JELD-WEN Holding, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 27, 2021, compared with the three months ended March 28, 2020. JELD-WEN manufactures and distributes windows, doors, and other building products. Unless noted, amounts are U.S. dollars.
Financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $1,092.4 million | $979.2 million | +11.6% |
| Gross margin | $235.9 million; 21.6% | $194.4 million; 19.9% | +21.4%; +1.7 percentage points |
| Operating income | $43.5 million; 4.0% of revenue | $15.2 million; 1.6% | Increased |
| Net income (loss) | $25.5 million; $0.25 diluted EPS | $(0.2) million; breakeven per share | Turned profitable |
| Adjusted EBITDA (non-GAAP) | $97.9 million; 9.0% of revenue | $74.5 million; 7.6% | +31.4% |
| Cash from operating activities | $(64.9) million | $(76.6) million | Cash use improved by $11.7 million |
| Cash from investing activities | $(18.3) million | $(22.4) million | Cash use improved by $4.0 million |
Revenue growth reflected 6% core growth—4% from pricing and 2% from favorable volume/mix—plus a 5% favorable foreign-exchange impact. Revenue increased in all segments: North America 9.0%, Europe 13.9%, and Australasia 19.2%. Adjusted EBITDA improved in each segment, while corporate and unallocated costs rose to $23.9 million from $6.5 million.
Balance sheet, debt, and liquidity
- Cash and cash equivalents were $612.8 million at quarter-end, down from $735.8 million at December 31, 2020. The company used $123.3 million of cash overall during the quarter.
- Total debt before unamortized issuance costs and discounts was $1.772 billion; balance-sheet current and long-term debt totaled approximately $1.759 billion. The company reported no ABL borrowings and was in compliance with its credit-facility and note covenants.
- Reported total liquidity was $992.7 million: $612.8 million of unrestricted cash, $340.4 million available under the ABL facility, and $39.5 million available under Australian facilities.
- Operating cash use reflected working-capital needs, including a $162.9 million accounts-receivable increase. Management said cash from operations and available financing should cover operating needs, planned investment, and debt service for at least the next 12 months.
- The company repurchased 809,884 shares for $23.1 million during the quarter. Capital expenditures were $17.9 million.
Changes, outlook, and key risks
- Gross-margin improvement was attributed to pricing, lower material usage, and improved labor efficiency, partly offset by higher freight and labor costs. Management also cited increased demand tied to low housing supply, low interest rates, and consumer focus on homes; supply-chain inflation and labor availability remained pressures.
- Other income was $10.8 million, primarily reflecting $9.2 million of foreign-currency gains. Interest expense increased to $18.5 million, mainly due to the 2020 issuance of $250 million of 6.25% senior secured notes. The effective tax rate was 28.9%, versus 123.8% in the prior-year quarter.
- No quantitative full-year earnings or revenue guidance is provided in the filing. Management cautioned that Q1 results are not necessarily indicative of full-year results; the business is seasonal, with sales generally higher in the second and third quarters.
- Litigation: In the Steves & Sons matter, an appeals court affirmed $36.5 million in past antitrust damages and a divestiture order, while vacating a conditional $139.4 million future-damages award. The divestiture process remained pending, and the company said the financial impact could not be estimated. A separate securities-class-action settlement agreement for $39.5 million, expected to be funded by D&O insurers, was reached after quarter-end and remained subject to court approval.
- Environmental contingency: For the former Everett, Washington site, remedial alternatives in a draft assessment ranged from $8.3 million to $57.0 million. The required remedy and ultimate cost were not yet known; the company warned the final cost could differ materially from its provisions.
- Other disclosed risks include raw-material and freight inflation, labor constraints, foreign-exchange and interest-rate movements, demand and seasonal variability, product warranties, and pending antitrust and other litigation. The company reported that disclosure controls were effective and that there were no updates to previously disclosed risk factors.
Important facts for investors to verify
- Progress and potential financial effects of the Steves divestiture process, related damages, and other litigation; confirm the status and funding of the post-quarter securities settlement.
- Final remediation requirements and cost for the Everett environmental matter, compared with the disclosed $8.3–$57.0 million range.
- Whether pricing and operating-efficiency gains can offset continuing material, freight, and labor inflation as demand and seasonal working-capital needs evolve.
- Cash conversion, liquidity, debt levels, and covenant compliance, particularly given first-quarter operating cash use and the company’s substantial legal and environmental exposures.