Core Natural Resources 10-Q 2024 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

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

For the quarterly period ended: June 29, 2024

or

 

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

For the transition period from          to

Commission file number: 1-14315

 

Cornerstone Building Brands, Inc.

(Exact name of registrant as specified in its charter)

 

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

5020 Weston Parkway	Suite 400	Cary	NC	27513
(Address of principal executive offices)				(Zip Code)

(866) 419-0042

(Registrant’s telephone number, including area code)

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

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

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

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

 

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

TABLE OF CONTENTS 

	Part I — Unaudited Financial Information
Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Statements of Loss	1
	Condensed Consolidated Statements of Comprehensive Loss	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
	Part II — Other Information
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 6.	Exhibits	30

i

PART I — UNAUDITED FINANCIAL INFORMATION 

Item 1. Condensed Consolidated Financial Statements. 

CORNERSTONE BUILDING BRANDS, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(In thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales	$	1,364,302	$	1,428,218	$	2,509,989	$	2,707,306
Cost of sales	1,047,171		1,130,381		1,959,302		2,127,608
Gross profit	317,131		297,837		550,687		579,698
Selling, general and administrative expenses	247,029		247,006		487,874		474,807
Income from operations	70,102		50,831		62,813		104,891
Interest expense	(106,747)		(92,314)		(201,567)		(186,425)
Foreign exchange (loss) gain	(2,773)		4,430		(6,786)		6,447
Gain (loss) on extinguishment of debt	—		379		—		(184)
Other income, net	673		3,632		3,556		4,805
Loss before income taxes	(38,745)		(33,042)		(141,984)		(70,466)
Income tax benefit	(31,524)		(10,716)		(16,190)		(19,325)
Net loss	$	(7,221)	$	(22,326)	$	(125,794)	$	(51,141)

See accompanying notes to the condensed consolidated financial statements.

1

CORNERSTONE BUILDING BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net loss	$	(7,221)	$	(22,326)	$	(125,794)	$	(51,141)
Other comprehensive (loss) income, net of tax:
Foreign exchange translation (loss) gain	(89)		483		(2,270)		(480)
Unrealized (loss) gain on derivative instruments, net of income tax of $592 , $(4,573), $(1,892) and $(1,219)	(2,020)		14,854		6,294		3,962
Other comprehensive (loss) income	(2,109)		15,337		4,024		3,482
Comprehensive loss	$	(9,330)	$	(6,989)	$	(121,770)	$	(47,659)

See accompanying notes to the condensed consolidated financial statements.

2

CORNERSTONE BUILDING BRANDS, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	June 29, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	122,299	$	468,877
Accounts receivable, net	699,714		596,621
Inventories	619,185		496,839
Other current assets	77,553		73,987
Total current assets	1,518,751		1,636,324
Property, plant and equipment, net	930,791		889,103
Lease right-of-use assets	537,024		365,292
Goodwill	1,959,830		1,681,764
Intangible assets, net	2,341,265		2,286,068
Other assets, net	83,010		74,790
Total assets	$	7,370,671	$	6,933,341
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	31,500	$	29,000
Short-term borrowings	160,000		—
Current portion of lease liabilities	79,920		64,711
Accounts payable	255,921		255,227
Accrued income and other taxes	73,354		57,058
Employee-related liabilities	82,551		113,081
Rebates, warranties and other customer-related liabilities	168,633		151,990
Other current liabilities	139,627		129,327
Total current liabilities	991,506		800,394
Long-term debt	3,901,852		3,382,550
Long-term lease liabilities	427,309		287,304
Deferred income tax liabilities	489,914		556,935
Other long-term liabilities	265,838		261,288
Total liabilities	$	6,076,419	$	5,288,471
Commitments and contingencies (Note 13)
Equity:
Common stock, $0.01 par value, 1,000 shares authorized, issued and outstanding at June 29, 2024 and December 31, 2023	$	—	$	—
Additional paid-in capital	1,537,176		1,766,024
Accumulated deficit	(264,815)		(139,021)
Accumulated other comprehensive income	21,891		17,867
Total equity	1,294,252		1,644,870
Total liabilities and equity	$	7,370,671	$	6,933,341

See accompanying notes to the condensed consolidated financial statements.

3

CORNERSTONE BUILDING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Equity
	Shares	Amount
Balance, March 30, 2024	1,000	$	—	$	1,535,991	$	(257,594)	$	24,000	$	1,302,397
Other comprehensive loss	—	—		—		—		(2,109)		(2,109)
Share-based compensation	—	—		1,185		—		—		1,185
Net loss	—	—		—		(7,221)		—		(7,221)
Balance, June 29, 2024	1,000	$	—	$	1,537,176	$	(264,815)	$	21,891	$	1,294,252
Balance, April 1, 2023	1,000	$	—	$	1,760,254	$	(92,311)	$	22,654	$	1,690,597
Other comprehensive income	—	—		—		—		15,337		15,337
Share-based compensation	—	—		2,485		—		—		2,485
Net loss	—	—		—		(22,326)		—		(22,326)
Balance, July 1, 2023	1,000	$	—	$	1,762,739	$	(114,637)	$	37,991	$	1,686,093

4

CORNERSTONE BUILDING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total Equity
	Shares	Amount
Balance, December 31, 2023	1,000	$	—	$	1,766,024	$	(139,021)	$	17,867	$	1,644,870
Other comprehensive income	—	—		—		—		4,024		4,024
Share-based compensation	—			2,777		—		—		2,777
Dividend to Parent	—	—		(231,625)		—		—		(231,625)
Net loss	—	—		—		(125,794)		—		(125,794)
Balance, June 29, 2024	1,000	$	—	$	1,537,176	$	(264,815)	$	21,891	$	1,294,252
Balance, December 31, 2022	1,000	$	—	$	1,757,932	$	(63,496)	$	34,509	$	1,728,945
Other comprehensive income	—	—		—		—		3,482		3,482
Share-based compensation	—	—		4,977		—		—		4,977
Other	—	—		(170)		—		—		(170)
Net loss	—	—		—		(51,141)		—		(51,141)
Balance, July 1, 2023	1,000	$	—	$	1,762,739	$	(114,637)	$	37,991	$	1,686,093

See accompanying notes to the condensed consolidated financial statements.

5

CORNERSTONE BUILDING BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Six Months Ended
	June 29, 2024		July 1, 2023
Cash flows from operating activities:
Net loss	$	(125,794)	$	(51,141)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	192,855		237,824
Amortization of debt issuance costs, debt discount and fair values	48,369		44,955
Share-based compensation expense	2,777		4,977
Non-cash lease expense	2,957		4,391
Loss on extinguishment of debt	—		184
Loss (gain) on sale of assets	2,242		(5)
Amortization of inventory and other fair value step ups	1,180		—
Change in fair value of contingent consideration	1,443		—
Unrealized loss (gain) on foreign currency exchange rates	6,786		(2,200)
Provision for credit losses	3,024		3,858
Deferred income taxes	(98,410)		(89,458)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	(88,509)		(57,882)
Inventories	(106,718)		17,206
Income taxes	15,011		27,404
Prepaid expenses and other current assets	(5,318)		12,576
Accounts payable	(8,258)		(24,370)
Accrued expenses	(41,120)		(97,612)
Other, net	(8,977)		(9,582)
Net cash flows from operating activities	(206,460)		21,125
Cash flows from investing activities:
Acquisitions, net of cash acquired	(450,995)		—
Capital expenditures	(102,076)		(79,100)
Proceeds from sale of property, plant and equipment	3,075		—
Net cash flows from investing activities	(549,996)		(79,100)
Cash flows from financing activities:
Proceeds from short-term borrowings	650,000		—
Repayments of short-term borrowings	(490,000)		—
Proceeds from term loans	500,000		—
Payments on term loans	(14,500)		(14,500)
Repurchases of senior notes	—		(33,885)
Payments of financing costs	(5,312)		—
Dividend payment to parent	(231,625)		—
Net cash flows from financing activities	408,563		(48,385)
Effect of exchange rate changes on cash and cash equivalents	1,315		(2,063)
Net decrease in cash and cash equivalents	(346,578)		(108,423)
Cash and cash equivalents at beginning of period	468,877		553,551
Cash and cash equivalents cash at end of period	$	122,299	$	445,128

 See accompanying notes to the condensed consolidated financial statements.

6

CORNERSTONE BUILDING BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

Note 1 — Basis of Presentation

Description of Business

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

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are presented in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements have been prepared in accordance with the Company's accounting policies and on the same basis as those financial statements included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2023 and should be read in conjunction with those Consolidated Financial Statements and the Notes thereto. Certain disclosures normally included in the Company’s Consolidated Financial Statements prepared in accordance with U.S. GAAP have been omitted on a basis consistent with the rules and regulations of the SEC.

The accompanying Condensed Consolidated Financial Statements include the accounts and operations of the Company and its majority-owned subsidiaries and all adjustments (consisting of normal recurring adjustments) that the Company considered necessary to present a fair statement of its results of operations, financial position and cash flows. All significant intercompany accounts and transactions have been eliminated in consolidation.

Note 2 — Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents mainly consist of highly liquid, unrestricted savings, checking, money market funds with original maturities of less than three months and other bank accounts.

The following table sets forth the components of cash and cash equivalents:

	June 29, 2024		December 31, 2023
Cash	$	122,299	$	228,975
Money market funds (Level 1 securities)	—		239,902
Total cash and cash equivalents	$	122,299	$	468,877

7

Accounts Receivable, Net

The Company reports accounts receivable net of an allowance for expected credit losses. The Company establishes provisions for expected credit losses based on the Company’s assessment of the collectability of amounts owed to the Company by its customers. Such allowances are included in selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Loss. In establishing the allowance, the Company considers changes in the financial position of a customer, age of the accounts receivable balances, availability of security, unusual macroeconomic conditions, lien rights and bond rights as well as disputes, if any, with its customers. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance, all collection efforts have been exhausted or any legal action taken by the Company has concluded. The Company’s allowance for expected credit losses was $5.8 million and $9.6 million at June 29, 2024 and December 31, 2023.

Fair Value Measurements

The carrying amounts of cash and cash equivalents, trade accounts receivable and accounts payable approximate fair value as of June 29, 2024 and December 31, 2023 given the instruments’ relatively short maturities. The carrying amounts of the indebtedness under revolving credit facilities approximate fair value as the interest rates are variable and reflective of market rates. Fair values for our other debt instruments are measured using Level 1 and Level 2 inputs. U.S. GAAP requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

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

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

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

In connection with certain business acquisitions, the Company periodically enters into agreements that require us to pay additional consideration to the relevant seller. These payments are contingent on the achievement of specified EBITDA targets in periods subsequent to the acquisition. The fair value of contingent consideration is based on unobservable, or Level 3, inputs including a probability-weighted average payout approach. Contingent consideration obligations are measured at fair value each reporting period and any adjustments to fair value are recognized in earnings in the period they are identified. The Company has not made any changes to the methods used to determine the fair value of its contingent consideration obligations.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures.

8

Note 3 — Acquisitions

Acquisitions Completed during the Current Year

In July 2024, the Company completed the acquisition of Mueller Supply Company, Inc. (“Mueller”) for a purchase price of $497.1 million, including a base purchase price of $475.0 million, as well as closing date cash and working capital. The transaction is subject to certain customary adjustments. Mueller is a leading manufacturer of residential metal roofing and components and steel buildings in Texas and the Southwest. The acquisition was funded through borrowing under the Company’s revolving credit facilities further discussed in Note 7. The business will be integrated into our Shelter Solutions reportable segment.

Acquisition of Harvey Building Products Corp.

In April 2024, the Company completed the acquisition of Harvey Building Products Corp. (“Harvey”) for a purchase price of $460.8 million, subject to certain customary adjustments. Harvey is a manufacturer of high performing windows and doors, and its portfolio of industry leading brands include Harvey, Softlite and Thermo-Tech. Headquartered in Waltham, Massachusetts, Harvey has approximately 1,200 employees at four manufacturing facilities located throughout the Northeast and Midwest. Harvey specializes in premium, custom windows and doors primarily serving the Eastern United States (“U.S.”). This acquisition was funded through issuing long-term debt further discussed in Note 7. Harvey is included in the Company’s Aperture Solutions reportable segment.

The purchase price allocation below is based upon provisional information and is subject to revision during the measurement period (up to one year from the acquisition date) as additional information concerning valuations is obtained. During the measurement period, as the Company obtains new information regarding facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities, the Company will accordingly revise the provisional purchase price allocation, which may include, but are not limited to, adjustments pertaining to intangible assets acquired, property, plant and equipment acquired and tax liabilities assumed.

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

	Fair Value
Cash and cash equivalent	$	10,423
Accounts receivable	26,723
Inventories	20,027
Property, plant and equipment	40,747
Lease right-of-use assets	124,271
Goodwill	271,827
Trade name and customer relationship intangibles	159,300
Other assets	3,829
Total assets acquired	657,147
Accounts payable and other liabilities assumed	55,108
Lease liabilities	106,613
Deferred income tax liabilities	34,587
Total liabilities assumed	196,308
Net assets acquired	$	460,839

The transaction was accounted for using the acquisition method and, as a result, tangible and intangible assets acquired, and liabilities assumed were recorded at their estimated fair values as of the acquisition date in April 2024. Any excess consideration over the fair value of the assets and liabilities assumed was recognized as goodwill and is subject to revision as the purchase price allocation is completed. The Company identified intangible assets for customer relationships, trade names and certain other intangibles. Intangible assets are amortized on a straight-line basis over their expected useful lives. The provisional fair value and expected useful life of identifiable intangible assets consists of the following:

9

	Fair Value		Useful Life (years)
Customer relationships	$	113,400	19
Trade names and other	45,900		15
Total	$	159,300

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired. The acquisition of Harvey resulted in the recognition of $271.8 million of goodwill. The goodwill recorded is a result of expected synergies and other benefits that we believe will result from the integration of the acquisition with our operations. Goodwill created as a result of the acquisition of Harvey is not expected to be deductible for tax purposes. A net deferred tax liability of $34.6 million was established as a result of the acquisition.

Acquisitions Completed During the Prior Year

In December 2023, the Company completed the acquisition of the Eastern Architectural Systems (“EAS”) business, whose operations are included in the Company’s Aperture Solutions reportable segment. EAS is based in Ft. Myers, Florida and manufactures custom-made aluminum and vinyl impact windows and doors. In August 2023, the Company completed the acquisition of M.A.C. Métal Architectural Inc. (“MAC Metal”), which became an indirect wholly-owned subsidiary of the Company. Headquartered in Saint-Hubert, Quebec, MAC Metal serves the North American residential and commercial markets with high-end steel siding and roofing products. MAC Metal is included in the Company’s Surface Solutions reportable segment.

The total purchase price for these acquisitions was $235.5 million, comprised of upfront cash payments of $217.7 million and earn-out contingent consideration of $16.8 million related to the MAC Metal transaction. The purchase price of these acquisitions was provisionally allocated to the assets acquired and liabilities assumed, which related primarily to inventory of $15.9 million, property, plant and equipment of $21.3 million, goodwill of $88.4 million, intangible assets such as, customer lists and trademarks, of $73.4 million and $34.3 million, contingent consideration of $16.8 million and noncurrent deferred income tax liabilities of $12.3 million. The goodwill recorded is a result of expected synergies and other benefits that we believe will result from the integration of the acquisitions with our operations.

The MAC Metal acquisition earn-out is payable over two consecutive twelve-month periods, with the first period starting in the month following the close of the applicable acquisition and payments are based upon achieving certain adjusted EBITDA-based metrics, as defined in the purchase agreement. There was an increase of $1.4 million in contingent consideration during the six months ended June 29, 2024 to $18.2 million, of which $8.2 million is recognized in other current liabilities and $10.0 million is recognized in other long-term liabilities on our Condensed Consolidated Balance Sheets at June 29, 2024.

Note 4 — Inventories

The following table sets forth the components of inventories:

	June 29, 2024		December 31, 2023
Raw materials	$	341,945	$	291,093
Work in process	108,618		59,336
Finished goods	168,622		146,410
Total inventories	$	619,185	$	496,839

10

Note 5 — Goodwill and Intangible Assets

Goodwill

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

	Aperture Solutions		Surface Solutions		Shelter Solutions		Total
Balance, December 31, 2023	$	771,133	$	708,423	$	202,208	$	1,681,764
Impact of acquisitions and related measurement period adjustments(1)	266,718		1,660		—		268,378
Currency translation	(600)		(2,231)		—		(2,831)
Other(2)	5,504		586		6,429		12,519
Balance, June 29, 2024	$	1,042,755	$	708,438	$	208,637	$	1,959,830

(1)     Measurement period adjustments have been recorded in conjunction with the acquisition of MAC Metal and EAS during the period. See Note 3 — Acquisitions for additional information.

(2)     Other includes insignificant out-of-period corrections totaling $12.5 million, which related to matters that existed as of the date of the merger transaction during July 2022 (the “Merger”).

Intangible Assets, Net

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

	Range of Life (in Years)			Weighted Average Amortization Period Remaining (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of June 29, 2024:
Customer lists and relationships	3	–	19	16	$	1,996,771	$	(271,450)	$	1,725,321
Trademarks, trade names and other		15		13	696,983		(81,039)		615,944
Total intangible assets					$	2,693,754	$	(352,489)	$	2,341,265
	Range of Life (in Years)			Weighted Average Amortization Period Remaining (Years)	Cost		Accumulated Amortization		Net Carrying Value
As of December 31, 2023:
Customer lists and relationships	3	–	19	16	$	1,883,757	$	(192,473)	$	1,691,284
Trademarks, trade names and other		15		14	653,992		(59,208)		594,784
Total intangible assets					$	2,537,749	$	(251,681)	$	2,286,068

Intangible assets are amortized on a straight-line basis. The following table sets forth the amortization expense related to intangible assets:

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Amortization expense	$	48,965	$	33,698	$	96,199	$	81,602

11

Note 6 — Product Warranties

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

	Six Months Ended
	June 29, 2024		July 1, 2023
Balance, beginning of period	$	194,235	$	202,463
Warranties sold	—		659
Revenue recognized	—		(1,223)
Expense	4,569		22,004
Claims and settlements	(4,715)		(21,695)
Impact of acquisitions	11,898		—
Reclassification of deferred warranty revenue(1)	(24,717)		—
Balance, end of period	$	181,270	$	202,208
Reflected as:
Current liabilities – Rebates, warranties and other customer-related liabilities	$	21,557	$	26,654
Noncurrent liabilities – Other long-term liabilities	159,713		175,554
Total product warranty liability	$	181,270	$	202,208

(1)     Reclassification of deferred warranty revenue for the Shelter Solutions reportable segment that had historically been included in the warranty liability disclosure. Deferred warranty revenue is recorded in other current liabilities of $2.9 million and other long-term liabilities of $23.2 million within our Condensed Consolidated Balance Sheets for six months ended June 29, 2024.

Note 7 — Debt

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

			June 29, 2024								December 31, 2023
	Effective Interest Rate		Principal Outstanding		Unamortized Fair Value Adjustment (1)		Unamortized Discount and Issuance Costs		Carrying Amount		Principal Outstanding		Unamortized Fair Value Adjustment(1)		Unamortized Discount and Issuance Costs		Carrying Amount
Term loan facility, due April 2028	8.57	%	$	2,515,500	$	(262,784)	$	—	$	2,252,716	$	2,528,500	$	(292,442)	$	—	$	2,236,058
Term loan facility, due August 2028	9.69	%	295,500		—		(16,693)		278,807		297,000		—		(18,370)		278,630
Term loan facility, due May 2031	10.02	%	500,000		—		(5,312)		494,688		—		—		—		—
6.125% senior notes, due January 2029	13.73	%	318,699		(81,003)		—		237,696		318,699		(87,050)		—		231,649
8.750% senior secured notes, due August 2028	10.61	%	710,000		—		(40,555)		669,445		710,000		—		(44,787)		665,213
Total long-term debt			$	4,339,699	$	(343,787)	$	(62,560)	$	3,933,352	$	3,854,199	$	(379,492)	$	(63,157)	$	3,411,550
Reflected as:
Current liabilities - Current maturities of long-term debt									$	31,500							$	29,000
Non-current liabilities - Long-term debt									3,901,852								3,382,550
Total long-term debt									$	3,933,352							$	3,411,550
Fair value - Senior notes - Level 1									$	958,045							$	988,702
Fair value - Term loans - Level 2(2)									3,265,653								2,835,596
Total fair value									$	4,223,698							$	3,824,298

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

(2)    Term loans are classified within Level 2 of the fair value hierarchy because they are valued based on quoted market prices.

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Fifth Amendment to the Cash Flow Credit Agreement

On May 15, 2024, the Company entered into a Fifth Amendment to the Cash Flow Credit Agreement, dated as of April 12, 2018, to incur a new incremental term loan facility (the “Term Loan Facility, due May 2031”) in the aggregate principal amount of $500.0 million, maturing on May 15, 2031. The Term Loan Facility, due May 2031, amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon maturity.

The Term Loan Facility, due May 2031 bears annual interest at a floating rate measured by reference to, at the Company’s option, either (i) a Term SOFR rate (subject to a floor of 0.50%) plus an applicable margin of 4.50% per annum or (ii) an alternate base rate plus an applicable margin of 3.50% per annum.

The Term Loan Facility, due May 2031 and previous borrowings under the Cash Flow Credit Agreement may be prepaid at the Company’s option at any time, subject to minimum principal amount requirements. Prepayments of the Term Loan Facility, due May 2031 in connection with a repricing transaction on or prior to November 15, 2024, are subject to a 1.00% prepayment premium. Prepayments may otherwise be made without premium or penalty (other than customary breakage costs). The 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.

Repurchase of 6.125% Senior Notes due January 2029

The Company repurchased an aggregate principal amount of $25.2 million and $46.8 million of 6.125% Senior Notes for $18.4 million and $33.9 million in cash during the three and six months ended July 1, 2023. The repurchases, which resulted in a write-off of associated unamortized debt discount and deferred financing costs, resulted in a gain of $0.4 million and a loss of $0.2 million during the three and six months ended July 1, 2023. There were no repurchases of the Company’s 6.125% Senior Notes during the three and six months ended June 29, 2024.

Short-Term Borrowings

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

	June 29, 2024						December 31, 2023
	Available		Borrowings		Letters of Credit and Priority Payables		Available		Borrowings		Letters of Credit and Priority Payables
Asset-based lending facility, due May 2029(1)	$	850,000	$	65,000	$	46,000	$	850,000	$	—	$	47,000
Cash flow revolver(2)	92,000		—		—		92,000		—		—
First-in-last-out tranche asset-based lending facility, due May 2029(1)	95,000		95,000		—		95,000		—		—
Total	$	1,037,000	$	160,000	$	46,000	$	1,037,000	$	—	$	47,000

(1)     As of June 29, 2024, borrowings on revolving credit facilities are included within short-term borrowings and classified as a current liability on the Condensed Consolidated Balance Sheets.

(2)     Cash flow revolver commitment of $92.0 million will mature in May 2029.

In July 2024, the Company borrowed $550.0 million under its revolving credit facilities principally to finance the acquisition of Mueller.

Eighth Amendment to the ABL Credit Agreement

On May 15, 2024, the Company entered into Amendment No. 8 to the ABL Credit Agreement (“Amendment No. 8”), which amended the ABL Credit Agreement in order to terminate the existing revolving commitments of each of the Extending Revolving Credit Lenders originally maturing on July 25, 2027 (the “Existing ABL Commitments”), and replace such Existing ABL Commitments with an extended revolving commitment of $945.0 million maturing on May 15, 2029, subject to the outstanding aggregate principal amount. As of May 15, 2024, following consummation of Amendment No. 8, there were $55.0 million of revolving loans drawn and $43.3 million of letters of credit issued under the ABL Facility.

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

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

Covenant Compliance

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

The Company’s debt agreements contain a number of covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness; make dividends and other restricted payments; incur additional liens; consolidate, merge, sell or otherwise dispose of all or substantially all assets; make investments; transfer or sell assets; enter into restrictive agreements; change the nature of the business; and enter into certain transactions with affiliates. The Company is in compliance with all of its covenants as of June 29, 2024.

Interest Rate Swaps

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

	April 2021 Swaps
Notional amount	$	1,500,000
Forecasted term loan interest payments being hedged	1-month SOFR
Fixed rate paid	2.0038%
Origination date	April 17, 2023
Maturity date	April 15, 2026
Fair value at June 29, 2024 - Other assets, net	$	66,900
Fair value at December 31, 2023 - Other assets, net	$	64,704
Level in fair value hierarchy(1)	Level 2

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

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Note 8 — Accumulated Other Comprehensive Income

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

	Foreign Currency Translation Adjustments		Derivative Instruments		Unrecognized Gain on Retirement Benefits		Total Accumulated Other Comprehensive Income
Balance, March 30, 2024	$	(11,734)	$	34,914	$	820	$	24,000
Activity	(89)		(2,020)		—		(2,109)
Balance, June 29, 2024	$	(11,823)	$	32,894	$	820	$	21,891
Balance, April 1, 2023	$	(7,752)	$	30,070	$	336	$	22,654
Activity	483		14,854		—		15,337
Balance, July 1, 2023	$	(7,269)	$	44,924	$	336	$	37,991

	Foreign Currency Translation Adjustments		Derivative Instruments		Unrecognized Gain on Retirement Benefits		Total Accumulated Other Comprehensive Income
Balance, December 31, 2023	$	(9,553)	$	26,600	$	820	$	17,867
Activity	(2,270)		6,294		—		4,024
Balance, June 29, 2024	$	(11,823)	$	32,894	$	820	$	21,891
Balance, December 31, 2022	$	(6,789)	$	40,962	$	336	$	34,509
Activity	(480)		3,962		—		3,482
Balance, July 1, 2023	$	(7,269)	$	44,924	$	336	$	37,991

Note 9 — Share-Based Compensation

Pre-Merger Awards

In connection with the Merger in July 2022, under which Cornerstone Building Brands became a privately held company, unvested share-based compensation awards that were previously granted to key employees and executives were cancelled and converted into a contingent contractual right to receive a cash payment from the Company upon vesting. The Company had $27.6 million at December 31, 2023 and $3.7 million at June 29, 2024 classified as a current liability within employee-related liabilities on its Condensed Consolidated Balance Sheets. The Company paid out $24.7 million of cash to settle Pre-Merger Awards in March 2024.

The Company recognized an expense of $1.3 million in the three months ended June 29, 2024 and a gain of $3.4 million in the three months ended July 1, 2023. The Company recognized an expense of $3.2 million in the six months ended June 29, 2024 and a gain of $1.4 million in the six months ended July 1, 2023. These amounts are included in selling, general and administrative expense on the Condensed Consolidated Statements of Loss. The gain during the six months ended July 1, 2023 mainly related to the Company updating its vesting expectations for certain performance share unit awards which have a range of payouts based on an EBITDA-based metric.

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Incentive Unit Awards

Beginning in the fourth quarter of 2022, pursuant to an incentive unit grant agreement, certain participants were granted incentive units in Camelot Return Ultimate, LP (the “Partnership”). The incentive units provide the holder with the opportunity to receive, upon certain vesting events and subject to Partnership repurchase rights and conditions, a return based upon the appreciation of the Partnership’s equity value from the date of grant. The incentive units vest over a five-year period on a straight-line basis. For the six months ended June 29, 2024, 35,760 incentive units were granted at an average grant date fair value of $46.89 per incentive unit. The Company recognized an expense from incentive units of $1.2 million in the three months ended June 29, 2024, and $2.5 million for the three months ended July 1, 2023. The Company recognized expense from incentive units of $2.8 million for the six months ended June 29, 2024, and $5.0 million for the six months ended July 1, 2023. The Company estimates that the unrecognized expense is expected to be recognized over a weighted-average period of 3.2 years totaling $26.5 million.

Note 10 — Equity Transactions

Dividend

In January 2024, the Company paid a dividend on our common stock in the aggregate amount of $231.6 million, which was received by our direct parent Camelot Return Intermediate Holdings, LLC, (“Camelot Parent”), and further distributed to Camelot Return Parent, LLC (“Camelot Return Parent”), an indirect parent of the Company. Camelot Return Parent used the funds received to redeem all 1,950,000 preferred units of Camelot Return Parent held by CD&R Pisces Holdings, L.P.

Note 11 — Income Taxes

The Company’s effective tax rate includes state income taxes, foreign tax rate differentials and changes in the valuation allowance. The following table sets forth the effective tax rate for the three and six months ended June 29, 2024 and July 1, 2023:

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Effective tax rate	81.4	%	32.4	%	11.4	%	27.4	%

The Company’s effective tax rate varied from the statutory tax rate primarily due to state income taxes, foreign tax rate differentials and changes in the valuation allowance. The change in the effective tax rate for the three and six month periods ended June 29, 2024 compared to the three and six month periods ended July 1, 2023 is primarily due to pre-tax book losses resulting from the additional book amortization and depreciation related to the Merger transaction.

Note 12 — Reportable Segment and Geographical Information

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) for purposes of allocating resources and evaluating financial performance. Our CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis, accompanied by information about our five operating segments, for the purposes of allocating resources and evaluating financial performance. The Company is organized into three reportable segments: Aperture Solutions, Surface Solutions and Shelter Solutions, which operate principally in the U.S. with limited operations in Canada.

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

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

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

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

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

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

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales:
Aperture Solutions	$	673,010	$	647,675	$	1,202,850	$	1,252,244
Surface Solutions	336,056		335,522		610,392		604,113
Shelter Solutions	355,236		445,021		696,747		850,949
Total net sales	$	1,364,302	$	1,428,218	$	2,509,989	$	2,707,306
Adjusted reportable segment EBITDA:
Aperture Solutions	$	99,624	$	103,293	$	144,504	$	168,086
Surface Solutions	74,440		61,499		117,675		87,806
Shelter Solutions	54,721		105,970		110,798		189,384
Total adjusted reportable segment EBITDA	228,785		270,762		372,977		445,276
Corporate and Other	(60,145)		(54,769)		(117,309)		(102,561)
Depreciation and amortization	(98,538)		(165,162)		(192,855)		(237,824)
Interest expense	(106,747)		(92,314)		(201,567)		(186,425)
Foreign exchange (loss) gain	(2,773)		4,430		(6,786)		6,447
Loss on extinguishment of debt	—		379		—		(184)
Other income, net	673		3,632		3,556		4,805
Loss before income taxes	$	(38,745)	$	(33,042)	$	(141,984)	$	(70,466)

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

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Aperture Solutions:
Vinyl windows	$	646,349	$	622,062	$	1,154,787	$	1,189,255
Aluminum windows and other	26,661		25,613		48,063		62,989
Total	$	673,010	$	647,675	$	1,202,850	$	1,252,244
Surface Solutions:
Vinyl siding	$	166,159	$	162,841	$	300,623	$	295,026
Metal siding	91,919		86,066		167,936		146,503
Injection molded siding	15,331		15,556		27,027		28,042
Stone	18,514		19,450		32,636		37,469
Stone veneer installation and other	44,133		51,609		82,170		97,073
Total	$	336,056	$	335,522	$	610,392	$	604,113
Shelter Solutions:
Metal building products	$	355,236	$	445,021	$	696,747	$	850,949
Total	$	355,236	$	445,021	$	696,747	$	850,949
Total net sales	$	1,364,302	$	1,428,218	$	2,509,989	$	2,707,306

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The following table sets forth total assets disaggregated by reportable segment:

	June 29, 2024		December 31, 2023
Total assets:
Aperture Solutions	$	3,632,297	$	2,934,102
Surface Solutions	2,278,285		2,268,443
Shelter Solutions	1,177,310		1,111,679
Corporate	282,779		619,117
Total assets	$	7,370,671	$	6,933,341

Note 13 — Commitments and Contingencies

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

Environmental

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

The Company believes it is in material compliance with all applicable laws and regulations and has recorded a liability of $8.5 million as of June 29, 2024 and $8.8 million as of December 31, 2023 for certain subsurface investigation and remedial matters.

Litigation

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

Stockholder Litigation

In July 2022, and pursuant to an Agreement and Plan of Merger dated March 5, 2022, Clayton, Dubilier and Rice, LLC (“CD&R”) became the indirect owner of Cornerstone Building Brands. In January 2023, purported former stockholders filed two separate complaints challenging the fairness of the Merger. The complaints are captioned Firefighters’ Pension System of the City of Kansas City, Missouri Trust and Gary D. Voigt v. Affeldt et al., C.A. No. 2023-0091-JTL (Del. Ch.) and Whitebark Value Partners LP and Robert Garfield v. Clayton Dubilier & Rice, LLC et al., C.A. No. 2023-0092-JTL (Del. Ch.). In both complaints, the plaintiffs allege that CD&R and its affiliates controlled the Company prior to the transaction and that certain directors and officers of the Company, as well as CD&R and its affiliates, breached their fiduciary duties and engaged in conduct resulting in a sale of the Cornerstone Building Brands public stockholders’ shares to CD&R at an unfair price. The plaintiffs seek unspecified monetary damages, attorneys’ fees, expenses and costs. The court consolidated the two cases, and on May 3, 2023, selected Whitebark Value Partners LP as lead plaintiff. On July 14, 2023, the defendants moved to dismiss the operative complaint. The motion to dismiss was denied on January 10, 2024, and the case is ongoing. On June 26, 2024, the plaintiffs filed an amended complaint. The Company intends to vigorously defend against these claims. The Company cannot predict with any degree of certainty the outcome of these matters or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss.

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In June 2023, a purported former stockholder filed a class action complaint in the United States District Court for the District of Delaware alleging that the Company’s disclosures issued in connection with the Merger were materially misleading in violation of Section 14(a) and Section 20(a) of the Securities Exchange Act of 1934. The complaint is captioned Water Island Merger Arbitrage Institutional Commingled Master Fund, L.P. v. Cornerstone Building Brands et al., Case No. 1:23-cv-00701 (D. Del.). The complaint alleges that the Company’s directors and officers issued misleading disclosures, which caused stockholders to approve the Merger at an unfair price. The plaintiff seeks unspecified monetary damages, interest, attorneys’ fees, expenses, and costs. On December 8, 2023, the defendants moved to dismiss the operative complaint, and, in the alternative, to stay the litigation. The Company intends to vigorously defend against these claims. The Company cannot predict with any degree of certainty the outcome of this matter or determine the extent of any potential liabilities. The Company also cannot provide an estimate of the possible loss or range of loss. The Company does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on its financial condition.

Note 14 — Supplemental Cash Flow Information

The following table sets forth supplemental cash flow information:

	Six Months Ended
	June 29, 2024		July 1, 2023
Supplemental cash flow information:
Interest paid	$	154,870	$	141,856
Income taxes paid	$	63,981	$	15,774

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CORNERSTONE BUILDING BRANDS, INC.

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

The following is management’s discussion and analysis of certain significant factors that have affected our consolidated financial condition and results of operations during the periods presented (the “MD&A”). This information should be read in conjunction with the Condensed Consolidated Financial Statements included herein “Item 1. Condensed Consolidated Financial Statements” and the Condensed Consolidated Financial Statements and the Notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”).

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will,” “target” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These risks, uncertainties and other factors include, but are not limited to:

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

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

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

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

•Seasonality of the business and adverse weather conditions;

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

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

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

•Ability to compete effectively against competitors;

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

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

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

•Increases in energy costs;

•Increases in freight and transportation costs;

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

•An impairment of our goodwill or intangible assets;

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

•Enforcement and obsolescence of our intellectual property rights;

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

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

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

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•Global climate change and compliance with new or changed laws or regulations relating to environmental, social and governance;

•Breaches of our information system security measures;

•Damage to our computer infrastructure and software systems, as well as issues relating to the incorporation of artificial intelligence solutions into our systems;

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

•Potential personal injury, property damage or product liability claims or other types of litigation, including stockholder litigation related to the Merger;

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

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

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

•Increases in tariffs or import and trade restrictions;

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

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

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

•Our ability to obtain financing on acceptable terms;

•Exchange rate fluctuations;

•Downgrades of our credit ratings;

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

•Other risks detailed under the caption “Risk Factors” in this Quarterly Report on Form 10-Q and in Part I, Item 1A in the 2023 Form 10-K and other filings we make with the Securities Exchange Commission.

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 in this Quarterly Report on Form 10-Q and in Part I, Item 1A in the 2023 Form 10-K and other filings we make with the Securities and Exchange Commission. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations unless the securities laws require us to do so.

Company Overview

Our Company

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

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

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

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

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

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

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

Results of Operations

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

	Three Months Ended						Six Months Ended
(Amounts in thousands)	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
Net sales	$	1,364,302		$	1,428,218		$	2,509,989		$	2,707,306
Gross profit	317,131			297,837			550,687			579,698
% of net sales	23.2		%	20.9		%	21.9		%	21.4		%
Selling, general and administrative expenses	247,029			247,006			487,874			474,807
% of net sales	18.1%			17.3%			19.4%			17.5%
Income from operations	70,102			50,831			62,813			104,891
% of net sales	5.1		%	3.6%			2.5		%	3.9		%
Interest expense	(106,747)			(92,314)			(201,567)			(186,425)
Foreign exchange (loss) gain	(2,773)			4,430			(6,786)			6,447
Gain (loss) on extinguishment of debt	—			379			—			(184)
Other income, net	673			3,632			3,556			4,805
Loss before income taxes	(38,745)			(33,042)			(141,984)			(70,466)
Income tax benefit	(31,524)			(10,716)			(16,190)			(19,325)
Net loss	$	(7,221)		$	(22,326)		$	(125,794)		$	(51,141)
Non-GAAP financial measure – Adjusted EBITDA*	$	197,857		$	238,522		$	304,798		$	379,702
% of net sales	14.5		%	16.7		%	12.1		%	14.0		%
* Refer to Non-GAAP Financial Measures for further discussion.

Net sales decreased $63.9 million, or 4.5%, for the three months ended June 29, 2024 compared to the comparable prior year period, and decreased $197.3 million, or 7.3%, for the six months ended June 29, 2024 compared to the comparable prior year period, mainly due to lower volume across all reportable segments, partially offset by the strategic acquisitions of M.A.C. Métal Architectural Inc. (“MAC Metal”) in August 2023, Eastern Architectural Systems (“EAS”) in December 2023 and Harvey Building Products Corp. (“Harvey”) in April 2024.

Gross profit as a percentage of net sales was 23.2% for the three months ended June 29, 2024, compared to 20.9% for the comparable prior year period, and 21.9% for the six months ended June 29, 2024 compared to 21.4% for the comparable prior year period. The increase was driven by manufacturing net efficiencies, partially offset by lower volumes.

Selling, general and administrative expenses increased $— million, or —%, for the three months ended June 29, 2024 compared to the comparable prior year period, and increased $13.1 million or 2.8% for the six months ended June 29, 2024 compared to the comparable prior year period. These increases were mainly due to higher employee compensation expenses, related to the timing of long-term incentive compensation and severance, partially offset by the cumulative catch-up adjustment made to depreciation expense during the prior year as a result of the Merger.

Interest expense increased $14.4 million for the three months ended June 29, 2024, compared to the comparable prior year period and increased $15.1 million for the six months ended June 29, 2024 compared to the comparable prior year period. The following table sets forth the components of interest expense:

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	Three Months Ended				Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Interest on outstanding borrowings	$	95,170	$	80,982	$	179,098	$	161,161
Cash impact of interest rate swaps	(12,992)		(10,956)		(26,011)		(19,995)
Amortization of interest rate swap fair value(1)	3,028		2,995		5,990		5,990
Amortization of debt discount, debt issuance costs and purchase accounting fair value adjustment(1)	21,465		19,197		42,379		38,965
Other	76		96		111		304
Total interest expense	$	106,747	$	92,314	$	201,567	$	186,425

(1)The fair value adjustments were made in connection with the Merger in July 2022.

Foreign exchange (loss) gain was $2.8 million and $6.8 million of losses for the three and six month periods ended June 29, 2024 compared to $4.4 million and $6.4 million of gains and for the three and six months ended July 1, 2023. The changes period over period are attributable to foreign exchange rate changes on intercompany loans based in Canadian currency.

Gain (loss) on extinguishment of debt included a gain of $0.4 million and loss of $0.2 million for the three months and six months ended July 1, 2023, which resulted from the repurchase of our 6.125% Senior notes due January 2029 (“the 6.125% Senior Notes”) during the three and six months ended July 1, 2023. No repurchases were made during the three and six months ended June 29, 2024.

Other income, net, decreased $3.0 million for the three months ended June 29, 2024, compared to the comparable prior year period, and decreased $1.2 million for the six months ended June 29, 2024 compared to the comparable prior year period. These decreases are mainly due to less interest income earned on our cash and cash equivalents year over year.

Income tax benefit increased $20.8 million for the three-month period ended June 29, 2024 compared to the comparable prior year period and decreased $3.1 million for the six months ended June 29, 2024 compared to the comparable prior year period mainly due to pre-tax book losses resulting from the additional book amortization and depreciation related to the Merger transaction in addition to the impact of state income tax as a result of internal restructuring.

Reportable Segment Results of Operations

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

	Three Months Ended				Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales:
Aperture Solutions	$	673,010	$	647,675	$	1,202,850	$	1,252,244
Surface Solutions	336,056		335,522		610,392		604,113
Shelter Solutions	355,236		445,021		696,747		850,949
Total net sales	$	1,364,302	$	1,428,218	$	2,509,989	$	2,707,306
Adjusted reportable segment EBITDA:
Aperture Solutions	$	99,624	$	103,293	$	144,504	$	168,086
Surface Solutions	74,440		61,499		117,675		87,806
Shelter Solutions	54,721		105,970		110,798		189,384
Corporate and Other	(60,145)		(54,769)		(117,309)		(102,561)
Depreciation and amortization	(98,538)		(165,162)		(192,855)		(237,824)
Income from operations	$	70,102	$	50,831	$	62,813	$	104,891

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Aperture Solutions

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

	Three Months Ended						Six Months Ended
(Amounts in thousands)	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
Net sales	$	673,010		$	647,675		$	1,202,850		$	1,252,244
Adjusted reportable segment EBITDA	$	99,624		$	103,293		$	144,504		$	168,086
% of net sales	14.8		%	15.9		%	12.0		%	13.4		%
Depreciation and amortization	$	44,826		$	68,007		$	86,264		$	103,932

Net sales for the three months ended June 29, 2024 increased $25.3 million, or 3.9%, and for the six months ended June 29, 2024 decreased $49.4 million, or 3.9%, mainly driven by lower volumes, partially offset by the strategic acquisition of EAS in December 2023 and Harvey in April 2024.

Adjusted reportable segment EBITDA for the three months ended June 29, 2024 decreased $3.7 million and for the six months ended June 29, 2024 decreased $23.6 million, mainly driven by lower volumes and an unfavorable price and product mix net of inflation, partially offset by manufacturing net efficiencies and the strategic acquisition of EAS in December 2023 and Harvey in April 2024.

Surface Solutions

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

	Three Months Ended						Six Months Ended
(Amounts in thousands)	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
Net sales	$	336,056		$	335,522		$	610,392		$	604,113
Adjusted reportable segment EBITDA	$	74,440		$	61,499		$	117,675		$	87,806
% of net sales	22.2		%	18.3		%	19.3		%	14.5		%
Depreciation and amortization	$	25,423		$	10,406		$	51,953		$	39,739

Net sales for the three months ended June 29, 2024 increased $0.5 million, or 0.2%, and for the six months ended June 29, 2024 increased $6.3 million, or 1.0% mainly driven by the strategic acquisition of MAC Metal in August 2023, partially offset by lower volumes and an unfavorable price and product mix.

Adjusted reportable segment EBITDA for the three months ended June 29, 2024 increased $12.9 million and for the six months ended June 29, 2024 increased $29.9 million, mainly due to net manufacturing efficiencies and the strategic acquisition of MAC Metal in August 2023, partially offset by lower volumes and an unfavorable price and product mix net of inflation.

Shelter Solutions

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

	Three Months Ended						Six Months Ended
(Amounts in thousands)	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
Net sales	$	355,236		$	445,021		$	696,747		$	850,949
Adjusted reportable segment EBITDA	$	54,721		$	105,970		$	110,798		$	189,384
% of net sales	15.4		%	23.8		%	15.9		%	22.3		%
Depreciation and amortization	$	27,510		$	84,883		$	53,148		$	90,683

Net sales for the three months ended June 29, 2024 decreased $89.8 million, or 20.2%, and for the six months ended June 29, 2024 decreased $154.2 million, or 18.1% mainly driven by lower volumes and unfavorable product and price mix.

Adjusted reportable segment EBITDA for the three months ended June 29, 2024 decreased $51.2 million and for the six months ended June 29, 2024 decreased $78.6 million, mainly due to lower volumes, unfavorable product and price mix net of inflation partially offset by manufacturing net efficiencies and lower selling, general and administrative costs.

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Corporate and Other

The following table sets forth Corporate and other:

	Three Months Ended				Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Corporate costs	$	30,928	$	32,240	$	68,179	$	65,574
Strategic development and acquisition related costs	9,232		8,915		13,306		16,537
Acquired inventory step-up amortization	841		—		1,180		—
Long-term incentive plan compensation	4,909		6,128		15,423		3,773
Facility closure charges and employee separation	1,231		2,609		2,757		11,431
Fair value of contingent consideration	1,443		—		1,443		—
Other	11,561		4,877		15,021		5,246
Total Corporate and Other	$	60,145	$	54,769	$	117,309	$	102,561

Corporate costs decreased $1.3 million and increased $2.6 million for the three and six months ended June 29, 2024, mainly due to the timing of employee compensation expenses.

Depreciation and Amortization

The following table sets forth depreciation and amortization:

	Three Months Ended				Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Depreciation:
Cost of sales	$	41,080	$	99,790	$	82,012	$	119,137
Selling, general and administrative expenses	8,493		31,674		14,644		37,085
Total depreciation	49,573		131,464		96,656		156,222
Amortization — Selling, general and administrative expenses	48,965		33,698		96,199		81,602
Total depreciation and amortization	$	98,538	$	165,162	$	192,855	$	237,824

Depreciation and amortization decreased $66.6 million for the three months ended June 29, 2024 and decreased $45.0 million for the six months ended June 29, 2024 mainly due to the Company recording a cumulative catch-up adjustment during the prior year which resulted in increases of $65.2 million and $1.3 million to cost of sales and selling, general and administrative expenses to account for the update in fair value of these assets as if the adjustments had been made as of the date of the Merger, as well as shortened useful lives and a higher depreciable base as a result of the Merger.

Non-GAAP Financial Measures

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

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

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Reconciliation of Net Loss to Adjusted EBITDA

The following table presents the reconciliation of net loss to Adjusted EBITDA:

	Three Months Ended				Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net loss	$	(7,221)	$	(22,326)	$	(125,794)	$	(51,141)
Interest expense	106,747		92,314		201,567		186,425
Foreign exchange (gain) loss	2,773		(4,430)		6,786		(6,447)
(Gain) loss on extinguishment of debt	—		(379)		—		184
Other income, net	(673)		(3,632)		(3,556)		(4,805)
Income tax benefit	(31,524)		(10,716)		(16,190)		(19,325)
Income from operations	70,102		50,831		62,813		104,891
Depreciation and amortization	98,538		165,162		192,855		237,824
Strategic development and acquisition related costs	9,232		8,915		13,306		16,537
Acquired inventory step-up amortization	841		—		1,180		—
Long-term incentive plan compensation(1)	4,909		6,128		15,423		3,773
Facility closure charges and employee separation	1,231		2,609		2,757		11,431
Fair value of contingent consideration	1,443		—		1,443		—
Other	11,561		4,877		15,021		5,246
Adjusted EBITDA	$	197,857	$	238,522	$	304,798	$	379,702

(1)Reflects expenses related to long-term incentive compensation plans, which includes awards that were granted prior to the Merger (“Pre-Merger Awards”) and incentive unit grants that occurred subsequent to the Merger.

See Part I, Item 1, “Condensed Consolidated Financial Statements”, Note 12 — Reportable Segment and Geographical Information, included herein, for the reconciliation of adjusted reportable segment EBITDA to loss before income taxes. Adjusted reportable segment EBITDA is the only measure of segment profit used by our chief operating decision maker.

Liquidity and Capital Resources

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

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

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The following table sets forth our total net liquidity position as of June 29, 2024:

(Amounts in thousands)	Amount
Cash and cash equivalents	$	122,299
Revolving credit facilities:
Asset-based lending facility(1)	850,000
Cash flow revolving facility	92,000
First-in-last-out tranche asset-based lending facility	95,000
Total revolving credit facilities	1,037,000
Less:
Debt issued under the facilities	160,000
Letters of credit outstanding and priority payables	46,000
Net credit facility	831,000
Net liquidity	$	953,299

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

In July 2024, the Company borrowed $550.0 million under its revolving credit facilities principally to finance the acquisition of Mueller Supply Company, Inc.

Cash Flows

	Six Months Ended
(Amounts in thousands)	June 29, 2024		July 1, 2023
Cash flows from operating activities	$	(206,460)	$	21,125
Cash flows from investing activities	$	(549,996)	$	(79,100)
Cash flows from financing activities	$	408,563	$	(48,385)

Cash Flows From Operating Activities

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

Net cash from operating activities was $(206.5) million for the six months ended June 29, 2024, a decrease from the $21.1 million provided by operations in the prior year. Lower volumes, higher core working capital, consisting of accounts receivable, inventories, accounts payables, and higher interest payments, were offset by the timing of incentive compensation plan payouts and the impact of the acquisitions.

Cash Flows From Investing Activities

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

Net cash from investing activities was $(550.0) million for the six months ended June 29, 2024 compared to $(79.1) million used in investing activities for the six months ended July 1, 2023. The $470.9 million decrease is mainly driven by higher capital expenditures and the acquisition of Harvey during the six months ended June 29, 2024 compared to the six months ended July 1, 2023.

In July 2024, the Company acquired Mueller Supply Company, Inc. for $497.1 million, including a base purchase price of $475.0 million, as well as closing date cash and working capital. The transaction is subject to customary adjustments.

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Cash Flows From Financing Activities

Our main uses of cash for financing activities include activity to repurchase and make payments on our long-term debt and distributions to our direct parent Camelot Return Intermediate Holdings, LLC, (“Camelot Parent”). Our main sources of cash from financing activities include the proceeds from issuances of debt.

Net cash from financing activities was $408.6 million for the six months ended June 29, 2024 compared to $(48.4) million used in financing activities for the six months ended July 1, 2023. The increase of $456.9 million is mainly driven by $650.0 million in additional short-term borrowings and $500.0 million in long-term borrowings through amendments to our ABL Credit Agreement and term loan facility during the six months ended June 29, 2024. The increase is partially offset by the dividend payment of $231.6 million made to Camelot Parent and $490.0 million in repayments of short-term borrowings.

Contingent Liabilities and Commitments

Leases

We have leases for certain manufacturing, warehouse, distribution locations, offices, vehicles and equipment. As of June 29, 2024 the Company had total future lease payments of $737.5 million, with $79.9 million payable within 12 months.

Debt

We have certain debt instruments outstanding. As of June 29, 2024 the Company had total future payments of $4.5 billion, with $191.5 million payable within 12 months. See Note 7 — Debt in the Notes to the Condensed Consolidated Financial Statements for additional information.

Critical Accounting Estimates

There have been no material changes in our critical accounting policies and estimates during the six months ended June 29, 2024. Refer to the 2023 Form 10-K for a description of the Company’s critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in our exposure to market risk during the six months ended June 29, 2024. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a description of the Company’s market risks.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 29, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures by a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed with an objective to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of June 29, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level. 

Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 29, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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CORNERSTONE BUILDING BRANDS, INC.

PART II — OTHER INFORMATION

Item 1. Legal Proceeding.

See Part I, Item 1, “Condensed Consolidated Financial Statements”, Note 13 — Commitments and Contingencies, which is incorporated herein by reference.

Item 1A. Risk Factors.

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”). The risks disclosed in the 2023 Form 10-K, and information provided elsewhere in this report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known, or that we currently deem to be immaterial, may materially adversely affect our business, financial condition or results of operations. We believe there have been no other material changes in our risk factors from those disclosed in the 2023 Form 10-K.

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Item 6. Exhibits.

Index to Exhibits

Exhibit No.	Description
*4.1	Fourth Supplemental Indenture, dated as of May 15, 2024, by and among Cornerstone Building Brands Services, Inc., the Company and Wilmington Trust, National Association, as trustee and note collateral agent
10.1	Fifth Amendment to Cash Flow Credit Agreement, dated as of May 15, 2024, by and among the Company, the several banks and other financial institutions party thereto, JPMorgan Chase Bank, N.A., as the resigning administrative agent and the resigning collateral agent and Deutsche Bank AG New York Branch, as the successor administrative agent and the successor collateral agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 15, 2024 and incorporated by reference herein)
10.2	Amendment No. 8 to ABL Credit Agreement, dated as of May 15, 2024, by and among Cornerstone Building Brands, Inc., the subsidiary borrowers party thereto, the several banks and other financial institutions party thereto party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 15, 2024 and incorporated by reference herein)
*31.1	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
*31.2	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002)
**32.1	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
**32.2	Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (Section 906 of the Sarbanes-Oxley Act of 2002)
*101.INS	Inline XBRL Instance Document
*101.SCH	Inline XBRL Taxonomy Extension Schema Document
*101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF	Inline XBRL Taxonomy Definition Linkbase Document
*101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*	Filed herewith
**	Furnished herewith
†	Management contracts or compensatory plans or arrangements

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SIGNATURES

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

	CORNERSTONE BUILDING BRANDS, INC.
Date: July 19, 2024	By:	/s/ Jeffrey S. Lee
		Jeffrey S. Lee
		Executive Vice President and Chief Financial Officer
Date: July 19, 2024	By:	/s/ Wayne F. Irmiter
		Wayne F. Irmiter
		Senior Vice President and Chief Accounting Officer

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