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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: April 2, 2022
 
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
 
 cnr-20220402_g1.jpg
Cornerstone Building Brands, Inc.
(Exact name of registrant as specified in its charter)

 
Delaware76-0127701
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5020 Weston ParkwaySuite 400CaryNC27513
(Address of principal executive offices)(Zip Code)
 
(866) 419-0042
(Registrant’s telephone number, including area code)

 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerýAccelerated filer
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock $0.01 par value per shareCNRNew York Stock Exchange

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, $0.01 par value - 127,354,001 shares as of April 26, 2022.




TABLE OF CONTENTS 
  PAGE
  
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
   
  
Item 1.
Item 1A.
Item 2.
Item 6.
 

i


PART I — FINANCIAL INFORMATION 
Item 1. Unaudited Consolidated Financial Statements. 
CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
 April 2,
2022
April 3,
2021
Net sales$1,566,838 $1,267,032 
Cost of sales1,232,931 1,007,303 
Gross profit333,907 259,729 
Selling, general and administrative expenses176,536 153,168 
Intangible asset amortization49,008 46,202 
Restructuring and impairment charges, net831 1,838 
Strategic development and acquisition related costs4,791 3,313 
Gain on legal settlements(76,575) 
Income from operations179,316 55,208 
Interest income32 117 
Interest expense(44,106)(56,499)
Foreign exchange gain (loss)1,444 (26)
Other income (expense), net(37)337 
Income (loss) before income taxes136,649 (863)
Provision for income taxes34,366 792 
Net income (loss)102,283 (1,655)
Net income allocated to participating securities(757) 
Net income (loss) applicable to common shares$101,526 $(1,655)
Income (loss) per common share:
Basic$0.80 $(0.01)
Diluted$0.79 $(0.01)
Weighted average number of common shares outstanding:
Basic127,129 125,506 
Diluted128,466 125,506 
See accompanying notes to consolidated financial statements.
 


1


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 Three Months Ended
 April 2,
2022
April 3,
2021
Comprehensive income:  
Net income (loss)$102,283 $(1,655)
Other comprehensive income, net of tax:  
Foreign exchange translation gains4,784 6,113 
Unrealized gain on derivative instruments, net of income tax of $(11,625) and $(2,690), respectively
60,696 9,137 
Amount reclassified from Accumulated other comprehensive income (loss) into earnings7,288  
Other comprehensive income72,768 15,250 
Comprehensive income$175,051 $13,595 
See accompanying notes to consolidated financial statements.
2


CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 April 2,
2022
December 31,
2021
ASSETS  
Current assets:  
Cash and cash equivalents$542,035 $394,447 
Restricted cash2,211 2,211 
Accounts receivable, less allowances of $12,153 and $11,299, respectively
708,340 685,316 
Inventories, net817,715 748,732 
Income taxes receivable3,502 14,514 
Investments in debt and equity securities, at market2,301 2,759 
Prepaid expenses and other99,777 135,701 
Assets held for sale3,400 3,400 
     Total current assets2,179,281 1,987,080 
Property, plant and equipment, less accumulated depreciation of $674,324 and $656,492, respectively
625,106 612,295 
Lease right-of-use assets295,692 322,608 
Goodwill1,355,161 1,358,056 
Intangible assets, net1,477,430 1,524,635 
Deferred income taxes2,055 1,839 
Other assets, net96,931 20,947 
     Total assets$6,031,656 $5,827,460 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$26,000 $26,000 
Accounts payable396,408 311,737 
Accrued compensation and benefits82,790 101,164 
Accrued interest12,186 19,775 
Accrued income taxes39,094 3,220 
Current portion of lease liabilities57,477 73,150 
Other accrued expenses281,376 320,389 
     Total current liabilities895,331 855,435 
Long-term debt3,005,873 3,010,843 
Deferred income taxes248,726 252,173 
Long-term lease liabilities238,134 251,061 
Other long-term liabilities284,469 281,609 
     Total long-term liabilities3,777,202 3,795,686 
Stockholders’ equity:  
Common stock, $0.01 par value; 200,000,000 authorized; 127,329,476 and 127,329,476 shares issued and outstanding at April 2, 2022, respectively; and 126,992,107 and 126,971,036 shares issued and outstanding at December 31, 2021, respectively
1,273 1,270 
Additional paid-in capital1,287,237 1,279,931 
Accumulated earnings (deficit)3,457 (98,826)
Accumulated other comprehensive income (loss), net67,156 (5,612)
Treasury stock, at cost (0 and 21,071 shares at April 2, 2022 and December 31, 2021, respectively)
 (424)
     Total stockholders’ equity1,359,123 1,176,339 
     Total liabilities and stockholders’ equity$6,031,656 $5,827,460 
See accompanying notes to consolidated financial statements.
3


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended
 April 2, 2022April 3, 2021
Cash flows from operating activities:  
Net income (loss)$102,283 $(1,655)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:  
Depreciation and amortization73,932 72,615 
Non-cash interest expense8,928 2,314 
Share-based compensation expense11,451 3,302 
Asset impairment368 493 
Provision for credit losses242 676 
Deferred income taxes(15,749)(9,729)
Changes in operating assets and liabilities, net of effect of acquisitions:  
Accounts receivable(23,628)(47,157)
Inventories(68,857)(62,028)
Income taxes11,012 7,976 
Prepaid expenses and other36,446 (7,755)
Accounts payable84,726 49,424 
Accrued expenses(28,312)8,597 
Other, net(2,736)2,958 
Net cash provided by operating activities190,106 20,031 
Cash flows from investing activities:  
Acquisitions, net of cash acquired4,396 (180)
Capital expenditures(33,306)(21,230)
Proceeds from sale of property, plant and equipment 715 
Net cash used in investing activities(28,910)(20,695)
Cash flows from financing activities:  
Payments on term loan(6,500)(6,404)
Payments on derivative financing obligations(3,282) 
Other(3,718)(1,055)
Net cash used in financing activities(13,500)(7,459)
Effect of exchange rate changes on cash and cash equivalents(108)585 
Net increase (decrease) in cash, cash equivalents and restricted cash147,588 (7,538)
Cash, cash equivalents and restricted cash at beginning of period396,658 680,478 
Cash, cash equivalents and restricted cash at end of period$544,246 $672,940 
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized$45,879 $40,913 
Taxes paid, net$1,562 $1,949 
 See accompanying notes to consolidated financial statements.
4






CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Common StockAdditional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Treasury StockStockholders’ Equity
 SharesAmountSharesAmount
Balance, December 31, 2021126,992,107 $1,270 $1,279,931 $(98,826)$(5,612)(21,071)$(424)$1,176,339 
Treasury stock purchases— — — — — (170,400)(4,082)(4,082)
Retirement of treasury shares(170,400)(2)(4,080)— — 170,400 4,082  
Issuance of restricted stock472,521 5 (5)— — — —  
Stock options exercised35,248  364 — — — — 364 
Other comprehensive income— — — — 72,768 — — 72,768 
Deferred compensation obligation—  (424)— — 21,071 424  
Share-based compensation— — 11,451 — — — — 11,451 
Net income— — — 102,283 — — — 102,283 
Balance, April 2, 2022127,329,476 $1,273 $1,287,237 $3,457 $67,156  $ $1,359,123 
Balance, December 31, 2020125,425,931 $1,255 $1,257,262 $(764,685)$(51,517)(25,332)$(510)$441,805 
Treasury stock purchases— — — — — (111,868)(1,541)(1,541)
Retirement of treasury shares(1,576) (15)— — 1,576 15  
Issuance of restricted stock338,939 3 (3)— — — —  
Stock options exercised44,361  486 — — — — 486 
Other comprehensive income— — — — 15,250 — — 15,250 
Deferred compensation obligation—  (86)— — 4,261 86  
Share-based compensation— — 3,302 — — — — 3,302 
Net loss— — — (1,655)— — — (1,655)
Balance, April 3, 2021125,807,655 $1,258 $1,260,946 $(766,340)$(36,267)(131,363)$(1,950)$457,647 
See accompanying notes to consolidated financial statements.

5


CORNERSTONE BUILDING BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 2, 2022
(Unaudited)

NOTE 1 — RECENT DEVELOPMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements for Cornerstone Building Brands, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “Cornerstone Building Brands,” “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present the Company’s financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2022 through April 2, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.
Certain reclassifications have been made to the prior period amounts in the unaudited consolidated financial statements to conform to the current presentation.
For additional information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022.
Recent Developments
On March 5, 2022, the Company entered into an Agreement and Plan of Merger (the “CD&R Merger Agreement”), by and among Camelot Return Intermediate Holdings, LLC (“Parent”), Camelot Return Merger Sub, Inc. (“Merger Sub”). Parent and Merger Sub are subsidiaries of investment funds managed by Clayton, Dubilier & Rice (“CD&R”). Upon the terms and subject to the conditions of the CD&R Merger Agreement, among other things, Merger Sub will merge with and into the Company (the “CD&R Merger”). As a result of the CD&R Merger, the Company will cease to be publicly-traded, and investment funds managed by CD&R will become the indirect owner of all of the Company’s outstanding shares of common stock that it does not already own. The proposed transaction has been approved by a special committee of independent directors of the Company’s board of directors (the “Special Committee”) previously formed to evaluate and consider any potential or actual proposal from CD&R. The board of directors of the Company, acting on the Special Committee’s recommendation, resolved unanimously to recommend that the stockholders of the Company vote to adopt and approve the CD&R Merger Agreement. The CD&R Merger is expected to close in the second or third quarter of 2022, subject to customary closing conditions. The waiting period under the Hart-Scott-Rodino Act of 1976, as amended, applicable to the proposed CD&R transaction expired on April 18, 2022. The transaction is subject to approval by holders of a majority of the shares not owned by CD&R and its affiliates.
Additional information about the CD&R Merger Agreement and the CD&R Merger will be set forth in the Company’s Definitive Proxy Statement on Schedule 14A that will be filed with the SEC.
Reporting Periods
The Company’s fiscal quarters are based on a four-four-five week calendar with periods ending on the Saturday of the last week in the quarter except that December 31st will always be the year-end date. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in thousands):
 April 2,
2022
December 31,
2021
Cash and cash equivalents$542,035 $394,447 
Restricted cash (1)
2,211 2,211 
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows$544,246 $396,658 
(1)Restricted cash primarily relates to indemnification agreements in both periods presented.
6


Accounts Receivable and Related Allowance
The Company reports accounts receivable net of an allowance for expected credit losses. Trade accounts receivable are the result of sales of vinyl windows, aluminum windows, vinyl siding, metal siding, injection molded products, metal building products, metal coating, and other products and services to customers throughout the United States and Canada and affiliated territories, including international builders who resell to end users. Sales are primarily denominated in U.S. dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process and we require payment prior to shipment for certain international shipments.
The Company establishes provisions for expected credit losses based on the Company’s assessment of the collectability of amounts owed to us by our customers. Such provisions are included in selling, general and administrative expenses. In establishing these reserves, the Company considers changes in the financial position of a customer, age of the accounts receivable balances, availability of security, unusual macroeconomic conditions, lien rights and bond rights as well as disputes, if any, with our customers. Our allowance for credit losses reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Interest on delinquent accounts receivable is included in the trade accounts receivable balance and recognized as interest income when earned and collectability is reasonably assured. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance, all collection efforts have been exhausted, and/or any legal action taken by the Company has concluded.
The following table represents the rollforward of the allowance for credit losses for the periods indicated (in thousands):
Three Months Ended
April 2,
2022
April 3,
2021
Ending balance, prior period$11,299 $13,313 
Provision for expected credit losses242 676 
Amounts charged against allowance for credit losses, net of recoveries170 438 
Allowance for credit losses of acquired company at date of acquisition442  
Ending balance$12,153 $14,427 
Net Sales
The Company enters into contracts that pertain to products, which are accounted for as separate performance obligations and are typically one year or less in duration. Given the nature of the Company's sales arrangements, we are not required to exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. Revenue is generally recognized when the product has shipped from the Company’s facility and control has transferred to the customer. For certain products, it is industry practice that customers take title to products upon delivery, at which time revenue is then recognized by the Company. For a portion of the Company’s business, when the Company processes customer owned material, control is deemed to transfer to the customer as the processing is being completed. Allowances for cash discounts, volume rebates and other customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages agreed upon with the Company’s various customers, which are typically earned by the customer over an annual period.
The Company’s revenues are adjusted for variable consideration, which includes customer volume rebates and prompt payment discounts. The Company measures variable consideration by estimating expected outcomes using analysis and inputs based upon anticipated performance, historical data, and current and forecasted information. Customer returns are recorded as a reduction to sales on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Company generally estimates customer returns based upon the time lag that historically occurs between the sale date and the return date, while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. Measurement of variable consideration is reviewed by management periodically and revenue is adjusted accordingly. The Company does not have significant financing components. The Company recognizes installation revenue, primarily within the stone veneer business, over the period for which the stone is installed, which is typically a very short duration.
Shipping and handling activities performed by the Company are considered activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.
7


In accordance with certain contractual arrangements, the Company receives payment from our customers in advance related to performance obligations that are to be satisfied in the future and recognizes such payments as deferred revenue, primarily related to the Company’s weathertightness warranties (see Note 12 — Warranty).
A portion of the Company’s revenue, exclusively within the Commercial segment, includes multiple-element revenue arrangements due to multiple deliverables. Each deliverable is generally determined based on customer-specific manufacturing and delivery requirements. Because the separate deliverables have value to the customer on a stand-alone basis, they are typically considered separate units of accounting. A portion of the entire job order value is allocated to each unit of accounting. Revenue allocated to each deliverable is recognized upon shipment. The Company uses estimated selling price (“ESP”) based on underlying cost plus a reasonable margin to determine how to separate multiple-element revenue arrangements into separate units of accounting, and how to allocate the arrangement consideration among those separate units of accounting. The Company determines ESP based on normal pricing and discounting practices.
The following table presents disaggregated revenue disclosure details of net sales by segment (in thousands):
Three Months Ended
April 2,
2022
April 3,
2021
Windows Net Sales Disaggregation:
Vinyl windows(1)
$657,796 $497,017 
Aluminum windows24,660 20,280 
Other19,654 9,966 
Total$702,110 $527,263 
Siding Net Sales Disaggregation:
Vinyl siding$161,200 $150,229 
Metal73,702 71,093 
Injection molded18,773 17,609 
Stone20,322 19,831 
Other products & services(2)
58,993 57,629 
Total$332,990 $316,391 
Commercial Net Sales Disaggregation:
Metal building products(3)
$476,458 $299,938 
Insulated metal panels(4)
 85,603 
Metal coil coating55,280 37,837 
Total$531,738 $423,378 
Total Net Sales:$1,566,838 $1,267,032 
(1)The Prime Windows LLC (“Prime Windows”) and Cascade Windows, Inc. (“Cascade Windows”) businesses are included in the results of operations as of their April 30, 2021 and August 20, 2021 acquisition dates, respectively.
(2)Other products & services primarily consist of installation of stone veneer products.
(3)Union Corrugating Company Holdings, Inc. (“UCC”) is included in the results of operations as of its December 3, 2021 acquisition date. The Company’s roll-up sheet doors (“DBCI”) business is only included in the fiscal 2021 results of operations through August 18, 2021, the date on which we divested of this business.
(4)The Company’s insulated metal panels (“IMP”) business is only included in the fiscal 2021 results of operations through August 9, 2021, the date on which we divested of this business.
8


NOTE 2 — ACCOUNTING PRONOUNCEMENTS
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the reference rate transition. The amendments in these ASUs are elective, apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform, and may be adopted as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of electing to apply the amendments.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires the recognition and measurement of contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. This creates an exception to the general recognition and measurement principles in ASC 805. The Company will be required to adopt this guidance in the annual and interim periods for the fiscal year ending December 31, 2023, with early adoption permitted. The amendments in this ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not anticipate that the adoption of this guidance will have a material impact on the consolidated financial statements.
NOTE 3 — ACQUISITIONS
Union Corrugating Company Holdings, Inc.
On December 3, 2021, the Company completed its acquisition of 100% of the issued and outstanding common stock of Union Corrugating Company Holdings, Inc. (“UCC”) for a purchase price of $214.2 million, including a post-closing adjustment of approximately $2.6 million that was finalized in the first quarter of 2022. UCC is a leading provider of residential metal roofing, metal buildings, and roofing components. The addition of UCC advances our growth strategy by expanding our offering to customers in the high growth metal roofing market. This acquisition was funded through cash available on the balance sheet. The Company reports UCC results within the Commercial segment.
9


The Company preliminarily determined the fair value of the tangible and intangible assets and the liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values, as follows (in thousands):
Assets acquired:
Cash$19,594 
Accounts receivable20,821 
Other receivables16 
Inventories68,727 
Prepaid expenses and other current assets1,356 
Property, plant and equipment24,184 
Lease right of use assets37,964 
Goodwill137,800 
Other assets94 
Total assets acquired310,556 
Liabilities assumed:
Accounts payable32,732 
Accrued expenses22,520 
Deferred income taxes1,289 
Current portion of lease liability3,859 
Other current liabilities1,852 
Non-current portion of lease liabilities34,105 
Total liabilities assumed96,357 
Net assets acquired$214,199 
The $137.8 million of preliminary goodwill was allocated to the Commercial segment. Goodwill from this acquisition is not deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to be realized.
Due to the recent closing of the UCC transaction, the purchase price allocation is preliminary and will be finalized when valuations are complete and final assessment of the fair value of acquired assets and assumed liabilities are completed. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of accounts receivable, other receivables, inventories, prepaid expenses and other current assets, property, plant and equipment, lease right of use assets, goodwill, intangible assets, other assets, accounts payable, accrued expenses, other current liabilities, other long-term liabilities, lease liabilities, and deferred income taxes.
Cascade Windows
On August 20, 2021, the Company completed its acquisition of Cascade Windows, Inc. (“Cascade Windows”) for $237.7 million in cash, including a post-closing adjustment of approximately $1.8 million that was finalized in the first quarter of 2022. Cascade Windows serves the residential new construction and repair and remodel markets with energy efficient vinyl window and door products from various manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through cash available on the balance sheet. The Company reports Cascade Windows’ results within the Windows segment.
10


The Company preliminarily determined the fair value of the tangible and intangible assets and the liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values, as follows (in thousands):
Assets acquired:
Cash$2,838 
Accounts receivable16,956 
Other receivables675 
Inventories16,278 
Prepaid expenses and other current assets1,538 
Property, plant and equipment18,300 
Lease right of use assets21,849 
Intangible assets (trade names/customer relationships)137,660 
Goodwill109,374 
Other assets500 
Total assets acquired325,968 
Liabilities assumed:
Accounts payable17,680 
Accrued expenses7,621 
Deferred income taxes33,221 
Current portion of lease liability247 
Other current liabilities2,349 
Non-current portion of lease liabilities19,926 
Other long-term liabilities7,211 
Total liabilities assumed88,255 
Net assets acquired$237,713 
The $109.4 million of goodwill was allocated to the Windows segment and is not deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to be realized.
The purchase price allocation is preliminary and will be finalized when valuations are complete and final assessment of the fair value of acquired assets and assumed liabilities are completed. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of accounts receivable, prepaid expenses and other current assets, goodwill, accrued expenses, and other current liabilities.
Prime Windows
On April 30, 2021, the Company acquired Prime Windows LLC (“Prime Windows”) for total consideration of $93.0 million, exclusive of a $2.0 million working capital adjustment that was finalized as of December 31, 2021. Prime Windows serves residential new construction and repair and remodel markets with energy efficient vinyl window and door products from two manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities. Prime Windows’ results are reported within the Windows segment.
11


Unaudited Pro Forma Financial Information
The following table provides unaudited supplemental pro forma results for the Company for the three months ended April 3, 2021 as if the UCC, Cascade Windows and Prime Windows acquisitions had occurred on January 1, 2021 (in thousands, except for per share data):
Three Months Ended
April 3, 2021
Net sales$1,382,660 
Net loss applicable to common shares(1,455)
Net loss per common share:
Basic$(0.01)
Diluted$(0.01)
The unaudited supplemental pro forma financial information was prepared based on historical information of the Company, UCC, Cascade Windows and Prime Windows. The unaudited supplemental pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the acquisitions or any integration costs. Unaudited pro forma balances are not necessarily indicative of operating results had the UCC, Cascade Windows and Prime Windows acquisitions occurred on January 1, 2021 or of future results.
NOTE 4 — RESTRUCTURING
The Company has various initiatives and programs in place within its business units to reduce selling, general, and administrative expenses (“SG&A”), manufacturing costs and to optimize the Company’s manufacturing footprint. During the three months ended April 2, 2022, the Company incurred restructuring charges of $0.2 million, $0.2 million and $0.4 million in the Windows, Siding and Commercial segments, respectively. Restructuring charges incurred to date since the current restructuring initiatives began in 2019 are $79.4 million. The following table summarizes the costs related to those restructuring plans for the three months ended April 2, 2022 and costs incurred to date since inception of those initiatives and programs (in thousands):
 Three Months EndedCosts Incurred to Date
 April 2, 2022(Since inception)
Severance$304 $40,231 
Asset impairments368 30,446 
Gain on sale of facilities, net (1,298)
Other restructuring costs159 10,036 
Total restructuring costs$831 $79,415 
For the three months ended April 2, 2022, total restructuring costs are recorded within restructuring and impairment costs in the consolidated statements of operations. The asset impairments of $0.4 million for the three months ended April 2, 2022 primarily included assets that were recorded at fair value less cost to sell, which was less than the assets’ carrying amount.
The following table summarizes our severance liability, included within other accrued expenses on the consolidated balance sheets, and cash payments made pursuant to the restructuring plans from inception through April 2, 2022 (in
12


thousands):
 WindowsSidingCommercialCorporateTotal
Balance, December 31, 2018$ $85 $ $2,333 $2,418 
Costs incurred1,094 1,834 2,721 4,009 9,658 
Cash payments(676)(1,437)(2,721)(4,579)(9,413)
Balance, December 31, 2019$418 $482 $ $1,763 $2,663 
Costs incurred4,294 2,705 16,561 3,013 26,573 
Cash payments(4,406)(2,352)(14,570)(4,346)(25,674)
Balance, December 31, 2020$306 $835 $1,991 $430 $3,562 
Costs incurred971 264 2,004 457 3,696 
Cash payments(1,262)(904)(2,473)(587)(5,226)
Balance, December 31, 2021$15 $195 $1,522 $300 $2,032 
Costs incurred212  67 25 304 
Cash payments(227)(195)(67)(325)(814)
Balance, April 2, 2022$ $ $1,522 $ $1,522 
We expect to fully execute our restructuring initiatives and programs over the next 12 to 24 months and we may incur future additional restructuring charges associated with these plans.
NOTE 5 — GOODWILL
The Company’s goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in thousands):
WindowsSidingCommercialTotal
Balance, December 31, 2020$397,024 $654,821 $142,884 $1,194,729 
Goodwill recognized from acquisitions143,964 122 140,342 284,428 
Divestiture  (121,464)(121,464)
Currency translation208 155  363 
Balance, December 31, 2021$541,196 $655,098 $161,762 $1,358,056 
Currency translation616 484  1,100 
Purchase accounting adjustments from prior year acquisitions(1,442)(10)(2,543)(3,995)
Balance, April 2, 2022$540,370 $655,572 $159,219 $1,355,161 

NOTE 6 — INVENTORIES
The components of inventory are as follows (in thousands):
 April 2, 2022December 31, 2021
Raw materials$507,577 $485,642 
Work in process and finished goods310,138 263,090 
Total inventory$817,715 $748,732 
 As of April 2, 2022, the Company had inventory purchase commitments of $235.3 million.
13



NOTE 7 — INTANGIBLES
The table that follows presents the major components of intangible assets as of April 2, 2022 and December 31, 2021 (in thousands). Intangible assets that are fully amortized have been removed from the disclosures.
Range of Life (Years)Weighted Average Amortization Period (Years)CostAccumulated AmortizationNet Carrying Value
As of April 2, 2022
Amortized intangible assets:
Trademarks/Trade names/Other3157$241,727 $(82,707)$159,020 
Customer lists and relationships72081,845,511 (527,101)1,318,410 
Total intangible assets8$2,087,238 $(609,808)$1,477,430 
As of December 31, 2021
Amortized intangible assets:
Trademarks/Trade names/Other3157$241,727 $(76,574)$165,153 
Customer lists and relationships72091,845,511 (486,029)1,359,482 
Total intangible assets