JELD-WEN Holding, Inc. — FY 2020 Form 10-K
Reporting period: Year ended December 31, 2020; this is an annual report, not a standalone fourth-quarter filing. JELD-WEN manufactures and distributes doors, windows, and related products through North America, Europe, and Australasia. All amounts below are in U.S. dollars.
Key financial results
| Metric | FY 2020 | FY 2019 | Change / context |
|---|---|---|---|
| Net revenue | $4,235.7 million | $4,289.8 million | Down 1.3%; core revenue fell 2%, as volume/mix declined 5% and pricing added 3%. |
| Gross profit / margin | $901.9 million / 21.3% | $872.5 million / 20.3% | Profit rose 3.4%; margin improved 1.0 percentage point. |
| Operating income / margin | $188.7 million / 4.5% | $190.4 million / 4.4% | Income declined slightly; margin edged higher. |
| Net income / diluted EPS | $91.6 million / $0.90 | $63.0 million / $0.62 | Improvement was driven in part by lower income tax expense. |
| Adjusted EBITDA (non-GAAP) | $446.4 million; 10.5% of revenue | $415.0 million; 9.7% | Up 7.6%. Reconcile the company’s adjustments, including substantial legal and environmental items. |
| Cash from operations | $355.7 million | $302.7 million | Up $52.9 million; included benefit from deferred payroll taxes and higher accruals. |
| Capital expenditures | $77.7 million | $101.5 million | Lower year over year. |
| Cash and cash equivalents | $735.8 million | $226.0 million | Year-end balance; excludes restricted cash. |
| Total debt, before unamortized costs and discounts | $1,781.4 million | $1,528.1 million | Includes $250 million of 6.25% secured notes issued in May 2020. |
| Total liquidity (company-defined, non-GAAP) | $1,121.5 million | $554.5 million | Includes unrestricted cash and available revolving-credit capacity. |
Performance and material changes
- North America revenue was $2,529.0 million, down 0.2%; Adjusted EBITDA rose 18.2% to $316.0 million, supported by pricing and lower material costs.
- Europe revenue increased 0.8% to $1,187.8 million; Adjusted EBITDA rose 17.4% to $136.4 million, reflecting cost savings and pricing.
- Australasia revenue fell 10.1% to $518.9 million and Adjusted EBITDA declined 16.2% to $62.4 million, amid lower volumes and adverse pricing.
- Gross-margin gains from sourcing savings and pricing were partly offset by unfavorable volume/mix and labor-cost inflation. SG&A rose 6.4% to $702.7 million, mainly due to legal expenses, environmental accruals, and estimated variable compensation.
- Income-tax expense fell to $25.1 million from $57.1 million; the effective tax rate was 21.5%, versus 47.5%, including a benefit related to the high-tax-exclusion election and tax planning.
Outlook, risks, and unusual items
- Management said cash from operations, cash balances, and revolving-credit availability were expected to support operations, planned capital expenditures, investments, and debt service for at least the next 12 months. No quantified consolidated earnings or revenue guidance is provided in the supplied filing text.
- COVID-19 caused intermittent plant closures, workforce and supply-chain disruptions, and high-teens revenue declines in April and May versus the prior year. Demand improved through the second quarter and the second half of 2020. The company received $7.4 million in pandemic-assistance reimbursements and deferred $20.9 million of U.S. employer payroll taxes, payable over 2021–2022.
- Management expected Australia’s new-home construction market to remain soft through 2021. Key ongoing risks include housing and remodeling cycles, raw-material and freight costs, labor availability, customer concentration, foreign exchange, debt covenants, and continued pandemic effects.
- Year-end legal claims provision was $108.6 million. In February 2021, an appeals court affirmed $36.5 million of past antitrust damages in the Steves litigation and affirmed a divestiture order, while vacating a conditional $139.4 million future-lost-profits award. The company said the eventual divestiture outcome and impact could not be estimated clearly.
- Separate interior molded-door antitrust class-action settlements remained subject to final court approval: each defendant agreed to pay $30.8 million in the direct-purchaser action and $9.75 million in the indirect-purchaser action.
- For the Everett, Washington environmental matter, potential remedial alternatives ranged from $8.3 million to $57.0 million; the required actions and final cost were undetermined and could differ materially from recorded provisions. A Pennsylvania wood-fiber waste pile must be removed by August 31, 2025; $2.3 million of bonds support the obligation.
- The company reported $10.5 million of impairment and restructuring charges, including impairment of ERP-module costs. It also recorded $67.1 million in legal costs and accruals and $7.5 million of environmental expenses among items excluded from Adjusted EBITDA.
- Management and the auditor reported effective internal control over financial reporting at December 31, 2020. Material weaknesses identified in 2019 were reported as remediated by year-end 2020.
Most important facts for investors to verify
- Review the Steves appeal, divestiture process, and antitrust settlement approvals, including potential cash and operating impacts not captured by the reported provision.
- Check the final Everett remediation plan and cost against the $8.3–$57.0 million range and recorded accruals.
- Assess whether revenue and volume trends, especially in Australasia, and the improved North America and Europe margins persisted after year-end.
- Reconcile Adjusted EBITDA to GAAP results and evaluate the recurring nature of excluded legal, environmental, restructuring, and other costs.
- Monitor debt maturities, refinancing and covenant capacity, and the composition and availability of reported liquidity.
- Evaluate the sustainability of cash generation, including the effects of deferred payroll taxes, seasonal working capital, pension funding, and capital spending.