# JELD-WEN Holding, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [JELD-WEN Holding, Inc.](/companies/jeld.md) (CIK 1674335)
- Form: 10-Q
- Filed: 2023-11-07
- Accepted by EDGAR: Nov 7, 2023, 16:35 ET
- Period: 2023-09-30
- Accession: 0001674335-23-000168
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1674335/000167433523000168/jeld-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1674335/000167433523000168/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-02 to 2023-09-30 | $1.08bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.28bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-02 to 2023-09-30 | $853.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.64bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-02 to 2023-09-30 | $223.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $640.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-02 to 2023-09-30 | $162.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $478.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-02 to 2023-09-30 | $48.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $134.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-02 to 2023-09-30 | $16.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $59.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-02 to 2023-09-30 | $17.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $31.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-02 to 2023-09-30 | $43.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $97.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-02 to 2023-09-30 | $0.51 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-02 to 2023-09-30 | $0.51 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-02 to 2023-09-30 | 86,349,840 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 85,729,136 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $273.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $69.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $239.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.53bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $3.01bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $736.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $2.17bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $0 | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $837.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,872 characters.

This MD&A contains forward-looking statements that involve risks and uncertainties. Please see the “Forward-Looking Statements” section above for a discussion of the uncertainties, risks and assumptions associated with these statements. This discussion should be read in conjunction with our unaudited financial statements and related notes thereto and the other disclosures contained elsewhere in this Form 10-Q, and our audited financial statements and related notes and MD&A included in our Form 10-K. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those listed under Item 1A – *Risk Factors* in our Form 10-K and Form 10-Q, and included elsewhere in this Form 10-Q.

This MD&A is a supplement to our unaudited financial statements and notes thereto included elsewhere in this Form 10-Q and is provided to enhance your understanding of our results of operations and financial condition. Our discussion of results of operations is presented in millions throughout the MD&A and due to rounding may not sum or calculate precisely to the totals and percentages provided in the tables. Our MD&A is organized as follows:

- Overview. This section provides a general description of our Company and reportable segments.
- Consolidated Results of Operations and Operating Results by Business Segment. This section provides our analysis and outlook for the significant line items on our consolidated statements of operations, as well as other information that we deem meaningful to an understanding of our results of operations on both a consolidated basis and a business segment basis.
- Liquidity and Capital Resources. This section contains an overview of our financing arrangements and provides an analysis of trends and uncertainties affecting liquidity, cash requirements for our business, and sources and uses of our cash.
- Critical Accounting Policies and Estimates. This section discusses the accounting policies that we consider important to the evaluation and reporting of our financial condition and results of operations, and whose application requires significant judgments or a complex estimation process.

### Company Overview

We are a leading global provider of windows, doors, wall systems, and other building products. We design, produce, and distribute an extensive range of interior and exterior doors, wood, vinyl, and aluminum windows, and related products for use in the new construction, R&R of residential homes, and, to a lesser extent, non-residential buildings.

Our continuing operations include manufacturing and distribution facilities in 16 countries, located in North America and Europe. For many product lines, our manufacturing processes are vertically integrated, enhancing our range of capabilities, our ability to innovate, and our quality control as well as providing supply chain, transportation, and working capital savings.

### Business Segments

Our business is organized in geographic regions to ensure integration across operations serving common end markets and customers. We have two reportable segments in our continuing operations: North America and Europe. Financial information related to our business segments can be found in Note 12 - *Segment Information* of our financial statements included elsewhere in this Form 10-Q.

### Results of Operations

The tables in this section summarize key components of our results of operations for the periods indicated, both in U.S. dollars and as a percentage of our net revenues. Certain percentages presented in this section have been rounded to the nearest whole number. Accordingly, totals may not equal the sum of the line items in the tables below.

We present several financial metrics in “Core” terms, such as Core Revenue, which excludes the impact of foreign exchange, acquisitions and divestitures completed in the last twelve months. We believe Core Revenue assists management, investors, and analysts in understanding the organic performance of the operations.

### Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 24, 2022

*(amounts in thousands)*

|  | Three Months Ended September 30, 2023 | % of Net Revenues | September 24, 2022 | % of Net Revenues |
| --- | ---: | ---: | ---: | ---: |
| Net revenues | $1,076,980 | 100.0% | $1,140,025 | 100.0% |
| Cost of sales | 853,384 | 79.2% | 933,636 | 81.9% |
| Gross margin | 223,596 | 20.8% | 206,389 | 18.1% |
| Selling, general and administrative | 162,820 | 15.1% | 162,208 | 14.2% |
| Goodwill impairment | — | —% | 54,885 | 4.8% |
| Restructuring and asset related charges | 12,698 | 1.2% | 6,552 | 0.6% |
| Operating income (loss) | 48,078 | 4.5% | (17,256) | (1.5)% |
| Interest expense, net | 16,737 | 1.6% | 21,273 | 1.9% |
| Loss on extinguishment of debt | 6,487 | 0.2% | — | 0.0% |
| Other income, net | (9,453) | (0.9)% | (5,180) | (0.5)% |
| Income (loss) from continuing operations before taxes | 34,307 | 3.2% | (33,349) | (2.9)% |
| Income tax expense | 17,399 | 1.6% | 11,715 | 1.0% |
| Income (loss) from continuing operations, net of tax | 16,908 | 1.6% | (45,064) | (4.0)% |
| Gain on sale of discontinued operations, net of tax | 26,076 | 2.4% | — | —% |
| Income from discontinued operations, net of tax | 801 | 0.1% | 11,872 | 1.0% |
| Net income (loss) | $43,785 | 4.1% | $(33,192) | (2.9)% |

### Consolidated Results

*Net Revenues –* Net revenues decreased $63.0 million, or 5.5%, to $1,077.0 million in the three months ended September 30, 2023 from $1,140.0 million in the three months ended September 24, 2022. The decrease was driven by a Core Revenue decrease of 7%, partially offset by a 1% positive foreign exchange impact. Core Revenues decreased due to a reduction in volume/mix of 10%, partially offset by a 3% benefit from price realization.

*Gross Margin –* Gross margin increased $17.2 million, or 8.3%, to $223.6 million in the three months ended September 30, 2023 from $206.4 million in the three months ended September 24, 2022. Gross margin as a percentage of net revenues was 20.8% in the three months ended September 30, 2023 and 18.1% in the three months ended September 24, 2022. The increase in gross margin percentage was due primarily to favorable price/cost.

*SG&A Expense –* SG&A expense increased $0.6 million, or 0.4%, to $162.8 million in the three months ended September 30, 2023 from $162.2 million in the three months ended September 24, 2022. SG&A expense as a percentage of net revenues increased to 15.1% in the three months ended September 30, 2023 from 14.2% in the three months ended September 24, 2022. The increase in SG&A expense and SG&A as a percentage of net revenues was primarily due to accelerated amortization of an ERP system that we intend to not utilize upon completion of the JW Australia Transition Services Agreement period, partially offset by net gains on property and equipment sales.

*Restructuring and Asset Related Charges –* Restructuring and asset related charges of $12.7 million in the three months ended September 30, 2023 relate to transformation initiatives, cost savings, and footprint rationalization activities in our North America and Europe segments. The restructuring charges in our North America segment primarily relate to charges incurred to close certain manufacturing facilities. For more information, refer to Note 16 - *Restructuring and Asset Related Charges* in our unaudited consolidated financial statements included in this Form 10-Q.

*Interest Expense, Net –* Interest expense, net, decreased $4.5 million, or 21.3%, to $16.7 million in the three months ended September 30, 2023 from $21.3 million in the three months ended September 24, 2022. The decrease was primarily due to the redemption of all $250.0 million of our 6.25% Senior Secured Notes and $200.0 million of our 4.63% Senior Notes during the three months ended September 30, 2023, higher interest income from interest rate derivatives, and decreased borrowings on our Revolving Credit Facilities, partially offset by an increase to the cost of borrowing on our variable rate Term Loan Facility.

*Loss on Extinguishment of Debt –* The $6.5 million loss on extinguishment of debt is related to the redemption of our Senior Secured Notes and partial redemption of our Senior notes during the three months ended September 30, 2023. Refer to Note 10. - *Long-Term Debt* in our unaudited consolidated financial statements included in this Form 10-Q.

*Other Income, Net –* Other income, net increased $4.3 million or 82.5% to $9.5 million in the three months ended September 30, 2023 from $5.2 million in the three months ended September 24, 2022. Other income, net in the three months ended September 30, 2023 primarily consisted of recovery of the JW Australia transition services costs incurred of $4.0 million and income from short-term investments and forward contracts related to the JW Australia divestiture of $3.1 million. Other income, net in the three months ended September 24, 2022 primarily consisted of insurance reimbursements of $1.5 million and pension gain of $1.4 million. Refer to Note 18 *- Other (Income), Net* for the remaining components of other income (loss), net.

*Income Taxes –* Income tax expense was $17.4 million and $11.7 million in the three months ended September 30, 2023 and September 24, 2022, respectively. The effective tax rate in the three months ended September 30, 2023 was 50.7% compared to (35.1)% in the three months ended September 24, 2022. The effective tax rate in the three months ended September 30, 2023 increased primarily due to $7.0 million of income tax expense from the net impact of discrete items, primarily resulting from increases in valuation allowances and increases in uncertain tax position reserves. The negative effective tax rate in the three months ended September 24, 2022 was primarily due to the $54.9 million goodwill impairment. For more information, refer to Note 11 - *Income Taxes* to our unaudited consolidated financial statements included in this Form 10-Q.

*Gain on Sale of Discontinued Operations –* The $26.1 million gain on sale of discontinued operations is related to the July 2, 2023 sale of JW Australia. Refer to Note 2 - *Discontinued Operations* to our unaudited consolidated financial statements included in this Form 10-Q.

### Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 24, 2022

*(amounts in thousands)*

|  | Nine Months Ended September 30, 2023 | % of Net Revenues | September 24, 2022 | % of Net Revenues |
| --- | ---: | ---: | ---: | ---: |
| Net revenues | $3,283,269 | 100.0% | $3,364,794 | 100.0% |
| Cost of sales | 2,642,331 | 80.5% | 2,780,125 | 82.6% |
| Gross margin | 640,938 | 19.5% | 584,669 | 17.4% |
| Selling, general and administrative | 478,060 | 14.6% | 482,249 | 14.3% |
| Goodwill impairment | — | —% | 54,885 | 1.6% |
| Restructuring and asset related charges | 28,776 | 0.9% | 11,796 | 0.4% |
| Operating income | 134,102 | 4.1% | 35,739 | 1.1% |
| Interest expense, net | 59,083 | 1.8% | 59,794 | 1.8% |
| Loss on extinguishment of debt | 6,487 | 0.2% | — | 0.0% |
| Other income, net | (10,981) | (0.3)% | (31,334) | (0.9)% |
| Income from continuing operations before taxes | 79,513 | 2.4% | 7,279 | 0.2% |
| Income tax expense | 31,638 | 1.0% | 20,960 | 0.6% |
| Income (loss) from continuing operations, net of tax | 47,875 | 1.5% | (13,681) | (0.4)% |
| Gain on sale of discontinued operations, net of tax | 26,076 | 0.8% | — | —% |
| Income from discontinued operations, net of tax | 23,249 | 0.7% | 25,787 | 0.8% |
| Net income | $97,200 | 3.0% | $12,106 | 0.4% |

### Consolidated Results

*Net Revenues –* Net revenues decreased $81.5 million, or 2.4%, to $3,283.3 million in the nine months ended September 30, 2023 from $3,364.8 million in the nine months ended September 24, 2022. Core Revenues decreased 2% due to an 8% decrease in volume/mix, partially offset by a 6% benefit from price realization.

*Gross Margin –* Gross margin increased $56.3 million, or 9.6%, to $640.9 million in the nine months ended September 30, 2023 from $584.7 million in the nine months ended September 24, 2022. Gross margin as a percentage of net revenues was 19.5% in the nine months ended September 30, 2023 and 17.4% in the nine months ended September 24, 2022. The increase in gross margin percentage was due primarily to the favorable price/cost, partially offset by accelerated depreciation in North America from reviews of equipment capacity optimization.

*SG&A Expense –* SG&A expense decreased $4.2 million, or 0.9%, to $478.1 million in the nine months ended September 30, 2023 from $482.2 million in the nine months ended September 24, 2022. SG&A expense as a percentage of net revenues increased to 14.6% in the nine months ended September 30, 2023 from 14.3% in the nine months ended September 24, 2022. The decrease in SG&A expense was primarily due to decreased labor expenses driven by a reduction in headcount, lower bad debt expense in our

North America segment due to improved collections, and gains on property and equipment sales, partially offset by increased performance-based variable compensation expenses.

*Restructuring and Asset Related Charges –* Restructuring and asset related charges of $28.8 million in the nine months ended September 30, 2023 relate to transformation initiatives, cost savings, and footprint rationalization activities in our North America and Europe segments. The restructuring charges in our North America segment primarily relate to charges incurred to close certain manufacturing facilities. For more information, refer to Note 16 - *Restructuring and Asset Related Charges* to our unaudited consolidated financial statements included in this Form 10-Q.

*Interest Expense, Net –* Interest expense, net, decreased $0.7 million, or 1.2%, to $59.1 million in the nine months ended September 30, 2023 from $59.8 million in the nine months ended September 24, 2022. The decrease was primarily due to higher interest income from interest rate derivatives, the redemption of our Senior Secured Notes and partial redemption of our Senior notes and decreased borrowings on our Revolving Credit Facilities during the nine months ended September 30, 2023, partially offset by an increase to the cost of borrowing on our variable rate Term Loan Facility.

*Loss on Extinguishment of Debt –* The $6.5 million loss on extinguishment of debt is related to the redemption of our Senior Secured Notes and partial redemption of our Senior notes during the nine months ended September 30, 2023. Refer to Note 10. - *Long-Term Debt* to our unaudited consolidated financial statements included in this Form 10-Q.

*Other Income, Net –* Other income, net decreased $20.4 million, or 65.0%, to $11.0 million in the nine months ended September 30, 2023 from $31.3 million in the nine months ended September 24, 2022. Other income, net in the nine months ended September 30, 2023 primarily consisted of recovery of the JW Australia transition services costs incurred of $4.0 million and income from short-term investments and forward contracts related to the JW Australia divestiture of $3.1 million, the recovery of cost from interest received on impaired notes of $3.0 million, foreign currency gains of $2.3 million and reimbursements from insurance of $1.2 million, partially offset by pension expense of $5.0 million. Other income, net in the nine months ended September 24, 2022 primarily consisted of the recovery of cost from interest received on impaired notes of $14.0 million, insurance reimbursements of $6.3 million, pension income of $4.5 million and foreign currency gains of $4.4 million. Refer to Note 18 *- Other (Income), Net* for the remaining components of other income, net.

*Income Taxes –* Income tax expense was $31.6 million and $21.0 million in the nine months ended September 30, 2023 and September 24, 2022, respectively. The effective tax rate in the nine months ended September 30, 2023 was 39.8% compared to 288.0% in the nine months ended September 24, 2022. The effective tax rate in the nine months ended September 30, 2023 decreased primarily due to the impacts of the $54.9 million goodwill impairment recorded in the nine months ended September 24, 2022. For more information, refer to Note 11 - *Income Taxes* to our unaudited consolidated financial statements included in this Form 10-Q.

*Gain on Sale of Discontinued Operations –* The $26.1 million gain on sale of discontinued operations is related to the July 2, 2023 sale of JW Australia. Refer to Note 2 - *Discontinued Operations* to our unaudited consolidated financial statements included in this Form 10-Q.

### Segment Results

We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC 280-10 - *Segment Reporting*. We define Adjusted EBITDA from continuing operations as income (loss) from continuing operations, net of tax, adjusted for the following items: income tax expense (benefit); depreciation and amortization; interest expense, net; and certain special items consisting of non-recurring legal and professional expenses and settlements; goodwill impairment; restructuring and asset related charges; other facility closure, consolidation, and other related costs and adjustments; M&A related costs; loss on extinguishment of debt; share-based compensation expense; non-cash foreign exchange transaction/translation (income) loss; and other special items. This non-GAAP financial measure should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP.

We have two reportable segments in our continuing operations, organized and managed principally by geographic region: North America and Europe. We report all other business activities in Corporate and unallocated costs.

Reconciliations of net income to Adjusted EBITDA from continuing operations for our segments’ operations are as follows:

*(amounts in thousands)*

|  | Three Months Ended September 30, 2023 North America | Europe | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income (loss) from continuing operations, net of tax | $40,469 | $10,672 | $51,141 | $(34,233) | $16,908 |
| Income tax expense (benefit) | 27,412 | 5,974 | 33,386 | (15,987) | 17,399 |
| Depreciation and amortization(1) | 17,128 | 7,482 | 24,610 | 6,341 | 30,951 |
| Interest expense, net | 604 | 147 | 751 | 15,986 | 16,737 |
| Special items:(2) |  |  |  |  |  |
| Legal and professional expenses and settlements | 802 | 1,264 | 2,066 | 5,335 | 7,401 |
| Restructuring and asset related charges | 11,890 | 838 | 12,728 | (30) | 12,698 |
| Other facility closure, consolidation, and related costs and adjustments | (7) | 88 | 81 | — | 81 |
| M&A related costs | 84 | — | 84 | 1,118 | 1,202 |
| Net loss (gain) on sale of property and equipment | 748 | (4,791) | (4,043) | 3 | (4,040) |
| Loss on extinguishment of debt | — | — | — | 6,487 | 6,487 |
| Share-based compensation expense | 914 | 455 | 1,369 | 2,013 | 3,382 |
| Non-cash foreign exchange transaction/translation loss (income) | 131 | 2,343 | 2,474 | (2,203) | 271 |
| Other special items | (213) | (21) | (234) | (3,502) | (3,736) |
| Adjusted EBITDA from continuing operations | $99,962 | $24,451 | $124,413 | $(18,672) | $105,741 |

(1) Corporate and Unallocated depreciation and amortization expense includes software accelerated amortization of $3.5 million for an ERP system that will not be utilized upon completion of the JW Australia Transition Services Agreement period.

(2) For the definitions of the Special items listed above, refer to Note 12 - *Segment Information* in our unaudited consolidated financial statements included in this Form 10-Q.

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*(amounts in thousands)*

|  | Three Months Ended September 24, 2022 North America | Europe | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income (loss) from continuing operations, net of tax | $80,983 | $(53,685) | $27,298 | $(72,362) | $(45,064) |
| Income tax expense (benefit)(1) | 1,624 | (5,857) | (4,233) | 15,948 | 11,715 |
| Depreciation and amortization | 17,568 | 7,208 | 24,776 | 3,150 | 27,926 |
| Interest expense, net | 1,152 | 1,653 | 2,805 | 18,468 | 21,273 |
| Special items:(2) |  |  |  |  |  |
| Legal and professional expenses and settlements | 2 | 594 | 596 | 1,900 | 2,496 |
| Goodwill impairment | — | 54,885 | 54,885 | — | 54,885 |
| Restructuring and asset related charges | 814 | 3,411 | 4,225 | 2,327 | 6,552 |
| Other facility closure, consolidation, and related costs and adjustments | 2,394 | 6,665 | 9,059 | — | 9,059 |
| M&A related costs | 143 | — | 143 | 2,825 | 2,968 |
| Net loss (gain) on sale of property and equipment | 87 | (10) | 77 | — | 77 |
| Share-based compensation expense (income) | 1,042 | 627 | 1,669 | (2,427) | (758) |
| Non-cash foreign exchange transaction/translation (income) loss | (59) | 6,269 | 6,210 | (3,431) | 2,779 |
| Other special items | (459) | (3,674) | (4,133) | 4,746 | 613 |
| Adjusted EBITDA from continuing operations | $105,291 | $18,086 | $123,377 | $(28,856) | $94,521 |

(1) Income tax expense in Corporate and unallocated costs includes the tax impact of U.S. Operations.

(2) For the definitions of the Special items listed above, refer to Note 12 - *Segment Information* in our unaudited consolidated financial statements included in this Form 10-Q.

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*(amounts in thousands)*

|  | Nine Months Ended September 30, 2023 North America | Europe | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income (loss) from continuing operations, net of tax | $126,987 | $28,627 | $155,614 | $(107,739) | $47,875 |
| Income tax expense (benefit) | 63,072 | 10,469 | 73,541 | (41,903) | 31,638 |
| Depreciation and amortization(1) | 62,625 | 22,414 | 85,039 | 12,469 | 97,508 |
| Interest expense, net | 4,188 | 692 | 4,880 | 54,203 | 59,083 |
| Special items:(2) |  |  |  |  |  |
| Legal and professional expenses and settlements | 804 | 3,720 | 4,524 | 9,085 | 13,609 |
| Restructuring and asset-related charges | 25,360 | 2,620 | 27,980 | 796 | 28,776 |
| Other facility closure, consolidation, and related costs and adjustments | (5) | 2,704 | 2,699 | — | 2,699 |
| M&A related costs | 651 | — | 651 | 4,520 | 5,171 |
| Net loss (gain) on sale of property and equipment | 1,132 | (5,088) | (3,956) | 3 | (3,953) |
| Loss on extinguishment of debt | — | — | — | 6,487 | 6,487 |
| Share-based compensation expense | 3,366 | 1,438 | 4,804 | 7,451 | 12,255 |
| Non-cash foreign exchange transaction/translation (income) loss | (168) | 1,192 | 1,024 | (1,921) | (897) |
| Other special items | (34) | (2,838) | (2,872) | (3,450) | (6,322) |
| Adjusted EBITDA from continuing operations | $287,978 | $65,950 | $353,928 | $(59,999) | $293,929 |

(1) North America depreciation and amortization expense includes accelerated depreciation of $9.1 million from reviews of equipment capacity optimization. Corporate and Unallocated depreciation and amortization expense includes software accelerated amortization of $3.5 million for an ERP system that we intend to not utilize upon completion of the JW Australia Transition Services Agreement period.

(2) For the definitions of the Special items listed above, refer to Note 12 - *Segment Information* in our unaudited consolidated financial statements included in this Form 10-Q.

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*(amounts in thousands)*

|  | Nine Months Ended September 24, 2022 North America | Europe | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income (loss) from continuing operations, net of tax | $188,882 | $(51,189) | $137,693 | $(151,374) | $(13,681) |
| Income tax expense (benefit)(1) | 4,629 | (1,331) | 3,298 | 17,662 | 20,960 |
| Depreciation and amortization | 51,116 | 22,703 | 73,819 | 9,445 | 83,264 |
| Interest expense, net | 3,070 | 5,512 | 8,582 | 51,212 | 59,794 |
| Special items:(2) |  |  |  |  |  |
| Legal and professional expenses and settlements | 2 | 594 | 596 | 4,409 | 5,005 |
| Goodwill impairment | — | 54,885 | 54,885 | — | 54,885 |
| Restructuring and asset-related charges | 5,565 | 3,945 | 9,510 | 2,286 | 11,796 |
| Other facility closure, consolidation, and related costs and adjustments | 2,394 | 11,876 | 14,270 | — | 14,270 |
| M&A related costs | 431 | — | 431 | 8,304 | 8,735 |
| Net loss (gain) on sale of property and equipment | 239 | 65 | 304 | (3) | 301 |
| Share-based compensation expense | 3,099 | 1,921 | 5,020 | 4,730 | 9,750 |
| Non-cash foreign exchange transaction/translation loss | 348 | 2,071 | 2,419 | 7,320 | 9,739 |
| Other special items | 6,073 | 1,772 | 7,845 | (1,849) | 5,996 |
| Adjusted EBITDA from continuing operations | $265,848 | $52,824 | $318,672 | $(47,858) | $270,814 |

(1) Income tax expense in Corporate and unallocated costs includes the tax impact of U.S. Operations.

(2) For the definitions of the Special items listed above, refer to Note 12 - *Segment Information* in our unaudited consolidated financial statements included in this Form 10-Q.

### Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 24, 2022

*(amounts in thousands)*

| Net revenues from external customers | Three Months Ended September 30, 2023 | September 24, 2022 | % Variance |
| --- | ---: | ---: | ---: |
| North America | $790,285 | $835,134 | (5.4)% |
| Europe | 286,695 | 304,891 | (6.0)% |
| Total Consolidated | $1,076,980 | $1,140,025 | (5.5)% |
| **Percentage of total consolidated net revenues** |  |  |  |
| North America | 73.4% | 73.3% |  |
| Europe | 26.6% | 26.7% |  |
| Total Consolidated | 100.0% | 100.0% |  |
| **Adjusted EBITDA from continuing operations (1)** |  |  |  |
| North America | $99,962 | $105,291 | (5.1)% |
| Europe | 24,451 | 18,086 | 35.2% |
| Corporate and unallocated costs | (18,672) | (28,856) | (35.3)% |
| Total Consolidated | $105,741 | $94,521 | 11.9% |
| **Adjusted EBITDA from continuing operations as a percentage of segment net revenues** |  |  |  |
| North America | 12.6% | 12.6% |  |
| Europe | 8.5% | 5.9% |  |
| Total Consolidated | 9.8% | 8.3% |  |

(1) Adjusted EBITDA from continuing operations is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA from continuing operations, see Note 12 - *Segment Information* in our unaudited consolidated financial statements.

#### North America

Net revenues in North America decreased $44.8 million, or 5.4%, to $790.3 million in the three months ended September 30, 2023 from $835.1 million in the three months ended September 24, 2022. The decrease was due to a decrease in Core Revenues of 5%. Core Revenues decreased primarily due to unfavorable volume/mix of 7% driven by weakened market demand, partially offset by a 2% benefit from price realization.

Adjusted EBITDA from continuing operations in North America decreased $5.3 million to $100.0 million, or 5.1%, in the three months ended September 30, 2023 from $105.3 million in the three months ended September 24, 2022. The decrease was primarily due to unfavorable volume/mix and higher other expenses, partially offset by favorable price/cost and improved productivity. The increase in other expenses was driven by increased performance-based variable compensation, increased pension expense, and the impact of inflation on labor expenses during the three months ended September 30, 2023 compared to the same period last year.

#### Europe

Net revenues in Europe decreased $18.2 million, or 6.0%, to $286.7 million in the three months ended September 30, 2023 from $304.9 million in the three months ended September 24, 2022. The decrease was primarily due to a decrease in Core Revenues of 11%. Core Revenues decreased due to unfavorable volume/mix of 17% primarily due to market softness across the region, partially offset by a 6% benefit from price realization.

Adjusted EBITDA from continuing operations in Europe increased $6.4 million, or 35.2%, to $24.5 million in the three months ended September 30, 2023 from $18.1 million in the three months ended September 24, 2022. The increase was primarily due to favorable productivity and positive price/cost, partially offset by unfavorable volume/mix.

#### Corporate and unallocated costs

Corporate and unallocated costs decreased by $10.2 million, or 35.3%, to $18.7 million in the three months ended September 30, 2023 from $28.9 million in the three months ended September 24, 2022. The decrease was primarily due a reduction in professional fees not associated with strategic transformation initiatives, decreased labor expense driven by reduced headcount, and the recovery of JW Australia transition services costs incurred, partially offset by losses on foreign exchange transactions in the current period compared to gains in the same period last year.

### Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 24, 2022

*(amounts in thousands)*

| Net revenues from external customers | Nine Months Ended September 30, 2023 | September 24, 2022 | % Variance |
| --- | ---: | ---: | ---: |
| North America | $2,375,430 | $2,396,584 | (0.9)% |
| Europe | 907,839 | 968,210 | (6.2)% |
| Total Consolidated | $3,283,269 | $3,364,794 | (2.4)% |
| **Percentage of total consolidated net revenues** |  |  |  |
| North America | 72.3% | 71.2% |  |
| Europe | 27.7% | 28.8% |  |
| Total Consolidated | 100.0% | 100.0% |  |
| **Adjusted EBITDA from continuing operations (1)** |  |  |  |
| North America | $287,978 | $265,848 | 8.3% |
| Europe | 65,950 | 52,824 | 24.8% |
| Corporate and unallocated costs | (59,999) | (47,858) | 25.4% |
| Total Consolidated | $293,929 | $270,814 | 8.5% |
| **Adjusted EBITDA from continuing operations as a percentage of segment net revenues** |  |  |  |
| North America | 12.1% | 11.1% |  |
| Europe | 7.3% | 5.5% |  |
| Total Consolidated | 9.0% | 8.0% |  |

(1) Adjusted EBITDA from continuing operations is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA from continuing operations, see Note 12 - *Segment Information* in our unaudited consolidated financial statements.

#### North America

Net revenues in North America decreased $21.2 million, or 0.9%, to $2,375.4 million in the nine months ended September 30, 2023 from $2,396.6 million in the nine months ended September 24, 2022. The decrease was driven by a 1% adverse foreign exchange impact. Core Revenues remained flat due to a 6% benefit from price realization, offset by unfavorable volume/mix of 6%. The unfavorable volume/mix was driven by weakened market demand, partially offset by increased market share.

Adjusted EBITDA from continuing operations in North America increased $22.1 million to $288.0 million, or 8.3 %, in the nine months ended September 30, 2023 from $265.8 million in the nine months ended September 24, 2022. The increase was primarily due to favorable price/cost, partially offset by unfavorable volume/mix and higher other expenses. The increase in other expenses was driven by increased performance-based variable compensation, higher pension expense, and the impact of inflation on labor expenses, partially offset by a reduction in bad debt expense due to improved collections.

#### Europe

Net revenues in Europe decreased $60.4 million, or 6.2%, to $907.8 million in the nine months ended September 30, 2023 from $968.2 million in the nine months ended September 24, 2022. The decrease was primarily due to a decrease in Core Revenues of 6%. Core Revenues decreased due to unfavorable volume/mix of 14% primarily due to market softness across the region, partially offset by an 8% benefit from price realization.

Adjusted EBITDA from continuing operations in Europe increased $13.1 million, or 24.8%, to $66.0 million in the nine months ended September 30, 2023 from $52.8 million in the nine months ended September 24, 2022. The increase was primarily due to favorable productivity and positive price/cost, partially offset by unfavorable volume/mix.

#### Corporate and unallocated costs

Corporate and unallocated costs increased by $12.1 million, or 25.4%, to $60.0 million in the nine months ended September 30, 2023, from $47.9 million in the nine months ended September 24, 2022. The increase in cost is primarily due to losses on foreign exchange transactions in the current period compared to gains in the same period last year and a reduction in the recovery of cost from interest received on impaired notes, partially offset by lower labor costs and the recovery of the JW Australia transition services costs incurred.

### Liquidity and Capital Resources

### Overview

We have historically funded our operations through a combination of cash from operations, draws on our revolving credit facilities, and the issuance of non-revolving debt such as our Term Loan Facility, Senior Notes, and Senior Secured Notes. We place a strong emphasis on cash flow generation, which includes an operating discipline focused on working capital management. Working capital fluctuates throughout the year and is impacted by inflation, the seasonality of our sales, customer payment patterns, supply availability, and the translation of the balance sheets of our foreign operations into the U.S. dollar. Typically, working capital increases at the end of the first quarter and beginning of the second quarter in conjunction with, and in preparation for, the peak season for home construction and remodeling in our North America and Europe segments, and decreases starting in the fourth quarter as inventory levels and accounts receivable decline. Inventories fluctuate for raw materials with long delivery lead times, such as steel, as we work through prior shipments and take delivery of new orders.

As of September 30, 2023, we had total liquidity (a non-GAAP measure) of $692.6 million, consisting of $239.2 million in unrestricted cash, $453.4 million available for borrowing under the ABL Facility, compared to total liquidity of $575.2 million as of December 31, 2022 (on a continuing operations basis and excluding JW Australia). The increase in total liquidity was primarily due to both higher cash balances and lower borrowings on our ABL Facility at September 30, 2023 compared to December 31, 2022.

As of September 30, 2023, our cash balances, including $0.7 million of restricted cash, consisted of $44.4 million in the U.S. and $195.5 million in non-U.S. subsidiaries. During the fiscal year ended December 31, 2022, the Company repatriated $132.8 million from non-U.S. subsidiaries and repaid a portion of the outstanding ABL Facility. Based on our current and forecasted level of operations and seasonality of our business, we believe that cash provided by operations and other sources of liquidity, including cash, cash equivalents, and availability under our revolving credit facilities, will provide adequate liquidity for ongoing operations, planned capital expenditures and other investments, and debt service requirements for at least the next twelve months.

We may, from time to time, refinance, reprice, extend, retire, or otherwise modify our outstanding debt to lower our interest payments, reduce our debt, or otherwise improve our financial position. These actions may include repricing amendments, extensions, and/or opportunistic refinancing of debt. The amount of debt that may be refinanced, repriced, extended, retired, or otherwise modified, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations.

We may, from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be on such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Based on hypothetical variable rate debt that would have resulted from drawing each revolving credit facility up to the full commitment amount, a 1.0% decrease in interest rates would have reduced our interest expense by $1.8 million in the three months ended September 30, 2023. A 1.0% increase in interest rates would have increased our interest expense by $1.8 million in the same period. In certain instances, the impact of a hypothetical decrease would have been partially mitigated by interest rate floors that apply to certain of our debt agreements.

### Borrowings and Refinancings

In July 2021, we refinanced our existing Term Loan Facility and ABL Facility by issuing replacement loans that aggregated to $550.0 million in principal amount under the Term Loan Facility and added $100.0 million in potential additional revolving loan capacity to our ABL Facility.

As of September 30, 2023, we were in compliance with the terms of all of our Credit Facilities and the indentures governing the Senior Notes.

Our results have been and will continue to be impacted by substantial changes in our net interest expense throughout the periods presented and into the future. See Note 10. - *Long-Term Debt* to our consolidated financial statements for additional details.

### Cash Flows (1)

The following table summarizes the changes to our cash flows for the periods presented:

*(amounts in thousands)*

| Cash provided by (used in): | Nine Months Ended September 30, 2023 | September 24, 2022 |
| --- | ---: | ---: |
| Operating activities | $272,983 | $(73,426) |
| Investing activities | 298,843 | (42,726) |
| Financing activities | (550,753) | (47,858) |
| Effect of changes in exchange rates on cash and cash equivalents | (2,035) | (31,732) |
| Net change in cash and cash equivalents | $19,038 | $(195,742) |

(1) Cash flow information is inclusive of cash flows from JW Australia as discontinued operations through the divestiture date of July 2, 2023.

#### Cash Flow from Operations

Net cash provided by (used in) operating activities improved to a $273.0 million source of cash in the nine months ended September 30, 2023 compared to a $73.4 million use of cash in the nine months ended September 24, 2022. The increase in cash provided by operating activities was primarily due to a $374.7 million improvement in net cash provided by our working capital accounts (accounts receivable, net, inventory, and accounts payable). Cash flow provided by Inventory was $221.8 million favorable compared to the nine months ended September 24, 2022, primarily driven by demand planning that drove lower inventory days on hand, which mitigated inflation on raw materials. Cash flow used in Accounts receivable, net of $116.4 million was favorable in the nine months ended September 30, 2023 compared to the nine months ended September 24, 2022, which was primarily due to decreased sales, partially offset by slightly deteriorated days sales outstanding. Cash flow provided by Accounts payable was $36.5 million favorable compared to the nine months ended September 24, 2022, which was primarily due to inflation on purchases, partially offset by demand planning that drove moderated purchasing.

#### Cash Flow from Investing Activities

Net cash provided by (used in) investing activities improved to a $298.8 million source of cash in the nine months ended September 30, 2023 compared to a $42.7 million use of cash in the nine months ended September 24, 2022, primarily driven by $367.5 million proceeds (payments) related to the sale of JW Australia, partially offset by an increase in capital expenditures of $22.9 million and a decrease in cash received from the recovery of cost from interest received on impaired notes of $11.0 million.

#### Cash Flow from Financing Activities

Net cash used in financing activities increased $502.9 million to $550.8 million in the nine months ended September 30, 2023 compared to $47.9 million in the nine months ended September 24, 2022, primarily due to net payments of long-term debt and debt extinguishment costs of $549.3 million in the nine months ended September 30, 2023 compared to net borrowings of $84.8 million in the nine months ended September 24, 2022, partially offset by the non-recurrence of repurchases of our Common Stock of $132.0 million in the nine months ended September 24, 2022.

### Critical Accounting Policies and Estimates

Our MD&A is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which may differ from these estimates.

Our significant accounting policies are described in Note 1 - *Summary of Significant Accounting Policies* to the consolidated financial statements presented in our 10-K. Our critical accounting policies and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K. Our significant and critical accounting policies have not changed significantly since our Form 10-K was filed.

### Holding Company Status

We are a holding company that conducts all of our operations through subsidiaries, and we rely on dividends or advances from our subsidiaries to fund the holding company. The majority of our operating income is derived from JWI, our main operating subsidiary. The ability of our subsidiaries to pay dividends to us is subject to applicable local law and may be limited due to the terms of other contractual arrangements, including our Credit Facilities, Senior Notes, and Senior Secured Notes.

The amount of our consolidated net assets that were available to be distributed under our Credit Facilities as of September 30, 2023 was $824.1 million.

## Market risk

As filed, 511 characters.

We are exposed to various types of market risks, including the effects of adverse fluctuations in foreign currency exchange rates, changes in interest rates, and movements in commodity prices for products we use in our manufacturing. To reduce our exposure to these risks, we maintain risk management controls and policies to monitor these risks and take appropriate actions to attempt to mitigate such forms of market risk. Our market risks have not changed significantly from those disclosed in the Form 10-K.

## Controls and procedures

As filed, 1,682 characters.

### Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, including this Report, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer (“CEO”) and principal financial officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, including the Company’s CEO and CFO, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Report and, based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s most recently completed quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 192 characters.

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K included in Part I Item 1A - *Risk Factors* for the year ended December 31, 2022.

Filed Nov 7, 2023.
Source: SEC EDGAR, the filing index for accession 0001674335-23-000168. Last ingested by Listed: Nov 12, 2026, 17:37 ET. No prices; not investment advice.