As Gaza conflict heightens, a wave of Arab unrest spreads across Israel.

As rockets and airstrikes have pummeled targets across Gaza and Israel, a different conflict has erupted in the streets of Arab neighborhoods and mixed Arab-Jewish towns across the state of Israel.

Palestinian citizens of Israel have rioted in several cities since Monday night, burning cars and Jewish-owned properties, as anger at the Gaza conflict, as well as at decades of discrimination dating back to the foundation of the state of Israel, found its expression in street violence.

In the central city of Lod, known in Arabic as Lydd, the government declared a state of emergency on Wednesday morning, after a synagogue, a school and several vehicles were torched by Arab rioters on Monday and Tuesday nights.

A Palestinian citizen, Moussa Hassouna, was shot dead by a Jewish resident during the disturbances on Monday night, and another wave of unrest followed his funeral 24 hours later.

Jewish communities have been built in Israel’s history, but only seven for Arabs. In the Negev, dozens of Bedouin towns have never been given planning permission, leading to the demolition of hundreds of structures there every year.

The question of land has particular resonance in Lod: Thousands of Palestinians fled from their homes there in 1948, never to return, and the trauma of that event still lingers today.

“I still feel unsure whether I can keep living here,” said Ms. Naqib. “I fear they will try to expel us from our homes.”

And while it was Arabs who rioted in Lod and destroyed people’s property this week, Ms. Naqib said, it was a Jew who ultimately killed an Arab on Monday night — Ms. Naqib’s second cousin.

“I feel very afraid,” Ms. Naqib said as she arrived at her cousin’s wake. “And I feel a lot of anger that these settlers can start to shoot us.”

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Cornerstone Building Brands Reports Record First-Quarter 2021 Results

CARY, N.C.–(BUSINESS WIRE)–Cornerstone Building Brands, Inc. (NYSE: CNR) (the “Company”), the largest manufacturer of exterior building products in North America, today reported first-quarter 2021 net sales of $1,267.0 million and net loss of $1.7 million or one cent per diluted share. This compares with net sales of $1,113.8 million and net loss of $542.1 million or $4.30 loss per diluted share in the same quarter last year.

Adjusted EBITDA1 for the first quarter of 2021 was $139.1 million or 11.0 percent of net sales, an improvement of 230 basis points from the same pro forma period a year ago, with 5 percent fewer ship days. The improvement was primarily due to higher volume leverage from robust demand for residential products and benefits from cost reduction initiatives partially offset by price/mix, net of inflation. Additionally, the Company achieved its eighth consecutive quarter of year-over-year Adjusted EBITDA1 margin expansion.

“We delivered exceptional first-quarter results, achieving record growth in net sales and Adjusted EBITDA,” said James S. Metcalf, Chairman and Chief Executive Officer. “We effectively leveraged the strengths of our business model to capitalize on the strong residential end markets and navigated through the demand driven supply chain disruptions to deliver better-than-expected volumes. The team’s strong operational execution is positioning Cornerstone Building Brands for long-term profitable growth.”

Segment Results Versus Prior Year

Due to the timing of the Company’s fiscal calendar, the first quarter of 2021 had three fewer ship days than the first quarter of 2020, which was approximately 5 percent less ship days.

  • Windows segment net sales for the quarter were $527.3 million, an increase of 17.6 percent from the prior-year quarter. Strong volumes across all channels of 15 percent coupled with favorable price/mix as a result of increased prices in response to rising commodity costs and other inflationary impacts drove the increase. Adjusted EBITDA1 was $61.0 million or 11.6 percent of net sales, an improvement of 250 basis points. The improvement was a result of the increased volume and benefits from cost saving initiatives.
  • Siding segment net sales for the quarter were $316.4 million an increase of 26.9 percent versus the pro forma1 first- quarter 2020. During the quarter, order momentum was strong as wholesale and retail demand outpaced prior year driving 19 percent higher shipped volume and slightly favorable price/mix as a result of increased prices in response to rising commodity costs and other inflationary impacts. Adjusted EBITDA1 was $57.1 million or 18.1 percent of net sales, an improvement of 260 basis points. The improvement was a result of the increased volume and realized benefits from cost savings initiatives, primarily in selling, general and administrative expenses.
  • Commercial segment net sales for the quarter were $423.4 million, essentially flat to the prior-year quarter due to unfavorable volume from three less ship days in the first quarter of 2021 as compared to the first quarter of 2020 partially offset by favorable price/mix as a result of increased prices in response to rising commodity costs and other inflationary impacts. Adjusted EBITDA1 was $53.4 million or 12.6 percent of net sales, an improvement of 180 basis points. Manufacturing efficiencies and realized benefits from cost savings initiatives were slightly offset by $7 million of unfavorable price/mix, net of inflation due to the pace of rising steel costs.

Balance Sheet and Liquidity

The Company generated strong cash flow from operations of $20.0 million, a cash generation improvement of $22.3 million over first-quarter 2020. Capital expenditures were $21.2 million, with approximately 50 percent invested in innovative product offerings and process automation that are expected to generate profitable growth in the future.

Free cash flow2 was a use of cash of $1.2 million, an increase of $28.6 million over the same period last year. The improvement was primarily driven by higher earnings generation in the period and the timing of payments associated with volume related expenses, partially offset by investments in working capital to support market demand.

The Company ended the quarter with approximately $666.7 million of unrestricted cash on hand and $1,353 million of liquidity. Additionally, the net debt leverage ratio improved to 4.6x at the end of the first quarter 2021 compared with 5.2x at the end of the first-quarter 2020.

Outlook

Second-Quarter 2021 Guidance

  • The Company expects net sales to be between $1,375 million and $1,425 million as a result of:

    • Strong single-family housing and repair and remodel end-market momentum
    • Improving non-residential end-markets
    • Material shortages and inflation impacts driving price actions
  • Gross Profit is anticipated to be between $305 million and $325 million

    • Adjusted EBITDA1 is expected to be between $185 million and $200 million

Additional Fiscal Year 2021 Guidance

  • Cost savings initiatives of approximately $75 million to $80 million
  • Return of near-term costs of approximately $20 million to $30 million
  • Capital spending is projected to be approximately 2.0% – 2.5% of net sales
  • Cash interest expense is expected to be approximately $200 million
  • Cash tax rate expected to be approximately 30%
  • Expect to improve net debt leverage by 3/4 to one turn

(1)

Adjusted and pro forma financial metrics used in this release, including Adjusted EBITDA, are non-GAAP measures. See reconciliations of GAAP results to adjusted results and pro forma results in the accompanying tables. A reconciliation of the forecasted range for the second quarter of 2021 is not included in this release. See “Non-GAAP Financial Measures” below.

(2)

Free cash flow is defined as net cash provided by operating activities less capital expenditures.

Conference Call Information

The Company will host a conference call at 9:00 a.m. EDT on Wednesday, May 12 to discuss its financial performance with investors and securities analysts. The financial results and supplemental information will be available online at investors.cornerstonebuildingbrands.com.

To register, please use this link http://www.directeventreg.com/registration/event/7387476.

After registering, an email confirmation with dial-in details and an unique entry code will be sent. Registration is open throughout the live call, however, to ensure you are connected for the entirety, please register at least 10 minutes before the start of the call. Additional call participation options are as follows:

Replay dial-in will be available through May 26, 2021

 

Dial-in number: 800-585-8367

 

Replay code: 7387476

About Cornerstone Building Brands

Cornerstone Building Brands is the largest manufacturer of exterior building products for residential and low-rise non- residential buildings in North America. Headquartered in Cary, North Carolina, the organization serves residential and commercial customers across new construction and repair and remodel markets. As the #1 manufacturer of vinyl windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines an expansive portfolio of strong brands and quality products with a broad multi-channel distribution platform that includes approximately 20,500 employees at manufacturing, distribution and branch office locations throughout North America. At Cornerstone Building Brands, corporate stewardship is a responsibility that is deeply embedded in our 75-year history. We are committed to our purpose of contributing positively to the communities where we live, work and play. For more information, visit us at www.cornerstonebuildingbrands.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “anticipate,” “guidance,” “plan,” “potential,” “expect,” “should,” “will,” “forecast,” “target” and similar expressions are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current expectations, assumptions and/ or beliefs concerning future events. As a result, these forward-looking statements rely on a number of assumptions, forecasts, and estimates and, therefore, these forward-looking statements are subject to a number of risks and uncertainties that may cause the Company’s actual performance to differ materially from that projected in such statements. Such forward-looking statements may include, but are not limited to, statements concerning our market commentary and performance expectations, including our second quarter 2021 forecasted net sales, gross profit, and Adjusted EBITDA, and our fiscal year 2021 forecasted cost savings initiatives, return of near-term costs, net debt leverage, capital spending, cash interest expense, cash tax rate and other consolidated financial performance guidance. Among the factors that could cause actual results to differ materially include, but are not limited to, industry cyclicality and seasonality and adverse weather conditions, challenging economic conditions affecting the nonresidential construction industry, downturns in the residential new construction and repair and remodeling end markets, or the economy or the availability of consumer credit, volatility in the United States (“U.S.”) economy and abroad, generally, and in the credit markets, the severity, duration and spread of the COVID-19 pandemic, as well as actions that may be taken by the Company or governmental authorities to contain COVID-19 or to treat its impact; an impairment of our goodwill and/or intangible assets; our ability to successfully develop new products or improve existing products and market acceptance of such products, the effects of manufacturing or assembly realignments, seasonality of the business and other external factors beyond our control, commodity price volatility and/or limited availability of raw materials, including steel, PVC resin, glass and aluminum, our ability to identify and develop relationships with a sufficient number of qualified suppliers and to avoid a significant interruption in our supply chains, retention and replacement of key personnel, enforcement and obsolescence of our intellectual property rights, costs related to compliance with, violations of or liabilities under environmental, health and safety laws, changes in building codes and standards, competitive activity and pricing pressure in our industry, our ability to make strategic acquisitions accretive to earnings, our ability to carry out our restructuring plans and to fully realize the expected cost savings, global climate change, including legal, regulatory or market responses thereto, breaches of our information system security measures, damage to our computer infrastructure and software systems, necessary maintenance or replacements to our enterprise resource planning technologies, potential personal injury, property damage or product liability claims or other types of litigation, compliance with certain laws related to our international business operations, increases in labor costs, inability to attract and retain employees, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers, significant changes in factors and assumptions used to measure certain of our defined benefit plan obligations and the effect of actual investment returns on pension assets, the cost and difficulty associated with integrating and combining acquired businesses, volatility of the Company’s stock price, substantial governance and other rights held by our sponsor investors, the effect on our common stock price caused by transactions engaged in by our sponsor investors, our directors or executives, our substantial indebtedness and our ability to incur substantially more indebtedness, limitations that our debt agreements place on our ability to engage in certain business and financial transactions, our ability to obtain financing on acceptable terms, downgrades of our credit ratings, and the effect of increased interest rates on our ability to service our debt. See also the “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other risks described in documents subsequently filed by the Company from time to time with the SEC, which identify other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

This press release includes certain “non-GAAP financial measures” as defined under the Securities Exchange Act of 1934 and in accordance with Regulation G. Management believes the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the financial results between periods on a more comparable basis. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. We have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and provided in accordance with U.S. GAAP at the end of this release. A reconciliation of the forecasted range for Adjusted EBITDA for the second quarter of 2021 is not included in this release due to the number of variables in the projected range and because we are currently unable to quantify accurately certain amounts that would be required to be included in the GAAP measure or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

 

 

April 3,
2021

 

April 4,
2020

Net sales

 

$

1,267,032

 

 

$

1,113,811

 

Cost of sales

 

1,007,303

 

 

882,924

 

Gross profit

 

259,729

 

 

230,887

 

 

 

20.5

%

 

20.7

%

 

 

 

 

 

Selling, general and administrative expenses

 

153,168

 

 

164,954

 

Intangible asset amortization

 

46,202

 

 

44,861

 

Restructuring and impairment charges, net

 

1,838

 

 

13,835

 

Strategic development and acquisition related costs

 

3,313

 

 

4,857

 

Goodwill impairment

 

 

 

503,171

 

Income (loss) from operations

 

55,208

 

 

(500,791

)

Interest income

 

117

 

 

338

 

Interest expense

 

(56,499

)

 

(54,835

)

Foreign exchange loss

 

(26

)

 

(4,137

)

Other income (expense), net

 

337

 

 

(662

)

Loss before income taxes

 

(863

)

 

(560,087

)

Provision (benefit) for income taxes

 

792

 

 

(18,014

)

 

 

(91.8

)%

 

3.2

%

 

 

 

 

 

Net loss

 

(1,655

)

 

(542,073

)

Net income allocated to participating securities

 

 

 

 

Net loss applicable to common shares

 

$

(1,655

)

 

$

(542,073

)

 

 

 

 

 

Loss per common share:

 

 

 

 

Basic

 

$

(0.01

)

 

$

(4.30

)

Diluted

 

$

(0.01

)

 

$

(4.30

)

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

Basic

 

125,506

 

 

126,093

 

Diluted

 

125,506

 

 

126,093

 

 

 

 

 

 

Increase (decrease) in sales

 

13.8

%

 

4.6

%

 

 

 

 

 

Selling, general and administrative expenses percentage of net sales

 

12.1

%

 

14.8

%

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

 

 

 

April 3,
2021

 

December 31,
2020

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

666,717

 

 

$

674,255

 

Restricted cash

6,223

 

 

6,223

 

Accounts receivable, net

601,476

 

 

554,649

 

Inventories, net

494,092

 

 

431,937

 

Income taxes receivable

31,403

 

 

39,379

 

Investments in debt and equity securities, at market

2,527

 

 

2,333

 

Prepaid expenses and other

84,127

 

 

77,751

 

Assets held for sale

3,909

 

 

4,644

 

Total current assets

1,890,474

 

 

1,791,171

 

 

 

 

 

Property, plant and equipment, net

628,198

 

 

631,821

 

Lease right-of-use assets

260,424

 

 

264,107

 

Goodwill

1,195,983

 

 

1,194,729

 

Intangible assets, net

1,540,470

 

 

1,584,604

 

Deferred income taxes

2,411

 

 

1,867

 

Other assets, net

10,346

 

 

10,191

 

Total assets

$

5,528,306

 

 

$

5,478,490

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

25,600

 

 

$

25,600

 

Accounts payable

260,930

 

 

211,441

 

Accrued compensation and benefits

73,962

 

 

81,548

 

Accrued interest

38,515

 

 

25,485

 

Accrued income taxes

5,650

 

 

5,060

 

Current portion of lease liabilities

69,042

 

 

70,125

 

Other accrued expenses

255,288

 

 

247,893

 

Total current liabilities

728,987

 

 

667,152

 

 

 

 

 

Long-term debt

3,559,339

 

 

3,563,429

 

Deferred income taxes

263,641

 

 

269,792

 

Long-term lease liabilities

194,672

 

 

198,875

 

Other long-term liabilities

324,020

 

 

337,437

 

Total long-term liabilities

4,341,672

 

 

4,369,533

 

 

 

 

 

Common stock

1,258

 

 

1,255

 

Additional paid-in capital

1,260,946

 

 

1,257,262

 

Accumulated deficit

(766,340

)

 

(764,685

)

Accumulated other comprehensive loss, net

(36,267

)

 

(51,517

)

Treasury stock, at cost

(1,950

)

 

(510

)

Total stockholders’ equity

457,647

 

 

441,805

 

 

 

 

 

Total liabilities and stockholders’ equity

$

5,528,306

 

 

$

5,478,490

 

CORNERSTONE BUILDING BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Cash flows from operating activities:

 

 

 

Net loss

$

(1,655

)

 

$

(542,073

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

72,615

 

 

69,769

 

Non-cash interest expense

2,314

 

 

2,274

 

Share-based compensation expense

3,302

 

 

3,387

 

Goodwill impairment

 

 

503,171

 

Asset impairment

493

 

 

3,079

 

Provision for credit losses

676

 

 

725

 

Deferred income taxes

(9,729

)

 

(35,734

)

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

Accounts receivable

(47,157

)

 

20,532

 

Inventories

(62,028

)

 

(20,724

)

Income taxes

7,976

 

 

18,212

 

Prepaid expenses and other

(7,755

)

 

1,554

 

Accounts payable

49,424

 

 

12,461

 

Accrued expenses

8,597

 

 

(40,662

)

Other, net

2,958

 

 

1,805

 

Net cash provided by (used in) operating activities

20,031

 

 

(2,224

)

Cash flows from investing activities:

 

 

 

Acquisitions, net of cash acquired

(180

)

 

(39,857

)

Capital expenditures

(21,230

)

 

(27,567

)

Proceeds from sale of property, plant and equipment

715

 

 

 

Net cash used in investing activities

(20,695

)

 

(67,424

)

Cash flows from financing activities:

 

 

 

Proceeds from stock options exercised

486

 

 

 

Proceeds from ABL facility

 

 

345,000

 

Proceeds from cash flow revolver

 

 

115,000

 

Payments on term loan

(6,404

)

 

(6,405

)

Payments related to tax withholding for share-based compensation

(1,541

)

 

(327

)

Net cash provided by (used in) financing activities

(7,459

)

 

453,268

 

Effect of exchange rate changes on cash and cash equivalents

585

 

 

(2,302

)

Net increase (decrease) in cash, cash equivalents and restricted cash

(7,538

)

 

381,318

 

Cash, cash equivalents and restricted cash at beginning of period

680,478

 

 

102,307

 

Cash, cash equivalents and restricted cash at end of period

$

672,940

 

 

$

483,625

 

Supplemental disclosure of cash flow information

 

 

 

Interest paid, net of amounts capitalized

$

40,913

 

 

$

36,931

 

Taxes paid, net

$

1,949

 

 

$

392

 

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

ADJUSTED NET INCOME (LOSS) PER DILUTED COMMON SHARE AND

NET INCOME (LOSS) COMPARISON

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net loss per diluted common share, GAAP basis

$

(0.01

)

 

$

(4.30

)

Restructuring and impairment charges, net

0.01

 

 

0.11

 

Strategic development and acquisition related costs

0.03

 

 

0.04

 

Non-cash loss on foreign currency transactions

 

 

0.03

 

Goodwill impairment

 

 

3.99

 

Customer inventory buybacks

 

 

 

COVID-19(3)

(0.01

)

 

0.01

 

Other, net

0.03

 

 

0.01

 

Tax effect of applicable non-GAAP adjustments(1)

(0.02

)

 

(1.09

)

Adjusted net income (loss) per diluted common share(2)

$

0.03

 

 

$

(1.20

)

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net loss applicable to common shares, GAAP basis

$

(1,655

)

 

$

(542,073

)

Restructuring and impairment charges, net

1,838

 

 

13,992

 

Strategic development and acquisition related costs

3,313

 

 

4,857

 

Non-cash loss on foreign currency transactions

26

 

 

4,137

 

Goodwill impairment

 

 

503,171

 

Customer inventory buybacks

 

 

120

 

COVID-19(3)

(643

)

 

1,230

 

Other, net

3,178

 

 

1,138

 

Tax effect of applicable non-GAAP adjustments(1)

(2,005

)

 

(137,448

)

Adjusted net income (loss) applicable to common shares(2)

$

4,052

 

 

$

(150,876

)

 

 

 

 

(1)

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

(2)

The Company discloses a tabular comparison of Adjusted net income (loss) per diluted common share and Adjusted net income (loss) applicable to common shares, which are non-GAAP measures, because they are referred to in the text of our press releases and are instrumental in comparing the results from period to period. Adjusted net income (loss) per diluted common share and Adjusted net income (loss) applicable to common shares should not be considered in isolation or as a substitute for net income (loss) per diluted common share and net income (loss) applicable to common shares as reported on the face of our consolidated statements of operations.

(3)

Costs included within the COVID-19 line item for the three months ended April 3, 2021 and April 4, 2020 include incremental labor costs due to quarantine related absenteeism, incremental facility cleaning costs, pandemic related supplies and personal protective equipment for employees, among other costs.

Certain amounts in this release have been subject to rounding adjustments. Accordingly, amounts shown as totals may not be the arithmetic aggregation of the individual amounts that comprise or precede them.

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

Consolidated

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net sales

$

1,267,032

 

 

$

1,113,811

 

Impact of Kleary Acquisition(1)

$

 

 

$

8,358

 

Pro forma net sales

$

1,267,032

 

 

$

1,122,169

 

 

 

 

 

Gross profit

$

259,729

 

 

$

230,887

 

 

20.5

%

 

20.7

%

 

 

 

 

Operating income (loss), GAAP

$

55,208

 

 

$

(500,791

)

Restructuring and impairment charges, net

1,838

 

 

13,992

 

Strategic development and acquisition related costs

3,313

 

 

4,857

 

Goodwill impairment

 

 

503,171

 

Customer inventory buybacks

 

 

120

 

COVID-19

(643

)

 

1,230

 

Other, net

3,178

 

 

1,138

 

Adjusted operating income

62,894

 

 

23,717

 

 

 

 

 

Other income (expense), net

337

 

 

(662

)

Depreciation and amortization

72,615

 

 

69,769

 

Share-based compensation expense

3,302

 

 

3,387

 

Adjusted EBITDA

139,148

 

 

96,211

 

 

 

 

 

Impact of Kleary acquisition(1)

 

 

1,869

 

Pro Forma Adjusted EBITDA

$

139,148

 

 

$

98,080

 

Pro forma Adjusted EBITDA as a % of pro forma Net sales

11.0

%

 

8.7

%

(1)

Reflects the net sales and Adjusted EBITDA of Kleary Masonry, Inc. for the period January 1, 2020 to March 1, 2020.

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

Windows

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net Sales

$

527,263

 

 

$

448,450

 

 

 

 

 

Gross profit

$

92,534

 

 

$

74,001

 

 

17.5

%

 

16.5

%

 

 

 

 

Operating income (loss), GAAP

$

29,362

 

 

$

(313,190

)

Restructuring and impairment charges, net

932

 

 

1,466

 

Strategic development and acquisition related costs

 

 

16

 

Goodwill impairment

 

 

320,990

 

COVID-19

 

 

928

 

Other, net

 

 

785

 

Adjusted operating income

30,294

 

 

10,995

 

 

 

 

 

Other income (expense), net

(87

)

 

 

Depreciation and amortization

30,798

 

 

29,853

 

Adjusted EBITDA

$

61,005

 

 

$

40,848

 

Adjusted EBITDA as a % of Net Sales

11.6

%

 

9.1

%

 

 

 

 

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

Siding

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net Sales

$

316,391

 

 

$

241,043

 

Impact of Kleary Acquisition(1)

 

 

8,358

 

Pro forma net sales

$

316,391

 

 

$

249,401

 

 

 

 

 

Gross profit

$

75,999

 

 

$

59,042

 

 

24.0

%

 

24.5

%

 

 

 

 

Operating income (loss), GAAP

$

27,528

 

 

$

(168,867

)

Restructuring and impairment charges, net

141

 

 

1,091

 

Strategic development and acquisition related costs

323

 

 

21

 

Goodwill impairment

 

 

176,774

 

Customer inventory buybacks

 

 

120

 

COVID-19

13

 

 

 

Other, net

 

 

(412

)

Adjusted operating income (loss)

28,005

 

 

8,727

 

 

 

 

 

Other income (expense), net

(32

)

 

 

Depreciation and amortization

29,148

 

 

28,007

 

Adjusted EBITDA

57,121

 

 

36,734

 

 

 

 

 

Impact of Kleary acquisition(1)

 

 

1,869

 

Pro Forma Adjusted EBITDA

$

57,121

 

 

$

38,603

 

Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales

18.1

%

 

15.5

%

 

 

 

 

(1)

Reflects the net sales and Adjusted EBITDA of Kleary Masonry, Inc. for the period January 1, 2020 to March 1, 2020.

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net Sales

$

423,378

 

 

$

424,318

 

 

 

 

 

Gross profit

$

91,196

 

 

$

97,844

 

 

21.5

%

 

23.1

%

 

 

 

 

Operating income, GAAP

$

41,585

 

 

$

16,841

 

Restructuring and impairment charges, net

672

 

 

11,705

 

Strategic development and acquisition related costs

58

 

 

(105

)

Goodwill impairment

 

 

5,407

 

COVID-19

(774

)

 

302

 

Other, net

163

 

 

811

 

Adjusted operating income

41,704

 

 

34,961

 

 

 

 

 

Other income (expense), net

354

 

 

114

 

Depreciation and amortization

11,360

 

 

10,901

 

Adjusted EBITDA

$

53,418

 

 

$

45,976

 

Net Sales as a % of Adjusted EBITDA

12.6

%

 

10.8

%

 

 

 

 

CORNERSTONE BUILDING BRANDS, INC.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(In thousands)

(Unaudited)

 

Three Months Ended

 

April 3,
2021

 

April 4,
2020

Net cash provided (used) in operating activities

$

20,031

 

 

$

(2,224

)

Less: Capital expenditures

(21,230

)

 

(27,567

)

Free cash flow

$

(1,199

)

 

$

(29,791

)

 

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F.B.I. Asking Questions After a Pension Fund Aimed High and Fell Short

A spokeswoman for the fund, Evelyn Williams, said that it was cooperating with the federal investigation and that the board had also opened its own inquiry. Beyond that, she said, the fund would not comment, because “protecting the integrity of these investigations is necessary.”

The fund’s 15 trustees have hired several law firms to deal with different lines of inquiry, plus an investment firm to assume the duties of the fund’s chief investment officer, James H. Grossman Jr.

The error in calculating returns was a tiny one, just four one-hundredths of a percentage point. But it was enough — just barely — to push the fund’s performance over a critical threshold of 6.36 percent that, by law, determines whether certain teachers have to pay more into the fund. The close call raised questions about whether someone had manipulated the numbers and the error wasn’t really an error at all.

Since the corrected number didn’t clear the benchmark, nearly 100,000 teachers hired after July 1, 2011, will have to contribute more for three years starting on July 1.

The pension fund, Pennsylvania’s biggest, has roughly 256,000 active members and 265,000 retirees. Pennsylvanians have been complaining about teachers’ pension costs since 2001, when state lawmakers sweetened all state workers’ pensions — including their own — on the thinking that the bull market of the 1990s would continue indefinitely. That mistake was laid bare a few months later when Wall Street and the economy dived after the terror attacks of Sept. 11. But lawmakers said the pension boosts couldn’t be reversed.

The pensions of state workers are often funded through the mysterious maze of the state budget, so their rising cost is hard to see. But teachers’ pensions in Pennsylvania are funded through local property taxes, so when the fund needed more money, homeowners felt the bite.

Taxpayer contributions to the teachers’ pension fund nearly quintupled from 2001 to 2008, causing an outcry. Then came the financial crisis of 2008, and seven years’ worth of taxpayer pain came to naught. The fund emerged from the Great Recession with even less money than it had in 2001, the year of the big miscalculation.

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Australian Company Loses Ugg Trademark Battle

MELBOURNE, Australia — An Australian company’s long-shot bid to scrap a U.S. trademark on the word “Ugg” has suffered another blow after an American appeals court rejected its argument, in a loss that could have far-reaching consequences for Australian makers of the sheepskin boots.

It’s the latest step in a five-year, high-stakes legal battle between the brand’s owner in the United States, Deckers Outdoor Corporation, and a company called Australian Leather. They have been wrangling over ownership of the name of a shoe that has been derided as unfashionable and downright ugly but that has still found its way onto the feet of celebrities like Oprah Winfrey and Tom Brady.

The Australian news media called the lawsuit a “David vs. Goliath” battle, and the case hit a nerve for many Australians, who consider the footwear a national, albeit unfashionable, symbol. The case also illustrated how global access to products on the internet could create clashes between local legal systems.

Australian Leather’s owner, Eddie Oygur, said after the court ruling on Friday that he would take the case to the U.S. Supreme Court.

2020 annual report.

The stakes for both companies were high. Before the verdict, Nicole Murdoch, an intellectual property lawyer at Eaglegate Lawyers in Brisbane, Australia, said a legal success for Mr. Oygur would have a “catastrophic effect for Deckers,” costing the company the trademark on which it had built its brand.

Mr. Oygur said before the verdict, “All the ugg boot makers in Australia will turn to imports because of the prices, and Australia will lose what’s been Australian since the 1930s.”

Personally, he had put everything on the line: the business he had run for nearly 40 years and a house he had mortgaged to pay his legal fees. He said he had spent over a million dollars on the case, lost the majority of his staff and seen the legal challenge scare off many of his customers.

“God help me, I’m not going to back down,” he said. “They gave me no choice. Absolutely no choice.”

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What to Do If Your Car is Recalled

Millions of cars are recalled each year, and roughly eight million already have been in 2021, according to the National Highway Traffic Safety Administration. Getting a notice from the automaker that your vehicle is among them and has a safety deficiency is not only alarming, it can also lead to a flood of questions.

What must I do next? How do I get this taken care of? Is this going to cost me anything?

Even more pressing is how urgent it is to get the problem remedied. The answer is that while minor maintenance can slide a bit without causing major trouble, the safety concerns addressed by a recall are not a footnote for the “maybe someday” section of your to-do list. Recalls vary in urgency, and sometimes repairs cannot be done by the dealer immediately because replacement parts are not available; it can take months until they are. But as a recent South Carolina case makes clear, procrastination can be deadly.

In January, the driver of a 2002 Honda Accord died as a result of a crash in which the car’s airbag deployed. As the 19th death in the United States caused by shrapnel from a ruptured Takata airbag inflater, it was hardly unprecedented. But this time there was a twist: Honda, which recalled the car in 2011, said it had tried more than 100 times to reach the car’s owner by mail, phone and by in-person visits. The faulty inflaters had never been replaced.

The Takata recall, the largest in history, involves 100 million inflaters, including 67 million in the United States. And these recalls are not all a decade old. As recently as March, Ford recalled 2.6 million cars, trucks and sport utility vehicles to replace Takata driver-side airbag components.

the traffic safety agency advised owners to “park their cars outside and away from homes, other structures and other flammable materials” to prevent property loss.

Recalls are not about customer complaints like a balky air-conditioner or a rusty fender. They are specifically safety issues, even if the danger is sometimes not readily apparent. Correcting the problem should be done as quickly as possible, and, yes, the automaker will pay for it.

They are required to contact owners by mail, but if you’ve been living away from your normal home during the pandemic, there’s a chance you could have missed the notice. And if you bought a used car, the recall notice may not have caught up with you yet.

It’s easy for you to check whether a vehicle has been recalled by entering the 17-digit vehicle identification number (or VIN) on the safety agency’s web page — nhtsa.gov/recalls. The VIN can be found on the car’s registration and often on the insurance card. It’s also visible through the glass on the lower edge of the windshield on the driver’s side.

Checking for recalls is a must, especially if you are buying a used car. Using that search, you will learn if the vehicle was recalled in the past 15 calendar years and whether the issue has been addressed. The report covers major automakers, motorcycle manufacturers and some medium/heavy truck manufacturers.

automaker learns of a safety defect it must notify the safety agency promptly.

The process can also begin with consumer complaints filed on the agency database. Those complaints are reviewed, and if an analysis deems further action is needed, an investigation is opened. If that finds a problem, a recall is initiated. In practice, automakers typically begin recalls on their own, before the agency intervenes. The safety agency monitors the process to assure that customer notices are properly issued and that repairs are tracked.

The automaker can choose to repair the defect, replace the vehicle with one of identical or similar specifications, or refund the full purchase price (adjusted for depreciation). If you’ve already paid for repairs that would have been done under the recall, the automaker often must reimburse you.

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Israeli Court Delays Expulsion of Palestinian Families in East Jerusalem

JERUSALEM — The Israeli Supreme Court delayed on Sunday a decision on whether to expel six Palestinian families from their homes in East Jerusalem after the attorney general requested more time, in part because of the tensions the case has stirred.

The court was to decide on Monday whether to uphold an expulsion order for the families in the Palestinian neighborhood of Sheikh Jarrah in East Jerusalem, in a hearing that many feared would set off a wave of unrest. Instead, the case was delayed by up to 30 days to allow the attorney general, Avichai Mandelblit, to review it.

For many Palestinians, the families’ plight has become emblematic of a wider effort to remove Palestinians from parts of East Jerusalem and of the past displacements of Arabs in the occupied territories and within Israel.

Since the start of the month, the prospect of the evictions has prompted daily protests, arrests and confrontations between Palestinians and the Israeli police and Jewish extremists.

form of apartheid and the United Nations rights agency says is a potential war crime.

“This isn’t just about the situation for my family,” said Mr. Skafi. “It’s about the situation for all Palestinians in East Jerusalem.”

Some city officials deny that the replacement of Palestinian families by Jewish settlers amounts to a strategy of displacement. Sheikh Jarrah “is not a political but a legal dispute” over land ownership, said Fleur Hassan-Nahoum, a deputy mayor of Jerusalem.

But others in the city leadership say it is part of a concerted effort to reinforce Jewish control of East Jerusalem and prevent it from being ceded in putative future peace negotiations to a Palestinian state.

Another deputy mayor, Aryeh King, said on Friday that it was “of course” part of a wider strategy of placing “layers of Jews” throughout the eastern half of the city. The goal, Mr. King said, is “to secure the future of Jerusalem as a Jewish capital for the Jewish people.”

Israel captured East Jerusalem in the 1967 Arab-Israeli war and annexed it.

Settlers in the neighborhood consider the Palestinians squatters on land that was historically owned by Jews. They said the court decision on Sunday was a sign of government weakness.

“I am so sorry that the Israeli government is afraid of the violence of a few young Arab people,” said Yonatan Yosef, a settler leader who lives in Sheikh Jarrah. But he promised that settlers would continue with their efforts to force Palestinians out of the neighborhood.

“The Israeli people will go back to their land, and those who don’t want that should go home,” Mr. Yosef said.

Peace Now, a campaign group that documents the expulsions of Palestinians in East Jerusalem, estimated that 200 Palestinian properties in strategic locations near the Old City of Jerusalem, housing several thousand residents, were at risk of eviction.

Up to 20,000 Palestinian homes across the city are under threat of demolition, according to Peace Now. Restrictions on building permits in East Jerusalem have forced Palestinian residents to either leave the city or to build illegal housing vulnerable to demolition orders.

The dispute in Sheikh Jarrah originated in 1876 when the land was under Ottoman rule. That year, Palestinian landowners sold a plot in Sheikh Jarrah to two Jewish trusts, an Israeli court has ruled. The land houses the tomb of a revered Jewish priest from antiquity, Shimon HaTzadik.

Jordan captured the plot in the Arab-Israeli war of 1948 and built dozens of homes there to house some of the hundreds of thousands of Palestinian refugees who had fled from what became Israel.

After Israel captured East Jerusalem in 1967, it eventually returned ownership of the Sheikh Jarrah homes to the Jewish trusts. The trusts later sold it to right-wing settlers, who have tried to evict the residents ever since. Some families have already been forced out, while the others are in various stages of the court process.

The case has foregrounded the imbalance in who gets to reclaim land in Jerusalem. In East Jerusalem, Jews are allowed to reclaim property that was under Jewish ownership before 1948. But Palestinian families have no legal mechanism to reclaim land they owned in West Jerusalem or anywhere else in Israel.

Israelis defend the policy on the grounds that changing it would undermine the Jewish character of the world’s only Jewish state.

Gabby Sobelman contributed reporting from Rehovot, Israel, and Iyad Abuhweila from Gaza City.

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Vaccinations Rise in the E.U. After a Long, Slow Start

Vaccinations are picking up pace in the European Union, a stunning turnaround after the bloc’s immunization drive stalled for months.

On average over the last week, nearly three million doses of the Covid-19 vaccine were being administered each day in the European Union, a group of 27 nations, according to Our World in Data, a University of Oxford database. Adjusted for population, the rate is roughly equivalent to the number of shots given each day in the United States, where demand has been falling.

The E.U. vaccination campaign, marred by disruptions in supplies of the AstraZeneca and Johnson & Johnson Covid-19 vaccines, pivoted last month to rely heavily on the Pfizer-BioNTech vaccine.

Last month, Ursula von der Leyen, the European Commission president, said that Pfizer had agreed to an early shipment of doses that she said should likely allow the bloc to reach its goal of inoculating 70 percent of adults by the end of the summer. The European Union is also on the verge of announcing a deal with Pfizer and its German partner BioNTech for 2022 and 2023 that will lock in 1.8 billion doses for boosters, variants and children’s vaccines.

customer than an investor.

“I think it is overdue that the E.U. has stepped up their vaccination campaign,” said Beate Kampmann, director of the Vaccine Center at the London School of Hygiene and Tropical Medicine.

“I think in the context of the rate of deaths we’ve seen and new cases we’ve seen in the E.U., it is absolutely vital that we get the vaccine to people there very, very quickly,” she added.

The E.U.’s increase underscores the global disparities in vaccination efforts.

About 83 percent of Covid shots have been given in high- and upper-middle-income countries, while only 0.3 percent of doses have been given in low-income countries. In North America, more than 30 percent of people have received at least one dose, according to Our World in Data. In Europe, the figure is nearly 24 percent. In Africa, it’s slightly more than one percent.

waiving intellectual property protections for Covid vaccines, which would need approval from the World Trade Organization. And even then, experts warn that pharmaceutical companies around the world would need technological help to make the vaccines and time to ramp up production.

European leaders like Ms. von der Leyen and President Emmanuel Macron have made it clear they think President Biden should take a different approach, and instead lift export restrictions on vaccines, which the United States has employed to keep most doses for use domestically. “We call upon all vaccine-producing countries to allow export and to avoid measures that disrupt the supply chains,” Ms. von der Leyen said in a speech last week.

But the matter is not so absolute, said Dr. Thomas Tsai, a professor who researches health policy at Harvard University. “What’s really needed is an all-of-the-above approach,” he said. Waiving patents is a big long-term step, he said, but lifting export bans would provide help sooner.

“There is a need to move toward a more comprehensive strategy” in vaccinating the world, Dr. Tsai said. “We need that same sort of Warp Speed type of commitment. It’s an investment.”

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The Week in Business: Where Are the Jobs?

Good morning and happy Mother’s Day. (Hi, mom!) Here’s the news you need to know for the week ahead in business and tech. — Charlotte Cowles

Credit…Giacomo Bagnara

Economists expected the April jobs report to be full of great news — lower unemployment, robust hiring, confetti! And by most measures, they were disappointed. The pace of hiring actually slowed, and the unemployment rate rose slightly, to 6.1 percent, for the first time in a year. What’s going on? It’s complicated. Some lawmakers say that the government’s supplemental unemployment benefits are discouraging people from re-entering the work force, particularly in lower-wage positions. Others point to the millions of Americans who aren’t able to work because they’re managing child care, as many schools still aren’t yet back to normal operations. Either way, the country’s economic recovery isn’t going to be simple.

It’s been five months since Facebook barred former President Donald J. Trump indefinitely for his role in inciting the Jan. 6 insurrection at the Capitol. As for when to allow him back, the platform kicked the question over to its independent oversight board, a group of about 20 academics, human rights leaders and political figures from around the globe. Last Wednesday, the group upheld Facebook’s ban, but ruled that the company had to establish a clearer policy for it. Facebook now has six months to make a long-term decision about Mr. Trump’s account and create community standards that justify it.

are divorcing. Their eponymous foundation has an endowment of about $50 billion and spent over $1 billion to combat the coronavirus pandemic in the past year alone. The organization released a statement saying that the couple intends to remain co-chairs and trustees, and no changes are expected. Still, the divorce will affect their shared fortune, much of which has been pledged but not yet donated to the foundation. Mr. Gates, 65, co-founded Microsoft and is one of the richest people in the world.

Credit…Giacomo Bagnara

President Joseph R. Biden will hold a meeting with the four top House and Senate leaders, from both sides of the aisle, for the first time since taking office. House Speaker Nancy Pelosi, the Senate majority leader Chuck Schumer, and their Republican counterparts, Kevin McCarthy and Mitch McConnell, are expected to discuss Mr. Biden’s $4 trillion economic agenda and his plans to fund it by taxing the rich. Republican lawmakers have fought the proposals from day one. Sounds like a fun conversation.

Warren Buffett, the chief executive of Berkshire Hathaway, says inflation is rising. The price of building materials and other consumer goods is going up as demand grows and production costs increase. But the Federal Reserve has repeatedly encouraged investors not to fret. Is the economy going to overheat, with interest rates so low? Probably a bit. But slightly higher prices for a temporary period is in step with the Fed’s general aim for an inflation rate of 2 percent on average over time, to make up for exceptionally weak gains over the past several years.

The Biden administration has backed a temporary suspension of intellectual property rights for coronavirus vaccines, which would allow third-party drugmakers around the world to manufacture and distribute them to nations that need them. But the U.S. pharmaceutical industry is not happy about this, particularly those who hold the patents on these vaccines. (Pfizer alone generated $3.5 billion in revenue from its Covid-19 vaccine in the first three months of this year.) Representatives of the companies argue that suspending those patents will discourage future innovation and potentially decrease the safety standards of vaccine manufacturing and efficacy. Support from the White House does not guarantee that a waiver will happen, but it adds momentum.

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Village Caught in Czech-Russia Spy Case Just Wants Things to Stop Blowing Up

VLACHOVICE-VRBETICE, Czech Republic — For nearly a century, local residents have wondered at the strange comings and goings at a sealed-off camp ringed by barbed wire and dotted with keep out signs on the edge of their village.

The armies of Czechoslovakia, Nazi Germany, the Soviet Union and the Czech Republic all made use over the decades of the 840-acre property, deterring trespassers with guard dogs and armed patrols.

When the professional soldiers pulled out in 2006, the secretive activities became even more shadowy. Dozens of weapons depots hidden among the trees were taken over by arms dealers, a company reprocessing missile fuel and other private businesses.

Then, in October 2014, came the biggest mystery of all.

An enormous explosion ripped through depot No. 16, knocking farmers in nearby fields to the ground and sending dangerous debris raining down on the surrounding area.

Russian and Czech diplomats from Prague and Moscow and pushed relations between the two countries to their lowest ebb since the end of the Cold War.

The villagers, more focused on local property values than geopolitics, just want things to stop blowing up.

Holding a chunk of shrapnel that landed in his garden in 2014, Vojtech Simonik said he “felt no relief, only shock and amazement” when he watched the Czech prime minister talk on television about Russia’s role.

The announcement “created a real buzz around here,” said Mr. Simonik, who worked for a time at the camp dismantling artillery shells. “After seven years of silence, all the arguments are starting up again.”

The fenced-off property in which the explosions took place loops around the edge of two small adjacent villages with about 1,500 residents — Vlachovice (pronounced VLAKH-o-vee-tseh), the larger settlement, and Vrbetice (pronounced VR-byet-tee-tseh), just a few houses and a side road leading to the former military camp’s main entrance.

The mayor of Vlachovice, Zdenek Hovezak, said he had long wanted to know what was going on in the camp but got nowhere because everyone working there, including villagers hired to clean and perform other tasks, had to sign agreements swearing them to secrecy.

“I had no idea there was such a massive quantity of explosives so near our village,” said Mr. Hovezak, who had just been elected and was about to take office when the October blast happened.

The Military Technical Institute, a state entity that has managed the site since the Czech army pulled out, says it is now reviewing what to do with the property but insists that it will not be used again to store explosive materials for either the military or private companies.

Rostislav Kassa, a local builder, said he did not really care whether Russia is to blame for blowing up the place — although he firmly believes that it is — but he is angry that the Czech authorities ignored his efforts to sound the alarm years before the explosions.

Disturbed by reports that a rocket fuel company had rented premises in the camp, he started a petition in 2009 warning of a potential environmental disaster. Most residents signed it, he said, but his complaints to the Defense Ministry went unheeded.

“It doesn’t really matter who blew it up,” he said. “The main issue is that our government let this happen.” His own theory is that Russia wanted to disrupt supplies of rocket fuel to NATO forces, not, as is widely believed, to blow up weapons destined for Ukraine.

Ales Lysacek, the chief of the village’s volunteer fire force, recalled being called to the camp that day in October 2014 after a fire broke out there. He was ordered to get back by police officers guarding the entrance, and a few minutes later, after a series of small explosions, a gigantic blast sent a shock wave that knocked him and his men off their feet.

“We had no idea what was in all the depots,” Mr. Lysacek said. Nobody had ever thought to tell local fire fighters of the potential danger. Officials later assured villagers that the explosions had been an accident but, Mr. Lysacek said, “nobody here really believed them.”

After the 2014 blasts, it took six years for pyrotechnical experts to search the camp and village land around it for unexploded munitions and other hazardous debris.

The laborious cleanup operation, during which roads were often closed and villagers repeatedly evacuated from their homes for safety reasons, ended just last October.

Mr. Hovezak, the mayor, was astonished, like most villagers, to hear Prime Minister Andrej Babis say last month in a late night news conference that the huge 2014 blast on their doorstep had been the work of Russia’s military intelligence agency, known as the G.R.U.

“I was in complete shock,” the mayor said. “Nobody here ever imagined that Russian agents could be involved.”

That they were, at least according to a yearslong investigation by the Czech police and security services, has only stoked more questions about what was really going on in the camp and suspicions among locals that they have been told only half the story.

Mr. Simonik, who found the shrapnel chunk in his yard, said that he was not entirely convinced Russia was to blame but that he had never believed the blast was just an accident either. “I definitely think it did not explode on its own,” he said. “It was triggered by somebody.”

Who that might be is a question that has reopened old fissures across the country over the past and current role of Russia, whose troops invaded Czechoslovakia in 1968 to depose its reform-minded communist leadership but is still credited by some Czechs for defeating Nazi Germany.

“The older generation remembers how Russians freed us from Hitler, while others remember 1968 when they invaded us,” said Ladislav Obadal, the deputy mayor of Vlachovice. “But hardly anyone has a good word for the Russians now.”

Except, that is, for President Milos Zeman, a frequent visitor to Moscow, who went on television recently to contradict the government’s account of the blasts. The explosions, he said, could have been an accident — sabotage by Russian spies was just one of two plausible theories.

Mr. Zeman’s statement prompted protests in Prague among Czechs who have long considered him far too Russia-friendly. It was also met with fury among residents of Vlachovice-Vrbetice who believe that Moscow should compensate the villages for all the physical and psychological damage caused, a demand the mayor said he supported if Russia’s role is proved.

Yaroslav Kassa, 70, the father of the local builder who said his disaster warnings had been ignored, has no doubt the Kremlin is to blame. “Of course the Russians did it,” Mr. Kassa said, noting that the Russian military would have detailed plans of the sprawling facility from the time when the Soviet army used it after the 1968 invasion.

His views have led to arguments with his neighbor, Jozef Svelhak, 74. Mr. Svelhak recalled how he knew and liked a former Soviet commander at the camp and said he had never heard of Russian spies in the area, only Western ones in the 1970s during the Cold War.

Half a century later, that spies are again said to be roaming around is a measure of how the Cold War suspicions rumble on in this remote eastern corner of the Czech Republic.

“It is fun to watch James Bond in films,” said another of Mr. Kassa’s sons, Yaroslav. “But we don’t want him hiding behind our hill.”

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