JELD-WEN Holding, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. The filing reports unaudited results for the three months ended March 30, 2024, compared with the three months ended April 1, 2023. JELD-WEN manufactures and distributes windows, doors, and related building products. Continuing operations are reported in North America and Europe; the Australasia business was sold in July 2023 and is presented as discontinued operations.
Financial performance and position
| Metric | Q1 2024 | Prior-year period |
|---|---|---|
| Net revenues | $959.1 million | $1,080.5 million |
| Gross margin | $172.6 million; 18.0% | $191.8 million; 17.7% |
| Operating income (loss) | $(28.3) million | $29.8 million |
| Continuing operations net income (loss) | $(27.7) million | $8.5 million |
| Net income (loss) per diluted share | $(0.32) | $0.18 |
| Adjusted EBITDA from continuing operations | $68.7 million; 7.2% of revenue | $79.3 million; 7.3% of revenue |
| Cash used in operating activities | $11.0 million | $0.7 million |
| Capital expenditures | $31.2 million | $21.4 million |
Revenue declined 11.2%; management attributed the decline primarily to a 12% decrease in core revenue from lower volume/mix. Gross margin percentage improved modestly, primarily on productivity, but the company moved to an operating loss. SG&A increased $30.0 million to $182.8 million, including $14.1 million of accelerated ERP amortization and higher professional fees.
At March 30, 2024, cash and cash equivalents were $234.5 million, total debt was $1.226 billion, and reported liquidity was $660.1 million, including $425.6 million available under the ABL Facility. The company had no ABL borrowings and was in compliance with its debt agreements. Total debt less cash was approximately $991 million. Operating cash use reflected lower earnings and working-capital movements; cash declined $53.9 million during the quarter.
Material changes and unusual items
- North America revenue fell 11.5% and segment Adjusted EBITDA declined 22.7% to $61.2 million; management cited weaker demand and unfavorable volume/mix, partly offset by productivity.
- Europe revenue fell 10.7% and segment Adjusted EBITDA declined 17.8% to $14.5 million, primarily from market softness and lower volume/mix, partly offset by productivity and pricing.
- Restructuring and asset-related charges rose to $18.1 million from $9.3 million. The company also recorded a $1.4 million loss related to a Term Loan Facility amendment.
- Other income was $14.3 million, including transition-service cost recovery, receipts on impaired notes, a refund of trade-duty deposits, insurance reimbursements, and foreign-currency gains.
- Q1 2024 included no income from discontinued operations; the prior-year period included $6.7 million after tax from discontinued operations.
Outlook, risks, and contingencies
The filing provides no specific full-year revenue or earnings guidance. Management said cash from operations and available liquidity are expected to support operations, planned capital expenditures, investments, and debt service for at least the next 12 months. Results are seasonal, with typically higher activity in the second and third quarters.
On April 11, 2024, the company announced plans to close facilities in Vista, California, and Hawkins, Wisconsin. It expects approximately $45 million of pretax restructuring and closure costs, including potential $10.2 million of inventory and product-related charges if inventory is unsold; it expects at least $11 million of annual pretax income improvement after closure. The company anticipates approximately $29 million of cash outlay by year-end 2024. It also continued European and other footprint-rationalization actions.
A court-ordered divestiture of the Towanda, Pennsylvania operations remains a significant contingency. On May 1, 2024, the company sought to vacate the divestiture requirement, but there is no assurance the motion will succeed or that a sale will be completed if the requirement remains. Towanda-related assets held for sale were $138.9 million at quarter-end. Other disclosed exposures include litigation, product warranties, self-insurance, and environmental remediation; the company notes that outcomes and estimates may differ materially.
Key risks include weak construction and repair-and-remodel demand, interest-rate and financing conditions, raw-material and labor costs, execution of restructuring initiatives, foreign-exchange movements, and litigation and environmental liabilities. Management stated that disclosure controls were effective at quarter-end and that there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether demand, volume/mix, and segment profitability stabilize after the Q1 declines.
- How much of the operating loss and higher SG&A reflects one-time costs versus ongoing expense, and how Adjusted EBITDA reconciles to GAAP results.
- Cash conversion, capital spending, and liquidity through the seasonal build in working capital.
- Actual closure costs, any inventory charges, timing of savings, and cash outlays from announced restructuring actions.
- Developments in the Towanda divestiture motion and other litigation, and any resulting financial-statement or cash-flow impact.