JELD-WEN Holding, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 25, 2022. JELD-WEN manufactures and distributes windows, doors, and related building products across North America, Europe, and Australasia. Results are seasonal, with construction and remodeling activity generally stronger in the second and third quarters.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1,331.0M | $1,245.8M | $2,502.0M | $2,338.2M |
| Gross margin | $246.2M; 18.5% | $291.9M; 23.4% | $449.5M; 18.0% | $527.9M; 22.6% |
| Operating income | $60.4M; 4.5% | $102.1M; 8.2% | $70.7M; 2.8% | $145.5M; 6.2% |
| Net income | $45.8M | $60.7M | $45.3M | $86.2M |
| Diluted EPS | $0.52 | $0.60 | $0.51 | $0.84 |
| Adjusted EBITDA (non-GAAP) | $125.8M | $148.2M | $206.0M | $246.2M |
Q2 revenue grew 6.8%; core revenue rose 11%, reflecting a 12% pricing benefit partly offset by 1% unfavorable volume/mix, while foreign exchange reduced reported growth by 4%. For the first half, revenue grew 7.0%, with the same stated core-revenue drivers. Despite higher sales, gross margin fell sharply as material, freight, and labor inflation and unfavorable volume/mix outweighed pricing and productivity improvements. Q2 Adjusted EBITDA margin was 9.5%, down from 11.9%.
Q2 segment revenue was up 13.4% in North America and down 2.8% in Europe and 2.6% in Australasia. Adjusted EBITDA declined in all three segments: 18.9% in North America, 49.6% in Europe, and 11.8% in Australasia. Favorable corporate/unallocated results, including recoveries and foreign-exchange gains, partly offset the segment declines.
Cash flow, debt, and liquidity
- First-half operating cash flow was negative $165.7M, versus positive $40.7M a year earlier; the company attributed the change primarily to higher working-capital investment and lower earnings. Investing cash outflow was $21.4M.
- First-half financing cash inflow was $81.1M, including $186.6M net borrowings, partly offset by $105.2M of share repurchases. Cash and cash equivalents declined $123.0M to $272.5M; restricted cash was $1.4M.
- Total debt was $1.912B at June 25, 2022, up from $1.721B at December 31, 2021. Long-term debt was $1.868B and current maturities were $30.8M. The company reported compliance with its credit-facility and note covenants.
- Reported total liquidity was $550.8M: $272.5M unrestricted cash, $262.3M ABL availability, and $16.0M available under the Australian facility. This was down from $837.8M at year-end, primarily due to repurchases, working-capital needs, and lower earnings. Management stated liquidity was adequate for operations, planned investment, and debt service for at least the next 12 months.
Management commentary, outlook, and risks
No quantified full-year guidance is provided in the supplied filing text. Management cited pricing and productivity as offsets to cost inflation, but reported margin pressure and weaker segment profitability. It identified potential exposure to housing and remodeling demand, raw-material and freight costs, labor, interest rates, foreign exchange, supply-chain disruption, and the Russia-Ukraine conflict. The company discontinued its limited Russian sales operations in Q1 2022 and noted heightened inflation risks, particularly in Europe.
Unusual items boosted reported other income in the first half, including $13.4M related to recovery of cost from interest received on impaired notes, $4.8M of insurance reimbursements, and foreign-currency gains. Q2 impairment and restructuring charges were $5.3M, primarily related to North America footprint rationalization. The company also reported material legal and environmental contingencies: it is proceeding with a court-directed divestiture of its Towanda, Pennsylvania operations; a derivative-litigation settlement was reached subject to court approval; Canadian antitrust class actions remain pending; and the Everett, Washington cleanup has an estimated range of possible outcomes of $11.8M–$33.4M, with final cost and allocation uncertain.
During Q2, the company repurchased 3.43M shares for $64.3M at an average $18.74 per share. On July 28, 2022, after quarter-end, the board authorized an additional $200M repurchase program.
Investor verification priorities
- Assess whether pricing and productivity can keep pace with material, freight, utility, and labor inflation, and monitor volume/mix and segment Adjusted EBITDA.
- Track working-capital recovery and operating cash generation after the first-half cash outflow, alongside liquidity and borrowings.
- Verify the timing, terms, and financial effects of the Towanda divestiture and the court approval and implementation of the derivative-litigation settlement.
- Review potential exposure from Canadian antitrust litigation, the Everett remediation process, and other legal, warranty, and self-insurance liabilities.
- Monitor use of the new $200M buyback authorization against debt levels, cash needs, and the company’s stated liquidity outlook.