JELD-WEN Holding, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 26, 2021; unaudited. JELD-WEN manufactures and distributes windows, doors, and other building products across North America, Europe, and Australasia. Comparisons below are with the corresponding 2020 periods unless noted.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $1,245.8m | $992.3m | $2,338.2m | $1,971.5m |
| Gross margin | $291.9m; 23.4% | $218.7m; 22.0% | $527.9m; 22.6% | $413.0m; 21.0% |
| Operating income | $102.1m; 8.2% of revenue | $50.1m; 5.0% | $145.5m; 6.2% | $65.3m; 3.3% |
| Net income | $60.7m | $23.1m | $86.2m | $22.9m |
| Diluted EPS | $0.60 | $0.23 | $0.84 | $0.23 |
| Adjusted EBITDA (non-GAAP) | $148.2m; 11.9% of revenue | $125.7m; 12.7% | $246.2m; 10.5% | $200.2m; 10.2% |
Cash flow, six months: Operating cash flow was $40.7m versus $38.3m. Investing used $41.5m, including $35.4m of property and equipment purchases and $9.3m of intangible purchases. Financing used $110.3m, mainly $56.9m of share repurchases and $54.7m of net debt repayments. Cash and cash equivalents declined $117.4m to $618.3m.
Debt and liquidity at June 26: Debt carrying value was $1,731.6m, including $42.3m current maturities; cash was $618.3m. The company reported total liquidity of $1,022.0m, comprising unrestricted cash and available borrowing capacity. Revolving credit availability was $403.7m. The company said it complied with its credit facility and note covenants.
Changes and management commentary
- Q2 revenue increased 25.5%; management attributed growth to 19% core revenue growth—13% volume/mix and 6% pricing—and a 6% foreign-exchange benefit. For the six months, revenue rose 18.6%, including 13% core growth and a 6% foreign-exchange benefit.
- Gross margin expanded as favorable volume/mix, pricing, lower material usage, and sourcing savings outweighed some inflation. Management also cited rising material, freight, and labor costs.
- Q2 Adjusted EBITDA rose 17.9%, but its consolidated margin declined from 12.7% to 11.9%. Corporate and unallocated costs increased to $24.9m from $9.0m, partly reflecting the non-recurrence of 2020 COVID-related cost savings and higher unallocated insurance costs.
- Demand benefited from low housing supply, low interest rates, and consumer focus on homes. The company reported intermittent facility closures related to COVID-19, as well as supply-chain inflation and labor availability pressures. Sales are seasonal, typically stronger in the second and third quarters.
- No quantified full-year revenue or earnings guidance is provided in the supplied filing text. Management said existing cash and other liquidity sources should cover operations, planned capital spending, investments, and debt service for at least the next 12 months.
Risks, contingencies, and unusual items
- Steves litigation: The Fourth Circuit affirmed $36.5m of past antitrust damages and a divestiture order relating to certain CMI assets, while vacating a conditional $139.4m future-lost-profits award. JELD-WEN said it would commence a process to divest its Towanda, Pennsylvania operations and related assets, but the ultimate impact and completion are uncertain. The judgment continues to accrue post-judgment interest.
- Other litigation: A securities class-action settlement contemplated a $39.5m payment funded by D&O insurers; it received preliminary court approval after quarter-end, with final approval still pending. The company also disclosed interior molded-door antitrust settlements and ongoing Canadian antitrust and derivative actions.
- Environmental exposure: For the Everett, Washington site, remedial alternatives in a draft assessment ranged from $8.3m to $57.0m. The required actions, cost, and allocation among potentially liable parties remained uncertain; the final cost could differ materially from recorded provisions.
- Other considerations: Warranty liability was $53.8m; self-insured risk liabilities were $83.4m. Risks include raw-material and freight inflation, labor constraints, foreign exchange, variable interest rates, seasonality, product and warranty claims, and legal outcomes. Management said previously disclosed 10-K risk factors had no updates.
- Post-quarter financing: On July 28, 2021, the company refinanced its term loans, extending maturity to July 2028, and amended its ABL Facility, extending maturity to July 2026 and increasing its commitment to $500m. These transactions occurred after the reporting date.
Key facts investors should verify
- Whether pricing and volume/mix gains can continue to offset material, freight, and labor inflation, and whether margin pressure eases.
- The final outcome, timing, and financial impact of the Steves divestiture and other litigation, including settlement approvals and recorded provisions.
- Cash conversion and working-capital needs as seasonal demand and receivables and inventory levels change.
- Post-quarter refinancing terms and future borrowing costs, alongside the company’s debt, liquidity, and covenant position.
- Final remediation requirements and cost allocation for the Everett environmental matter.