economic conditions;

•sales of our Common Stock by our significant stockholders;

•fluctuations in stock market price and ~~Ply Gem could harm~~volume; and

•other general economic conditions.

During 2019, our stock price on the ~~reputation~~NYSE ranged from a high of $9.30 per share to a low of $3.75 per share. In recent years, the stock market in general has experienced extreme price and volume fluctuations that have affected the market price for many companies in industries similar to ours. Some of these fluctuations have been unrelated to the operating performance of the ~~Company.~~

Ifaffected companies. These market fluctuations may decrease the ~~Company is not able to successfully combine the businesses~~market price of NCI and Ply Gem in an efficient, cost-effective and timely manner, the anticipated benefits and cost savings of the Merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of NCIour Common Stock in the revenues, levels of expenses and results of operations may be affected adversely. If the Company is not able to adequately address integration challenges, the Company may be unable to successfully integrate NCI’s and Ply Gem’s operations or realize the anticipated benefits of the Merger.future.

In connection with the Merger, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.

Although Ply Gem and the Company have conducted extensive due diligence on each other in connection with the Merger, we cannot assure that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues throughThe CD&R Investors own a ~~customary~~significant amount of ~~due diligence, or that factors outside of~~ our ~~control will not later arise. Unexpected risks may arise~~Common Stock and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the Merger, purchase accounting, and the proposed operation of the Company, as the surviving corporation going forward, we may be required to take write-offs or write-downs, restructuring and impairment or other charges. As a result, we may be forced to write-down or write-off assets, restructure its operations, or incur impairment or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition and results of operations.

~~Pursuant to the Merger Agreement, we entered into a stockholders agreement with each of the Investors pursuant to which the CD&R Investors will~~ have substantial governance and other rights ~~setting forth certain terms and conditions regarding the ownership of the CD&R Investors’ shares of NCI Common Stock.~~

~~Pursuant to the terms of the Merger Agreement, on November 16, 2018, the Company entered into the New Stockholders Agreement with each of the Investors.~~

~~Pursuant~~pursuant to the New Stockholders Agreement, among other matters, the CD&R Investor Group is entitled to nominate for election, fill vacancies and appoint five out of twelve initial members of NCI’s board of directors and, thereafter, so long as the CD&R Investor Group beneficially owns at least 7.5% of the outstanding shares of NCI Common Stock, to nominate for election, fill vacancies and appoint replacements for a number of Board members in proportion to the CD&R Investor Group’s percentage beneficial ownership of outstanding NCI Common Stock, but never to exceed one less than the number of independent, non-CD&R-affiliated directors serving on the Board. The New Stockholders Agreement contains voting agreements between the Company and each of the Investors, including the requirement that each Investor shall vote all of the shares of Common Stock that it beneficially owns (a) in favor of all director nominees, other than CD&R Investor Nominees or director nominees proposed by a Golden Gate Investor, nominated by the Board for election by the stockholders of the Company in accordance with the terms of the New Stockholders Agreement and the Sixth Amended and Restated By-laws of the Company, (b) as recommended by the Board, on any and all (i) proposals relating to or concerning compensation or equity incentives for directors, officers or employees of the Company adopted in the ordinary course of business consistent with past practice, (ii) proposals by stockholders of the Company, other than a proposal by a CD&R Investor or a Golden Gate Investor, and (iii) proposals the subject matter of which is a CD&R Investor Consent Action (as defined in the New Stockholders Agreement), provided that, in respect of clauses (i) and (iii) only, that the Board’s recommendation is consistent with the CD&R Investor Group’s exercise of its consent rights provided in the New Stockholders Agreement, and (c) not in favor of any transaction constituting, or that would result in, a Change of Control (as defined in the New Stockholders Agreement) that has not been approved by a majority of the Independent Non-CD&R Investor Directors (as defined in the New Stockholders Agreement), if the per share consideration to be received by any CD&R Investor or Golden Gate Investor in connection with such transaction is not equal to, and in the same form as, the per-share consideration to be received by the shareholders not affiliated with the Investors.Agreement.

The CD&R Investor Group collectively ~~owns~~owned approximately ~~49.6%~~49.1% of ~~the~~our outstanding ~~NCI common stock~~Common Stock as of ~~November 16, 2018.~~December 31, 2019. As a significant stockholder, the CD&R Investors could significantly influence the outcome of matters requiring a stockholder vote, including the election of directors, the adoption of any amendment to ~~NCI’s~~our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions. Their influence over ~~NCI~~Cornerstone may have the effect of delaying or preventing a change of control or may adversely affect the voting and other rights of other stockholders.

Further, the CD&R Investor Group has substantial governance and other rights pursuant to the New Stockholders Agreement, including the ability, for so long as it beneficially owns at least 7.5% of our outstanding shares of Common Stock, to nominate for election, fill vacancies and appoint replacements for a number of Board members in proportion to the CD&R Investor Group’s percentage beneficial ownership of our outstanding Common Stock, but never to exceed one less than the number of independent, non-CD&R-affiliated directors serving on the Board.

Transactions engaged in by the CD&R Investors, the Golden Gate Investors or our directors or executives involving our Common Stock may have an adverse effect on the price of our ~~stock.~~Common Stock.

~~Pursuant~~We are party to ~~the terms of~~ the New Registration Rights Agreement, ~~the Company granted~~which grants the Investors customary demand and piggyback registration ~~rights, including rights to demand registrations and underwritten~~rights. We filed two shelf registration ~~statement offerings with respect to the shares of NCI Common Stock that are held~~statements on Form S-3, declared effective by the ~~Investors following the consummation of the Merger.~~

OnSEC on April 8, 2016 ~~the SEC declared effective our shelf registration statement on Form S-3 which registered~~and February 28, 2019, registering the resale of ~~the~~ shares of our Common Stock held by the CD&R Fund VIII Investor Group. Pursuant to the New Registration Rights Agreement, the Company is required to use its reasonable best efforts to file a registration statement on Form S-3 or any comparable or successor form or forms or any similar short-form registration statement prior to February 14, 2019 with respect toGroup and the Golden Gate ~~Investors.~~Investors, respectively. At any time after May 16, 2020, CD&R Pisces may request in writing that the Company effect the registration ~~under and in accordance with the provisions~~ of ~~the Securities Act of 1933,~~ all or any part of the shares of ~~NCI~~ Common Stock that CD&R Pisces beneficially owns.

~~Upon the consummation~~

As of ~~the Merger, as of November 16, 2018,~~December 31, 2019, the CD&R Fund VIII Investor Group, CD&R Pisces and the Golden Gate Investor Group ~~each~~ owned approximately ~~18.3%~~18.1%, ~~31.3%~~31.0% and ~~13.4%~~13.3%, respectively, of ~~the~~our issued and outstanding ~~NCI~~ Common Stock.

Future sales of our shares by these stockholders could have the effect of lowering our stock price. The perceived risk associated with the possible sale of a large number of shares by these stockholders could cause some of our stockholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock by our directors or officers could cause other institutions or individuals to engage in short sales of our Common Stock, which may further cause the price of our stock to decline.

From time to time our directors, executive officers, or any of the Investors may sell shares of our Common Stock on the open market or otherwise, for a variety of reasons, which may be related or unrelated to the performance of our business. These sales will be publicly disclosed in filings made with the SEC. Our stockholders may perceive these sales as a reflection on management’s view of the business which may result in a drop in the price of our stock or cause some stockholders to sell their shares of our Common Stock.

Risks related to our indebtedness

We have substantial debt and may incur substantial additional debt, which could adversely affect our financial health, reduce our profitability, limit our ability to obtain financing in the future and pursue certain business opportunities and make payments on our indebtedness.

~~We have substantial indebtedness.~~ As of ~~October 28, 2018, we had total indebtedness of approximately $412.9 million. Following the consummation of the Merger, on November 16, 2018~~December 31, 2019, we had total indebtedness of approximately $3.2 billion.

The amount of our debt or other similar obligations could have important consequences for us, including, but not limited to:

•a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes;

•our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our outstanding indebtedness may be impaired in the future;

•we are exposed to the risk of increased interest rates because a portion of our borrowings is at variable rates of interest;

•we may be at a competitive disadvantage compared to our competitors with less debt or with comparable debt at more favorable interest rates and ~~that,~~who, as a result, may be better positioned to withstand economic downturns;

•our ability to refinance indebtedness may be limited or the associated costs may increase;

•our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing may be impaired in the future;

•it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such indebtedness;

•we may be more vulnerable to general adverse economic and industry conditions; and

•our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be limited, or we may be prevented from making capital investments that are necessary or important to our operations, ~~in general,~~ growth strategy ~~and~~or efforts to improve operating margins of our business units.

If we cannot service our debt, we will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We can give you no assurance that we can do any of these things on satisfactory terms or at all.

Further, the terms of the Current Cash Flow Credit Agreement, the Current ABL Credit Agreement and the Current Indenture provide us and our subsidiaries with the flexibility to incur a substantial amount of additional secured or unsecured indebtedness in the future if we or our subsidiaries are in compliance with certain incurrence ratios set forth therein. Any such incurrence of additional indebtedness may increase the risks created by our current substantial indebtedness. As of December 31, 2019, we were able to borrow up to approximately $425.9 million under the Current ABL Facility. All of these borrowings under the Current ABL Facility would be secured.

The Current Indenture, the Current Cash Flow Credit Agreement and the Current ABL Credit Agreement contain restrictions and limitations that could significantly impact our ability and the ability of most of our subsidiaries to engage in certain business and financial transactions.

~~Current Indenture~~

The Current Indenture, ~~(as~~the Current Cash Flow Credit Agreement and the Current ABL Credit Agreement (each as defined in Item 7, ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations) contains~~Operations") contain restrictive covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

•incur additional indebtedness or issue certain preferred shares;

•pay dividends, redeem stock or make other distributions in respect of capital stock;

•repurchase, prepay or redeem the 8.00% Senior Notes (as defined in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations") and subordinated indebtedness;

•make investments;

~~create~~•incur additional liens;

•transfer or sell assets;

•create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers;

•make negative pledges;

•consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•enter into certain transactions with our affiliates; and

•designate subsidiaries as unrestricted subsidiaries.

~~Current Cash Flow Credit Agreement and Current ABL Credit Agreement~~

The Current Cash Flow Credit Agreement and the Current ABL Credit Agreement (each as defined in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations) contain a number of covenants that limit our ability and the ability of our restricted subsidiaries to:

~~incur additional indebtedness or issue certain preferred shares;~~

~~pay dividends, redeem stock or make other distributions in respect of capital stock;~~

~~repurchase, prepay or redeem the 8.00% Senior Notes (as defined in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations) and subordinated indebtedness;~~

~~make investments;~~

~~incur additional liens;~~

~~transfer or sell assets;~~

~~create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers;~~

~~make negative pledges;~~

~~consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;~~

~~enter into certain transactions with our affiliates; and~~

~~designate subsidiaries as unrestricted subsidiaries.~~

In addition, the Current Cash Flow Revolver (as defined in Item 7, ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations) will under certain circumstances require~~Operations") requires us to maintain a maximum total secured leverage ratio under certain circumstances, and the Current ABL Facility (as defined in Item 7, ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and

Results of ~~Operations) will under certain circumstances require~~Operations") requires us to maintain a minimum consolidated fixed charge coverage ~~ratio.~~ratio under certain circumstances. The Current ABL Credit Agreement ~~will~~ also ~~contain~~contains other covenants customary for asset-based facilities of this nature. Our ability to borrow additional amounts under the Current Cash Flow Revolver and the Current ABL Facility depends upon satisfaction of these covenants. Events beyond our control can affect our ability to meet these covenants.

We are required to make mandatory pre-payments under the Current Cash Flow Credit Agreement and the Current ABL Credit Agreement upon the occurrence of certain events, including the sale of assets and the issuance of debt, in each case subject to certain limitations and conditions set forth in the Current Cash Flow Credit Agreement and the Current ABL Credit Agreement.

In addition, under certain circumstances and subject to the limitations set forth in the Current Cash Flow Credit Agreement, the Current Term Loan Facility (as defined in Item 7. ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Result of ~~Operations)~~Operations") may require us to make prepayments of the term loans to the extent we generate excess positive cash flow each ~~fiscal~~ year, beginning with the ~~fiscal~~ year ~~ending~~ended December 31, 2019.

Any future financing arrangements entered into by us may also contain similar covenants and restrictions. As a result of these covenants and restrictions, we may be limited in our ability to plan for or react to market conditions or to meet extraordinary capital needs or otherwise ~~could restrict~~restricted in our activities. These covenants and restrictions could also adversely affect our ability to finance our future operations or capital needs or to engage in other business activities that would be in our interest.

Our failure to comply with obligations under the Current Cash Flow Credit Agreement, the Current ABL Credit Agreement or the Current Indenture, as well as others contained in any future debt instruments from time to time, may result in an event of default under the Current Cash Flow Credit Agreement, the Current ABL Credit Agreement or the Current Indenture, as applicable. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our business, results of operations, financial condition and cash flows could be adversely affected.

~~Despite our indebtedness levels, we~~

We may have future capital needs and ~~our subsidiaries~~ may not be able to ~~incur substantially more indebtedness, which may increase~~obtain additional financing on acceptable terms or at all.

Although we believe that our current cash position and the ~~risks to our financial condition created by our substantial indebtedness.~~

~~The terms of the Current Cash Flow Credit Agreement,~~additional committed funding available under the Current ABL Credit Agreement and the Current Indenture provide us and our subsidiaries with the flexibility to incur a substantial amount of indebtedness in the future, which indebtedness may be secured or unsecured. As of October 28, 2018, we had total indebtedness of approximately $412.9 million. Following the consummation of the Merger, on November 16, 2018 we had total indebtedness of approximately $3.2 billion. In particular, if we or our subsidiaries are in compliance with certain incurrence ratios set forth in the Current Cash Flow Credit Agreement, the Current ABL Credit Facility and the Current Indenture, we may be able to incur substantial additional indebtedness. Any such incurrence of additional indebtedness may increase the risks created by our current substantial indebtedness. As of October 28, 2018, we were able to borrow up to approximately $141.0 million under the Pre-merger ABL Credit Facility. All of these borrowings under the Pre-merger ABL Credit Facility would be secured. At November 16, 2018, following the consummation of the Merger, there were no amounts drawn on the Current Cash Flow Revolver is sufficient for our current operations, any reductions in our available borrowing capacity, or our inability to renew or replace our debt facilities, when required or when business conditions warrant, could have a material adverse effect on our business, financial condition and results of operations. Our ability to secure additional financing or financing on favorable terms and to satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, the ~~Current ABL Credit Facility.~~availability of credit generally, economic and market conditions and financial, business and other factors, many of which are beyond our control.

If financing is not available when needed, or is available on unfavorable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution.

Our credit ratings are important to our cost of capital. The major debt rating agencies routinely evaluate our debt based on a number of factors, which include financial strength and business risk as well as transparency with rating agencies and timeliness of financial reporting. A downgrade in our debt rating could result in increased interest and other expenses on our existing variable interest rate debt, and could result in increased interest and other financing expenses on future borrowings. Downgrades in our debt rating could also restrict our access to capital markets and affect the value and marketability of our outstanding notes.

An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability, decrease our liquidity and impact our solvency.

To the extent LIBOR exceeds 0.00%, our indebtedness under the Current Cash Flow Facilities (as defined in Item 7, ~~Management’s~~"Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations)~~Operations") and the Current ABL ~~facility~~Facility will bear interest at variable rates, and our future indebtedness may bear interest at variable rates. As a result, increases in interest rates could increase the cost of servicing such debt and materially reduce our profitability and cash flows. As of ~~November 16, 2018,~~December 31, 2019, assuming all Current ABL Facility revolving loans were fully drawn, each one percent change in interest rates would result in approximately a $31.7 ~~million~~ million change in annual interest expense on the Current Term Loan Facility and the Current ABL Facility. The impact of such an increase would be more significant for us than it would be for some other companies because of our substantial debt.

Item 1B. Unresolved Staff Comments.

There are no unresolved staff comments outstanding with the Securities and Exchange Commission at this time.

Item 2. Properties.

AsOur corporate headquarters is located in Cary, North Carolina. We own and lease properties in the United States, Canada, Costa Rica and Mexico. The following table lists our principal manufacturing and warehousing facilities as of ~~October 28, 2018, we conducted manufacturing operations at the following facilities:~~December 31, 2019:

Facility

~~Products~~

~~Square Feet~~

~~Owned or~~
~~Leased~~Product type/Usage

~~Domestic:~~Commercial Segment:

~~Chandler, Arizona~~

~~Doors and related metal components~~

~~37,000~~

~~Leased~~

~~Tolleson, Arizona~~

~~Metal components~~⁽¹⁾

~~70,551~~

~~Owned~~

~~Sheridan, Arkansas~~

~~Insulated metal panels~~

~~215,000~~

~~Owned~~

~~Atwater, California~~

~~Engineered building systems~~⁽²⁾

~~219,870~~

~~Owned~~

~~Rancho Cucamonga, California~~

~~Metal coil coating~~

~~98,137~~

~~Owned~~

~~Adel, Georgia~~

~~Metal components~~⁽¹⁾

~~78,809~~

~~Owned~~

~~Lithia Springs, Georgia~~

~~Metal components~~⁽³⁾

~~118,446~~

~~Owned~~

~~Douglasville, Georgia~~

~~Doors and related metal components~~

~~87,811~~

~~Owned~~

~~Marietta, Georgia~~

~~Metal coil coating~~

~~205,000~~

~~Leased/Owned~~

~~Mattoon, Illinois~~

~~Insulated metal panels~~

~~124,800~~

~~Owned~~

~~Shelbyville, Indiana~~

~~Metal components~~⁽¹⁾

~~70,200~~

~~Owned~~

~~Shelbyville, Indiana~~

~~Insulated metal panels~~

~~108,300~~

~~Leased~~

~~Monticello, Iowa~~

~~Engineered building systems~~⁽⁴⁾

~~231,966~~

~~Owned~~

~~Mount Pleasant, Iowa~~

~~Engineered building systems~~⁽⁴⁾

~~218,500~~

~~Owned~~

~~Frankfort, Kentucky~~

~~Insulated metal panels~~

~~270,000~~

~~Owned~~

~~Hernando, Mississippi~~

~~Metal components~~⁽¹⁾

~~129,682~~

~~Owned~~

~~Omaha, Nebraska~~

~~Metal components~~⁽⁵⁾

~~56,716~~

~~Owned~~

~~Las Vegas, Nevada~~

~~Insulated metal panels~~

~~126,400~~

~~Leased~~

~~Rome, New York~~

~~Metal components~~⁽⁵⁾

~~53,700~~

~~Owned~~

~~Cambridge, Ohio~~

~~Metal coil coating~~

~~200,000~~

~~Owned~~

~~Middletown, Ohio~~

~~Metal coil coating~~

~~170,000~~

~~Owned~~

~~Oklahoma City, Oklahoma~~

~~Metal components~~⁽⁵⁾

~~59,400~~

~~Leased~~

~~Ambridge, Pennsylvania~~

~~Metal coil coating~~

~~32,000~~

~~Leased~~

~~Elizabethton, Tennessee~~

~~Engineered building systems~~⁽⁴⁾

~~228,113~~

~~Owned~~

~~Lexington, Tennessee~~

~~Engineered building systems~~⁽⁶⁾

~~140,504~~

~~Owned~~

~~Memphis, Tennessee~~

~~Metal coil coating~~

~~65,895~~

~~Owned~~

~~Houston, Texas~~

~~Metal components~~⁽³⁾

~~264,641~~

~~Owned~~

~~Houston, Texas~~

~~Metal coil coating~~

~~40,000~~

~~Owned~~

~~Houston, Texas~~

~~Engineered building systems~~⁽⁴⁾⁽⁷⁾

~~615,064~~

~~Owned~~

~~Houston, Texas~~

~~Doors and related metal components~~

~~42,572~~

~~Owned~~

~~Lewisville, Texas~~

~~Insulated metal panels~~

~~91,800~~

~~Owned~~

~~Lubbock, Texas~~

~~Metal components~~⁽¹⁾

~~95,376~~

~~Owned~~

~~Salt Lake City, Utah~~

~~Metal components~~⁽³⁾

~~84,800~~

~~Owned~~

~~Prince George, Virginia~~

~~Insulated metal panels~~

~~101,400~~

~~Owned~~

~~Foreign:~~

~~Monterrey, Mexico~~

~~Engineered building systems~~⁽⁶⁾

~~246,196~~

~~Owned~~

~~Hamilton, Ontario, Canada~~

~~Insulated metal panels~~

~~100,000~~

~~Leased~~

2018 % 2017 % 2016 %
Total sales:
Engineered Building Systems $ 798,299
39.9
$ 693,980
39.2
$ 672,235
39.9
Metal Components 689,344
34.5
636,661
36.0
586,690
34.8
Insulated Metal Panels 504,413
25.2
441,404
24.9
396,327
23.5
Metal Coil Coating 417,296
20.9
368,880
20.8
346,348
20.6
Intersegment sales (408,775 ) (20.5 ) (370,647 ) (20.9 ) (316,672 ) (18.8 )
Total net sales $ 2,000,577
100.0
$ 1,770,278
100.0
$ 1,684,928
100.0
External sales:



Engineered Building Systems $ 755,353
37.8
$ 659,863
37.3
$ 652,471
38.7
Metal Components 612,645
30.6
544,669
30.8
495,020
29.4
Insulated Metal Panels 424,762
21.2
372,304
21.0
347,771
20.6
Metal Coil Coating 207,817
10.4
193,442
10.9
189,666
11.3
Total net sales $ 2,000,577
100.0
$ 1,770,278
100.0
$ 1,684,928
100.0
Operating income (loss):



Engineered Building Systems $ 66,689
$ 41,388
$ 62,046

Metal Components 87,593
78,768
70,742

Insulated Metal Panels 47,495
47,932
24,620

Metal Coil Coating 28,588
21,459
32,422

Corporate (104,445 ) (79,767 ) (81,051 )
Total operating income $ 125,920
$ 109,780
$ 108,779

Unallocated other expense (42,825 ) (26,642 ) (29,815 )
Income before income taxes $ 83,095
$ 83,138
$ 78,964

RESULTS OF OPERATIONS FOR FISCAL ~~2018~~2019 COMPARED TO FISCAL ~~2017~~2018

~~Consolidated~~Commercial


	Fiscal Year Ended
(Amounts in thousands)	December 31, 2019						October 28, 2018
Statement of operations data:
Net sales	$	1,847,893	100.0	%	$	2,000,577	100.0	%
Gross profit	457,747		24.8	%	462,682		23.1	%
SG&A expense (including acquisition costs)	245,397		13.3	%	221,737		11.1	%
Amortization of intangible assets	11,277		0.6	%	9,648		0.5	%
Loss on disposition of business, net	—		—	%	5,673		0.3	%
Gain on insurance recovery	—		—	%	(4,741)		(0.2)	%
Operating income	201,073		10.9	%	230,365		11.5	%

Net sales ~~increased by 13.0%,~~for the year ended December 31, 2019 were $1,847.9 million, a decrease of $152.7 million, or ~~$230.3 million for fiscal 2018, compared to fiscal 2017.~~7.6% from the year ended October 28, 2018. The ~~year-over-year improvement~~decrease in net sales was ~~primarily~~mostly driven by ~~continued commercial discipline~~lower tonnage volumes due to market hesitation in late 2018 through the pass-through of higher costs in a rising cost environment across each of our segments and underlying volume growth in the Engineered Building Systems and Insulated Metal Panel segments. Each segment achieved year over year external revenue growth.

~~Consolidated cost of sales~~ ~~increased by 13.6%, or $183.7 million for fiscal 2018, compared to fiscal 2017. This increase resulted primarily from higher input costs, including transportation, materials and skilled labor.~~

~~Gross margin~~ was 23.1% for fiscal 2018 compared to 23.5% for fiscal 2017. The lower margin in the current period was primarily driven by higher freight and manufacturing costs, both of which experienced significant inflationary pressures during fiscal 2018. These factors were largely mitigated during the secondfirst half of 2019. Rising steel prices in early-mid 2018 motivated customers to accelerate delivery of products ahead of price increases. This was compounded by the ~~fiscal~~fact that the price of steel was increasing at a faster rate than other alternative materials like hardwood and concrete. While our addressable market lost market share to these other products, we maintained price discipline and gained market share within our addressable market.

Gross profit for the year ~~through commercial discipline.~~

~~Engineered Building Systems sales~~ ~~increased 15.0%,~~ended December 31, 2019 was $457.7 million, a decrease of $4.9 million or $104.3 million to $798.3 million in fiscal 2018, compared to $694.0 million in fiscal 2017. The increase in sales is a result of commercial discipline, the pass through of higher materials costs, and to a lesser extent, higher internal and external volumes. Sales to third parties for fiscal 2018 increased $95.5 million to $755.4 million from $659.9 million in the prior fiscal year.

~~Operating income of the Engineered Building Systems segment increased to $66.7 million in fiscal 2018 compared to $41.4 million in the prior fiscal year. The $25.3 million increase resulted primarily~~1.1% from the ~~increased revenue discussed above, as well as better leverage of engineering, selling, general and administrative expenses resulting from the execution of prior~~ year ~~cost reduction initiatives.~~

~~Metal Components sales~~ ~~increased 8.3%, or $52.7 million to $689.3 million in fiscal 2018, compared to $636.7 million in fiscal 2017.~~ended October 28, 2018. The ~~increase was primarily driven by higher external volumes and the pass-through of increasing materials costs, offset by a~~ decrease in internal volume based on a shift in internal production strategy, which moved a portion of fabrication from Metal Components to the Engineered Buildings Systems segment. Sales to third parties for fiscal 2018 increased $68.0 million to $612.6 million from $544.7 million in the prior fiscal year.

~~Operating income of the Metal Components segment increased to $87.6 million in fiscal 2018, compared to $78.8 million in the prior fiscal year. The $8.8 million increase~~gross profit was driven primarily by ~~commercial discipline and improved operating~~lower leverage ~~across the~~of fixed cost structure ~~on higher~~as a result of the lower tonnage volumes partially offset by higher ~~transportation costs.~~

~~Insulated Metal Panels~~selling prices. As a percentage of net sales, ~~increased 14.3%~~ gross profit was 24.8%, ~~or $63.0 million to $504.4 million in fiscal 2018, compared to $441.4 million in fiscal 2017. Sales to third parties for fiscal 2018 increased $52.5 million to $424.8 million~~an increase of 170 basis points from ~~$372.3 million in~~ the ~~prior fiscal~~ year ~~due to continued high demand, predominantly within our cold storage and industrial, commercial, and institutional products. In addition, the~~ended October 28, 2018. The increase in sales was also driven by a $10.6 million, or 13.2%, increase in internal sales, primarily through the Engineered Building Systems and Metal Components divisions as we continue to execute on our adjacency initiatives.

~~Operating income of the Insulated Metal Panels segment decreased to $47.5 million in fiscal 2018, compared to $47.9 million in the prior fiscal year. The $0.4 million decrease~~ was driven by a ~~$6.7~~combination of price discipline, cost reduction initiatives and supply chain/procurement initiatives that have driven more discounts and rebates into material costs.

Selling, general and administrative expenses were $245.4 million, ~~loss recognized on~~an increase of $23.7 million or 10.7% from the ~~sale of the China manufacturing facility and impacts from a change~~year ended October 28, 2018. The increase is driven in ~~product mix during the current year. In addition, prior period operating income includes $9.2~~part by $21.8 million of ~~gain on insurance recovery~~general and administrative costs that are allocated to the Commercial segment that were previously categorized as unallocated corporate costs prior to the Merger. After adjusting for ~~settlements on damaged or destroyed plant~~the incremental general and ~~equipment whereas~~administrative costs, the increase was driven by investments in ~~fiscal 2018 we recorded a gain~~talent and technology within our insulated metal panel and pre-engineered buildings businesses partially offset by the impact of ~~$4.7~~cost initiatives that have been implemented.

Amortization expense for the year ended December 31, 2019 was $11.3 million, ~~as we reached final settlement on this matter. Largely offsetting these factors were increased fiscal 2018 volume and better leverage~~an increase of ~~our fixed cost structure.~~

~~Metal Coil Coating sales~~ ~~increased by 13.1%, or $48.4 million to $417.3 million in fiscal 2018, compared to $368.9 million in the prior year. Sales to third parties increased $14.4 million to $207.8~~$1.6 million from ~~$193.4 million in~~ the ~~prior fiscal~~ year ~~primarily~~ended October 28, 2018. The amortization expense is higher due to the ~~pass-through~~amortization of ~~increasing material costs. In addition, the increase in sales was also driven by a $34.0 million, or 16.3%, increase in internal sales.~~trade names which were previously classified as indefinite lived.

Operating income of the Metal Coil Coating segment increased to $28.6 million in fiscal 2018, compared to $21.5 million in the prior fiscal year. The $7.1 million increase was primarily due to the increase in package product sales and lower engineering, selling, general and administrative expenses resulting from the execution of prior year cost reduction initiatives. In addition, fiscal 2017 included a $6.0 million goodwill impairment, discussed below.

~~Consolidated engineering, selling, general and administrative expenses~~ increased to $307.1 million in fiscal 2018, compared to $293.1 million in the prior fiscal year. The $14.0 million increase is related to higher current year revenue, as well as a $4.6 million charge related to the acceleration of retirement benefits of our former CEO. Excluding the effects of the acceleration of CEO retirement benefits, as a percentage of sales, engineering, selling, general and administrative expenses were 15.1% for fiscal 2018 as compared to 16.6% for fiscal 2017.

~~Consolidated intangible asset amortization~~ ~~remained consistent at $9.6 million during fiscal 2018 and fiscal 2017.~~

~~Goodwill impairment~~ ~~for fiscal 2017 of $6.0 million was related to the coil coating operations of CENTRIA within our Metal Coil Coating segment. There was no corresponding impairment for fiscal 2018.~~

~~Consolidated restructuring charges~~ ~~for~~fiscal 2018 and 2017 were $1.9 million and $5.3 million, respectively. Each period generally includes severance-related costs, related to our actions taken to streamline our management and engineering and drafting activities, and also to optimize our overall manufacturing structure and footprint. In fiscal 2017, we incurred severance-related charges including in connection with the closure of three facilities, included in our Engineered Building Systems segment, Metal Components segment, and Insulated Metal Panels segment. The current fiscal year charges are offset by a $0.6 million gain on the sale of a facility that was previously designated as “held for sale”.

~~Consolidated strategic development and acquisition related costs were~~ $17.2 million during fiscal 2018, compared to $2.0 million in the prior fiscal year. These non-operational costs include external legal, financial and due diligence costs incurred to deliver on our strategic initiatives.

Loss on disposition of business for ~~fiscal~~the year ended October 28, 2018 was $5.7 million. During the second quarter of fiscal 2018 we recorded a loss of $6.7 million on the sale of our China manufacturing facility ~~included in~~and during the ~~Insulated Metal Panels segment and also~~third quarter of fiscal 2018 we recorded a $1.0 million gain related to the disposal of a non-strategic product ~~line previously consolidated within the Insulated Metal Panels segment.~~line. There was no corresponding loss ~~for~~in fiscal ~~2017.~~2019.

~~Consolidated gain~~Gain on insurance recoveryfor ~~fiscal~~the year ended October 28, 2018 ~~and 2017 were~~was $4.7 million ~~and $9.7 million, respectively, which~~ related to ~~settlements~~proceeds from a final settlement with our insurers for property damage at one of our facilities. There was no corresponding gain in fiscal 2019.

Siding


	Fiscal Year Ended
(Amounts in thousands)	December 31, 2019						October 28, 2018
Statement of operations data:
Net sales	$	1,111,407	100.0	%	$	—	—	%
Gross profit	277,583		25.0	%	—		—	%
SG&A expense (including acquisition costs)	111,770		10.1	%	—		—	%
Amortization of intangible assets	99,540		9.0	%	—		—	%
Operating income	66,273		6.0	%	—		—	%

Net sales for the year ended December 31, 2019 were $1,111.4 million. Net sales for the year ended December 31, 2019 were favorablyimpacted by the inclusion of $150.5 million for the ESW Acquisition, which closed on February 20, 2019. Excluding ESW, our net sales were $960.9 million for the year ended December 31, 2019. Our net sales for the U.S. and Canadian markets were approximately $1,037.1 million and $74.3 million, respectively, for the year ended December 31, 2019. For the year ended December 31, 2019, foreign currency negatively impacted our net sales by $2.4 million. As summarized by the VSI, our unit U.S. net sales for the year ended December 31, 2019 were relatively flat compared to ~~two~~the year ended December 31, 2018 resulting in a market share of approximately 37.2% based on the unit data provided by the VSI.For Canada, our market share was approximately 33.2% of the Canadian vinyl siding market.The Canadian economy continues to be challenged with lower consumer spending driving slower economic growth and development.

Gross profit for the year ended December 31, 2019 was $277.6 million.Gross profit was negatively impacted $14.4 million by the non-cashinventory fair value step-up associated with the Merger and by $1.9 million for the non-cash inventory fair value step-up associated with the ESW acquisition that closed on February 20, 2019 both of which increased costs of goods sold during the year ended December 31, 2019. Gross profit for the year ended December 31, 2019 includes ESW gross profit of $34.1 million. Excluding ESW and the impact of these inventory step-ups, our gross profit would have been $259.7 million for the year ended December 31, 2019. We historically pass along increases in raw material input costs to our customers but normally there is a lag period of approximately 90-120 days between the impact of higher raw material costs and customer pricing actions. For our Siding segment, we focus predominantly on PVC resin, which increased 2.0%, and aluminum (Midwest Ingot) which decreased 13.5% during the year ended December 31, 2019 compared to the year ended December 31, 2018.In addition to raw material costs, we closely monitor labor and freight costs. Labor costs have trended higher recently given the shortage of manufacturing labor personnel and wage inflation pressure. For the year ended December 31, 2019, foreign currency negatively impacted our gross profit by $0.7 million.

As a percentage of net sales, our gross profit percentage was 27.0% excluding ESW and the fair value step-up. Our net sales and profitability are normally higher during the second and third quarters due to weather seasonality which increases building activity in both the new construction and repair and remodeling markets. With increased production volumes during the late spring and summer months, our gross profit trends higher during the second and third quarters.

Selling, general, and administrative expenses were $111.8 million for the year ended December 31, 2019 including $28.5 million of SG&Aexpenses attributed to ESW.Included within SG&A expenses are sales and marketing expenses, research and development costs, and legal and professional fees and non-manufacturing personnel costs. As a percentage of net sales, SG&A expenses were 8.7% for the year ended December 31, 2019 excluding ESW.

Amortization expense for the year ended December 31, 2019 was $99.5 million or 9.0% of net sales. The amortization expense is directlyattributed to the Merger and the ESW acquisition and the resulting fair values assigned to our intangible assets including trade names and customer lists which both have finite amortization periods.

Windows


	Fiscal Year Ended
(Amounts in thousands)	December 31, 2019						October 28, 2018
Statement of operations data:
Net sales	$	1,930,447	100.0	%	$	—	—	%
Gross profit	353,089		18.3	%	—		—	%
SG&A expense (including acquisition costs)	193,791		10.0	%	—		—	%
Amortization of intangible assets	66,760		3.5	%	—		—	%
Operating income	92,538		4.8	%	—		—	%

Net sales for the year ended December 31, 2019 were $1,930.4 million. Net sales for the year ended December 31, 2019 included netsales of $419.4 million and $402.3 million for Silver Line and Atrium, respectively. The Silver Line acquisition was completed on October 14, 2018 while the Atrium acquisition was completed on April 12, 2018 with both entities’ net sales included for the Company within the Windows segment for the year ended December 31, 2019. Excluding these 2018 acquisitions, our net sales would have been $1,108.7 million for the year ended December 31, 2019. Our net sales for the U.S. and Canadian markets were approximately $1,741.7 million and $188.7 million, respectively, for the year ended December 31, 2019. For the year ended December 31, 2019, foreign currency negatively impacted our net sales by $4.1 million.

Gross profit for the year ended December 31, 2019 was $353.1 million.Gross profit for the year ended December 31, 2019 includesSilver Line gross profit of $47.4 million and Atrium gross profit of $98.5 million.The Silver Line acquisition was completed on October 14, 2018 while the Atrium acquisition was completed on April 12, 2018 with both entities’ gross profit included for the Company within the Windows segment for the year ended December 31, 2019. Excluding the impact of the Silver Line and Atrium gross profit, our gross profit would have been $207.2 million for the year ended December 31, 2019. Historically, our gross profit is impacted by raw material costs, specifically PVC resin, aluminum, and glass.PVC resin increased 2.0%, aluminum (Midwest Ingot) decreased 13.5%, and glass increased 1.5% during the year ended December 31, 2019 compared to the year ended December 31, 2018.We pass along increases in raw material input costs to our customers but normally there is a lag period of approximately 90-120 days between the impact of higher raw material costs and customer pricing actions. In addition to raw material costs, we closely monitor labor and freight costs. Labor costs have trended higher recently given the shortage of manufacturing labor personnel and wage inflation pressure. For the year ended December 31, 2019, foreign currency negatively impacted our gross profit by $1.2 million.

As a percentage of net sales, our gross profit percentage was 18.7% excluding Silver Line and Atrium gross profit. We focused our efforts during 2019 on improving our gross profit margins by investing in automation projects at our manufacturing facilities, maintaining our price discipline in certain competitive markets, and focusing on our customer needs and service proposition and integrating our manufacturing facilities and product profiles.These efforts enabled us to achieve the ~~Metal Components~~18.7% gross profit percentage for the year ended December 31, 2019.

Selling, general, and ~~Insulated Metal Panels segment.~~administrative expenses were $193.8 million for the year ended December 31, 2019. SG&A expenses for the year ended December 31, 2019 includes $19.7 million and $41.9 million of Silver Line and Atrium SG&A expenses, respectively. Excluding the impact of Silver Line and Atrium, SG&A expenses would have been $132.2 million. Included within SG&A expenses are sales and marketing expenses, research and development costs, and legal and professional fees and non-manufacturing personnel costs. As a percentage of net sales, SG&A expenses were 11.9% for the year ended December 31, 2019 excluding Silver Line and Atrium as we normally gain leverage on the fixed component of SG&A expenses during the second and third quarters.

~~Consolidated interest~~Amortization expense ~~decreased~~for the year ended December 31, 2019 was $66.8 million, or 3.5% of net sales. The amortization expense is directly attributed to theMerger and the fair values assigned to our intangible assets including trade names and customer lists which both have finite amortization periods.

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


	Fiscal Year Ended
(Amounts in thousands)	December 31, 2019		October 28, 2018
Statement of operations data:
SG&A expense	$	(125,281)	$	(87,281)
Acquisition related expenses	(19,867)		(17,164)
Operating loss	(145,148)		(104,445)
Interest expense	(229,262)		(21,808)
Interest income	674		140
Currency translation gain (loss)	2,054		(244)
Loss on debt extinguishment	—		(21,875)
Other income, net	1,183		962
Income tax provision (benefit)	4,775		19,989

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 year ended December 31, 2019 increased $40.7 million or 39.0% compared to the year ended October 28, 2018 due primarily to the addition of the Ply Gem corporate cost center, increased stock-based compensation expense and $50.2 million of costs associated with the Merger and other strategic acquisition costs.

Interest expense increased to $229.3 million for the year ended December 31, 2019 compared to $21.8 million for ~~fiscal 2018, compared to $28.9 million for fiscal 2017.~~the year ended October 28, 2018. The ~~decrease~~interest expense increase is primarily due to debt obligations assumed in the ~~redemption~~Merger. Following the consummation of the Merger, our ~~8.25% Senior Notes~~consolidated debt balance increased to $3.2 billion at December 31, 2019 as compared to $407.2 million at October 28, 2018.

Foreign exchange gain (loss) for the year ended December 31, 2019 was a $2.1 million gain, compared to a loss of $0.2 million for the year ended October 28, 2018, due to exchange rate fluctuations in the Canadian dollar and ~~lower variable rates on~~Mexican peso relative to the ~~Pre-merger Term Loan Credit Facility, both results of activities to strengthen our capital structure that were completed in February 2018.~~U.S. dollar.

Loss on debt extinguishment ~~for fiscal 2018~~ was $21.9 ~~million. There was no corresponding amount recorded in fiscal 2017.~~million for the year ended October 28, 2018. During ~~our second quarter of fiscal~~the year ended October 28, 2018, we recognized a pretax loss, primarily on the extinguishment of our 8.25% senior notes due 2023, of $21.9 million, of which approximately $15.5 million represented the call premium paid on the redemption of the notes. There was no corresponding loss in fiscal 2019.

Consolidated ~~foreign exchange gain (loss)~~provision (benefit) for income taxes was ~~a loss~~an expense of ~~$0.2 million for fiscal 2018, compared to a gain of $0.5~~$4.8 million for the ~~prior~~ year ~~primarily due~~ended December 31, 2019 compared to ~~the fluctuations in the exchange rate between the Canadian dollar and U.S. dollar in the current period.~~

~~Consolidated provision for income taxes~~ ~~was~~an expense of $20.0 million for ~~fiscal 2018, compared to $28.4 million for~~ the ~~prior fiscal~~ year ~~primarily as a result of higher pre-tax income in fiscal 2017.~~ended October 28, 2018. The effective tax rate for ~~fiscal 2018~~the year ended December 31, 2019 was ~~24.1%~~45.0% compared to ~~34.2%~~24.1% for ~~fiscal 2017.~~the year ended October 28, 2018. The change in the effective tax rate was primarily driven by the continuing effects associated with the enactment of the U.S. Tax ~~Reform.~~

~~Diluted income per common share~~ ~~improved to $0.94 per diluted common share~~Cuts and Jobs Act, limitations on the deduction for ~~fiscal 2018, compared to $0.77 per diluted common share for fiscal 2017. The improvement in diluted income per common share was primarily due to the $8.3 million increase in~~ net ~~income applicable to common shares resulting from the factors described above in this section and share repurchases executed during fiscal 2018.~~

~~RESULTS OF OPERATIONS FOR FISCAL 2017 COMPARED TO FISCAL 2016~~

~~Consolidated sales~~ increased by 5.1%, or $85.4 million for fiscal 2017, compared to fiscal 2016. The increase was driven by continued commercial discipline in the pass-through of higher costs in a rising steel price environment predominantly in the Engineered Building Systems and Metal Components segments despite overall tonnage volumes being lower year over year.

~~Consolidated cost of sales~~ increased by 7.6%, or $95.4 million for fiscal 2017, compared to fiscal 2016. This increase was the result of rising raw materials costs during fiscal 2017 as compared to declining materials costs in fiscal 2016.

~~Gross margin~~ was 23.5% for fiscal 2017 compared to 25.4% for fiscal 2016. The decrease in gross margin was primarily a result of lower volumes in the Engineered Building Systems segment, uneven production flow and increased transportation costs.

~~Engineered Building Systems sales~~ ~~increased 3.2%, or $21.7 million to $694.0 million in fiscal 2017, compared to $672.2 million in fiscal 2016. The increase in sales is a result of commercial discipline,~~interest expense partially offset by ~~lower volumes in~~ the fourth quarter of fiscal 2017, primarily driven by hurricane related disruptions. Sales to third parties for fiscal 2017 increased $7.4 million to $659.9 million from $652.5 million in the prior fiscal year.

~~Operating income~~impact of the Engineered Building Systems segment decreased to $41.4 million in fiscal 2017 compared to $62.0 million in the prior fiscal year. The $20.7 million decrease resulted from rapidly rising steel costs during the current year as compared to the prior fiscal year, combined with the disruptive impact of hurricanes during the fourth quarter of fiscal 2017.

~~Metal Components sales~~ increased 8.5%, or $50.0 million to $636.7 million in fiscal 2017, compared to $586.7 million in fiscal 2016. The increase in sales was primarily driven by higher external volumes and the execution of commercial discipline. Sales to third parties for fiscal 2017 increased $49.6 million to $544.7 million from $495.0 million in the prior fiscal year.

~~Operating income~~reversal of the Metal Components segment increased to $78.8 million in fiscal 2017, compared to $70.7 million in the prior fiscal year. The $8.0 million increase was driven by the increased sales discussed in the immediately preceding paragraph.Canadian valuation allowance for $3.9 million.

~~Insulated Metal Panels sales~~ increased 11.4%, or $45.1 million to $441.4 million in fiscal 2017, compared to $396.3 million in fiscal 2016. The increase in sales was primarily driven by commercial discipline and improved product mix.

Operating income of the Insulated Metal Panels segment increased to $47.9 million in fiscal 2017, compared to $24.6 million in the prior fiscal year. The $23.3 million increase was driven predominantly due to a higher mix of higher margin architectural products.

~~Metal Coil Coating sales~~ increased by 6.5%, or $22.5 million to $368.9 million in fiscal 2017, compared to $346.3 million in the prior year. The increase in sales was primarily the result of pass through of higher steel prices through its coil package products. Metal Coil Coating third-party sales increased $3.8 million to $193.4 million from $189.7 million in the prior fiscal year and accounted for 10.9% of total consolidated third-party sales for fiscal 2017.

Operating income of the Metal Coil Coating segment decreased to $21.5 million in fiscal 2017, compared to $32.4 million in the prior fiscal year. The $11.0 million decrease was driven by lower manufacturing efficiency due to lower volumes and higher material costs in fiscal 2017.

~~Consolidated engineering, selling, general and administrative expenses~~ decreased to $293.1 million in fiscal 2017, compared to $302.6 million in the prior fiscal year. As a percentage of sales, engineering, selling, general and administrative expenses were 16.6% for fiscal 2017 as compared to 18.0% for fiscal 2016. The $9.4 million decrease in expenses was primarily due to the cost reductions resulting from execution of strategic initiatives.

~~Consolidated intangible asset amortization~~ ~~remained consistent at $9.6 million during fiscal 2017 and fiscal 2016.~~

~~Goodwill impairment~~ ~~for fiscal 2017 of $6.0 million was related to the coil coating operations of CENTRIA within our Metal Coil Coating segment.~~

~~Consolidated restructuring charges~~ ~~for~~fiscal 2017 were $5.3 million. These charges relate to our efforts to streamline our management, engineering and drafting and manufacturing structures as well as to optimize our manufacturing footprint. We incurred severance-related charges associated with these activities, including in connection with the closure of three facilities, included in our Engineered Building Systems segment, Metal Components segment, and Insulated Metal Panels segment in fiscal 2017.

~~Consolidated strategic development and acquisition related costs~~ decreased to $2.0 million during fiscal 2017, compared to $2.7 million in the prior fiscal year. These non-operational costs include external legal, financial and due diligence costs incurred to deliver on our strategic initiatives.

~~Consolidated interest expense~~ decreased to $28.9 million for fiscal 2017, compared to $31.0 million for fiscal 2016. The decrease is primarily a result of voluntary principal prepayments the Company made on its term loan during fiscal 2017 and 2016.

~~Consolidated foreign exchange gain (loss)~~ was a gain of $0.5 million for fiscal 2017, compared to a loss of $1.4 million for the prior year primarily due to the fluctuations in the exchange rate between the Canadian dollar and U.S. dollar in the current period.

~~Consolidated provision for income taxes~~ was $28.4 million for fiscal 2017, compared to $27.9 million for the prior fiscal year, primarily as a result of higher pre-tax income in fiscal 2017. The effective tax rate for fiscal 2017 was 34.2% compared to 35.4% for fiscal 2016.

~~Diluted income per common share~~ improved to $0.77 per diluted common share for fiscal 2017, compared to $0.70 per diluted common share for fiscal 2016. The improvement in diluted income per common share was primarily due to the $3.8 million increase in net income applicable to common shares resulting from the factors described above in this section and share repurchases executed during fiscal 2017.

LIQUIDITY AND CAPITAL RESOURCES

General

Our cash, ~~and~~ cash equivalents ~~decreased~~and restricted cash increased from ~~$65.7~~$54.5 million to ~~$54.3~~$102.3 million during the transition period ended December 31, 2018 and fiscal ~~2018.~~2019. The following table summarizes our consolidated cash flows for fiscal 2019 and 2018, and ~~fiscal 2017~~the Transition Period (in thousands):

Fiscal Year Ended
October 28,
2018 October 29,
2017
Net cash provided by operating activities $ 82,463
$ 63,874
Net cash used in investing activities (38,174 ) (10,284 )
Net cash used in financing activities (55,582 ) (53,529 )
Effect of exchange rate changes on cash and cash equivalents (93 ) 194
Net (decrease) increase in cash and cash equivalents (11,386 ) 255
Cash and cash equivalents at beginning of period 65,658
65,403
Cash and cash equivalents at end of period $ 54,272
$ 65,658


	Fiscal Year Ended
	December 31, 2019		October 28, 2018		October 29,2018 - December 31, 2018
Net cash provided by operating activities	$	229,608	$	82,463	$	11,099
Net cash provided by (used in) investing activities	(294,758)		(38,174)		73,492
Net cash provided by (used in) financing activities	17,540		(55,473)		9,161
Effect of exchange rate changes on cash and cash equivalents	2,310		(93)		(662)
Net increase (decrease) in cash, cash equivalents and restricted cash	(45,300)		(11,277)		93,090
Cash, cash equivalents and restricted cash at beginning of period	147,607		65,794		54,517
Cash, cash equivalents and restricted cash at end of period	$	102,307	$	54,517	$	147,607

Operating Activities

Our business is both seasonal and cyclical and cash flows from operating activities may fluctuate during the year and from year to year due to economic conditions. We ~~generally~~ rely on cash as well as short-term borrowings, when needed, to meet cyclical and seasonal increases in working capital needs. These needs generally rise during periods of increased economic activity or ~~increasing raw material prices~~ due to higher levels of inventory and accounts receivable. ~~During economic slowdowns, or periods of decreasing~~Working capital needs also fluctuate based on raw material ~~costs, working capital needs generally decrease as a result of the reduction of inventories and accounts receivable.~~prices.

Net cash provided by operating activities was $229.6 million during fiscal 2019 compared to $82.5 million during fiscal 2018 ~~compared~~and $11.1 million provided during the Transition Period. The change in cash flow provided by operations is due to ~~$63.9 million during fiscal 2017. The change~~the inclusion of current period operations from Ply Gem subsequent to the Merger on November 16, 2018 and decreasing inventory that was driven by ~~an increase in earnings~~improved purchasing and lower input costs, partially offset by certain acquisition costs related to the Merger. The improved cash flow from operations during fiscal 2019 is due to the inclusion of current period operations from Ply Gem and ESW subsequent to the Merger and normal seasonal trends in the ~~current fiscal year as compared to the prior fiscal year, offset by net cash used for~~timing of working ~~capital as described below.~~capital.

Net cash used in accounts receivable was $38.2 million for fiscal 2019 compared to $35.4 million for ~~the~~ fiscal ~~year ended October 28, 2018 compared to $19.6 million for the fiscal year ended October 29, 2017.~~2018. The ~~increase~~change in accounts receivable asperiod over period relates to seasonal trends in working capital and timing of ~~October 28, 2018 as compared to~~collections given the ~~prior~~change in fiscal ~~year was primarily the result of strong revenue growth during the current period.~~year. Our trailing 90-days sales outstanding (“DSO”) was approximately 41.2 days at December 31, 2019 as compared to 39.3 days and 35.2 days at December 31, 2018 and October 28, 2018, ~~as compared to 35.1 days at October 29, 2017.~~respectively.

The change in cash flows relating to inventory for fiscal 2019 was an increase of $91.8 million compared to a decrease of $58.5 million for fiscal 2018. The change in inventory period over period relates to lower commodity pricing and improved purchasing combined with increases in net payment discounts from the addition of Ply Gem and ESW in fiscal ~~year ended October 28, 2018 was $47.1 million and resulted primarily from higher inventory purchases to support higher sales and the continued increase in material costs, particularly steel.~~2019. Our trailing 90-days inventory on-hand (“DIO”) ~~was~~improved to 42.7 days at December 31, 2019 as compared to 54.1 days and 54.9 days at December 31, 2018 and October 28, 2018, ~~as compared to 51.5 days at October 29, 2017.~~respectively.

Net cash ~~provided by~~used in accounts payable was $21.1 million for fiscal 2019 compared to $24.5 million provided for ~~the~~ fiscal ~~year ended October 28, 2018 compared to $4.9 million for the fiscal year ended October 29, 2017.~~2018. Our vendor payments can fluctuate significantly based on the timing of disbursements, inventory purchases and vendor payment ~~terms.~~terms and the inclusion of the cash provided by accounts payable from Ply Gem in fiscal 2019. Our trailing 90-days payable outstanding (“DPO”) at December 31, 2019 was 20.8 days as compared to 24.0 days and 33.4 days at December 31, 2018 and October 28, 2018, ~~was 33.4 days compared to 32.5 days at October 29, 2017.~~respectively.

Net cash ~~provided by~~used in accrued expenses was ~~$16.3~~$40.4 million for ~~the~~ fiscal ~~year ended October 28, 2018~~2019 compared to ~~$12.3~~$16.3 million net cash ~~used in~~provided by accrued expenses for the fiscal year ended October ~~29, 2017.~~28, 2018. The change was primarily driven by timing of interest payments and compensation payments.

Investing Activities

Cash used in investing activities ~~increased~~was $294.8 million during fiscal 2019 compared to $38.2 million used during fiscal 2018 ~~compared to $10.3~~and $73.5 million provided during the Transition Period. During fiscal 2019, we paid approximately $179.2 million, net of cash acquired, for the acquisition of Environmental Stoneworks and during the Transition Period we had $87.1 million of net cash received from the acquisition of Ply Gem. We used ~~in the prior fiscal year. In fiscal 2018, we used~~$121.1 million, $47.8 million and $13.6 million for capital expenditures, ~~sold a business in China, resulting in a net use of $4.4 million of cash~~during fiscal 2019 and ~~sold a non-strategic product line in our Insulated Metal Panels segment for $3.0 million. Additionally, we sold one manufacturing facility in our Engineered Building Systems segment~~2018, and two manufacturing facilities in our Metal Components segment for total cash consideration of $6.3 million and we received insurance proceeds of $4.7 million as reimbursement for new assets acquired for a facility in the Insulated Metal Panels segment that experienced a fire in June 2016. In fiscal 2017, we used $22.1 million for capital expenditures. These cash outflows were partially offset by $8.6 million in cash proceeds from insurance for an involuntary loss on conversion at two of our facilities and $3.2 million in cash received from the sale of assets previously classified as held for sale.

Transition Period, respectively.

Financing Activities

Cash provided by financing activities was $17.5 million in fiscal 2019 compared $55.5 million used in financing activities ~~was $55.6 million~~ in fiscal 2018 ~~compared $53.5~~and $9.2 million provided by financing activities in the ~~prior~~Transition Period. During fiscal ~~year.~~ 2019, we borrowed $200.0 million to finance the ESW Acquisition and repaid all but $70.0 million of that amount, paid $25.6 million on quarterly installments on our Current Term Loan, made a $24.9 million payment on the tax receivable agreement and used $1.9 million for the purchases of shares related to restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards and units.

During the Transition Period, we repaid $325.0 million on the Current ABL Facility, used $4.1 million for the purchases of shares related to restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards and units. Net cash provided in the repayment of the pre-Merger Term Loan Credit Agreement and refinancing of long-term debt in connection with the Merger, including payments of financing costs was $366.4 million. We also made a $22.5 million payment on the tax receivable agreement and a $3.5 million payment for settlements of our appraisal share liability. Finally, we made a $0.7 million payment for contingent consideration that was originally accrued in purchase accounting in 2015 in connection with Ply Gem’s acquisition of Canyon Stone.

During fiscal 2018, we borrowed periodically under our ABL Facility and repaid all of that amount during the period, used $51.8 million to repurchase shares of our outstanding common stock under programs approved by the Board of Directors on September 8, 2016 and October 10, 2017 and for the purchases of shares related to restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards and units. Net cash used in the redemption of our Senior Notes and refinancing of long-term debt, including payments of financing cost; as well as payments on the refinanced term loan was $3.2 million. We received $1.3 million in cash proceeds from the exercises of stock options.

During fiscal 2017 we used $43.6 million to repurchase shares of our Common Stock under our authorized stock repurchase programs and for the purchases of shares related to restricted stock that were withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of restricted stock awards and units. In addition, we used $10.2 million to make voluntary principal prepayments on borrowings under the credit agreement that governed our then-outstanding term loans Credit Agreement and we received $1.7 million in cash proceeds from the exercises of stock options.

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

Equity Investment

On August 14, 2009, ~~the Company~~we entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the ~~Company~~us 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. ~~(collectively,~~, 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 ours, which was ~~later~~ converted tointo shares of our ~~Common Stock~~common stock on May 14, 2013.

OnIn January 2014, the CD&R Fund VIII Investor Group completed a registered underwritten offering, in which the CD&R Fund VIII Investor Group offered 8.5 million shares of Common Stock at a price to the public of $18.00 per share (the “2014 Secondary Offering”). The underwriters also exercised their option to purchase 1.275 million additional shares of Common Stock. In addition, ~~the Company~~we entered into an agreement with the CD&R Fund VIII Investor Group to repurchase 1.15 million shares of ~~its~~our Common Stock at ~~the~~a price per share equal to the price per share paid by the underwriters to the CD&R Fund VIII Investor Group in the underwritten offering (the “2014 Stock Repurchase”). The 2014 Stock Repurchase, which was completed at the same time as the 2014 Secondary Offering, represented a private, non-underwritten transaction between NCI and the CD&R Fund VIII Investor Group that was approved and recommended by the Affiliate Transactions Committee of our ~~board~~Board of ~~directors.~~Directors.

On July 25, 2016, the CD&R Fund VIII Investor Group completed a registered underwritten offering, in which the CD&R Fund VIII Investor Group offered 9.0 million shares of our Common Stock at a price to the public of $16.15 per share (the “2016 Secondary Offering”). The underwriters also exercised their option to purchase 1.35 million additional shares of our Common Stock from the CD&R Fund VIII Investor Group. The aggregate offering price for the 10.35 million shares sold in the 2016 Secondary Offering was approximately $160.1 million, net of underwriting discounts and commissions. The CD&R Fund VIII Investor Group received all of the proceeds from the 2016 Secondary Offering and no shares in the 2016 Secondary Offering were sold by ~~the Company~~us or any of ~~its~~our officers or directors (although certain of our directors are affiliated with the CD&R Fund VIII Investor Group). In connection with the 2016 Secondary Offering and 2016 Stock Repurchase (as defined below), we incurred approximately $0.7 million in expenses, which were included in engineering, selling, general and administrative expenses in the consolidated statements of operations for the fiscal year ended October 30, 2016.

On July 18, 2016, ~~the Company~~we entered into an agreement with the CD&R Fund VIII Investor Group to repurchase approximately 2.9 million shares of our Common Stock at the price per share equal to the price per share paid by the underwriters to the CD&R Fund VIII Investor Group in the underwritten offering (the “2016 Stock Repurchase”). The 2016 Stock Repurchase, which was completed concurrently with the 2016 Secondary Offering, represented a private, non-underwritten transaction between ~~the Company~~us and the CD&R Fund VIII Investor Group that was approved and recommended by the Affiliate Transactions Committee of our ~~board~~Board of ~~directors. See Note~~ 18 ~~— Stock Repurchase Program.~~Directors.

On December 11, 2017, the CD&R Fund VIII Investor Group completed a registered underwritten offering of 7,150,000 shares of the ~~Company’s~~our Common Stock at a price to the public of $19.36 per share (the “2017 Secondary Offering”). Pursuant to the underwriting agreement, at the CD&R Fund VIII Investor Group request, ~~the Company~~we purchased 1.15 million of the 7.15 million shares of ~~the~~our Common Stock from the underwriters in the 2017 Secondary Offering at a price per share equal to the price at which the underwriters purchased the shares from the CD&R Fund VIII Investor Group. The total amount ~~the Company~~we spent on these repurchases was $22.3 million.

~~At October 28,~~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 (the “Ply Gem-Atrium Merger”).

Pursuant to the terms of the Merger Agreement, on November 16, 2018, we entered into (i) a stockholders agreement (the “New Stockholders Agreement”) between us, and ~~October 29, 2017,~~each of the CD&R Fund VIII Investor Group, ~~owned approximately 34.4%~~CD&R Pisces Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Pisces”, and ~~43.8%, respectively, of~~together with the ~~outstanding shares of our Common Stock.~~

~~On November 16, 2018,~~CD&R Fund VIII Investor Group, the ~~Company entered into (i)~~“CD&R Investor Group”) and the ~~New Stockholders Agreement between~~Golden Gate Investor Group (together with the ~~Company and each of~~CD&R Investor Group, the ~~Investors,~~“Investors”), pursuant to which ~~the Company~~we granted to the Investors certain governance, preemptive and subscription rights and (ii) ~~the New~~a registration rights agreement (the “New Registration Rights ~~Agreement with~~Agreement”) between us and each of the Investors, pursuant to which ~~the Company~~we 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 NCI~~our Common Stock that are held by the Investors following the consummation of the Merger. ~~Pursuant to the terms of the New Stockholders Agreement, the Company~~

At December 31, 2019 and ~~the CD&R Fund VIII Investor Group terminated the Old Stockholders Agreement and the Old Registration Rights Agreement.~~

~~In addition, pursuant to Section 3.1(c)(i) of the New Stockholders Agreement,~~ ~~the~~ CD&R Investor Group is entitled to nominate for election, fill vacancies and appoint five out of twelve initial members of NCI’s board of directors following consummation of the Merger and, thereafter, so long as2018, the CD&R Investor Group ~~beneficially owns at least 7.5%~~owned approximately 49.1% and 49.4%, respectively, of the outstanding shares of ~~NCI~~our Common ~~Stock, to nominate for election, fill vacancies~~Stock.

Debt

Our outstanding indebtedness will mature in 2023 (Current ABL Facility and ~~appoint replacements for a number of Board members~~Current Cash Flow Revolver), 2025 (Current Term Loan Facility), and 2026 (8.00% Senior Notes). We may not be successful in ~~proportion to~~refinancing, extending the CD&R Investor Group’s percentage beneficial ownership of outstanding NCI Common Stock, but never to exceed one less than the number of independent, non-CD&R-affiliated directors serving on the Board.

The New Stockholders Agreement contains voting agreements between the Company and each of the Investors, including the requirement that each Investor shall vote all of the shares of Common Stock that it beneficially owns (a) in favor of all director nominees, other than CD&R Investor Nomineesmaturity or ~~director nominees proposed by a Golden Gate Investor, nominated by the Board for election by the stockholders of the Company in accordance with~~otherwise amending the terms of such indebtedness because of market conditions, disruptions in the ~~New Stockholders Agreement~~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 ~~the Sixth Amended~~our subsidiaries could face substantial liquidity problems and ~~Restated By-laws~~may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure our indebtedness. Following consummation of the ~~Company, (b) as recommended by~~Merger, the Board, on any and all (i) proposals relating to or concerning compensation or equity incentives for directors, officers or employees of the Company adopted in the ordinary course of business consistent with past practice, (ii) proposals by stockholders of the Company, other than a proposal by a CD&R Investor or a Golden Gate Investor, and (iii) proposals the subject matter of which is a CD&R Investor Consent Action (as defined in the New Stockholders Agreement), provided that, in respect of clauses (i) and (iii) only, that the Board’s recommendation is consistent with the CD&R Investor Group’s exercise of its consent rights provided in the New Stockholders Agreement, and (c) not in favor of any transaction constituting, or that would result in, a Change of Control (as defined in the New Stockholders Agreement) that has not been approved by a majority of the Independent Non-CD&R Investor Directors (as defined in the New Stockholders Agreement), if the per share consideration to be received by any CD&R Investor or Golden Gate Investor in connection with such transaction is not equal to, and in the same form as, the per-share consideration to be received by the shareholders not affiliated with the Investors.

~~Debt~~

~~On February 8, 2018, the Company entered into a~~Current Term Loan Credit Agreement (the “Pre-merger Term Loan Credit Agreement”) and ABL Credit Agreement (the “Pre-merger ABL Credit Agreement”), the proceeds of which, together, were used to redeem the 8.25% senior notes and to refinance the Company’s then existing term loan credit facility and the Company’s then existing asset-based revolving credit facility.

~~The Pre-merger Term Loan Credit Agreement~~Facility provided for an aggregate principal amount of ~~$415.0 million (the “Pre-merger Term Loan Credit Facility”). Proceeds from borrowings under the Pre-merger Term Loan Credit Facility were used, together with cash on hand, (i)~~$2,560.0 million. We have also entered into certain interest rate swap agreements to refinance the existing term loan credit agreement, (ii) to redeem and repay the Notes (the foregoing, collectively, the “Refinancing”) and (iii) to pay any fees, premiums and expenses incurred in connection with the Refinancing.reduce our variable interest rate risk.

The ~~Pre-merger~~Current ABL Credit Agreement ~~provided~~provides for an asset-based revolving credit facility which ~~allowed~~allows aggregate maximum borrowings by the ABL ~~Borrowers~~borrowers of up to ~~$150.0 million (the “Pre-merger ABL Credit Facility”).~~$611.0 million. As set forth in the ~~Pre-merger~~Current ABL Credit Agreement, extensions of credit under the ~~Pre-merger~~Current ABL ~~Credit~~ Facility are ~~limited by~~subject to a monthly borrowing base ~~calculated periodically~~calculation that is based on specified percentages of the value of eligible inventory, eligible accounts receivable and eligible credit card receivables, ~~and eligible inventory,~~ less certain reserves and subject to certain other adjustments. Availability isunder the Current ABL Facility will be reduced by issuance of letters of credit as well as any ~~borrowings.~~borrowings outstanding thereunder.

As of ~~October 28, 2018,~~December 31, 2019, we had an aggregate principal amount of ~~$412.9~~$3,238.6 million of outstanding indebtedness, comprising ~~$412.9~~$70.0 million of borrowings under the Current ABL Facility, $2,523.6 million of borrowings under our ~~Pre-merger~~Current Term Loan ~~Credit Facility.~~Facility and $645.0 million of 8.00% Senior Notes outstanding. We had no revolving loans outstanding under the ~~Pre-merger ABL Credit Facility.~~Current Cash Flow Revolver. Our excess availability under the ~~Pre-merger~~Current ABL ~~Credit~~ Facility was ~~$141.0~~$425.9 million as of ~~October 28, 2018.~~December 31, 2019. In addition, standby letters of credit related to certain insurance policies totaling approximately ~~$9.0~~$30.2 million were outstanding but undrawn under the ~~Pre-merger~~ ABL ~~Credit~~ Facility.

For additional information, see Note 1112 — Long-Term Debt ~~and Note Payable~~ in the notes to the consolidated financial statements.

In connection with the merger with Ply Gem, on November 16, 2018 we assumed the outstanding debt obligations of Ply Gem and repaid in full amounts outstanding under the Pre-merger Term Loan Credit Agreement and the Pre-merger ABL Credit

Agreement. For additional information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our indebtedness following the Merger.

Cash Flow

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-~~short-term and long-term liquidity requirements, including payment of operating expenses and ~~repaying~~repayment of debt, we rely primarily on cash from operations. Beyond cash generated from operations, ~~$141.0~~$425.9 million is available with our ~~Pre-merger~~Current ABL ~~Credit~~ Facility at ~~October 28, 2018~~December 31, 2019, $115.0 million is available with our Current Cash Flow Revolver and we have aan unrestricted cash balance of ~~$54.3~~$98.4 million as of ~~October 28, 2018. Following~~December 31, 2019.

We expect to contribute $5.2 million to the ~~consummation of the Merger, we have a U.S. ABL Facility~~Defined Benefit Plans in fiscal 2020 and ~~a Canadian ABL Facility, which together have an aggregate capacity of approximately $611~~$0.8 million ~~and a Cash Flow Revolver of up~~ to ~~$115 million, none of which was drawn as of November 16, 2018.~~OPEB Plans in fiscal 2020.

We expect that ~~for the next 12 months,~~ cash generated from operations and our ~~Pre-merger~~availability under the ABL Credit Facility 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 of approximately 2.0%-2.5% of net sales for fiscal ~~2019~~2020 and expansion when needed.

~~We expect~~Our corporate strategy evaluates potential acquisitions that would provide additional synergies in our Commercial, Siding and Windows segments. From time to ~~contribute $1.2 million~~time, we may enter into letters of intent or agreements to ~~our defined benefit plans~~acquire assets or companies in ~~fiscal 2019.~~these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.

~~During fiscal 2018~~From time to time, we ~~repurchased an aggregate of $46.7 million~~have used available funds to repurchase shares of our ~~Common Stock~~common stock under ~~the~~our stock repurchase ~~programs authorized in September 8, 2016 and~~programs. On October 10, ~~2017. On~~2017 and March 7, 2018, ~~the Company~~we announced that ~~its~~our 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 our outstanding Common Stock for a cumulative total of $100.0 million. ~~At October 28, 2018,~~Under these repurchase programs, we are authorized to repurchase shares, if at all, at times and in amounts that we deem appropriate in accordance with all applicable securities laws and regulations. Shares repurchased are usually retired. There is no time limit on the duration of the programs. During fiscal 2019 and the Transition Period, there were no repurchases under the stock repurchase programs. As of December 31, 2019, approximately $55.6 million remained available for stock repurchases, all under the ~~stock repurchase~~ programs ~~authorized~~announced on October 10, 2017 and March 7, 2018. WeIn addition to repurchases of shares of our common stock under our stock repurchase program, we also ~~withheld~~withhold shares of restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of awards of restricted stock related to our 2003 Long-Term Stock Incentive Plan.

~~The Company~~We may ~~repurchase or otherwise retire the Company’s debt and~~from time to time take ~~other~~ steps to reduce ~~the Company’s~~our debt or otherwise improve ~~the Company’s~~our financial position. These actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, ~~and~~ opportunistic refinancing of ~~debt.~~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 ~~the Company’s~~our debt, ~~the Company’s~~our cash position, compliance with debt covenants and other considerations.

~~Affiliates of the Company~~ Our affiliates may also purchase ~~the Company’s~~our debt from time to time through open market purchases or other transactions. In such cases, ~~the Company’s~~our debt may not be retired, in which case ~~the Company~~we would continue to pay interest in accordance with the terms of the debt, and ~~the Company~~we would continue to reflect the debt as outstanding ~~in its~~on our consolidated balance sheets.

In connection with the Merger, on November 16, 2018, we assumed the outstanding debt obligations of Ply Gem and repaid in full amounts outstanding under the Pre-merger Term Loan Credit Agreement and the Pre-merger ABL Credit Agreement. For additional information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our indebtedness following the Merger.

~~NON-GAAP MEASURES~~

Set forth below are certain non-GAAP measures which include adjusted operating income (loss), adjusted EBITDA, adjusted net income per diluted common share and adjusted net income applicable to common shares. We define adjusted operating income (loss) as operating income (loss) adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations. We define adjusted EBITDA as net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations and certain non-cash items of the Company. Such measurements are not prepared in accordance with U.S. GAAP and should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. Management believes the use of such non-GAAP measures on a consolidated and operating segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating these measures, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in these non-GAAP measures. In addition, certain financial covenants related to our term loan and asset-based lending credit agreements are based on similar non-GAAP measures. The non-GAAP information provided is unique to the Company and may not be consistent with the methodologies used by other companies.

The following tables reconcile adjusted net income per diluted common share to net income per diluted common share and adjusted net income applicable to common shares to net income applicable to common shares for the periods indicated (in thousands):

Fiscal Three Months Ended Fiscal Year Ended
October 28,
2018 October 29,
2017 October 28,
2018 October 29,
2017
Net income per diluted common share, GAAP basis $ 0.41
$ 0.25
$ 0.94
$ 0.77
Loss on extinguishment of debt —
—
0.33
—
Loss on disposition of business —
—
0.08
—
Goodwill impairment —
0.09
—
0.08
Restructuring and impairment charges, net 0.01
0.02
0.03
0.07
Strategic development and acquisition related costs 0.18
0.00
0.26
0.03
Acceleration of CEO retirement benefits —
—
0.07
—
Gain on insurance recovery —
—
(0.07 ) (0.14 )
Other, net —
0.00
0.00
0.01
Tax effect of applicable non-GAAP adjustments⁽¹⁾
(0.05 ) (0.04 ) (0.19 ) (0.02 )
Adjusted net income per diluted common share $ 0.55
$ 0.32
$ 1.45
$ 0.80

Fiscal Three Months Ended Fiscal Year Ended
October 28,
2018 October 29,
2017 October 28,
2018 October 29,
2017
Net income applicable to common shares, GAAP basis $ 27,417
$ 17,412
$ 62,694
$ 54,399
Loss on extinguishment of debt —
—
21,875
—
Loss on disposition of business —
—
5,673
—
Goodwill impairment —
6,000
—
6,000
Restructuring and impairment charges, net 769
1,710
1,912
5,297
Strategic development and acquisition related costs 11,661
193
17,164
1,971
Acceleration of CEO retirement benefits —
—
4,600
—
Gain on insurance recovery —
—
(4,741 ) (9,749 )
Other, net —
28
(323 ) 591
Tax effect of applicable non-GAAP adjustments⁽¹⁾
(3,418 ) (3,093 ) (12,783 ) (1,603 )
Adjusted net income applicable to common shares $ 36,429
$ 22,250
$ 96,071
$ 56,906


~~(1)~~	~~The Company calculated the tax effect of non-GAAP adjustments by applying the combined federal and state applicable statutory tax rate for the period to each applicable non-GAAP item.~~

~~The following tables reconcile adjusted operating income (loss) and adjusted EBITDA to operating income (loss) for the periods indicated below:~~

Consolidated

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Total Net Sales $ 421,349
$ 457,069
$ 548,525
$ 573,634
$ 2,000,577

Operating Income, GAAP 12,898
18,956
54,501
39,565
125,920
Restructuring and impairment charges, net 1,094
488
(439 ) 769
1,912
Strategic development and acquisition related costs 727
1,134
3,642
11,661
17,164
Loss (gain) on disposition of business —
6,686
(1,013 ) —
5,673
Acceleration of CEO retirement benefits 4,600
—
—
—
4,600
Gain on insurance recovery —
—
(4,741 ) —
(4,741 )
Adjusted Operating Income 19,319
27,264
51,950
51,995
150,528

Other income and expense 928
(34 ) 87
(261 ) 720
Depreciation and amortization 10,358
10,442
10,174
11,351
42,325
Share-based compensation expense 2,270
1,998
1,041
2,729
8,038
Adjusted EBITDA $ 32,875
$ 39,670
$ 63,252
$ 65,814
$ 201,611

Year over year growth, Total Net Sales 7.6 % 8.7 % 16.9 % 17.4 % 13.0 %
Operating Income Margin 3.1 % 4.1 % 9.9 % 6.9 % 6.3 %
Adjusted Operating Income Margin 4.6 % 6.0 % 9.5 % 9.1 % 7.5 %
Adjusted EBITDA Margin 7.8 % 8.7 % 11.5 % 11.5 % 10.1 %

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Total Net Sales $ 391,703
$ 420,464
$ 469,385
$ 488,726
$ 1,770,278

Operating Income, GAAP 9,886
32,472
34,097
33,325
109,780
Restructuring and impairment charges, net 2,264
315
1,009
1,709
5,297
Strategic development and acquisition related costs 357
124
1,297
193
1,971
Loss on sale of assets and asset recovery —
137
—
—
137
Gain on insurance recovery —
(9,601 ) (148 ) —
(9,749 )
Unreimbursed business interruption costs —
191
235
28
454
Goodwill impairment —
—
—
6,000
6,000
Adjusted Operating Income 12,507
23,638
36,490
41,255
113,890

Other income and expense 309
449
1,322
(62 ) 2,018
Depreciation and amortization 10,315
10,062
10,278
10,664
41,319
Share-based compensation expense 3,042
2,820
2,284
2,084
10,230
Adjusted EBITDA $ 26,173
$ 36,969
$ 50,374
$ 53,941
$ 167,457

Operating Income Margin 2.5 % 7.7 % 7.3 % 6.8 % 6.2 %
Adjusted Operating Income Margin 3.2 % 5.6 % 7.8 % 8.4 % 6.4 %
Adjusted EBITDA Margin 6.7 % 8.8 % 10.7 % 11.0 % 9.5 %

Engineered Building Systems

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Total Sales $ 156,964
$ 167,240
$ 230,098
$ 243,997
$ 798,299
External Sales 148,288
157,136
218,614
231,315
755,353

Operating Income, GAAP 8,263
9,271
24,296
24,859
66,689
Restructuring and impairment charges, net 1,136
280
(464 ) 397
1,349
Strategic development and acquisition related costs 173
—
—
—
173
Adjusted Operating Income 9,572
9,551
23,832
25,256
68,211

Other income and expense 733
(88 ) (179 ) (156 ) 310
Depreciation and amortization 2,077
2,323
1,905
2,322
8,627
Adjusted EBITDA $ 12,382
$ 11,786
$ 25,558
$ 27,422
$ 77,148

Year over year growth, Total sales 3.8 % 2.8 % 19.9 % 29.7 % 15.0 %
Year over year growth, External Sales 2.3 % 1.7 % 20.0 % 29.8 % 14.5 %
Operating Income Margin 5.3 % 5.5 % 10.6 % 10.2 % 8.4 %
Adjusted Operating Income Margin 6.1 % 5.7 % 10.4 % 10.4 % 8.5 %
Adjusted EBITDA Margin 7.9 % 7.0 % 11.1 % 11.2 % 9.7 %

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Total Sales $ 151,263
$ 162,624
$ 191,910
$ 188,183
$ 693,980
External Sales 145,021
154,456
182,164
178,222
659,863

Operating Income, GAAP 6,503
6,894
14,948
13,043
41,388
Restructuring and impairment charges, net 1,910
186
941
695
3,732
Loss on sale of assets and asset recovery —
137
—
—
137
Adjusted Operating Income 8,413
7,217
15,889
13,738
45,257

Other income and expense (41 ) (125 ) 1,291
(694 ) 431
Depreciation and amortization 2,276
2,285
2,255
2,198
9,014
Adjusted EBITDA $ 10,648
$ 9,377
$ 19,435
$ 15,242
$ 54,702

Operating Income Margin 4.3 % 4.2 % 7.8 % 6.9 % 6.0 %
Adjusted Operating Income Margin 5.6 % 4.4 % 8.3 % 7.3 % 6.5 %
Adjusted EBITDA Margin 7.0 % 5.8 % 10.1 % 8.1 % 7.9 %

Metal Components

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Total Sales $ 146,832
$ 168,456
$ 186,421
$ 187,635
$ 689,344
External Sales 127,528
147,661
165,697
171,759
612,645

Operating Income, GAAP 17,089
22,082
28,688
19,734
87,593
Restructuring and impairment charges, net (1,403 ) 120
25
—
(1,258 )
Adjusted Operating Income 15,686
22,202
28,713
19,734
86,335

Other income and expense 53
67
54
82
256
Depreciation and amortization 1,576
1,444
1,357
1,440
5,817
Adjusted EBITDA $ 17,315
$ 23,713
$ 30,124
$ 21,256
$ 92,408

Year over year growth, Total sales 9.4 % 8.8 % 12.1 % 3.5 % 8.3 %
Year over year growth, External Sales 10.4 % 10.8 % 17.8 % 10.7 % 12.5 %
Operating Income Margin 11.6 % 13.1 % 15.4 % 10.5 % 12.7 %
Adjusted Operating Income Margin 10.7 % 13.2 % 15.4 % 10.5 % 12.5 %
Adjusted EBITDA Margin 11.8 % 14.1 % 16.2 % 11.3 % 13.4 %

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Total Sales $ 134,173
$ 154,895
$ 166,305
$ 181,288
$ 636,661
External Sales 115,557
133,290
140,639
155,183
544,669

Operating Income, GAAP 12,376
19,997
23,276
23,119
78,768
Restructuring and impairment charges, net 305
129
60
69
563
Gain on insurance recovery —
(420 ) (148 ) —
(568 )
Adjusted Operating Income 12,681
19,706
23,188
23,188
78,763

Other income and expense 28
52
55
84
219
Depreciation and amortization 1,334
1,302
1,266
1,422
5,324
Adjusted EBITDA $ 14,043
$ 21,060
$ 24,509
$ 24,694
$ 84,306

Operating Income Margin 9.2 % 12.9 % 14.0 % 12.8 % 12.4 %
Adjusted Operating Income Margin 9.5 % 12.7 % 13.9 % 12.8 % 12.4 %
Adjusted EBITDA Margin 10.5 % 13.6 % 14.7 % 13.6 % 13.2 %

Insulated Metal Panels

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Total Sales $ 110,794
$ 113,413
$ 133,740
$ 146,466
$ 504,413
External Sales 97,513
99,792
106,605
120,852
424,762

Operating Income, GAAP 7,071
1,540
17,859
21,025
47,495
Restructuring and impairment charges, net 1,284
88
—
372
1,744
Strategic development and acquisition related costs 300
61
—
(23 ) 338
Loss (gain) on disposition of business —
6,686
(1,013 ) —
5,673
Gain on insurance recovery —
—
(4,741 ) —
(4,741 )
Adjusted Operating Income 8,655
8,375
12,105
21,374
50,509

Other income and expense (273 ) 223
(51 ) 92
(9 )
Depreciation and amortization 4,388
4,335
4,324
4,557
17,604
Adjusted EBITDA $ 12,770
$ 12,933
$ 16,378
$ 26,023
$ 68,104

Year over year growth, Total sales 16.4 % 10.2 % 11.7 % 18.6 % 14.3 %
Year over year growth, External Sales 18.3 % 15.0 % 8.8 % 15.0 % 14.1 %
Operating Income Margin 6.4 % 1.4 % 13.4 % 14.4 % 9.4 %
Adjusted Operating Income Margin 7.8 % 7.4 % 9.1 % 14.6 % 10.0 %
Adjusted EBITDA Margin 11.5 % 11.4 % 12.2 % 17.8 % 13.5 %

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Total Sales $ 95,195
$ 102,937
$ 119,730
$ 123,542
$ 441,404
External Sales 82,441
86,773
98,026
105,064
372,304

Operating Income, GAAP 2,192
19,377
11,468
14,895
47,932
Restructuring and impairment charges, net —
—
8
683
691
Strategic development and acquisition related costs —
—
—
90
90
Gain on insurance recovery —
(9,181 ) —
—
(9,181 )
Unreimbursed business interruption costs —
191
235
28
454
Adjusted Operating Income 2,192
10,387
11,711
15,696
39,986

Other income and expense 35
340
(211 ) 356
520
Depreciation and amortization 4,392
4,258
4,516
4,742
17,908
Adjusted EBITDA $ 6,619
$ 14,985
$ 16,016
$ 20,794
$ 58,414

Operating Income Margin 2.3 % 18.8 % 9.6 % 12.1 % 10.9 %
Adjusted Operating Income Margin 2.3 % 10.1 % 9.8 % 12.7 % 9.1 %
Adjusted EBITDA Margin 7.0 % 14.6 % 13.4 % 16.8 % 13.2 %

Metal Coil Coating

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Total Sales $ 88,343
$ 95,190
$ 116,440
$ 117,323
$ 417,296
External Sales 48,020
52,480
57,609
49,708
207,817

Operating Income, GAAP 5,376
7,129
9,121
6,962
28,588
Adjusted Operating Income 5,376
7,129
9,121
6,962
28,588

Depreciation and amortization 2,058
2,085
2,097
2,248
8,488
Adjusted EBITDA $ 7,434
$ 9,214
$ 11,218
$ 9,210
$ 37,076

Year over year growth, Total sales 0.0 % 9.8 % 22.2 % 19.0 % 13.1 %
Year over year growth, External Sales (1.4 )% 14.2 % 18.6 % (1.1 )% 7.4 %
Operating Income Margin 6.1 % 7.5 % 7.8 % 5.9 % 6.9 %
Adjusted Operating Income Margin 6.1 % 7.5 % 7.8 % 5.9 % 6.9 %
Adjusted EBITDA Margin 8.4 % 9.7 % 9.6 % 7.9 % 8.9 %

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Total Sales $ 88,340
$ 86,729
$ 95,261
$ 98,550
$ 368,880
External Sales 48,684
45,945
48,556
50,257
193,442

Operating Income, GAAP 6,706
6,227
7,107
1,419
21,459
Goodwill impairment —
—
—
6,000
6,000
Adjusted Operating Income 6,706
6,227
7,107
7,419
27,459

Other income and expense 31
—
—
—
31
Depreciation and amortization 2,106
2,009
2,063
2,065
8,243
Adjusted EBITDA $ 8,843
$ 8,236
$ 9,170
$ 9,484
$ 35,733

Operating Income Margin 7.6 % 7.2 % 7.5 % 1.4 % 5.8 %
Adjusted Operating Income Margin 7.6 % 7.2 % 7.5 % 7.5 % 7.4 %
Adjusted EBITDA Margin 10.0 % 9.5 % 9.6 % 9.6 % 9.7 %

Corporate

(In thousands) Fiscal Three Months Ended Fiscal Year Ended
January 28,
2018 April 29,
2018 July 29,
2018 October 28,
2018 October 28,
2018
Operating Loss, GAAP $ (24,901 ) $ (21,066 ) $ (25,463 ) $ (33,015 ) $ (104,445 )
Restructuring and impairment charges, net 77
—
—
—
77
Strategic development and acquisition related costs 254
1,073
3,642
11,684
16,653
Acceleration of CEO retirement benefits 4,600
—
—
—
4,600
Adjusted Operating Loss (19,970 ) (19,993 ) (21,821 ) (21,331 ) (83,115 )

Other income and expense 415
(236 ) 263
(279 ) 163
Depreciation and amortization 259
255
491
784
1,789
Share-based compensation expense 2,270
1,998
1,041
2,729
8,038
Adjusted EBITDA $ (17,026 ) $ (17,976 ) $ (20,026 ) $ (18,097 ) $ (73,125 )

Fiscal Three Months Ended Fiscal Year Ended
January 29,
2017 April 30,
2017 July 30,
2017 October 29,
2017 October 29,
2017
Operating Loss, GAAP $ (17,891 ) $ (20,023 ) $ (22,702 ) $ (19,151 ) $ (79,767 )
Restructuring and impairment charges, net 49
—
—
262
311
Strategic development and acquisition related costs 357
124
1,297
103
1,881
Adjusted Operating Loss (17,485 ) (19,899 ) (21,405 ) (18,786 ) (77,575 )

Other income and expense 256
182
187
192
817
Depreciation and amortization 207
208
178
237
830
Share-based compensation expense 3,042
2,820
2,284
2,084
10,230
Adjusted EBITDA $ (13,980 ) $ (16,689 ) $ (18,756 ) $ (16,273 ) $ (65,698 )

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of ~~October 28, 2018,~~December 31, 2019, we were not involved in any unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

The following table shows our contractual obligations as of ~~October 28, 2018~~December 31, 2019 (in thousands):

Payments due by period
Contractual Obligation Total Less than
1 year 1 – 3 years 3 – 5 years More than
5 years
Total debt⁽¹⁾
$ 412,925
$ 4,150
$ 8,300
$ 8,300
$ 392,175
Interest payments on debt⁽²⁾
107,578
17,398
34,268
33,564
22,348
Operating leases 44,998
13,951
14,425
8,929
7,693
Projected pension obligations⁽³⁾
19,578
754
3,929
5,061
9,834
Total contractual obligations $ 585,079
$ 36,253
$ 60,922
$ 55,854
$ 432,050


~~(1)~~	Reflects amounts outstanding under the Pre-merger Term Loan Credit Facility and the Pre-merger ABL Credit Facility which were paid off in full upon consummation of the Merger. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our indebtedness following the Merger.


~~(2)~~	~~Interest payments were calculated based on rates in effect at October 28, 2018 for variable rate obligations.~~


~~(3)~~	Amounts represent our estimate of the minimum funding requirements as determined by government regulations. Amounts are subject to change based on numerous assumptions, including the performance of the assets in the plans and bond rates.


	Payments due by period
Contractual Obligation	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Total debt⁽¹⁾	$	3,238,587	$	25,600	$	121,200	$	51,200	$	3,040,587
Interest payments on debt⁽²⁾	1,046,018		191,776		374,803		369,186		110,253
Operating leases	379,852		89,649		143,016		64,842		82,345
Projected pension obligations⁽³⁾	69,140		7,304		14,462		14,138		33,236
Purchase obligations⁽⁴⁾	107,743		107,743		—		—		—
Total contractual obligations	$	4,841,340	$	422,072	$	653,481	$	499,366	$	3,266,421

(1)Reflects amounts outstanding under the Current ABL Facility, Current Term Loan Facility and the 8.00% Senior Notes and excludes any amounts potentially due under the excess cash flow provisions within the Current Term Loan Facility. Amounts currently drawn on the Current ABL Facility are reflected in the "3-5 years" column consistent with the non-current classification on the consolidated balance sheets. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on our indebtedness following the Merger.

(2)Interest payments were calculated based on rates in effect at December 31, 2019 for variable rate obligations.

(3)Amounts represent our estimate of the minimum funding requirements as determined by government regulations. Amounts are subject to change based on numerous assumptions, including the performance of the assets in the plans and bond rates. Includes obligations with respect to the Company’s Defined Benefit Plans and the other post-employment benefit (“OPEB”) ~~Plans.~~Plan.

(4)Purchase obligations are defined as purchase agreements that are enforceable and legally binding and that specify all significant terms, including quantity, price and the approximate timing of the transaction. These obligations are related primarily to inventory purchases under two 2020 contracts that were finalized during 2019.

CONTINGENT LIABILITIES AND COMMITMENTS

Our insurance carriers require us to secure standby letters of credit as a collateral requirement for our projected exposure to future period claims growth and loss development which includes IBNR claims. For all insurance carriers, the total standby letters of credit are approximately $30.2 million and $9.0 million at December 31, 2019 and ~~$10.0 million at~~ October 28, 2018, ~~and October 29, 2017,~~ respectively.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those estimates that may have a significant effect on our financial condition and results of operations. Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements. The following discussion of critical accounting policies addresses those policies that are both important to the portrayal of our financial condition and results of operations and require significant judgment and estimates. We base our estimates and judgment on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Revenue recognition. We recognize ~~revenues~~revenue when ~~all~~obligations under the terms of contracts with our customers are satisfied; generally, this occurs upon shipment or when control is transferred. Revenue is measured as the ~~following conditions~~amount of consideration expected to be received in exchange for transferring the goods. In addition, revenue is deferred when cash payments are ~~met: persuasive evidence~~received or due in advance of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Generally, these criteria are met at the time product is shipped or services are complete.performance. In instances where an order is partially shipped, we recognize revenue based on the relative sales value of the materials shipped. Provisions are made upon the sale for estimated product returns. Costs associated with shipping and handling our products are included in cost of sales.

Insurance accruals. We have a self-funded Administrative Services Only (“ASO”) arrangement for our employee group health insurance. We purchase individual stop-loss protection to cap our medical claims liability at ~~$355,000~~$500,000 per claim. Each reporting period, we record the costs of our health insurance plan, including paid claims, an estimate of the change in in IBNR claims, taxes and administrative fees, when applicable, (collectively the “Plan Costs”) as general and administrative expenses and cost of sales in our consolidated statements of operations. The estimated IBNR claims are based upon (i) a recent average level of paid claims under the plan, (ii) an estimated claims lag factor and (iii) an estimated claims growth factor to provide for those claims that have been incurred but not yet paid. We have deductible programs for our Workers Compensation/Employer Liability and Auto Liability insurance policies, and a self-insured retention (“SIR”) arrangement for our General Liability insurance policy. The Workers Compensation deductible is $250,000 per occurrence. The Property and Auto Liability deductibles are $500,000 and $250,000, respectively, per occurrence. The General Liability has a self-insured retention of $1,000,000 per occurrence. For workers’ compensation costs, we monitor the number of accidents and the severity of such accidents to develop appropriate estimates for expected costs to provide both medical care and indemnity benefits, when applicable, for the period of time that an employee is incapacitated and unable to work. These accruals are developed using third-party insurance adjuster reserve estimates of the expected cost for medical treatment, and length of time an employee will be unable to work based on industry statistics for the cost of similar disabilities and statutory impairment ratings. For general liability and automobile claims, accruals are developed based on third-party insurance adjuster reserve estimates of the expected cost to resolve each claim, including damages and defense costs, based on legal and industry trends, and the nature and severity of the claim. Accruals also include estimates for IBNR claims, and taxes and administrative fees, when applicable. This statistical information is trended by a third-party actuary to provide estimates of future expected costs based on loss development factors derived from our period-to-period growth of our claims costs to full maturity (ultimate), versus original estimates.

We believe that the assumptions and information used to develop these accruals provide the best basis for these estimates because, as a general matter, the accruals historically have proved to be reasonable and accurate. However, significant changes in expected medical and health care costs, negative changes in the severity of previously reported claims or changes in laws that govern the administration of these plans could have an impact on the determination of the amount of these accruals in future periods. Our methodology for determining the amount of health insurance accrual considers claims growth and claims lag, which is the length of time between the incurred date and processing date. ~~For~~

Warranty.The Company sells a number of products and offers a number of warranties. The specific terms and conditions of these warranties vary depending on the ~~health insurance accrual,~~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 ~~change of 10% above~~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 ~~outstanding claims would result in a financial impact of $0.2 million.~~to be recognized.

Share-Based Compensation. Under FASB Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation, the fair value and compensation expense of each option award is estimated as of the date of grant using a Black-Scholes-Merton option pricing formula. The fair value and compensation expense of the performance share units (“PSUs”) grant is estimated based on the Company’s stock price as of the date of grant using a Monte Carlo simulation. Expected volatility is based on historical volatility of our stock over a preceding period commensurate with the expected term of the option. The

expected volatility considers factors such as the volatility of our share price, implied volatility of our share price, length of time our shares have been publicly traded, appropriate and regular intervals for price observations and our corporate and capital structure. With the adoption of ASU 2016-09 in the first quarter of fiscal 2018, we account for forfeitures of outstanding but unvested grants in the period they occur. For the fiscal year ended October 29, 2017, the forfeiture rate in our calculation of share-based compensation expense was based on historical experience and was estimated at 5.0% for our non-officers and 0% for our officers. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula since we historically have not paid dividends on our common shares and have no current plans to do so in the future. ~~We granted an immaterial amount of options during the fiscal years ended October 29, 2017 and October 30, 2016. We did not grant stock options during the fiscal year ended October 28, 2018.~~

Long-term incentive awards granted to our senior executives generally have a three-year performance period. Long-term incentive awards include restricted stock units and PSUs representing 40% and 60% of the total value, respectively. The restricted stock units vest upon continued employment. Vesting of the PSUs is contingent upon continued employment and the achievement of targets with respect to the following metrics, as defined by management: (1) cumulative free cash flow (weighted 40%); (2) cumulative earnings per share (weighted 40%); and (3) total shareholder return (weighted 20%), in each case during the performance period. At the end of the performance period, the number of actual shares to be awarded varies between 0% and 200% of target amounts. The PSUs vest pro rata if an executive’s employment terminates prior to the end of the performance period due to death, disability, or termination by the Company without cause or by the executive for good reason. If an executive’s employment terminates for any other reason prior to the end of the performance period, all outstanding unvested PSUs, whether earned or unearned, will be forfeited and cancelled. If a change in control occurs prior to the end of the performance period, the PSU payout will be calculated and paid assuming that the maximum benefit had been achieved. If an executive’s employment terminates due to death or disability while any of the restricted stock is unvested, then all of the unvested restricted stock will become vested. If an executive’s employment is terminated by the Company without cause or after reaching normal retirement age, the unvested restricted stock will be forfeited. If a change in control occurs prior to the end of the performance period, the restricted stock will fully vest. The fair value of the awards is based on the Company’s stock price as of the date of grant. During the fiscal years 2018, 2017 and 2016, we granted PSUs with fair values of approximately $3.8 million, $4.6 million and $4.7 million, respectively, to the Company’s senior executives.

Long-term incentive awards granted to our key employees generally have a three-year performance period. Long-term incentive awards are granted 50% in restricted stock units and 50% in PSUs. Vesting of PSUs is contingent upon continued employment and the achievement of free cash flow and earnings per share targets, as defined by management, over a three-year period. At the end of the performance period, the number of actual shares to be awarded varies between 0% and 150% of target amounts. However, a minimum of 50% of the awards will vest upon continued employment over the three-year period if the minimum targets are not met. The PSUs vest earlier upon death, disability or a change in control. A portion of the awards also vests upon termination without cause or after reaching normal retirement age prior to the vesting date, as defined by the agreements governing such awards. The fair value of Performance Share Awards is based on the Company’s stock price as of the date of grant. During the fiscal years ended October 28, 2018, October 29, 2017 and October 30, 2016, we granted Performance Share Awards with an equity fair value of $2.8 million, $2.0 million and $2.4 million, respectively. The PSUs granted in December 2017, 2016 and 2015 to our senior executives cliff vest at the end of the three-year performance period. For the PSUs granted in December 2014 to our senior executives, one-half vested on December 15, 2016 and one-half vested on December 15, 2017.

We granted 0.4 million, 0.3 million and 0.3 million restricted shares during the fiscal years ended October 28, 2018, October 29, 2017 and October 30, 2016, respectively. The restricted stock units granted in December 2017, 2016 and 2015 to our senior executives vest one-third annually. For the restricted stock units granted in December 2014 to our senior executives, two-thirds vested on December 15, 2016 and one-third vested on December 15, 2017.

The compensation cost related to share-based awards is recognized over the requisite service period. The requisite service period is generally the period during which an employee is required to provide service in exchange for the award. For awards with performance conditions, the amount of share-based compensation expense recognized is based upon the probable outcome of the performance conditions, as defined and determined by management. Our option awards and restricted stock awards are subject to graded vesting over a service period, which is typically three or four years. We generally recognize compensation cost for these awards on a straight-line basis over the requisite service period for the entire award. In addition, certain of our awards provide for accelerated vesting upon qualified retirement. We recognize compensation cost for such awards over the period from grant date to the date the employee first becomes eligible for retirement.

Income taxes. The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The amount recorded in our consolidated financial statements reflects estimates of final amounts due to timing of completion and filing of actual income tax returns. Estimates are required with respect to, among other things, the appropriate state income tax rates used in the various states in which we and our subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for federal, state, and foreign income tax purposes and valuation allowances required, if any, for tax assets that may not be realized in the future. We establish reserves when, despite our belief that our tax return positions are fully supportable, certain positions could be challenged, and the positions may not be fully sustained. Our provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state, Canadian federal and provincial, Mexican federal, and other jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or

adjustments of accruals for tax contingencies or valuation allowances, and the change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

As of ~~October 28, 2018,~~December 31, 2019, the ~~$1.8~~$60.9 million net operating loss ~~and tax credit~~ carryforward included ~~$0.1~~$32.6 million for U.S federal losses, $11.6 million for U.S. state ~~loss carryforwards~~losses and ~~$1.7~~$16.7 million for foreign ~~loss carryforward. The~~losses. A portion of the state net operating loss carryforwards will expire in ~~2019 to 2029 years,~~2020, if unused and the foreign loss carryforward will ~~start~~begin to expire in fiscal 2028, if unused.

Accounting for acquisitions, intangible assets and goodwill. Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets and liabilities of the acquired business. For most assets and liabilities, purchase price allocation is accomplished by recording the asset or liability at its estimated fair value. The most difficult estimations of individual fair values are those involving property, plant and equipment and identifiable intangible assets. We use all available information to make these fair value determinations and, for major business acquisitions, typically engage an outside appraisal firm to assist in the fair value determination of the acquired long-lived assets.

The Company has approximately ~~$148.3~~$1,669.6 million of goodwill as of ~~October 28, 2018,~~December 31, 2019, of which approximately ~~$14.3~~$148.3 million pertains to our ~~Engineered Building Systems~~Commercial segment, ~~$7.1~~$807.3 million pertains to our ~~Metal Components~~Siding segment, ~~$121.5~~and $714.0 million pertains to our Insulated Metal Panels segment and $5.4 million pertains to our Metal Coil Coating segment. The Company also has $13.5 million of other intangible assets with indefinite lives as of October 28, 2018 pertaining to our Engineered Building SystemsWindows segment. We perform an annual impairment assessment of goodwill and indefinite-lived intangibles. Additionally, we assess goodwill and indefinite-lived intangibles for impairment whenever events or changes in circumstances indicate that the fair values may be below the carrying values of such assets. Unforeseen events, changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of our assets and result in a non-cash impairment charge. Some factors considered important that could trigger an impairment review include the following: significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for our overall business and significant sustained negative industry or economic trends.

The fair value of our reporting units is based on a blend of estimated discounted cash flows and publicly traded company ~~multiples~~multiples. A significant reduction in projected sales and ~~transaction multiples.~~earnings which would lead to a reduction in future cash flows could indicate potential impairment. The results from each of these models are then weighted and combined into a single estimate of fair value for our reporting units. Estimated discounted cash flows are based on projected sales and related cost of sales. Publicly traded company multiples and acquisition multiples are derived from information on traded shares and analysis of recent acquisitions in the marketplace, respectively, for companies with operations similar to ours. The primary assumptions used in these various models include earnings multiples of acquisitions in a comparable industry, future cash flow estimates of each of the reporting units, weighted average cost of capital, working capital and capital expenditure requirements. During fiscal 2017, management early adopted the new accounting principle that simplified the test for goodwill impairment by eliminating the second step of the goodwill test. Management does not believe the estimates used in the analysis are reasonably likely to change materially in the future, but we will continue to assess the estimates in the future based on the expectations of the reporting units. Changes in assumptions used in the fair value calculation could result in an estimated reporting unit fair value that is below the carrying value, which may result in an impairment of goodwill.

We completed our annual goodwill impairment test as of ~~July 30, 2018~~September 29, 2019 for each of our reporting units. We have the option of performing an assessment of certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value or proceeding directly to a quantitative impairment test. We elected to apply the ~~qualitative~~quantitative assessment for the goodwill inimpairment test for our reporting units within each of our operating segments as of ~~July 30, 2018. Additionally,~~September 29, 2019.

A summary of the key assumptions utilized in the goodwill impairment analysis at September 29, 2019, as it relates to the fair values and the sensitivities for these assumptions follows:


	As of September 29, 2019
	Engineered Building Systems			Metal Components			Insulated Metal Panels			Metal Coil Coating			Siding			Windows
Assumptions:
Income Approach:
Terminal growth rate	3.0		%	3.0		%	3.0		%	3.0		%	3.0		%	3.5		%
Discount rate	14.0		%	14.0		%	14.5		%	13.0		%	10.5		%	15.0		%

Market approach:
Control premiums	5.0		%	5.0		%	5.0		%	5.0		%	—		%	—		%

Sensitivities
(amounts in thousands)
Estimated fair value decrease in the event of a 1% decrease in the terminal year growth	$	20,700		$	24,100		$	22,600		$	7,200		$	178,300		$	73,100
Estimated fair value decrease in the event of a 1% decrease in the discount rate	35,000			40,300			38,700			12,100			251,000			124,100
Estimated fair value decrease in the event of a 1% decrease in the control premium	4,100			4,600			4,800			1,400			n/a			n/a

Overall, we ~~applied~~utilize the ~~qualitative assessment~~same key assumptions in preparing the prospective financial information (“PFI”) utilized in the discounted cash flow test for ~~our indefinite-lived intangible~~the reporting units. However, each reporting unit is impacted differently by industry trends, how market factors are influencing the reporting units’ expected performance, competition, and other unique business factors as mentioned above.


(amounts in thousands)	As of September 29, 2019
Estimated Engineered Building Systems reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	1,200
Estimated Metal Components reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	(1,900)
Estimated Insulated Metal Panels reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	1,000
Estimated Metal Coil Coating reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	700
Estimated Windows reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	(700)
Estimated Siding reporting unit fair value increase (decrease) in the event of a 10% increase in the weighting of the market multiples method	$	(6,100)

The Company’s annual goodwill impairment tests performed as of ~~July 30, 2018. Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value~~September 29, 2019 indicated no impairment. The Company's estimate of a reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact they would have on the estimated fair value using positive, neutral, and negative categories based on current business conditions. Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is determined using relative weightings. Additionally, the Company considers the results of the most recent quantitative impairment test completed for a reporting unit and compares the weighted average cost of capital (WACC), publicly traded company multiples and observable and recent transaction multiples between the current and prior years for a reporting unit. Based on our assessment of these tests, we do not believe it is more likely than not that the fair value of ~~these~~its Engineered Building Systems, Metal Components, Insulated Metal Panels, Metal Coil Coaters, Siding and Windows reporting units exceeded their 2019 carrying values by approximately 244%, 206%, 57%, 8%, 12% and 3%, respectively.

We provide no assurance that: (1) valuation multiples will not decline, (2) discount rates will not increase, or (3) the ~~indefinite-lived intangible assets are less than their respective carrying amounts.~~earnings, book values or projected earnings and cash flows of our reporting units will not decline. We will continue to analyze changes to these assumptions in future periods. We will continue to evaluate goodwill during future periods and future declines in the residential housing and remodeling markets and nonresidential markets as well as good economic conditions could result in future goodwill impairments.

Allowance for doubtful accounts. Our allowance for doubtful accounts reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Management uses significant judgment in estimating uncollectible amounts. In estimating uncollectible accounts, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical customer performance and anticipated customer performance. While we believe these processes effectively address our exposure for doubtful accounts and credit losses have historically been within expectations, changes in the economy, industry, or specific customer conditions may require adjustments to the allowance for doubtful accounts.

In fiscal 2019, 2018 ~~2017~~ and ~~2016,~~2017, we established new reserves (net of recoveries of previously written off balances) for doubtful accounts of $2.0 million, $(0.5) million ~~$1.9 million~~ and ~~$1.3~~$1.9 million, respectively. In fiscal years 2019, 2018 ~~2017~~ and ~~2016,~~2017, we wrote off uncollectible accounts, net of recoveries, of $2.8 million, $1.6 million ~~$1.0 million~~ and ~~$1.6~~$1.0 million, respectively, all of which had been previously reserved.

Inventory valuation. In determining the valuation of inventory, we record an allowance for obsolete inventory using the specific identification method for ~~steel coils and other raw materials.~~our inventory. Management also reviews the carrying value of inventory for lower of cost or net realizable value. Our primary raw ~~material is~~materials are steel coils which have historically shown significant price ~~volatility.~~volatility as well as PVC resin, glass and aluminum. We generally manufacture to customers’ orders, and thus maintain raw materials with a variety of ultimate end uses. We record a lower of cost or net realizable value charge to cost of sales when the net realizable value (selling price less estimated cost of disposal), based on our intended end usage, is below our estimated product cost at completion. Estimated net realizable value is based upon assumptions of targeted inventory turn rates, future demand, anticipated finished goods sales prices, management strategy and market conditions for ~~steel.~~steel, PVC resin, aluminum and glass. If projected end usage or projected sales prices change significantly from management’s current estimates or actual market conditions are less favorable than those projected by management, inventory write-downs may be required.

Property, plant and equipment valuation. We assess the recoverability of the carrying amount of property, plant and equipment for assets held and used at the lowest level asset grouping for which cash flows can be separately identified, which may be at an individual asset level, plant level or divisional level depending on the intended use of the related asset, if certain events or changes in circumstances indicate that the carrying value of such asset groups may not be recoverable and the undiscounted cash flows estimated to be generated by those asset groups are less than the carrying amount of those asset groups. Events and circumstances which indicate an impairment include (a) a significant decrease in the market value of the asset groups; (b) a significant change in the extent or manner in which an asset group is being used or in its physical condition; (c) a significant change in our business conditions; (d) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of an asset group; (e) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection that demonstrates continuing losses associated with the use of an asset group; or (f) a current expectation that, more likely than not, an asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. We assess our asset groups for any indicators of impairment on at least a quarterly basis.

If we determine that the carrying value of an asset group is not recoverable based on expected undiscounted future cash flows, excluding interest charges, we record an impairment loss equal to the excess of the carrying amount of the asset group over its fair value. The fair value of asset groups is determined based on prices of similar assets adjusted for their remaining useful life.

Contingencies. We establish reserves for estimated loss contingencies when we believe a loss is probable and the amount of the loss can be reasonably estimated. Our contingent liability reserves are related primarily to litigation and environmental matters. Legal costs for uninsured claims are accrued as part of the ultimate settlement. Revisions to contingent liability reserves are reflected in operations in the period in which there are changes in facts and circumstances that affect our previous assumptions with respect to the likelihood or amount of loss. Reserves for contingent liabilities are based upon our assumptions and estimates regarding the probable outcome of the matter. We estimate the probable cost by evaluating historical precedent as well as the specific facts relating to each particular contingency (including the opinion of outside advisors, professionals and experts). Should the outcome differ from our assumptions and estimates or other events result in a material adjustment to the accrued estimated reserves, revisions to the estimated reserves for contingent liabilities would be required and would be recognized in the period the new information becomes known.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 3 — Accounting Pronouncements in the notes to the consolidated financial statements for information on recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

~~Steel Prices~~Commercial Business

We are subject to market risk exposure related to volatility in the price of steel. For the fiscal year ended ~~October 28, 2018,~~December 31, 2019, material costs (predominantly steel costs) constituted approximately ~~66%~~63% of our Commercial segment 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.

We normally do not maintain an inventory of steel in excess of our current production requirements. However, from time to time, we may purchase steel in advance of announced steel price increases. In addition, it is our current practice to purchase all steel inventory that has been ordered but is not in our possession. Therefore, our inventory may increase if demand for our products declines. We can give no assurance that steel will remain available or that prices will not continue to be volatile.

With material costs (predominantly steel costs) accounting for approximately ~~66%~~63% of our Commercial segment cost of sales for fiscal ~~2018,~~2019, a one percent change in the cost of steel could have resulted in a pre-tax impact on cost of sales of approximately ~~$10.1~~$8.8 million for our fiscal year ended ~~October 28, 2018.~~December 31, 2019. 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.

Siding and Windows 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 2.0% for the fiscal year ended December 31, 2019 compared to the twelve months ended December 31, 2018.

Other Commodity Risks

In addition to market risk exposure related to the volatility in the price of steel, we are subject to market risk exposure related to volatility in the price of natural gas. As a result, we occasionally enter into both index-priced and fixed-price contracts for the purchase of natural gas. We have evaluated these contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the criteria for characterization as a derivative instrument may be exempted from hedge accounting treatment as normal purchases and normal sales and, therefore, these forward contracts are not marked to market. At ~~October 28, 2018,~~December 31, 2019, all our contracts for the purchase of natural gas met the scope exemption for normal purchases and normal sales.

Ply Gem is also subject to significant market risk with respect to the pricing of principal raw materials, which include PVC resin, aluminum, glass and wood. 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.

Interest Rates

We are subject to market risk exposure related to changes in interest rates on our ~~Pre-merger~~ Term Loan Credit Facility and ~~Pre-merger~~Current ABL Credit Facility. These instruments bear interest at an agreed upon percentage point spread from either the prime interest rate or LIBOR. Under our ~~Pre-merger~~ Term Loan Credit Facility, we may, at our option, fix the interest rate for certain borrowings based on a spread over LIBOR for 30 days to six months. At ~~October 28, 2018,~~December 31, 2019, we had ~~$412.9~~$2,523.6 million outstanding under our ~~Pre-merger~~ Term Loan Credit Facility. Based on this balance, ~~an immediate change of~~a one percent change in the interest rate would cause a change in interest expense of approximately ~~$4.1~~$25.2 million on an annual basis. The fair value of our ~~term loan credit facility~~Term Loan Credit Facility at ~~October 28,~~December 31, 2019 and December 31, 2018 ~~and October 29, 2017~~ was approximately ~~$412.4~~$2,514.9 million and ~~$144.1~~$2,319.8 million, respectively, compared to the face value of ~~$412.9~~$2,523.6 million and ~~$144.1~~$2,549.2 million, respectively. During the year ended December 31, 2019, we entered into cash flow interest rate swap hedge contracts for $1.5 billion to mitigate the exposure risk of our floating interest rate debt. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate payment. At December 31, 2019, our cash flow hedge contracts had a fair value liability of $30.0 million and is recorded as a non-current liability as of December 31, 2019 in our consolidated balance sheets.

See Note 1112 — Long-Term Debt ~~and Note Payable~~ in the notes to the consolidated financial statements for more information on the material terms of our long-term debt.

The table below presents scheduled debt maturities and related weighted average interest rates for each of the fiscal years relating to debt obligations as of October 28, 2018. Weighted average variable rates are based on an adjusted LIBOR rates at October 28, 2018, plus applicable margins.

Scheduled Maturity Date⁽¹⁾
Fair Value
Fiscal Year 2019 Fiscal Year 2020 Fiscal Year 2021 Fiscal Year 2022 Fiscal Year 2023 Thereafter Total 10/28/2018
(In thousands, except interest rate percentages)
Total Debt:
Variable Rate $ 4,150
$ 4,150
$ 4,150
$ 4,150
$ 4,150
$ 392,175
$ 412,925
$ 412,409
⁽²⁾
Average interest rate 4.24 % 4.24 % 4.24 % 4.24 % 4.24 % 4.24 % 4.24 %


~~(1)~~	Expected maturity date amounts are based on the face value of debt and do not reflect fair market value of the debt. Amounts reflect maturity dates under the Pre-merger Term Loans which were repaid in full on November 16, 2018. See “Item 7.

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a description of our new debt facilities.~~


~~(2)~~	~~Based on recent trading activities of comparable market instruments.~~

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 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 ~~losses~~gains (losses) were ~~$0.3~~$0.9 million, $(0.3) million and ~~$0.8~~$(0.1) million for ~~the~~ fiscal ~~years ended October 29,~~2019 and 2017, and ~~October 30, 2016,~~the transition period ended December 31, 2018, respectively. For ~~the~~ fiscal ~~year ended October 28,~~ 2018, the net foreign currency re-measurement gain (loss) was insignificant.

The functional currency for our Canadian 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 in stockholders’ equity. The net foreign currency exchange gains (losses) ~~gains~~ included in net income (loss) for ~~the~~ fiscal ~~years ended October 28,~~2019, 2018 ~~October 29,~~and 2017, and ~~October 30, 2016~~the transition period ended December 31, 2018, were $1.2 million, $(0.2) million, $0.8 million and ~~$(0.6)~~$(1.6) million, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) was $3.2 million, $(0.1) million, $0.2 million and ~~$(0.3)~~$(4.2) million for ~~the~~ fiscal ~~years ended October 28,~~2019, 2018 ~~October 29,~~and 2017, and ~~October 30, 2016,~~the transition period ended December 31, 2018, respectively.

~~On January 29, 2018, we closed~~Labor Force Risk

Our manufacturing process is highly engineered but involves manual assembly, fabrication, and manufacturing processes. We believe that our success depends upon our ability to employ, train, and retain qualified personnel with the ability to design, utilize, and enhance these services and products. In addition, our ability to expand our operations depends in part on our ability to increase our labor force as the ~~sale of CENTRIA International LLC, which owned our China manufacturing facility~~residential and ~~are therefore no longer exposed~~nonresidential construction markets continue to ~~fluctuations~~recover and minimize labor inefficiencies. A significant increase in the ~~foreign currency exchange rate between~~wages paid by competing employers could result in a reduction of our labor force, increases in the ~~U.S. dollar~~wage rates that we must pay, or both. If either of these events were to occur, our cost structure could increase, our margins could decrease, and Chinese yuan. The functional currency for our China operations was the Chinese yuan. The net foreign currency translation adjustment was insignificant for the fiscal years ended October 28, 2018 and October 29, 2017.

any growth potential could be impaired.

Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS




Management’s Report on Internal Control Over Financial Reporting	6058
~~Report~~Reports of Independent Registered Public Accounting ~~Firm on Internal Control Over Financial Reporting~~Firms		6159
~~Report of Independent Registered Public Accounting Firm~~		62
Financial Statements:
Consolidated Statements of Operations for the ~~Fiscal~~ Years Ended ~~October 28, 2018, October 29, 2017 and October 30, 2016~~		63
~~Consolidated Statements of Comprehensive Income for the Fiscal Years Ended October 28, 2018, October 29, 2017 and October 30, 2016~~	64
~~Consolidated Balance Sheets as of~~December 31, 2019, October 28, 2018 and October 29, 2017, and the Transition Period Ended December 31, 2018	6562
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 20 19, October 28, 2018 and October 29, 2017, and the Transition Period Ended December 31, 2018		63
Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018		64
Consolidated Statements of Cash Flows for the ~~Fiscal~~ Years Ended December 31, 2019, October 28, 2018 and October 29, 2017, and ~~October 30, 2016~~the Transition Period Ended December 31, 2018		6665
Consolidated Statements of Stockholders’ Equity for the ~~Fiscal~~ Years Ended December 31, 2019, October 28, 2018 and October 29, 2017, and ~~October 30, 2016~~the Transition Period Ended December 31, 2018		6766
Notes to the consolidated financial statements		6867

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of ~~NCI~~Cornerstone Building ~~Systems,~~Brands, Inc. (the “Company” or “our”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and ~~board~~Board of ~~directors~~Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Internal control over financial reporting includes the controls themselves, monitoring (including internal auditing practices), and actions taken to correct deficiencies as identified.

Internal control over financial reporting has inherent limitations and may not prevent or detect misstatements. The design of an internal control system is also based in part upon assumptions and judgments made by management about the likelihood of future events, and there can be no assurance that an internal control will be effective under all potential future conditions. Therefore, even those systems determined to be effective can provide only reasonable, not absolute, assurance with respect to the financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of ~~October 28, 2018.~~December 31, 2019. In making this assessment, management used the criteria for internal control over financial reporting described in Internal Control — Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operating effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of the Company’s Board of Directors. Based on this assessment, management has concluded that, as of ~~October 28, 2018,~~December 31, 2019, the Company’s internal control over financial reporting was effective.

~~Ernst & Young~~Grant Thornton LLP, the independent registered public accounting firm that has audited the Company’s consolidated financial statements, has audited the effectiveness of the Company’s internal control over financial reporting as of ~~October 28, 2018,~~December 31, 2019, as stated in their report included elsewhere herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To ~~the Shareholders and~~ the Board of Directors ~~of NCI~~and Shareholders

Cornerstone Building ~~Systems,~~Brands, Inc.

Opinion on Internal Control over Financial Reporting

We have audited ~~NCI Building Systems, Inc.~~the internal control over financial reporting of Cornerstone Building Brands, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of ~~October 28, 2018,~~December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~(2013 framework) (the COSO criteria)~~(“COSO”). In our opinion, ~~NCI Building Systems, Inc. (the Company)~~the Company maintained, in all material respects, effective internal control over financial reporting as of ~~October 28, 2018,~~December 31, 2019, based on criteria established in the ~~COSO criteria.~~2013 Internal Control‑Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ~~(PCAOB)~~(“PCAOB”), the consolidated ~~balance sheets~~financial statements of ~~NCI Building Systems, Inc.,~~the Company as of ~~October 28, 2018~~ and ~~October 29, 2017,~~for the ~~related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period~~year ended ~~October 28, 2018, and the related notes~~December 31, 2019, and our report dated ~~December 19, 2018~~March 3, 2020 expressed an unqualified opinion ~~thereon.~~on those financial statements.

Basis for ~~Opinion~~opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on ~~internal control.~~Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and ~~Limitations~~limitations of ~~Internal Control Over Financial Reporting~~internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ ~~Ernst & Young~~GRANT THORNTON LLP

~~Houston, Texas~~

~~December 19, 2018~~

Raleigh, North Carolina

March 3, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To ~~the Shareholders and~~ the Board of Directors ~~of NCI~~and Shareholders

Cornerstone Building ~~Systems,~~Brands, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ~~NCI~~Cornerstone Building ~~Systems,~~Brands, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year ended December 31, 2019 and for the period from October ~~28,~~29, 2018 to December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the year ended December 31, 2019 and for the period from October 29, ~~2017,~~2018 to December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2020 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842).

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the ~~related~~applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2018.

Raleigh, North Carolina

March 3, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Cornerstone Building Brands, Inc. (formerly named NCI Building Systems, Inc.)

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows of Cornerstone Building Brands, Inc. (formerly named NCI Building Systems, Inc. (the “Company”)) for each of the ~~three~~two years in the period ended October 28, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the ~~financial position~~results of the ~~Company at October 28, 2018 and October 29, 2017, and the results of its~~Company’s operations and its cash flows for each of the ~~three~~two years in the period ended October 28, 2018, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 28, 2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 19, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We ~~have~~ served as the Company’s auditor ~~since 1991.~~from 1991 to 2019.

Houston, Texas

December 19, 2018,

except with respect to the effects of the change in the composition of reportable segments, change in the income statement presentation of service cost and other components for defined benefit pension and other postretirement benefit plans, and change in presentation of restricted cash in the statement of cash flows as discussed in Notes 1, 3, and 20 as to which the date is February 19, 2019

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

~~NCI BUILDING SYSTEMS, INC.~~(In thousands, except per share data)


	Fiscal Year Ended
	October 28, 2018			October 29, 2017			October 30, 2016				Year Ended
	(In thousands, except per share data)										December 31, 2019		October 28, 2018		October 29, 2017		October 29, 2018 - December 31, 2018
Sales	$	2,000,577		$	1,770,278		$	1,684,928		Sales	$	4,889,747	$	2,000,577	$	1,770,278	$	559,870
Cost of sales	1,537,895			1,354,214			1,257,038			Cost of sales	3,801,328		1,537,895		1,354,214		475,780
Gross profit	462,682			416,064			427,890			Gross profit	1,088,419		462,682		416,064		84,090
Engineering, selling, general and administrative expenses	307,106			293,145			302,551
Selling, general and administrative expenses										Selling, general and administrative expenses	627,861		307,106		293,145		95,783
Intangible asset amortization	9,648			9,620			9,638			Intangible asset amortization	177,577		9,648		9,620		20,132
Goodwill impairment	—			6,000			—			Goodwill impairment	—		—		6,000		—
Restructuring and impairment charges, net	1,912			5,297			4,252			Restructuring and impairment charges, net	18,060		1,912		5,297		1,253
Strategic development and acquisition related costs	17,164			1,971			2,670			Strategic development and acquisition related costs	50,185		17,164		1,971		29,094
Loss on disposition of business	5,673			—			—			Loss on disposition of business	—		5,673		—		1,244
Gain on insurance recovery	(4,741		)	(9,749		)	—			Gain on insurance recovery	—		(4,741)		(9,749)		—
Income from operations	125,920			109,780			108,779
Income (loss) from operations										Income (loss) from operations	214,736		125,920		109,780		(63,416)
Interest income	140			238			146			Interest income	674		140		238		68
Interest expense	(21,808		)	(28,899		)	(31,019		)	Interest expense	(229,262)		(21,808)		(28,899)		(28,556)
Foreign exchange (loss) gain	(244		)	547			(1,401		)
Gain from bargain purchase	—			—			1,864
Foreign exchange gain (loss)										Foreign exchange gain (loss)	2,054		(244)		547		(1,713)
Loss on extinguishment of debt	(21,875		)	—			—			Loss on extinguishment of debt	—		(21,875)		—		(3,284)
Other income, net	962			1,472			595			Other income, net	1,183		962		1,472		44
Income before income taxes	83,095			83,138			78,964
Provision for income taxes	19,989			28,414			27,937
Net income	$	63,106		$	54,724		$	51,027
Income (loss) before income taxes										Income (loss) before income taxes	(10,615)		83,095		83,138		(96,857)
Provision (benefit) for income taxes										Provision (benefit) for income taxes	4,775		19,989		28,414		(20,667)
Net income (loss)										Net income (loss)	$	(15,390)	$	63,106	$	54,724	$	(76,190)
Net income allocated to participating securities	(412		)	(325		)	(389		)	Net income allocated to participating securities	—		(412)		(325)		—
Net income applicable to common shares	$	62,694		$	54,399		$	50,638
Income per common share:
Net income (loss) applicable to common shares										Net income (loss) applicable to common shares	$	(15,390)	$	62,694	$	54,399	$	(76,190)

Income (loss) per common share:										Income (loss) per common share:
Basic	$	0.95		$	0.77		$	0.70		Basic	$	(0.12)	$	0.95	$	0.77	$	(0.71)
Diluted	$	0.94		$	0.77		$	0.70		Diluted	$	(0.12)	$	0.94	$	0.77	$	(0.71)

Weighted average number of common shares outstanding:										Weighted average number of common shares outstanding:
Basic	66,260			70,629			72,411			Basic	125,576		66,260		70,629		107,813
Diluted	66,362			70,778			72,857			Diluted	125,576		66,362		70,778		107,813



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



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


PART I		3
Item 1.	Business	3
Item 1A.	Risk Factors	1517
Item 1B.	Unresolved Staff Comments	2729
Item 2.	Properties	2729
Item 3.	Legal Proceedings	2830
PART II		2931
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2931
Item 6.	Selected Financial Data	3133
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3234
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	5655
Item 8.	Financial Statements and Supplementary Data	5957
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~108~~115
Item 9A.	Controls and Procedures	~~108~~115
Item 9B.	Other Information	~~108~~115
PART III		~~109~~116
Item 10.	Directors, Executive Officers and Corporate Governance	~~109~~116
Item 11.	Executive Compensation	~~109~~116
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~109~~116
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~109~~116
Item 14.	Principal Accounting Fees and Services	~~109~~116
Part IV		~~110~~117
Item 15.	Exhibits, Financial Statement Schedules	~~110~~117
Item 16.	Form 10-K Summary	~~114~~120

Atwater, California		Metal building products
Lithia Springs, Georgia		Metal building products
Marietta, Georgia		Metal coil coating
Mattoon, Illinois		Insulated metal panels
Shelbyville, Indiana⁽¹⁾		Insulated metal panels
Monticello, Iowa		Metal building products
Mount Pleasant, Iowa		Metal building products
Frankfort, Kentucky		Insulated metal panels
Hernando, Mississippi		Metal building products
Jackson, Mississippi		Metal coil coating
Las Vegas, Nevada⁽¹⁾		Insulated metal panels
Cambridge, Ohio		Metal coil coating
Middletown, Ohio		Metal coil coating
Elizabethton, Tennessee		Metal building products
Lexington, Tennessee		Metal building products
Houston, Texas⁽²⁾		Metal building products
Prince George, Virginia		Insulated metal panels
Hamilton, Ontario, Canada⁽¹⁾		Insulated metal panels
Monterrey, Mexico		Metal building products
Siding Segment:
~~(2)~~ Kearney, Missouri⁽¹⁾	~~End walls, secondary structures~~	Vinyl siding and ~~metal roof~~other (trim)
Kansas City, Missouri⁽¹⁾		Warehousing
Sidney, Ohio		Metal
Gaffney, South Carolina		Injection molded
Gaffney, South Carolina⁽¹⁾		Warehousing
Jasper, Tennessee		Vinyl siding
Harrisonburg, Virginia⁽¹⁾		Warehousing
Stuarts Draft, Virginia		Vinyl siding
Martinsburg, West Virginia⁽¹⁾		Vinyl siding
Martinsburg, West Virginia⁽¹⁾		Warehousing
Brantford, Ontario, Canada⁽¹⁾		Warehousing
Paris, Ontario, Canada		Vinyl siding
Windows Segment:
Corona, California⁽¹⁾		Vinyl windows
Sacramento, California⁽¹⁾		Vinyl windows
Vacaville, California⁽¹⁾		Vinyl windows
Lithia Springs, Georgia⁽¹⁾		Vinyl windows and ~~wall systems for components and engineered building systems.~~warehousing
Peachtree City, Georgia⁽¹⁾		Vinyl windows
Lansing, Illinois⁽¹⁾		Vinyl windows
Paris, Illinois		Vinyl windows
Paris, Illinois⁽¹⁾		Warehousing
Middlesex, New Jersey⁽¹⁾		Vinyl windows
North Brunswick, New Jersey⁽¹⁾		Vinyl windows
Welcome, North Carolina⁽¹⁾		Vinyl windows
Marion, Ohio⁽¹⁾		Vinyl windows

Bryan, Texas⁽¹⁾		Vinyl & Aluminum windows
Dallas, Texas⁽¹⁾		Vinyl & Aluminum windows
Rocky Mount, Virginia⁽¹⁾⁽²⁾		Vinyl & Aluminum windows and other (doors) and warehousing
Auburn, Washington⁽¹⁾		Vinyl windows
Ellenboro, West Virginia		Vinyl windows
Pennsboro, West Virginia		Vinyl windows
St. Marys, West Virginia		Vinyl windows and other (trim)
Vienna, West Virginia⁽¹⁾		Warehousing
Calgary, Alberta, Canada⁽¹⁾		Vinyl & Aluminum windows and other (doors) and warehousing
St. Thomas, Ontario, Canada		Vinyl windows
(1) Location is leased as of December 31, 2019
~~(4)~~(2) Location has multiple principal facilities	~~Primary structures, secondary structures and metal roof and wall systems for engineered building systems.~~



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



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


~~(1)~~Sheridan, Arkansas			~~Secondary structures and~~			Insulated metal ~~roof and wall systems.~~panels


~~(3)~~ Walbridge, Ohio⁽¹⁾			~~Full components product range.~~			Vinyl windows and warehousing


~~(6)~~	~~Primary structures for engineered building systems.~~


Fiscal Year 2019 Quarter Ended					Fiscal Year 2019 Quarter Ended	High		Low
March 30					March 30	$	8.69	$	5.80
June 29					June 29	$	6.70	$	4.20
September 28					September 28	$	6.37	$	3.75
December 31					December 31	$	9.30	$	5.46

Transition Period Ended					Transition Period Ended	High		Low
December 31, 2018					December 31, 2018	$	13.82	$	6.66

Fiscal Year 2018 Quarter Ended	High		Low		Fiscal Year 2018 Quarter Ended	High		Low
January 28	$	21.20	$	15.45	January 28	$	21.20	$	15.45
April 29	$	18.95	$	15.60	April 29	$	18.95	$	15.60
July 29	$	23.35	$	15.15	July 29	$	23.35	$	15.15
October 28	$	17.25	$	12.30	October 28	$	17.25	$	12.30

Fiscal Year 2017 Quarter Ended	High		Low
January 29	$	18.10	$	13.80
April 30	$	17.85	$	15.40
July 30	$	18.60	$	16.25
October 29	$	18.13	$	13.05


Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Programs⁽²⁾
September 29, 2019 to October 26, 2019	400	$	6.44	—	$	55,573
October 27, 2019 to November 23, 2019	124,524	$	6.92	—	$	55,573
November 24, 2019 to December 31, 2019	97,209	$	8.63	—	$	55,573
Total	222,133	$	7.67	—


	2018			2017			2016			2015			2014				2019					2018				2017				2016			2015
	(In thousands, except per share data)																(In thousands, except per share data)
Sales	$	2,000,577		$	1,770,278		$	1,684,928		$	1,563,693		$	1,370,540		Sales	$	4,889,747		$	2,000,577		$	1,770,278			$	1,684,928		$	1,563,693
Net income	$	63,106	⁽¹⁾	$	54,724	⁽²⁾	$	51,027	⁽³⁾	$	17,818	⁽⁴⁾	$	11,185	⁽⁵⁾
Net income applicable to common shares	$	62,694	⁽¹⁾	$	54,399	⁽²⁾	$	50,638	⁽³⁾	$	17,646	⁽⁴⁾	$	11,085	⁽⁵⁾
Net income (loss)																Net income (loss)	$	(15,390)	⁽¹⁾	$	63,106	⁽³⁾	$	54,724	⁽⁴⁾		$	51,027	⁽⁵⁾	$	17,818	⁽⁶⁾
Net income (loss) applicable to common shares																Net income (loss) applicable to common shares	$	(15,390)	⁽¹⁾	$	62,694	⁽³⁾	$	54,399	⁽⁴⁾		$	50,638	⁽⁵⁾	$	17,646	⁽⁶⁾
Earnings per common share:																Earnings per common share:
Basic	$	0.95	⁽¹⁾	$	0.77	⁽²⁾	$	0.70	⁽³⁾	$	0.24	⁽⁴⁾	$	0.15	⁽⁵⁾	Basic	$	(0.12)	⁽¹⁾	$	0.95	⁽³⁾	$	0.77	⁽⁴⁾		$	0.70	⁽⁵⁾	$	0.24	⁽⁶⁾
Diluted	$	0.94	⁽¹⁾	$	0.77	⁽²⁾	$	0.70	⁽³⁾	$	0.24	⁽⁴⁾	$	0.15	⁽⁵⁾	Diluted	$	(0.12)	⁽¹⁾	$	0.94	⁽³⁾	$	0.77	⁽⁴⁾		$	0.70	⁽⁵⁾	$	0.24	⁽⁶⁾
Cash flow from operating activities	$	82,463		$	63,874		$	68,479		$	105,785		$	34,104		Cash flow from operating activities	$	229,608		$	82,463		$	63,874			$	68,479		$	105,785
Total assets	$	1,110,375		$	1,031,112		$	1,025,396		$	1,049,317		$	739,025		Total assets	$	5,564,346	⁽²⁾	$	1,110,375		$	1,031,112			$	1,025,396		$	1,049,317
Total debt	$	407,226		$	387,290		$	396,051		$	434,542		$	233,709		Total debt	$	3,182,524		$	407,226		$	387,290			$	396,051		$	434,542
Stockholders’ equity	$	330,265		$	305,247		$	281,317		$	271,976		$	246,542		Stockholders’ equity	$	935,318		$	330,265		$	305,247			$	281,317		$	271,976
Diluted average common shares	66,362			70,778			72,857			73,923			74,709			Diluted average common shares	125,576			66,362			70,778				72,857			73,923


~~(3)~~	~~Includes~~ ~~gain on sale of assets and asset recovery of $1.6 million ($1.0 million after tax),~~ ~~restructuring charges of $4.3 million ($2.6 million after tax),~~ ~~strategic development and acquisition related costs of $2.7 million ($1.6 million after tax), and gain from bargain purchase of $1.9 million (non-taxable).~~


~~(5)~~	Includes gain on insurance recovery of $1.3 million ($0.8 million after tax), secondary offering costs of $0.8 million ($0.5 million after tax), foreign exchange losses of $1.1 million ($0.7 million after tax), strategic development and acquisition related costs of $5.0 million ($3.1 million after tax) and reversal of Canadian deferred tax valuation allowance of $2.7 million in fiscal 2014.


~~(7)~~	~~Structural steel.~~


	Year Ended December 31, 2019
Commercial Net Sales Disaggregation:
Metal building products	$	1,249,757
Insulated metal panels	441,441
Metal coil coating	156,695
Total	$	1,847,893

Siding Net Sales Disaggregation:
Vinyl siding	$	525,005
Metal	263,018
Injection molded	66,578
Stone	92,228
Other products & services	164,578
Total	$	1,111,407

Windows Net Sales Disaggregation:
Vinyl windows	$	1,838,796
Aluminum windows	53,622
Other	38,029
Total	$	1,930,447

Total Net Sales:	$	4,889,747



	Fiscal Three Months Ended						Fiscal Year Ended
	October 28, 2018			October 29, 2017			October 28, 2018			October 29, 2017
Net income per diluted common share, GAAP basis	$	0.41		$	0.25		$	0.94		$	0.77
Loss on extinguishment of debt	—			—			0.33			—
Loss on disposition of business	—			—			0.08			—
Goodwill impairment	—			0.09			—			0.08
Restructuring and impairment charges, net	0.01			0.02			0.03			0.07
Strategic development and acquisition related costs	0.18			0.00			0.26			0.03
Acceleration of CEO retirement benefits	—			—			0.07			—
Gain on insurance recovery	—			—			(0.07		)	(0.14		)
Other, net	—			0.00			0.00			0.01
Tax effect of applicable non-GAAP adjustments⁽¹⁾	(0.05		)	(0.04		)	(0.19		)	(0.02		)
Adjusted net income per diluted common share	$	0.55		$	0.32		$	1.45		$	0.80



Consolidated

(In thousands)	Fiscal Three Months Ended												Fiscal Year Ended
	January 28, 2018			April 29, 2018			July 29, 2018			October 28, 2018			October 28, 2018
Total Net Sales	$	421,349		$	457,069		$	548,525		$	573,634		$	2,000,577

Operating Income, GAAP	12,898			18,956			54,501			39,565			125,920
Restructuring and impairment charges, net	1,094			488			(439		)	769			1,912
Strategic development and acquisition related costs	727			1,134			3,642			11,661			17,164
Loss (gain) on disposition of business	—			6,686			(1,013		)	—			5,673
Acceleration of CEO retirement benefits	4,600			—			—			—			4,600
Gain on insurance recovery	—			—			(4,741		)	—			(4,741		)
Adjusted Operating Income	19,319			27,264			51,950			51,995			150,528

Other income and expense	928			(34		)	87			(261		)	720
Depreciation and amortization	10,358			10,442			10,174			11,351			42,325
Share-based compensation expense	2,270			1,998			1,041			2,729			8,038
Adjusted EBITDA	$	32,875		$	39,670		$	63,252		$	65,814		$	201,611

Year over year growth, Total Net Sales	7.6		%	8.7		%	16.9		%	17.4		%	13.0		%
Operating Income Margin	3.1		%	4.1		%	9.9		%	6.9		%	6.3		%
Adjusted Operating Income Margin	4.6		%	6.0		%	9.5		%	9.1		%	7.5		%
Adjusted EBITDA Margin	7.8		%	8.7		%	11.5		%	11.5		%	10.1		%

	Fiscal Three Months Ended												Fiscal Year Ended
	January 29, 2017			April 30, 2017			July 30, 2017			October 29, 2017			October 29, 2017
Total Net Sales	$	391,703		$	420,464		$	469,385		$	488,726		$	1,770,278

Operating Income, GAAP	9,886			32,472			34,097			33,325			109,780
Restructuring and impairment charges, net	2,264			315			1,009			1,709			5,297
Strategic development and acquisition related costs	357			124			1,297			193			1,971
Loss on sale of assets and asset recovery	—			137			—			—			137
Gain on insurance recovery	—			(9,601		)	(148		)	—			(9,749		)
Unreimbursed business interruption costs	—			191			235			28			454
Goodwill impairment	—			—			—			6,000			6,000
Adjusted Operating Income	12,507			23,638			36,490			41,255			113,890

Other income and expense	309			449			1,322			(62		)	2,018
Depreciation and amortization	10,315			10,062			10,278			10,664			41,319
Share-based compensation expense	3,042			2,820			2,284			2,084			10,230
Adjusted EBITDA	$	26,173		$	36,969		$	50,374		$	53,941		$	167,457

Operating Income Margin	2.5		%	7.7		%	7.3		%	6.8		%	6.2		%
Adjusted Operating Income Margin	3.2		%	5.6		%	7.8		%	8.4		%	6.4		%
Adjusted EBITDA Margin	6.7		%	8.8		%	10.7		%	11.0		%	9.5		%



Corporate

(In thousands)	Fiscal Three Months Ended												Fiscal Year Ended
	January 28, 2018			April 29, 2018			July 29, 2018			October 28, 2018			October 28, 2018
Operating Loss, GAAP	$	(24,901	)	$	(21,066	)	$	(25,463	)	$	(33,015	)	$	(104,445	)
Restructuring and impairment charges, net	77			—			—			—			77
Strategic development and acquisition related costs	254			1,073			3,642			11,684			16,653
Acceleration of CEO retirement benefits	4,600			—			—			—			4,600
Adjusted Operating Loss	(19,970		)	(19,993		)	(21,821		)	(21,331		)	(83,115		)

Other income and expense	415			(236		)	263			(279		)	163
Depreciation and amortization	259			255			491			784			1,789
Share-based compensation expense	2,270			1,998			1,041			2,729			8,038
Adjusted EBITDA	$	(17,026	)	$	(17,976	)	$	(20,026	)	$	(18,097	)	$	(73,125	)

	Fiscal Three Months Ended												Fiscal Year Ended
	January 29, 2017			April 30, 2017			July 30, 2017			October 29, 2017			October 29, 2017
Operating Loss, GAAP	$	(17,891	)	$	(20,023	)	$	(22,702	)	$	(19,151	)	$	(79,767	)
Restructuring and impairment charges, net	49			—			—			262			311
Strategic development and acquisition related costs	357			124			1,297			103			1,881
Adjusted Operating Loss	(17,485		)	(19,899		)	(21,405		)	(18,786		)	(77,575		)

Other income and expense	256			182			187			192			817
Depreciation and amortization	207			208			178			237			830
Share-based compensation expense	3,042			2,820			2,284			2,084			10,230
Adjusted EBITDA	$	(13,980	)	$	(16,689	)	$	(18,756	)	$	(16,273	)	$	(65,698	)



	Scheduled Maturity Date⁽¹⁾																					Fair Value
	Fiscal Year 2019			Fiscal Year 2020			Fiscal Year 2021			Fiscal Year 2022			Fiscal Year 2023			Thereafter			Total			10/28/2018
	(In thousands, except interest rate percentages)
Total Debt:
Variable Rate	$	4,150		$	4,150		$	4,150		$	4,150		$	4,150		$	392,175		$	412,925		$	412,409	⁽²⁾
Average interest rate	4.24		%	4.24		%	4.24		%	4.24		%	4.24		%	4.24		%	4.24		%


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

																								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 (Loss) Income			Treasury Stock					Stockholders’ Equity					Shares			Amount										Shares				Amount
	Shares		Amount												Shares		Amount
	(In thousands, except share data)
Balance, November 1, 2015	74,529,750		$	745		$	640,767		$	(353,733	)	$	(8,280	)	(447,426	)	$	(7,523	)	$	271,976
Treasury stock purchases	—		—			—			—			—			(4,589,576	)	(64,015		)	(64,015		)
Retirement of treasury shares	(4,423,564	)	(44		)	(62,235		)	—			—			4,423,564		62,279			—
Issuance of restricted stock	56,868		—			—			—			—			(161,633	)	—			—
Stock options exercised	1,418,219		14			12,598			—			—			—		—			12,612
Excess tax shortfall from share-based compensation arrangements	—		—			(289		)	—			—			—		—			(289		)
Foreign exchange translation losses and other, net of taxes	—		—			—			—			(325		)	—		—			(325		)
Deferred compensation obligation	—		—			1,387			—			—			—		—			1,387
Unrecognized actuarial losses on pension obligations	—		—			—			—			(1,948		)	—		—			(1,948		)
Share-based compensation	—		—			10,892			—			—			—		—			10,892
Net income	—		—			—			51,027			—			—		—			51,027
Balance, October 30, 2016	71,581,273		$	715		$	603,120		$	(302,706	)	$	(10,553	)	(775,071	)	$	(9,259	)	$	281,317		Balance, October 30, 2016	71,581,273		$	715		$	603,120						$	(302,706)			$	(10,553)			(775,071)	$	(9,259)		$	281,317
Treasury stock purchases	—		—			—			—			—			(2,957,838	)	(43,603		)	(43,603		)	Treasury stock purchases	—		—			—		—		—		(2,957,838)			(43,603)				(43,603)
Retirement of treasury shares	(3,443,448	)	(34		)	(50,553		)	—			—			3,443,448		50,587			—			Retirement of treasury shares	(3,443,448)		(34)			(50,553)		—		—		3,443,448			50,587				—
Issuance of restricted stock	356,701		4			(4		)	—			—			(19,806	)	—			—			Issuance of restricted stock	356,701		4			(4)		—		—		(19,806)			—				—
Stock options exercised	182,923		2			1,651			—			—			—		—			1,653			Stock options exercised	182,923		2			1,651		—		—		—			—				1,653
Excess tax benefits from share-based compensation arrangements	—		—			1,515			—			—			—		—			1,515			Excess tax benefits from share-based compensation arrangements	—		—			1,515		—		—		—			—				1,515
Foreign exchange translation gains and other, net of taxes	—		—			(3,547		)	(64		)	198			—		—			(3,413		)	Foreign exchange translation gains and other, net of taxes	—		—			(3,547)		(64)		198		—			—				(3,413)
Deferred compensation obligation	235		—			(135		)	—			—			18,139		135			—			Deferred compensation obligation	235		—			(135)		—		—		18,139			135				—
Unrecognized actuarial gains on pension obligations	—		—			—			—			2,824			—		—			2,824			Unrecognized actuarial gains on pension obligations	—		—			—		—		2,824		—			—				2,824
Share-based compensation	—		—			10,230			—			—			—		—			10,230			Share-based compensation	—		—			10,230		—		—		—			—				10,230
Net income	—		—			—			54,724			—			—		—			54,724			Net income	—		—			—		54,724		—		—			—				54,724
Balance, October 29, 2017	68,677,684		$	687		$	562,277		$	(248,046	)	$	(7,531	)	(291,128	)	$	(2,140	)	$	305,247		Balance, October 29, 2017	68,677,684		$	687		$	562,277	$	(248,046)	$	(7,531)	(291,128)			$	(2,140)			$	305,247
Treasury stock purchases	—		—			—			—			—			(2,938,974	)	(51,773		)	(51,773		)	Treasury stock purchases	—		—			—		—		—		(2,938,974)			(51,773)				(51,773)
Retirement of treasury shares	(2,938,974	)	(29		)	(51,743		)	—			—			2,938,974		51,772			—			Retirement of treasury shares	(2,938,974)		(29)			(51,743)		—		—		2,938,974			51,772				—
Issuance of restricted stock	410,520		4			(4		)	—			—			181,439		—			—			Issuance of restricted stock	410,520		4			(4)		—		—		181,439			—				—
Stock options exercised	115,424		1			1,278			—			—			—		—			1,279			Stock options exercised	115,424		1			1,278		—		—		—			—				1,279
Foreign exchange translation losses and other, net of taxes	—		—			(55		)	—			(93		)	—		—			(148		)	Foreign exchange translation losses and other, net of taxes	—		—			(55)		—		(93)		—			—				(148)
Deferred compensation obligation	—		—			(954		)	—			—			48,876		954			—			Deferred compensation obligation	—		—			(954)		—		—		48,876			954				—
Unrecognized actuarial gains on pension obligations	—		—			—			—			916			—		—			916			Unrecognized actuarial gains on pension obligations	—		—			—		—		916		—			—				916
Share-based compensation	—		—			11,638			—			—			—		—			11,638			Share-based compensation	—		—			11,638		—		—		—			—				11,638
Cumulative effect of accounting change	—		—			1,351			(1,351		)	—			—		—			—			Cumulative effect of accounting change	—		—			1,351		(1,351)		—		—			—				—
Net income	—		—			—			63,106			—			—		—			63,106			Net income	—		—			—		63,106		—		—			—				63,106
Balance, October 28, 2018	66,264,654		$	663		$	523,788		$	(186,291	)	$	(6,708	)	(60,813	)	$	(1,187	)	$	330,265		Balance, October 28, 2018	66,264,654		$	663		$	523,788	$	(186,291)	$	(6,708)	(60,813)			$	(1,187)			$	330,265
Treasury stock purchases																							Treasury stock purchases	—		—			—		—		—		(347,040)			(4,128)				(4,128)
Retirement of treasury shares																							Retirement of treasury shares	(296,954)		(3)			(3,634)		—		—		296,954			3,637				—
Issuance of restricted stock																							Issuance of restricted stock	977,226		10			(10)		—		—		—			—				—
Issuance of common stock for the Ply Gem merger																							Issuance of common stock for the Ply Gem merger	58,638,233		586			712,455		—		—		—			—				713,041

Other comprehensive loss																							Other comprehensive loss	—		—			—		—		(4,105)		—			—				(4,105)

Share-based compensation																							Share-based compensation	—		—			4,457		—		—		—			—				4,457
Cumulative effect of accounting change																							Cumulative effect of accounting change	—		—			—		(3,358)		—		—			—				(3,358)
Net loss																							Net loss	—		—			—		(76,190)		—		—			—				(76,190)
Balance, December 31, 2018																							Balance, December 31, 2018	125,583,159		$	1,256		$	1,237,056	$	(265,839)	$	(10,813)	(110,899)			$	(1,678)			$	959,982
Treasury stock purchases																							Treasury stock purchases	—		—			—		—		—		(256,857)			(1,934)				(1,934)
Retirement of treasury shares																							Retirement of treasury shares	(306,531)		(3)			(2,420)		—		—		306,531			2,423				—
Issuance of restricted stock																							Issuance of restricted stock	819,641		8			(8)		—		—		—			—				—
Issuance of common stock for the Ply Gem merger																							Issuance of common stock for the Ply Gem merger	13,731		—			167		—		—		—			—				167
Other comprehensive loss																							Other comprehensive loss	—		—			—		—		(21,585)		—			—				(21,585)
Deferred compensation obligation																							Deferred compensation obligation	—		—			(86)		—		—		5,712			86				—
Share-based compensation																							Share-based compensation	—		—			14,078		—		—		—			—				14,078
Net loss																							Net loss	—		—			—		(15,390)		—		—			—				(15,390)
Balance, December 31, 2019																							Balance, December 31, 2019	126,110,000		$	1,261		$	1,248,787	$	(281,229)	$	(32,398)	(55,513)			$	(1,103)			$	935,318



	October 28, 2018			October 29, 2017
Land	$	17,398		$	18,473
Buildings and improvements	172,920			178,019
Machinery, equipment and furniture	356,509			336,163
Transportation equipment	4,287			4,599
Computer software and equipment	116,449			117,515
Construction in progress	28,608			15,092
	696,171			669,861
Less: accumulated depreciation	(459,931		)	(442,866		)
	$	236,240		$	226,995


	December 31, 2019		December 31, 2018
Land	$	24,510	$	26,029
Buildings and improvements	266,094		258,547
Machinery and equipment	918,380		799,342
	1,208,984		1,083,918
Less accumulated depreciation	(556,143)		(469,911)
Total property, plant and equipment, net	$	652,841	$	614,007



Buildings and improvements	15	–	39 years
Machinery, equipment and furniture	3	–	15 years
Transportation equipment	4	–	10 years
Computer software and equipment	3	–	7 years


Assets acquired:
Restricted cash	$	3,379
Accounts receivable	17,134
Inventories	13,062
Prepaid expenses and other current assets	3,677
Property, plant and equipment	14,295
Lease right-of-use assets	11,372
Intangible assets (trade names/customer relationships)	91,170
Goodwill	61,767
Other assets	157
Total assets acquired	216,013
Liabilities assumed:
Accounts payable	5,910
Other accrued expenses	12,725
Lease liabilities	11,365
Other long-term liabilities	3,450
Total liabilities assumed	33,450
Net assets acquired	$	182,563


Assets acquired:
Cash	$	102,121
Accounts receivable	345,601
Inventories	301,388
Prepaid expenses and other current assets	52,923
Property, plant and equipment	364,708
Intangible assets (trade names/customer relationships)	1,720,000
Goodwill	1,462,958
Other assets	4,868
Total assets acquired	4,354,567
Liabilities assumed:
Accounts payable	139,955
Tax receivable agreement liability	47,355
Other accrued expenses (inclusive of $23.6 million for current warranty liabilities)	244,622
Debt (inclusive of current portion)	2,674,767
Other long-term liabilities ($163.7 million for accrued long-term warranty)	163,668
Deferred income taxes	323,308
Other long-term liabilities	31,947
Total liabilities assumed	3,625,622
Net assets acquired	$	728,945



	November 3, 2015
Current assets	$	307
Property, plant and equipment	4,810
Assets acquired	5,117
Current liabilities assumed	380
Fair value of net assets acquired	4,737
Total cash consideration transferred	2,201
Deferred tax liabilities	672
Gain from bargain purchase	$	(1,864	)



	Fiscal Year Ended			Costs Incurred To Date (since inception)
	October 28, 2018			Costs Incurred To Date (since inception)
General severance	$	2,272		$	11,234
Plant closing severance	31			3,310
Asset impairments	1,171			7,140
Gain on sale of facility	(2,049		)	(2,049		)
Other restructuring costs	102			1,415
Total restructuring costs	$	1,527		$	21,050


	Costs Incurred To Date (since inception)

General severance	$	8,485
Plant closing severance	1,173
Asset impairments	2,963
Loss on sale of facilities, net	64
Other restructuring costs	5,375
Total restructuring costs	$	18,060


	General Severance		Plant Closing Severance		Total
Balance at December 31, 2018	$	2,418	$	—	$	2,418
Costs incurred	8,485		1,173		9,658
Cash payments	(8,240)		(1,173)		(9,413)
Balance, December 31, 2019	$	2,663	$	—	$	2,663



	Engineered Building Systems		Metal Components		Insulated Metal Panels		Metal Coil Coating			Total
Balance, October 30, 2016	$	14,310	$	7,110	121,444		$	11,407		$	154,271
Impairment ⁽¹⁾	—		—		—		(6,000		)	(6,000		)
Other, net	—		—		20		—			20
Balance, October 29, 2017	$	14,310	$	7,110	121,464		5,407			$	148,291
Balance, October 28, 2018	$	14,310	$	7,110	$	121,464	$	5,407		$	148,291


	Range of Life (Years)						Weighted Average Amortization Period (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of December 31, 2019
Amortized intangible assets:
Trademarks/Trade names/other⁽¹⁾	5	–	15	9	$	252,942		$	(38,010)	$	214,932
Customer lists and relationships	9	–	20	11	1,737,060			(211,292)		1,525,768
Total intangible assets				10	$	1,990,002		$	(249,302)	$	1,740,700
(1) During fiscal 2019, the Company began amortization of trade names previously classified as indefinite-lived over an eight-year period.

	Range of Life (Years)						Weighted Average Amortization Period (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of December 31, 2018
Amortized intangible assets:
Trademarks/Trade names	8	–	15	10	$	226,967		$	(15,483)	$	211,484
Customer lists and relationships	9	–	20	11	1,503,410			(58,448)		1,444,962

Indefinite-lived intangible assets:
Trade names					13,455			—		13,455
Total intangible assets				11	$	1,743,832		$	(73,931)	$	1,669,901



	Range of Life (Years)			October 28, 2018			October 29, 2017
Amortized intangible assets:
Cost:
Trade names		15		$	29,167		$	29,167
Customer lists and relationships	12	–	20	136,210			136,210
				$	165,377		$	165,377
Accumulated amortization:
Trade names				$	(12,657	)	$	(10,713	)
Customer lists and relationships				(38,646		)	(30,971		)
				$	(51,303	)	$	(41,684	)

Net book value				$	114,074		$	123,693
Indefinite-lived intangible assets:
Trade names				13,455			13,455
Total intangible assets at net book value				$	127,529		$	137,148


Weighted-average remaining lease term	5.9 years
Weighted-average IBR	6.13	%


	Year Ended December 31, 2019
Operating lease costs
Fixed lease costs	$	102,767
Variable lease costs⁽¹⁾	107,357

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