| LONG-TERM DEBT | LONG-TERM DEBT Debt was comprised of the following (in thousands): July 2, December 31, Term loan facility due April 2028 $ 2,567,500 $ 2,580,500 6.125% senior notes due January 2029 489,030 500,000 Less: unamortized discounts and unamortized deferred financing costs (1) (40,438) (43,657) Total long-term debt, net of unamortized discounts and unamortized deferred financing costs 3,016,092 3,036,843 Less: current portion of long-term debt 26,000 26,000 Total long-term debt, less current portion $ 2,990,092 $ 3,010,843 (1) Includes the unamortized discounts and unamortized deferred financing costs associated with the term loan facility and the 6.125% senior notes due January 2029. The unamortized deferred financing costs associated with the asset-based and revolving credit facilities of $1.2 million and $1.3 million as of July 2, 2022 and December 31, 2021, respectively, are classified in other assets on the consolidated balance sheets. Term Loan Facility due April 2028 and Cash Flow Revolver On April 12, 2018, Ply Gem Midco entered into a Cash Flow Agreement (the "Current Cash Flow Credit Agreement"), which provides for (i) a term loan facility (the “Existing Term Loan Facility”) in an original aggregate principal amount of $1,755.0 million, issued with a discount of 0.5%, and (ii) a cash flow-based revolving credit facility (the “Existing Cash Flow Revolver” and together with the Existing Term Loan Facility, the “Existing Cash Flow Facilities”) of up to $115.0 million. On November 16, 2018, the Company entered into an incremental term loan facility in connection with the Merger, which increased the aggregate principal amount of the Existing Term Loan Facility by $805.0 million. The proceeds of this incremental term loan facility were used to, among other things, (a) finance the Merger and to pay certain fees, premiums and expenses incurred in connection therewith, (b) repay in full amounts outstanding under the Pre-merger Term Loan Credit Agreement and the Pre-merger ABL Credit Agreement and (c) repay $325.0 million of borrowings outstanding under the ABL Facility. On November 16, 2018, in connection with the consummation of the Merger, NCI and Ply Gem Midco entered into a joinder agreement with respect to the Existing Cash Flow Facilities, and the Company became the Borrower (as defined in the Current Cash Flow Credit Agreement) under the Existing Cash Flow Facilities. On April 15, 2021, the Company entered into a Second Amendment to the Current Cash Flow Credit Agreement (the “Second Amendment"), among the Company, the several banks and other financial institutions party thereto (the "Cash Flow Lenders") and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Cash Flow Agent”), which amended the Current Cash Flow Credit Agreement to, among other things: • Terminate $92.0 million of commitments by Cash Flow Lenders under the Company’s cash flow-based revolving credit facility of up to $115.0 million, maturing on April 12, 2023 (the “Existing Cash Flow Revolver”); and • Replace such commitments with $92.0 million of extended cash flow-based revolving commitments, maturing on April 12, 2026 (the “Extended Cash Flow Revolver” and together with the Existing Cash Flow Revolver, the “Current Cash Flow Revolver”). On April 15, 2021, the Company entered into (i) a Third Amendment to Current Cash Flow Credit Agreement (the “Third Amendment”), among the Company, the subsidiary guarantors parties thereto, the Cash Flow Lenders party thereto and the Cash Flow Agent and (ii) an Increase Supplement (the “Increase Supplement”), between the Company and JPMorgan Chase Bank, N.A., as the increasing lender. The Third Amendment amended the Current Cash Flow Credit Agreement to, among other things, refinance the Existing Term Loan Facility in an original aggregate principal amount of $1,755.0 million with Tranche B Term Loans in an aggregate principal amount of $2,491.6 million, maturing on April 12, 2028. The Increase Supplement supplemented the Current Cash Flow Credit Agreement to, among other things, increase the aggregate principal amount of the Tranche B Term Loan Facility by $108.4 million (the “Incremental Tranche B Term Loans”), for a total principal amount of $2,600.0 million (the “Current Term Loan Facility” and together with the Current Cash Flow Revolver, the “Current Cash Flow Facilities”). Proceeds of the Incremental Tranche B Term Loans were used, together with cash on hand, (i) for the redemption of all of the 8.00% Senior Notes (as defined below) (the “Senior Notes Redemption”) and (ii) to pay any fees and expenses incurred in connection with the extension and refinancing of the Company’s senior credit facilities and the Senior Notes Redemption. In connection with the Third Amendment and the Increase Supplement to the Current Cash Flow Credit Agreement, the Company incurred $24.8 million in financing costs of which $13.2 million was deferred and are being amortized using the effective interest method. The Current Term Loan Facility amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity. The Current Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a floor of 0.50%) plus an applicable margin of 3.25% per annum or (ii) an alternate base rate plus an applicable margin of 2.25% per annum. At July 2, 2022, the interest rates on the Current Term Loan Facility were as follows: July 2, 2022 Interest rate 4.57 % Effective interest rate 4.02 % The Company entered into certain interest rate swap agreements in 2019 and 2021 to effectively convert a portion of its variable rate debt to fixed. See Note 16 — Derivatives. Loans outstanding under the Current Cash Flow Revolver bear annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a floor of 0.00%) plus an applicable margin ranging from 2.50% to 3.00% per annum depending on the Company’s secured leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 1.50% to 2.00% per annum depending on the Company’s secured leverage ratio. There are no amortization payments under the Current Cash Flow Revolver. Additionally, unused commitments under the Current Cash Flow Revolver are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Company’s secured leverage ratio. Both the Current Term Loan Facility and Current Cash Flow Revolver may be prepaid at the Company’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal amount requirements. Subject to certain exceptions, the Current Term Loan Facility is subject to mandatory prepayments in an amount equal to: • the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and • 50% of annual excess cash flow (as defined in the Current Cash Flow Credit Agreement), subject to reduction to 25% and 0% if specified secured leverage ratio targets are met to the extent that the amount of such excess cash flow exceeds $10.0 million. No payments were required in 2021 under the fiscal year 2020 excess cash flow calculation. The obligations under the Current Cash Flow Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by: • a perfected security interest in substantially all tangible and intangible assets of the Company and each subsidiary guarantor (other than ABL Priority Collateral (as defined below)), including the capital stock of each direct material wholly-owned U.S. restricted subsidiary owned by the Company and each subsidiary guarantor, and 65% of the capital stock of any non-U.S. subsidiary held directly by the Company or any subsidiary guarantor, subject to certain exceptions (the “Cash Flow Priority Collateral”), which security interest will be senior to the security interest in the foregoing assets securing the Current ABL Facility; and • a perfected security interest in the ABL Priority Collateral, which security interest will be junior to the security interest in the ABL Priority Collateral securing the Current ABL Facility. The Current Cash Flow Revolver includes a financial covenant set at a maximum secured leverage ratio of 7.75:1.00, which will apply if the outstanding amount of loans and drawings under letters of credit which have not then been reimbursed exceeds a specified threshold at the end of any fiscal quarter. On July 25, 2022, in connection with the consummation of the CD&R Merger, Parent entered into a joinder agreement with respect to the Existing Cash Flow Facilities, and Parent became Holdings (as defined in the Current Cash Flow Credit Agreement) under the Existing Cash Flow Facilities. ABL Facility due July 2027 On April 12, 2018, Ply Gem Midco entered into an ABL Credit Agreement (the “Current ABL Credit Agreement”), which provides for an asset-based revolving credit facility (the “Existing ABL Facility”) of up to $360.0 million, consisting of (i) $285.0 million available to U.S. borrowers (subject to U.S. borrowing base availability) (the “ABL U.S. Facility”) and (ii) $75.0 million available to both U.S. borrowers and Canadian borrowers (subject to U.S. borrowing base and Canadian borrowing base availability) (the “ABL Canadian Facility”). The Company and, at their option, certain of their subsidiaries are the borrowers under the Existing ABL Facility. On October 15, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $36.0 million, which upsized the Existing ABL Facility to $396.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $285.0 million to $313.5 million and (y) the ABL Canadian Facility being increased from $75.0 million to $82.5 million. On November 16, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $215.0 million in connection with the Merger, which upsized the Existing ABL Facility to $611.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $313.5 million to $483.7 million and (y) the ABL Canadian Facility being increased from $82.5 million to $127.3 million. On November 16, 2018, in connection with the consummation of the Merger, the Company and Ply Gem Midco entered into a joinder agreement with respect to the Existing ABL Facility, and the Company became the Parent Borrower (as defined in the Current ABL Credit Agreement) under the Existing ABL Facility. On April 15, 2021, the Company entered into Amendment No. 6 to the Current ABL Credit Agreement, by and among the Company, the subsidiary borrowers party thereto, the several banks and financial institutions party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent, which amended the Current ABL Credit Agreement in order to, among other things: • Terminate the existing revolving commitments of each of the Extending ABL Credit Lenders (as defined in therein), originally maturing on April 12, 2023 (the “Existing Amendment No. 6 ABL Commitments”); and • Replace the Existing ABL Commitments with an extended revolving commitment of $611.0 million, maturing on April 12, 2026 (the “Amendment No. 6 ABL Facility”). On July 25, 2022, the Company entered into Amendment No. 7 to the Current ABL Credit Agreement, by and among the Company, the subsidiary borrowers party thereto, the several banks and financial institutions party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent, which amended the Current ABL Credit Agreement in order to, among other things: • Terminate the existing revolving commitments of each of the Extending ABL Credit Lenders (as defined in therein), originally maturing on April 12, 2026 (the “Existing ABL Commitments”); • Replace the Existing ABL Commitments with an extended revolving commitment of $611.0 million, maturing on July 25, 2027 (the “Current ABL Facility”); • Upsize the Current ABL Facility to $850.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $483.7 million to $672.9 million and (y) the ABL Canadian Facility being increased from $127.3 million to $177.1 million; and • Add an incremental first-in, last-out tranche asset-based revolving credit facility of $95.0 million (the “FILO Facility”). Borrowing availability under the Current ABL Facility and the FILO Facility (collectively, the “ABL Facilities”) is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of eligible inventory, eligible accounts receivable and eligible credit card receivables, less certain reserves and subject to certain other adjustments as set forth in the Current ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings. As of July 2, 2022, the Company had the following in relation to the Current ABL Facility (in thousands): July 2, 2022 Excess availability $ 565,411 Revolving loans outstanding — Letters of credit outstanding 40,146 Loans outstanding under the Current ABL Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) a term Secured Overnight Financing Rate (“SOFR”) rate (subject to a SOFR floor of 0.00%) plus an applicable margin ranging from 1.25% to 1.75% per annum depending on the average daily excess availability under the Current ABL Facility or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 0.75% per annum depending on the average daily excess availability under the Current ABL Facility. Additionally, unused commitments under the ABL Facility are subject to a 0.25% per annum fee. Loans outstanding under the FILO Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) a term SOFR rate (subject to a SOFR floor of 0.00%) plus an applicable margin ranging from 2.25% to 2.75% per annum depending on the average daily excess availability under the FILO Facility or (ii) an alternate base rate plus an applicable margin ranging from 1.25% to 1.75% per annum depending on the average daily excess availability under the FILO Facility. Additionally, unused commitments under the FILO Facility are subject to a 0.25% per annum fee. The obligations under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by: • a perfected security interest in all present and after-acquired inventory, accounts receivable, deposit accounts, securities accounts, and any cash or other assets in such accounts and other related assets owned by the Company and the U.S. subsidiary guarantors and the proceeds of any of the foregoing, except to the extent such proceeds constitute Cash Flow Priority Collateral, and subject to certain exceptions (the “ABL Priority Collateral”), which security interest is senior to the security interest in the foregoing assets securing the Current Cash Flow Facilities; and • a perfected security interest in the Cash Flow Priority Collateral, which security interest will be junior to the security interest in the Cash Flow Collateral securing the Current Cash Flow Facilities. Additionally, the obligations of the Canadian borrowers under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned Canadian restricted subsidiary of the Canadian borrowers, subject to certain exceptions, and are secured by substantially all assets of the Canadian borrowers and the Canadian subsidiary guarantors, subject to certain exceptions. The Current ABL Credit Agreement includes a minimum fixed charge coverage ratio of 1.00:1.00, which is tested only when specified availability is less than 10.0% of the lesser of (x) the then applicable borrowing base and (y) the then aggregate effective commitments under the Current ABL Facility, and continuing until such time as specified availability has been in excess of such threshold for a period of 20 consecutive calendar days. On July 25, 2022, in connection with the consummation of the CD&R Merger, Parent entered into a joinder agreement with respect to the ABL Facilities, and Parent became Holdings (as defined in the Current ABL Credit Agreement) under the ABL Facilities. Term Loan Facility due August 2028 On July 25, 2022, in connection with the CD&R Merger, the Company entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) which provides for a term loan facility (the “New Term Loan Facility”) in an original aggregate principal amount of $300.0 million (the “New Term Loans”), issued with a discount of 9.5%. Proceeds from the New Term Loan Facility, together with other sources, were used to fund the consummation of the CD&R Merger. The Term Loan Credit Agreement will mature on August 1, 2028 and will bear interest at a floating rate per annum of, at the Company’s option, term SOFR plus 5.625% or a base rate plus 4.625%. The term SOFR rate is subject to an interest rate floor of 0.50% and the base rate is subject to an interest rate floor of 0.00%. Borrowings under the Term Loan Credit Agreement will amortize in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount; provided that if the New Term Loans outstanding as of July 25, 2022 will not be discharged as of July 23, 2027, the last business day of each fiscal quarter ending on or after July 25, 2027 and prior to April 15, 2028 shall not be an amortization payment date. The Term Loan Credit Agreement is guaranteed by each of the Company’s wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the ABL Facilities on a joint and several basis with the Company or a subsidiary guarantor), and are secured by a perfected security interest in the Cash Flow Priority Collateral, which security interest will be senior to the security interest in the Cash Flow Priority Collateral securing the ABL Facilities and equal to the security interest in the Cash Flow Priority Collateral securing the Current Cash Flow Facilities; and a perfected security interest in the ABL Priority Collateral, which security interest will be junior to the security interest in the ABL Priority Collateral securing the ABL Facilities and equal to the security interest in the ABL Priority Collateral securing the Current Cash Flow Facilities. The New Term Loan Facility may be prepaid at the Company’s option at any time, subject to minimum principal amount requirements, without premium or penalty, except as set forth below: • prior to August 1, 2024, prepayments of the New Term Loan Facility will be subject to the applicable make-whole premium; • prior to August 1, 2024, up to 40.0% of the original aggregate principal amount of the New Term Loan Facility may be prepaid with proceeds of certain equity offerings, at a prepayment premium equal to 108.750% of the principal amount thereof; • on or after August 1, 2024 and prior to August 1, 2025, prepayments of the New Term Loan Facility will be subject to a prepayment premium equal to 106.563% of the principal amount thereof; • on or after August 1, 2025 and prior to August 1, 2026, prepayments of the New Term Loan Facility will be subject to a prepayment premium equal to 103.281% of the principal amount thereof; and • on or after August 1, 2026, prepayments of the New Term Loan Facility will be at a price equal to 100.000% of the principal amount thereof. 8.750% Senior Secured Notes due January 2028 On July 25, 2022, in connection with the CD&R Merger, the Company issued $710.0 million in aggregate principal amount of 8.750% Senior Secured Notes due August 2028 (the “8.750% Senior Secured Notes”). Proceeds from the 8.750% Senior Secured Notes, together with other sources, were used to fund the consummation of the CD&R Merger. The 8.750% Senior Secured Notes bear interest at 8.750% per annum and will mature on August 1, 2028. Interest is payable semi-annually in arrears on January 15 and July 15 of each year and on August 1, 2028; provided, that if the New Term Loans outstanding as of July 25, 2022 will not be discharged as of July 15, 2027, in lieu of the interest payment date that would otherwise be January 15, 2028, interest will instead be payable in cash on April 15, 2028. The first interest date will be January 15, 2023. The 8.750% Senior Secured Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the Current ABL Facility on a joint and several basis with the Company or a subsidiary guarantor). The 8.750% Senior Secured Notes are secured senior indebtedness and are effectively senior to all of the Company’s indebtedness under the Current ABL Facility, to the extent of the value of the Cash Flow Priority Collateral securing such indebtedness, effectively subordinated to all of the Company’s indebtedness under the Current ABL Facility, to the extent of the value of the ABL Priority Collateral securing such indebtedness, equal with the Company’s indebtedness secured by liens on the collateral that are pari passu to the liens on the collateral securing the 8.750% Senior Secured Notes (including the Current Cash Flow Facilities and the New Term Loan Facility), and are senior in right of payment to future subordinated indebtedness of the Company. The Company may redeem the 8.750% Senior Secured Notes in whole or in part at any time as set forth below: • prior to August 1, 2024, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date, plus the applicable make-whole premium; • prior to August 1, 2024, up to 40% of the aggregate principal amount with the proceeds of certain equity offerings at a redemption price of 108.750% plus accrued and unpaid interest, if any, to but not including the redemption date; • on or after August 1, 2024 and prior to August 1, 2025, at a price equal to 106.563% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; • on or after August 1, 2025 and prior to August 1, 2026, at a price equal to 103.281% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; and • on or after August 1, 2026, at a price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date. 6.125% Senior Notes due January 2029 On September 24, 2020, the Company issued $500.0 million in aggregate principal amount of 6.125% Senior Notes due January 2029 (the “6.125% Senior Notes”). Proceeds from the 6.125% Senior Notes were used to repay outstanding amounts under the Company’s Current ABL Facility and Current Cash Flow Revolver. The 6.125% Senior Notes bear interest at 6.125% per annum and will mature on January 15, 2029. Interest is payable semi-annually in arrears on January 15 and July 15 commencing on January 15, 2021. The effective interest rate for the 6.125% Senior Notes was 6.33% as of July 2, 2022, after considering each of the different interest expense components of this instrument, including the coupon payment and the deferred debt issuance costs. The 6.125% Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the Current ABL Facility on a joint and several basis with the Company or a subsidiary guarantor). The 6.125% Senior Notes are unsecured senior indebtedness and are effectively subordinated to all of the Company’s existing and future senior secured indebtedness, including indebtedness under the Current Term Loan Facility, Current Cash Flow Revolver, ABL Facilities and New Term Loan Facility, and are senior in right of payment to future subordinated indebtedness of the Company. The Company may redeem the 6.125% Senior Notes in whole or in part at any time as set forth below: • prior to September 15, 2023, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date, plus the applicable make-whole premium; • prior to September 15, 2023, up to 40% of the aggregate principal amount with the proceeds of certain equity offerings at a redemption price of 106.125% plus accrued and unpaid interest, if any, to but not including the redemption date; • on or after September 15, 2023 and prior to September 15, 2024, at a price equal to 103.063% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; • on or after September 15, 2024 and prior to September 15, 2025, at a price equal to 101.531% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; and • on or after September 15, 2025, at a price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date. During the second quarter of 2022, the Company entered into a 10b5-1 trading plan to repurchase an aggregate principal amount of up to $100 million of its 6.125% Senior Notes. As of July 2, 2022, the Company repurchased an aggregate principal amount of $11.0 million of the 6.125% Senior Notes for $7.3 million in cash. The net carrying value of the extinguished debt, including unamortized debt discount and deferred financing costs, was $10.9 million, resulting in a $3.6 million gain on extinguishment of debt, which is included as a separate item in the consolidated statements of operations. Subsequent to July 2, 2022, the Company completed the 10b5-1 trading plan by repurchasing an aggregate principal amount of $89.0 million for $63.3 million in cash. The Company anticipates recognizing a gain of approximately $24.0 million in the third quarter of fiscal 2022 after the write-off of associated unamortized debt discount and deferred financing costs. Redemption of 8.00% Senior Notes On April 15, 2021, the Company redeemed the outstanding $645.0 million aggregate principal amount of the 8.00% Senior Notes due April 2026 (the “8.00% Senior Notes”) for $670.8 million using cash on hand and proceeds from the Incremental Tranche B Term Loans. The redemption resulted in a pre-tax loss on extinguishment of debt of $41.9 million during the year ended December 31, 2021, comprising a make-whole premium of $25.8 million and a write-off of $16.1 million in unamortized deferred financing costs. Debt Covenants The Company’s debt agreements contain a number of covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness; make dividends and other restricted payments; incur additional liens; consolidate, merge, sell or otherwise dispose of all or substantially all assets; make investments; transfer or sell assets; enter into restrictive agreements; change the nature of the business; and enter into certain transactions with affiliates. As of July 2, 2022, the Company was in compliance with all covenants that were in effect on such date. |
