JELD-WEN(JELD) - 2023 Q3 - Quarterly Report

Part I - Financial Information Unaudited Financial Statements The unaudited consolidated financial statements for JELD-WEN Holding, Inc. for Q3 2023 are presented, with the Australasia business reclassified as discontinued operations - The financial statements adhere to GAAP for interim reporting, noting that Q3 2023 results may not indicate full-year performance[45] - The sale of the Australasia business (JW Australia) was completed on July 2, 2023, with its net assets and operations now reported as discontinued operations[46] Consolidated Statements of Operations The company reported net income of $43.8 million in Q3 2023, a turnaround from a prior-year loss, driven by improved gross margins and the absence of a goodwill impairment charge, despite a 5.5% decline in net revenues Q3 & Nine Months 2023 vs 2022 Performance (Continuing Operations) | Metric (in thousands) | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,076,980 | $1,140,025 | $3,283,269 | $3,364,794 | | Gross Margin | $223,596 | $206,389 | $640,938 | $584,669 | | Operating Income (Loss) | $48,078 | $(17,256) | $134,102 | $35,739 | | Income (Loss) from Continuing Operations | $16,908 | $(45,064) | $47,875 | $(13,681) | | Net Income (Loss) | $43,785 | $(33,192) | $97,200 | $12,106 | | Diluted EPS from Continuing Operations | $0.20 | $(0.53) | $0.56 | $(0.16) | - A significant factor in the prior year's Q3 loss was a $54.9 million goodwill impairment charge, which did not recur in Q3 2023[27] - The company recognized a $26.1 million gain on the sale of discontinued operations in Q3 2023, significantly contributing to net income[27] Consolidated Balance Sheets As of September 30, 2023, total assets decreased to $3.01 billion and total debt reduced to $1.23 billion due to the Australasia divestiture, while total shareholders' equity increased to $837.2 million Balance Sheet Comparison (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $1,529,998 | $1,695,606 | | Total Assets | $3,008,317 | $3,501,361 | | Total Current Liabilities | $736,309 | $786,626 | | Long-Term Debt | $1,193,252 | $1,712,790 | | Total Liabilities | $2,171,159 | $2,777,813 | | Total Shareholders' Equity | $837,158 | $723,548 | - Assets and liabilities of discontinued operations, which were $204.7 million and $104.6 million respectively at year-end 2022, are no longer on the balance sheet as of September 30, 2023, following the sale[32] Consolidated Statements of Cash Flows Net cash from operating activities significantly improved to $273.0 million for the nine months ended September 30, 2023, with investing activities providing $298.8 million from the Australasia sale, while financing activities used $550.8 million for debt repayment Cash Flow Summary (Nine Months Ended, in thousands) | Activity | Sep 30, 2023 | Sep 24, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $272,983 | $(73,426) | | Net Cash from Investing Activities | $298,843 | $(42,726) | | Net Cash from Financing Activities | $(550,753) | $(47,858) | | Net Change in Cash | $19,038 | $(195,742) | - The significant cash inflow from investing activities is attributed to the sale of JW Australia, which provided net proceeds of $367.5 million[40][41] - The company used cash from operations and the divestiture to make net debt repayments of $549.3 million, contrasting with net borrowings of $84.8 million and $132.0 million in common stock repurchases in the prior year[40][231] Notes to Unaudited Consolidated Financial Statements The notes detail the financial statements, covering the Australasia divestiture, debt structure changes, segment performance, restructuring, assets held for sale, and legal contingencies - Discontinued Operations: The sale of the Australasia business (JW Australia) was completed on July 2, 2023, for approximately AUD $688 million, resulting in net cash proceeds of about $446 million and a net gain on sale of $26.1 million[53] - Debt Repayment: On August 3, 2023, the company redeemed all $250.0 million of its 6.25% Senior Secured Notes and $200.0 million of its 4.63% Senior Notes, recognizing a pre-tax loss on extinguishment of $6.5 million[78] - Restructuring: The company announced plans to close two manufacturing facilities in Tijuana, Mexico, and Vista, California, expecting pre-tax restructuring costs of $15.9 million to $19.7 million[114] - Assets Held for Sale: The Towanda, PA operations remain classified as held for sale with total assets of $134.2 million as of September 30, 2023, as required by a legal settlement[116][118] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q3 2023 financial results, noting a 5.5% decrease in net revenues, improved gross margin to 20.8%, and enhanced liquidity of $692.6 million with significant operating cash flow improvement Q3 2023 vs Q3 2022 Consolidated Results | Metric (in thousands) | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $1,076,980 | $1,140,025 | (5.5)% | | Gross Margin | $223,596 | $206,389 | 8.3% | | Gross Margin % | 20.8% | 18.1% | +270 bps | | Operating Income (Loss) | $48,078 | $(17,256) | N/A | - The decrease in Q3 net revenues was driven by a 10% reduction in volume/mix, partially offset by a 3% benefit from price realization[173] - Total liquidity stood at $692.6 million as of September 30, 2023, comprising $239.2 million in cash and $453.4 million available under the ABL Facility[221] Segment Results In Q3 2023, North America net revenues decreased 5.4% with a flat Adjusted EBITDA margin of 12.6%, while Europe's net revenues fell 6.0% but its Adjusted EBITDA margin significantly improved to 8.5% Q3 2023 Segment Performance | Segment | Net Revenues (in millions) | % Change YoY | Adjusted EBITDA (in millions) | Adj. EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | | North America | $790.3 | (5.4)% | $100.0 | 12.6% | | Europe | $286.7 | (6.0)% | $24.5 | 8.5% | - North America's Adjusted EBITDA decreased by 5.1% to $100.0 million, impacted by lower volume and higher expenses, offset by favorable pricing[210] - Europe's Adjusted EBITDA increased by 35.2% to $24.5 million, as productivity and pricing benefits more than offset the significant drop in volume[212] Liquidity and Capital Resources The company maintains strong liquidity of $692.6 million, with operating cash flow significantly improving to $273.0 million for the first nine months of 2023, primarily due to working capital management and debt reduction from the JW Australia divestiture - The company's working capital management improved, leading to a $374.7 million favorable change in cash flow from operating assets and liabilities compared to the prior year[229] - Cash flow from financing activities was a use of $550.8 million, primarily due to net debt repayments of $549.3 million, contrasting with net borrowings in the prior year[231] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks including foreign currency, interest rate, and commodity price fluctuations, with no significant changes reported since the last Annual Report on Form 10-K - The company's primary market risks are foreign currency exchange rates, interest rates, and commodity prices[236] - No material changes to the company's market risks were reported for the period[236] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[238] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[239] Part II - Other Information Legal Proceedings This section refers to Note 21 for detailed legal proceedings, including the Towanda, PA facility divestiture related to Steves & Sons litigation and the settlement of Canadian antitrust litigation - Information regarding legal proceedings is detailed in Note 21 - Commitments and Contingencies[240] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022, were reported - No material changes to risk factors were reported since the last Form 10-K filing[241] Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the third quarter of 2023 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the third quarter[242] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 1350, as well as Inline XBRL documents[243]