Cary, N.C.-based Cornerstone Building Brands Inc. acquired Prime Window Systems LLC to expand manufacturing capacity and create new sales opportunities in the Western U.S.
Headquartered in Denver, Prime Window serves residential new construction and repair and remodel markets with energy-efficient vinyl window and door products. The company generated 2020 sales of $60 million and has about 300 employees at manufacturing locations in Denver and Union Gap, Wash.
The April 30 deal is mentioned in Cornerstone's first-quarter report with the U.S. Securities and Exchange Commission, but not many details are given in the May 11 filing, which covers the three months ending April 3.
The report says the acquisition was funded through borrowings under the Cornerstone's existing credit facilities.
"We are in the process of allocating the purchase price to identifiable assets and liabilities," the report says. "The company expects Prime's results to be reported within the windows segment."
Cornerstone, which also has reportable segments for siding and commercial products, is the largest manufacturer of exterior building products in North America.
Overall, first-quarter sales increased by 13.8 percent to $1.26 billion compared with the same period last year.
The company delivered exceptional first-quarter results and achieved record growth in sales, according to Cornerstone Chairman and CEO James Metcalf.
"The residential momentum continues to be strong with solid underlying fundamentals that support long-term sustainable growth," Metcalf said in a quarterly conference call. "March U.S. housing starts totaled 1.7 million units on a seasonally adjusted basis. Repair and remodel activity also remained robust in the first quarter supported by rising home equity, high personal savings rates and a limited resale inventory."
Cornerstone is experiencing encouraging tailwinds, Metcalf said, and has a "very favorable" outlook.
The Prime acquisition expands the window product portfolio with new offerings for structures up to 15 stories and is an important part of the growth strategy, the CEO said.
"[It] fills a geographic void. It puts us in a market that we have not been in. And it's accretive overall, not only to the portfolio of the window business, but accretive to the company," Metcalf said.
About 9 percent of the first-quarter increase was driven by strong demand for residential products sold through the windows and siding segments, which made up 66.6 percent of total sales for the quarter.
Cornerstone says it is the No. 1 manufacturer of vinyl windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories.
The company ranks No. 2 among North American pipe, profile and tubing extruders with $2.36 billion in sales of building products made with plastic materials, according to Plastics News' latest ranking.
In the first quarter, window sales were up 17.6 percent to $527.3 million compared to the same period a year ago due to residential demand coupled with increased prices in response to rising commodity costs and other inflationary impacts.
The lead time for windows has increased, too, and it is taking 2-3 times longer to move products. In response, Cornerstone is also adding capacity at a manufacturing plant in Sacramento, Calif., where it will spend about $10 million.
"This investment will enhance our West Coast presence, position us to capture more market share and increase our capacity by approximately 50 percent," Metcalf said.
In addition, Cornerstone has been hiring more workers and paying overtime to handle the backlog.
The company is paying more for materials, too, and passing along that increase. The average market price for PVC resin increased about 38.7 percent in the first quarter of 2021 compared to 2020, the report noted, adding that Cornerstone manages the exposure to commodity pricing risk in part by increasing its selling prices.
"We have announced several price increases across our portfolio to stay ahead of the rising costs," Chief Financial Officer Jeff Lee said.
Siding sales increased 26.9 percent to $316.4 million compared to the same period a year ago. The company says order momentum was strong as wholesale and retail demand outpaced the prior year.
For the commercial segment, sales of $423.4 million were flat due in part to unfavorable volume because there were three fewer shipping days, the report says.
Cornerstone officials see opportunities increasing for light commercial buildings, such as warehouses and data centers up to five stories, in particular.
Looking ahead, company officials said Cornerstone building products are sold across several large and attractive end markets and the business is well positioned to benefit from broader societal and population trends favoring suburban regions, as employment and living preferences shift toward such regions.
"We also believe that the ongoing COVID-19 pandemic, while still causing economic uncertainty worldwide, has driven strong demand for residential repair and remodel activity, residential new construction and select segments of the low-rise nonresidential construction market, such as distribution, warehouse, health care and educational facilities in suburban regions; however, the COVID-19 pandemic has also caused challenges in other areas of nonresidential construction, most notably in retail and commercial office facilities in densely populated urban centers, where we have minimal, if any, participation," the report says.
In the release, Cornerstone offered second-quarter guidance that says sales are expected to be between $1.37 billion and $1.42 billion as a result of strong single-family housing and repair and remodel end market momentum, improving nonresidential end markets, and material shortages and inflation impacts driving price actions.