SEC Info - JELD-WEN Holding, Inc. - ‘10-Q’ for 9/24/22

(amounts in thousands, except share and per share amounts)

Amount

Preferred stock, $ i i 0.01 / par value per share

i —

Common stock, $ i i 0.01 / par value per share

Balance at beginning of period

i 85,857,994

i 859

i 99,131,782

i 991

Shares issued for exercise/vesting of share-based compensation awards

i 134,218

i 1

i 251,952

i 2

Shares repurchased

( i 1,641,084)

( i 17)

( i 7,762,169)

( i 77)

Shares surrendered for tax obligations for employee share-based transactions

( i 19,592)

i —

Balance at period end

i 84,331,536

i 843

i 91,621,565

i 916

Additional paid-in capital

Balance at beginning of period

i 730,963

i 706,787

Shares issued for exercise/vesting of share-based compensation awards

i —

i 3,021

Shares surrendered for tax obligations for employee share-based transactions

( i 341)

i —

Amortization of share-based compensation

( i 316)

i 6,328

Balance at period end

i 730,306

i 716,136

Employee stock notes

Balance at beginning of period

( i 673)

Net issuances, payments and accrued interest on notes

i —

Balance at period end

( i 673)

Balance at period end

i 729,633

i 715,463

Retained earnings

Balance at beginning of period

i 155,331

i 400,783

Shares repurchased

( i 25,274)

( i 221,017)

Net (loss) income

( i 33,192)

i 40,542

Balance at period end

i 96,865

i 220,308

Accumulated other comprehensive income (loss)

Balance at beginning of period

( i 149,973)

( i 81,435)

Foreign currency adjustments

( i 55,196)

( i 26,895)

Unrealized gain on interest rate hedges

i 2,341

i 64

Net actuarial pension gain

i 583

i 2,003

Balance at period end

( i 202,245)

( i 106,263)

Total shareholders’ equity at period end

i 625,096

i 830,424

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

JELD-WEN HOLDING, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

Nine Months Ended

(amounts in thousands, except share and per share amounts)

Amount

Preferred stock, $ i i 0.01 / par value per share

i —

Common stock, $ i i 0.01 / par value per share

Balance at beginning of period

i 90,193,550

i 902

i 100,806,068

i 1,008

Shares issued for exercise/vesting of share-based compensation awards

i 1,112,005

i 11

i 612,760

i 6

Shares repurchased

( i 6,848,356)

( i 69)

( i 9,749,810)

( i 97)

Shares surrendered for tax obligations for employee share-based transactions

( i 125,663)

( i 1)

( i 47,453)

( i 1)

Balance at period end

i 84,331,536

i 843

i 91,621,565

i 916

Additional paid-in capital

Balance at beginning of period

i 720,124

i 691,360

Shares issued for exercise/vesting of share-based compensation awards

i 2,000

i 5,344

Shares surrendered for tax obligations for employee share-based transactions

( i 2,764)

( i 1,277)

Amortization of share-based compensation

i 10,946

i 20,709

Balance at period end

i 730,306

i 716,136

Employee stock notes

Balance at beginning of period

( i 673)

Net issuances, payments and accrued interest on notes

i —

Balance at period end

( i 673)

Balance at period end

i 729,633

i 715,463

Retained earnings

Balance at beginning of period

i 215,611

i 371,462

Shares repurchased

( i 130,852)

( i 277,891)

Net income

i 12,106

i 126,737

Balance at period end

i 96,865

i 220,308

Accumulated other comprehensive income (loss)

Balance at beginning of period

( i 93,746)

( i 58,693)

Foreign currency adjustments

( i 121,457)

( i 54,600)

Unrealized gain on interest rate hedges

i 11,464

i 1,502

Net actuarial pension gain

i 1,494

i 5,528

Balance at period end

( i 202,245)

( i 106,263)

Total shareholders’ equity at period end

i 625,096

i 830,424

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements

JELD-WEN HOLDING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months Ended

(amounts in thousands)

OPERATING ACTIVITIES

Net income

i 12,106

i 126,737

Adjustments to reconcile net income to cash used in operating activities:

Depreciation and amortization

i 97,624

i 103,336

Deferred income taxes

i 9,623

( i 2,701)

Net loss on disposition of assets

i 353

i 923

Goodwill impairment

i 54,885

i —

Adjustment to carrying value of assets

i 534

i 1,916

Amortization of deferred financing costs

i 2,298

i 2,296

Loss on extinguishment of debt

i —

i 1,001

Stock-based compensation

i 10,946

i 20,709

Amortization of U.S. pension expense

i 1,083

i 6,975

Recovery of cost from interest received on impaired notes

( i 13,953)

i —

Other items, net

i 41,859

( i 4,335)

Net change in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable

( i 166,610)

( i 123,860)

Inventories

( i 146,992)

( i 98,790)

Other assets

( i 31,143)

( i 14,683)

Accounts payable and accrued expenses

i 67,134

i 114,109

Change in short term and long-term tax liabilities

( i 13,173)

i 1,651

Net cash (used in) provided by operating activities

( i 73,426)

i 135,284

INVESTING ACTIVITIES

Purchases of property and equipment

( i 53,070)

( i 59,155)

Proceeds from sale of property and equipment

i 1,190

i 3,141

Purchase of intangible assets

( i 4,392)

( i 14,576)

Recovery of cost from interest received on impaired notes

i 13,953

i —

Cash received for notes receivable

i 79

i 2,132

Change in securities for deferred compensation plan

( i i 486 / )

i —

Net cash used in investing activities

( i 42,726)

( i 68,458)

FINANCING ACTIVITIES

Change in long-term debt

i 84,775

( i 72,243)

Common stock issued for exercise of options

i 2,011

i 5,350

Common stock repurchased

( i 131,987)

( i 277,988)

Payments to tax authorities for employee share-based compensation

( i 2,657)

( i 1,278)

Net cash used in financing activities

( i 47,858)

( i 346,159)

Effect of foreign currency exchange rates on cash

( i 31,732)

( i 12,336)

Net decrease in cash and cash equivalents

( i 195,742)

( i 291,669)

Cash, cash equivalents and restricted cash, beginning

i 396,890

i 736,594

Cash, cash equivalents and restricted cash, ending

i 201,148

i 444,925

For further information see Note 21 - Supplemental Cash Flow.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

JELD-WEN HOLDING, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. i Description of Company and Summary of Significant Accounting Policies

Nature of Business – JELD-WEN Holding, Inc., along with its subsidiaries, is a vertically integrated global manufacturer and distributor of windows, doors, and other building products that derives substantially all its revenues from the sale of its door and window products. Unless otherwise specified or the context otherwise requires, all references in these notes to “JELD-WEN,” “we,” “us,” “our,” or the “Company” are to JELD-WEN Holding, Inc. and its subsidiaries.

We have facilities located in the U.S., Canada, Europe, Australia, Asia, and Mexico. Our products are marketed primarily under the JELD-WEN brand name in the U.S. and Canada and under JELD-WEN and a variety of acquired brand names in Europe, Australia, and Asia.

Our revenues are affected by the level of new housing starts and remodeling activity in each of our markets. Our sales typically follow seasonal new construction and repair and remodeling industry patterns. The peak season for home construction and remodeling in many of our markets generally corresponds with the second and third calendar quarters, and therefore, sales volume is typically higher during those quarters. Our first and fourth quarter sales volumes are generally lower due to reduced repair and remodeling activity and reduced activity in the building and construction industry as a result of colder and more inclement weather in certain areas of our geographic end markets.

Basis of Presentation – The accompanying unaudited consolidated financial statements as of September 24, 2022 and for the three and nine months ended September 24, 2022 and September 25, 2021, respectively, have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the SEC. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company’s financial position for the periods presented. The results for the three and nine months ended September 24, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or any other period. The accompanying consolidated balance sheet as of December 31, 2021 was derived from audited financial statements included in our Annual Report on Form 10-K. The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

All U.S. dollar and other currency amounts, except per share amounts, are presented in thousands unless otherwise noted.

i Fiscal Year – We operate on a fiscal calendar year, and each interim quarter is comprised of two 4-week periods and one 5-week period, with each week ending on a Saturday. Our fiscal year always begins on January 1 and ends on December 31. As a result, our first and fourth quarters may have more or fewer days included than a traditional 91-day fiscal quarter.

i Use of Estimates – The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and allocations that affect amounts reported in the consolidated financial statements and related notes. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets including goodwill and other intangible assets, employee benefit obligations, income tax uncertainties, contingent assets and liabilities, provisions for bad debt, inventory, warranty liabilities, legal claims, valuation of derivatives, environmental remediation, and claims relating to self-insurance. Actual results could differ due to the uncertainty inherent in the nature of these estimates.

COVID-19 – The CARES Act in the U.S. and similar legislation in other jurisdictions includes measures that assisted companies in responding to the COVID-19 pandemic. These measures consisted primarily of cash assistance to support employment levels and deferment of remittance of certain non-income tax expense payments. The most significant impact was from the CARES Act in the U.S., which included a provision that allowed employers to defer the remittance of the employer portion of the social security tax relating to 2020. The deferred employment payment must be paid over two years. Original payment due dates were in 2021 and 2022, however updated guidance provided by the Internal Revenue Service in December 2021 allowed for these payments to be made during 2022 and 2023. The Company deferred $ i 20.9 million of the employer portion of social security tax in 2020, of which $ i 9.9 million was paid in the first quarter of 2022 and the remaining $ i 11.0 million is included in accrued payroll and benefits in the consolidated balance sheet as of September 24, 2022. As of December 31, 2021, the deferral $ i 20.9 million was equally recorded between accrued payroll and benefits and deferred credits and other liabilities in the consolidated balance sheet.

i Recent Accounting Standards – In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and

exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of LIBOR or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, to clarify the scope of ASU No. 2020-04. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. In May 2020, we elected the expedient within ASC 848 which allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modifications in their terms related to reference rate reform. In addition, ASC 848 allows for the option to change the method of assessing effectiveness upon a change in critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848. At this time, we have elected to continue the method of assessing effectiveness as documented in the original hedge documentation and apply the practical expedients related to probability to assume that the reference rate on the hypothetical derivative matches the reference rate on the hedging instrument. We plan to evaluate the remaining expedients for adoption, as applicable, when contracts are modified. We currently do not expect this guidance to have a material impact on our consolidated financial statements. Refer to Note 18 - Derivative Financial Instruments for additional disclosure information relating to our hedging activity.

We have considered the applicability and impact of all ASUs. We have assessed ASUs not listed above and have determined that they were either not applicable or were not expected to have a material impact on our financial statements.

Note 2. i Accounts Receivable

We sell our manufactured products to a large number of customers, primarily in the residential housing construction and remodel sectors, broadly dispersed across many domestic and foreign geographic regions. We assess the credit risk relating to our accounts receivable based on quantitative and qualitative factors, primarily historical credit collections within each region where we have operations. We perform ongoing credit evaluations of our customers to minimize credit risk. We do not usually require collateral for accounts receivable, but will require advance payment, guarantees, a security interest in the products sold to a customer, and/or letters of credit in certain situations. Customer accounts receivable converted to notes receivable are collateralized by inventory or other collateral.

At September 24, 2022 and December 31, 2021, we had an allowance for credit losses of $ i 16.4 million and $ i 10.2 million, respectively.

Note 3. i Inventories

Inventories are stated at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor, and manufacturing overhead costs.


(amounts in thousands)	September 24, 2022		December 31, 2021
Raw materials	$	i 560,913	$	i 478,566
Work in process	i 36,270		i 36,065
Finished goods	i 128,676		i 101,340
Total inventories	$	i 725,859	$	i 615,971

Note 4. i Property and Equipment, Net


(amounts in thousands)	September 24, 2022		December 31, 2021
Property and equipment	$	i 2,076,156	$	i 2,137,861
Accumulated depreciation	( i 1,330,048)		( i 1,339,057)
Total property and equipment, net	$	i 746,108	$	i 798,804

We monitor all property and equipment for any indicators of potential impairment whenever events or changes in circumstances indicate the carrying amount of the corresponding asset group may not be recoverable. We recorded i no impairment charges for the three months ended September 24, 2022 and $ i 0.5 million for the nine months ended September 24, 2022. We recorded impairment charges of $ i 0.7 million and $ i 1.8 million for the three and nine months ended September 25, 2021.

The effect on our carrying value of property and equipment due to currency translations for foreign property and equipment, net, was a decrease of $ i 37.6 million as of September 24, 2022 compared to December 31, 2021.

Depreciation expense was recorded as follows:

Three Months Ended

Nine Months Ended

(amounts in thousands)

Cost of sales

i 22,793

i 22,777

i 67,797

i 69,020

Selling, general and administrative

i 1,629

i 2,150

i 5,057

i 6,944

Total depreciation expense

i 24,422

i 24,927

i 72,854

i 75,964

Note 5. i Goodwill

The following table summarizes the changes in goodwill by reportable segment:

(amounts in thousands)

North
America

Europe

Australasia

Total
Reportable
Segments

Balance as of December 31, 2021

i 182,645

i 278,668

i 83,900

i 545,213

Impairment

i —

( i 54,885)

i —

( i 54,885)

Currency translation

( i 357)

( i 39,580)

( i 7,097)

( i 47,034)

Balance as of September 24, 2022

i 182,288

i 184,203

i 76,803

i 443,294

We test goodwill for impairment annually during the fourth quarter for all of our reporting units, and more frequently if events or circumstances warrant such a review. We estimate the fair value of the reporting units using discounted cash flow projections. In determining the fair value of the reporting units, we make significant assumptions and estimates about the extent and timing of future cash flows all of which are considered Level 3 inputs, including revenue growth rates, projected segment EBITDA, discount rates, capital expenditures, and terminal growth rates as well as an estimate of economic and market conditions over the forecast period. If the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment charge is recorded for the difference, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit.

During the quarter ended September 24, 2022, management identified various qualitative and quantitative factors which collectively indicated a triggering event had occurred within our North America and Europe reporting units. These factors included the macroeconomic environment in each region including increasing interest rates, persistent inflation, and operational inefficiencies attributable to ongoing global supply chain disruptions, the continuing geopolitical environment in Europe associated with the war in Ukraine, and foreign exchange fluctuations. All of these factors have negatively impacted our business performance.

Based upon the results of our interim impairment analysis, we concluded that the carrying value of our Europe reporting unit exceeded its fair value, and we recorded a goodwill impairment charge of $ i 54.9 million, representing a partial impairment of goodwill assigned to the Europe reporting unit. In addition, we determined the fair value of our North America reporting unit exceeded its book value by i 14% and concluded the carrying value of our North America reporting unit was not impaired. There can be no assurance the estimates and assumptions used in the interim impairment analysis,

particularly our long-term financial projections, will prove to be accurate, and as a result, a future goodwill impairment charge could have a material effect on the Company’s consolidated financial position and results of operations.

Note 6. i Intangible Assets, Net

The cost and accumulated amortization values of our intangible assets were as follows:

(amounts in thousands)

Cost

Accumulated
Amortization

Net
Book Value

Customer relationships and agreements

i 135,048

( i 74,535)

i 60,513

Software

i 117,272

( i 42,037)

i 75,235

Trademarks and trade names

i 52,092

( i 11,638)

i 40,454

Patents, licenses and rights

i 42,727

( i 25,074)

i 17,653

Total amortizable intangibles

i 347,139

( i 153,284)

i 193,855

(amounts in thousands)

Cost

Accumulated
Amortization

Net
Book Value

Customer relationships and agreements

i 145,940

( i 73,635)

i 72,305

Software

i 118,114

( i 35,816)

i 82,298

Trademarks and trade names

i 55,806

( i 10,771)

i 45,035

Patents, licenses and rights

i 46,353

( i 23,810)

i 22,543

Total amortizable intangibles

i 366,213

( i 144,032)

i 222,181

The effect on our carrying value of intangible assets due to currency translations for foreign intangible assets was a decrease of $ i 8.5 million as of September 24, 2022 compared to December 31, 2021.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the corresponding asset group may not be recoverable. i Intangible assets that become fully amortized are removed from the accounts in the period that they become fully amortized. Amortization expense was recorded as follows:

Three Months Ended

Nine Months Ended

(amounts in thousands)

Amortization expense

i 7,810

i 8,373

i 23,993

i 24,727

Note 7. i Accrued Expenses and Other Current Liabilities


(amounts in thousands)	September 24, 2022		December 31, 2021
Accrued sales and advertising rebates	$	i 88,245	$	i 90,623
Current portion of operating lease liability	i 42,855		i 43,880
Non-income related taxes	i 33,598		i 25,030
Deferred revenue and customer deposits	i 26,484		i 25,568
Accrued freight	i 23,081		i 19,020
Current portion of warranty liability (Note 8)	i 22,494		i 23,523
Accrued interest payable	i 18,453		i 3,633
Accrued expenses	i 18,453		i 18,636
Current portion of accrued claim costs relating to self-insurance programs	i 17,543		i 14,352
Accrued income taxes payable	i 17,058		i 16,237
Current portion of restructuring accrual	i 4,934		i 171
Current portion of derivative liability (Note 18)	i 3,414		i 5,527
Legal claims provision	i 3,036		i 3,476
Total accrued expenses and other current liabilities	$	i 319,648	$	i 289,676

The legal claims provision relates primarily to contingencies associated with the ongoing legal matters disclosed in Note 20 - Commitments and Contingencies.

The accrued sales and advertising rebates, accrued interest payable, accrued freight, and non-income related taxes can fluctuate significantly period-over-period due to timing of payments.

Prior period balances in the table above have been reclassified to conform to current period presentation.

Note 8. i Warranty Liability

Warranty terms vary from i one year to lifetime on certain window and door components. Warranties are normally limited to servicing or replacing defective components for the original customer. Product defects arising within six months of sale are classified as manufacturing defects and are not included in the current period expense below. Some warranties are transferable to subsequent owners and are either limited to i 10 years from the date of manufacture or require pro-rata payments from the customer. A provision for estimated warranty costs is recorded at the time of sale based on historical experience and is periodically adjusted to reflect actual experience.

An analysis of our warranty liability is as follows:

(amounts in thousands)

Balance as of January 1

i 54,860

i 52,296

Current period charges

i 21,326

i 21,143

Experience adjustments

i 384

i 3,306

Payments

( i 21,169)

( i 23,327)

Currency translation

( i 1,451)

( i 203)

Balance at period end

i 53,950

i 53,215

Current portion

( i 22,494)

( i 22,545)

Long-term portion

i 31,456

i 30,670

The most significant component of our warranty liability is in the North America segment, which totaled $ i 46.2 million at September 24, 2022, after discounting future estimated cash flows at rates between i 0.53% and i 2.75%. Without discounting, the liability would have been higher by approximately $ i 2.8 million.

Note 9. i Long-Term Debt

Our long-term debt, net of original issue discount and unamortized debt issuance costs, consisted of the following:

(amounts in thousands)

Interest Rate

Senior Secured Notes and Senior Notes

i 4.63% - i 6.25%

i 1,050,000

Term loans

i 1.30% - i 4.74%

i 544,736

i 547,598

Revolving credit facilities

i 3.81% - i 4.01%

i 115,000

i —

Finance leases and other financing arrangements

i 1.25% - i 6.17%

i 96,025

i 97,874

Mortgage notes

i 2.22% - i 2.72%

i 21,009

i 25,411

Total Debt

i 1,826,770

i 1,720,883

Unamortized debt issuance costs and original issue discounts

( i 12,411)

( i 14,626)

Current maturities of long-term debt

( i 40,086)

( i 38,561)

Long-term debt

i 1,774,273

i 1,667,696

Summaries of our significant changes to outstanding debt agreements as of September 24, 2022 are as follows:

Senior Secured Notes and Senior Notes

In May 2020, we issued $ i 250.0 million of Senior Secured Notes bearing interest at i 6.25% and maturing in May 2025 in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The proceeds were net of fees and expenses associated with debt issuance, including an underwriting fee of i 1.25%. Interest is payable semiannually, in arrears, each May and November.

In December 2017, we issued $ i 800.0 million of unsecured Senior Notes in i two tranches: $ i 400.0 million bearing interest at i 4.63% and maturing in December 2025, and $ i 400.0 million bearing interest at i 4.88% and maturing in December 2027 in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

Term Loans

U.S. Facility - Initially executed in October 2014, we amended the Term Loan Facility in July 2021 to, among other things, extend the maturity date from December 2024 to July 2028 and provide additional covenant flexibility. Pursuant to the amendment, certain existing and new lenders advanced $ i 550.0 million of replacement term loans, the proceeds of which were used to prepay in full the amount outstanding under the previously existing term loans. The replacement term loans bear interest at LIBOR (subject to a floor of i 0.00%) plus a margin of i 2.00% to i 2.25% depending on JWI’s corporate credit ratings. In addition, the amendment also modifies certain other terms and provisions of the Term Loan Facility. Voluntary prepayments of the replacement term loans are permitted at any time, in certain minimum principal amounts, but were subject to a i 1.00% premium during the first six months. The amendment requires i 0.25% of the initial principal to be repaid quarterly until maturity. As a result of this amendment, we recognized debt extinguishment costs of $ i 1.3 million, which included $ i 1.0 million of unamortized debt issuance costs and original discount fees. As of the date of the amendment, the outstanding principal balance, net of original issue discount, was $ i 548.6 million. As of September 24, 2022, the outstanding principal balance, net of original issue discount, was $ i 543.3 million.

In May 2020, we entered into interest rate swap agreements with a weighted average fixed rate of i 0.395% paid against one-month LIBOR floored at i 0.00% with outstanding notional amounts aggregating to $ i 370.0 million corresponding to that amount of the debt outstanding under our Term Loan Facility. The interest rate swap agreements are designated as cash flow hedges of a portion of the interest obligations on our Term Loan Facility borrowings and mature in December 2023. See Note 18 - Derivative Financial Instruments for additional information on our derivative assets and liabilities.

Australia Facility - During the second quarter of 2021, we repaid the AUD i 50.0 million ($ i 38.4 million) outstanding principal balance of the floating rate revolving loan facility and terminated the term loan commitment.

Revolving Credit Facilities

ABL Facility - In July 2021, we amended the ABL Facility to, among other things, extend the maturity date from December 2022 to July 2026, increase the aggregate commitment to $ i 500.0 million, amend the interest rate grid applicable to the loans thereunder, provide additional covenant flexibility, and conform certain terms and provisions to the Term Loan Facility. Pursuant to the amendment, the amount allocated to U.S. borrowers was increased to $ i 465.0 million. The amount allocated to Canadian borrowers was maintained at $ i 35.0 million. Borrowings under the ABL Facility bear, at the borrower’s option, interest at either a base rate plus a margin of i 0.25% to i 0.50% depending on excess availability or LIBOR plus a margin of i 1.25% to i 1.50% depending on excess availability. As of September 24, 2022, we had $ i 115.0 million of outstanding borrowings, $ i 34.6 million in letters of credit and $ i 347.4 million available under the ABL Facility.

Australia Senior Secured Credit Facility - In June 2019, we amended the Australia Senior Secured Credit Facility, reallocating availability from the Australia Term Loan Facility and collapsing the floating rate revolving loan facility into an AUD i 35.0 million interchangeable facility to be used for guarantees, asset financing, and loans of twelve months or less. The interchangeable facility does not have a set maturity date but is instead subject to an annual review each June.

In May 2020, we amended the Australia Senior Secured Credit Facility to relax certain financial covenants. The amended non-term loan portion of the facility bore line fees of i 0.70%, compared to line fees of i 0.50% under the previous amendment. The amendment also provided for a supplemental AUD i 30.0 million floating rate revolving loan facility.

In December 2021, we amended the Australia Senior Secured Credit Facility to reinstate maintenance financial covenant ratios to pre-pandemic thresholds and renewed the facility through its next annual review. The amended facility includes line fees of i 0.50%, compared to line fees of i 0.70% under the previous amendment. As of September 24, 2022, we had AUD i 23.0 million ($ i 15.2 million) available under this facility.

The Australia Senior Secured Credit Facility is secured by guarantees of JWA and its subsidiaries, fixed and floating charges on the assets of JWA group, and mortgages on certain real properties owned by the JWA group. The combined agreement requires that JWA maintain certain financial ratios, including a minimum consolidated interest coverage ratio and a maximum consolidated debt to EBITDA ratio. The agreement limits dividends and repayments of intercompany loans where the JWA group is the borrower and limits loans or other financial accommodations to non-obligor entities.

At September 24, 2022, we had combined borrowing availability of $ i 362.6 million under our revolving credit facilities.

Mortgage Notes – In December 2007, we entered into i thirty-year mortgage notes secured by land and buildings in Denmark with principal payments which began in 2018. As of September 24, 2022, we had DKK i 159.2 million ($ i 21.0 million) outstanding under these notes.

Finance leases and other financing arrangements – In addition to finance leases, we include insurance premium financing arrangements and loans secured by equipment in this category. As of September 24, 2022, we had $ i 96.0 million outstanding in this category, with maturities ranging from 2022 to 2028.

As of September 24, 2022, we were in compliance with the terms of all of our credit facilities and the indentures governing the Senior Notes and Senior Secured Notes.

Note 10. i Income Taxes

The Company previously completed its accounting for the income tax effects of the Tax Act. We have considered ongoing developments released through the date hereof and determined that they have no material impact on our tax accounts for the nine months ended September 24, 2022. Final guidance, once issued, may materially affect our conclusions regarding the net related effects of the Tax Act on our unaudited consolidated financial statements. Until then, management will continue to monitor and work with its tax advisors to interpret any guidance issued.

The effective income tax rate for continuing operations was ( i 100.8)% and i 72.4% for the three and nine months ended September 24, 2022, respectively, compared to ( i 7.8)% and i 19.0% for the three and nine months ended September 25, 2021, respectively. In accordance with ASC 740-270, we recorded tax expense of $ i 16.7 million and $ i 31.7 million in the three and nine months ended September 24, 2022, respectively, compared to a tax benefit of $ i 2.9 million and tax expense of $ i 29.8 million from operations in the three and nine months ended September 25, 2021, respectively, by applying our estimated annual effective tax rate to year-to-date income for includable entities during the respective periods. The effective tax rate for the three and nine months ended September 24, 2022 is impacted by goodwill impairment charges in the third quarter of 2022. Our estimated annual effective tax rate for both years includes the impact of the tax on GILTI. The application of the estimated annual effective tax rate in interim periods may result in a significant variation in the customary relationship between income tax expense and pretax accounting income due to the seasonality of our global

business. Entities that are currently generating losses and for which there is a full valuation allowance are excluded from the worldwide effective tax rate calculation and are calculated separately.

The impact of significant discrete items is separately recognized in the quarter in which they occur. The tax expense for discrete items included in the tax provision for continuing operations for the three months ended September 24, 2022 was an expense of $ i 1.9 million compared to a benefit of $ i 9.3 million for the three months ended September 25, 2021. The discrete tax expense amounts for the three months ended September 24, 2022 were comprised primarily of $ i 2.8 million of tax expense attributable to share-based compensation, partially offset by $ i 1.1 million of tax benefit attributed to return-to-provision adjustments. The discrete tax benefit amounts for the three months ended September 25, 2021 were comprised primarily of $ i 12.3 million of tax benefit attributed to return-to-provision adjustments, primarily related to the impact of GILTI, and $ i 2.0 million of tax benefit attributable to research and development tax credits, partially offset by $ i 4.4 million of tax expense attributable to removing our assertion on certain undistributed foreign earnings, which is discussed below, and $ i 0.4 million of tax expense attributable to interest expense on uncertain tax positions.

The tax benefit related to discrete items included in the tax provision for continuing operations for the nine months ended September 24, 2022 was $ i 4.5 million compared to $ i 10.9 million for the nine months ended September 25, 2021. The discrete tax benefits for the nine months ended September 24, 2022 were comprised primarily of $ i 9.5 million of tax benefit attributable to the release of valuation allowance on state net operating losses and $ i 1.2 million of tax benefit attributable to return-to-provision adjustments, partially offset by $ i 3.4 million of tax expense attributable to share-based compensation and $ i 2.6 million of tax expense attributable to current period interest expense on uncertain tax positions. The discrete benefit amounts for the nine months ended September 25, 2021 were comprised primarily of $ i 12.2 million of tax benefit attributed to return-to-provision adjustments, primarily related to the impact of GILTI, $ i 2.0 million of tax benefit attributable to research and development tax credits, $ i 1.8 million of tax benefit related to future changes to the UK tax rate enacted in the period, $ i 0.4 million of tax benefit attributable to share-based compensation, partially offset by $ i 4.4 million of tax expense attributable to removing our assertion on certain undistributed foreign earnings, which is discussed below, and $ i 1.0 million of tax expense attributable to interest expense on uncertain tax positions.

Under ASC 740-10, we provide for uncertain tax positions and the related interest expense by adjusting unrecognized tax benefits and accrued interest accordingly. We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. We had unrecognized tax benefits without regard to accrued interest of $ i 27.0 million and $ i 26.8 million as of September 24, 2022 and December 31, 2021, respectively.

In the third quarter of 2022, the Company repatriated $ i 82.2 million from certain foreign subsidiaries and does not anticipate any additional remittances in the foreseeable future. For additional explanation regarding current operating challenges within our European segment and reporting unit, refer to Note 5 - Goodwill in our financial statements. As a result, the Company has asserted that its future earnings generated in Europe in excess of previously taxed earnings are permanently reinvested as of September 24, 2022 and will not record deferred taxes on such amounts in future periods.

Note 11. i Segment Information

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 determined that we have i three reportable segments, organized and managed principally by geographic region. Our reportable segments are North America, Europe, and Australasia. We report all other business activities in Corporate and unallocated costs. Factors considered in determining the i three reportable segments include the nature of business activities, the management structure accountable directly to the CODM, the discrete financial information available and the information regularly reviewed by the CODM. Management reviews net revenues and Adjusted EBITDA to evaluate segment performance and allocate resources. We define Adjusted EBITDA as net income (loss), adjusted for the following items: loss from discontinued operations, net of tax; equity earnings of non-consolidated entities; income tax (benefit) expense; depreciation and amortization; interest expense, net; impairment and restructuring charges; gain on previously held shares of equity investment; (gain) loss on sale of property and equipment; share-based compensation expense; non-cash foreign exchange transaction/translation (income) loss; other items; other non-cash items; and costs related to debt restructuring and debt refinancing.

The following tables set forth certain information relating to our segments’ operations:

(amounts in thousands)

North
America

Europe

Australasia

Total Operating
Segments

Corporate
and
Unallocated
Costs

Total
Consolidated

Three Months Ended September 24, 2022

Total net revenues

i 835,319

i 305,011

i 165,213

i 1,305,543

—

i 1,305,543

Intersegment net revenues

( i 185)

( i 120)

( i 9,428)

( i 9,733)

—

( i 9,733)

Net revenues from external customers

i 835,134

i 304,891

i 155,785

i 1,295,810

i —

i 1,295,810

Goodwill impairment

i —

( i 54,885)

i —

( i 54,885)

i —

( i 54,885)

Impairment and restructuring charges

i 814

i 3,411

i 26

i 4,251

i 2,328

i 6,579

Adjusted EBITDA

i 105,291

i 18,086

i 19,940

i 143,317

( i 26,788)

i 116,529

Three Months Ended September 25, 2021

Total net revenues

i 676,937

i 324,169

i 151,382

i 1,152,488

—

i 1,152,488

Intersegment net revenues

( i 144)

( i 1,615)

( i 4,144)

( i 5,903)

—

( i 5,903)

Net revenues from external customers

i 676,793

i 322,554

i 147,238

i 1,146,585

i —

i 1,146,585

Impairment and restructuring charges

i 114

i 314

i 169

i 597

( i 21)

i 576

Adjusted EBITDA

i 76,889

i 23,780

i 17,565

i 118,234

( i 19,362)

i 98,872

(amounts in thousands)

North
America

Europe

Australasia

Total Operating
Segments

Corporate
and
Unallocated
Costs

Total
Consolidated

Nine Months Ended September 24, 2022

Total net revenues

i 2,397,370

i 968,364

i 452,597

i 3,818,331

—

i 3,818,331

Intersegment net revenues

( i 786)

( i 154)

( i 19,591)

( i 20,531)

—

( i 20,531)

Net revenues from external customers

i 2,396,584

i 968,210

i 433,006

i 3,797,800

i —

i 3,797,800

Goodwill impairment

i —

( i 54,885)

i —

( i 54,885)

i —

( i 54,885)

Impairment and restructuring charges

i 5,565

i 3,945

i 79

i 9,589

i 2,287

i 11,876

Adjusted EBITDA

i 265,848

i 52,824

i 46,184

i 364,856

( i 42,283)

i 322,573

Nine Months Ended September 25, 2021

Total net revenues

i 2,057,081

i 995,451

i 447,379

i 3,499,911

—

i 3,499,911

Intersegment net revenues

( i 545)

( i 2,635)

( i 11,948)

( i 15,128)

—

( i 15,128)

Net revenues from external customers

i 2,056,536

i 992,816

i 435,431

i 3,484,783

i —

i 3,484,783

Impairment and restructuring charges

i 1,030

i 1,441

i 253

i 2,724

( i 76)

i 2,648

Adjusted EBITDA

i 272,002

i 92,358

i 48,759

i 413,119

( i 68,094)

i 345,025

Reconciliations of net income to Adjusted EBITDA are as follows:

Three Months Ended

Nine Months Ended

(amounts in thousands)

Net income (loss)

( i 33,192)

i 40,542

i 12,106

i 126,737

Income tax expense (benefit)

i 16,665

( i 2,946)

i 31,698

i 29,772

Depreciation and amortization

i 32,546

i 33,661

i 97,624

i 103,336

Interest expense, net

i 21,138

i 19,377

i 59,714

i 56,692

Goodwill impairment

i 54,885

i —

i 54,885

i —

Impairment and restructuring charges (1)

i 9,747

i 1,124

i 15,066

i 3,466

Loss on sale of property and equipment

i 76

i 561

i 265

i 993

Share-based compensation expense

( i 316)

i 6,328

i 10,946

i 20,709

Non-cash foreign exchange transaction/translation loss (income)

i 1,620

( i 2,812)

i 7,901

( i 16,308)

Other items (2)

i 13,240

i 1,695

i 31,207

i 18,286

Other non-cash items (3)

i 120

i —

i 1,161

i —

Costs relating to debt restructuring and debt refinancing

i —

i 1,342

i —

i 1,342

Adjusted EBITDA

i 116,529

i 98,872

i 322,573

i 345,025

(1)Impairment and restructuring charges consist of (i) impairment and restructuring charges that are included in our accompanying unaudited consolidated statements of operations plus (ii) additional charges relating to inventory and/or manufacturing of our products that are included in cost of sales in our accompanying unaudited consolidated statements of operations were $ i 3,168 and $ i 548 for the three months ended September 24, 2022 and September 25, 2021, respectively, and $ i 3,190 and $ i 818 for the nine months ended September 24, 2022 and September 25, 2021, respectively. For further explanation of impairment and restructuring charges that are included in our unaudited consolidated statements of operations, see Note 15 - Impairment and Restructuring Charges in our financial statements.

(2)Other non-recurring items not core to ongoing business activity include: (i) in the three months ended September 24, 2022 (1) $ i 6,458 in legal and professional expenses, primarily relating to litigation, M&A evaluations, and strategic transformation initiatives, (2) $ i 6,290 in facility closure, consolidation, and other related costs, (3) $ i 3,243 relating primarily to exit costs for executives, and (4) ($ i 2,884) in adjustments related to fire damage and downtime at one of our facilities; (ii) in the three months ended September 25, 2021 (1) $ i 357 in legal and professional expenses relating primarily to litigation and (2) $ i 1,122 in facility closure, consolidation, startup, and other related costs; (iii) in the nine months ended September 24, 2022 (1) $ i 14,584 in legal and professional expenses, primarily relating to litigation, M&A evaluations, and strategic transformation initiatives, (2) $ i 11,788 in facility closure, consolidation, and other related costs, (3) $ i 3,243 relating primarily to exit costs for executives, (4) $ i 1,898 in compensation and non-income taxes associated with exercises of legacy equity awards, and (5) ($ i 436) in adjustments related to fire damage and downtime at one of our facilities; (iv) in the nine months ended September 25, 2021 (1) $ i 15,702 in legal and professional expenses relating primarily to litigation and (2) $ i 1,905 in facility closure, consolidation, startup, and other related costs.

(3)Other non-cash items include $ i 148 and i 1,196 for unrealized mark-to-market losses from other derivatives in the three and nine months ended September 24, 2022, respectively.

Note 12. i Capital Stock

Preferred Stock - Our Board of Directors is authorized to issue Preferred Stock from time to time in one or more series and with such rights, privileges, and preferences as the Board of Directors shall from time to time determine. We have not issued any shares of Preferred Stock.

Common Stock - Common Stock includes the basis of shares outstanding plus amounts recorded as additional paid-in capital. Shares outstanding exclude the shares issued to the Employee Benefit Trust that are considered similar to treasury shares and total i i 193,941 / shares at both September 24, 2022 and December 31, 2021 with a total original issuance value of $ i i 12.4 / million.

We record share repurchases on their trade date and reduce shareholders’ equity and increase accounts payable. Repurchased shares are retired, and the excess of the repurchase price over the par value of the shares is charged to retained earnings.

On July 27, 2021, our Board of Directors increased our previous repurchase authorization to a total of $ i 400.0 million with no expiration date.

On July 28, 2022, our Board of Directors authorized a new share repurchase program, replacing our previous share repurchase authorization, with an aggregate value of $ i 200.0 million and no expiration date. As of September 24, 2022, there have been no share repurchases under this program.

During the three and nine months ended September 24, 2022, we repurchased i 1,641,084 and i 6,848,356, respectively, at an average price of $ i 15.41 and $ i 19.12, respectively. During the three and nine months ended September 25, 2021, we repurchased i 7,762,169 and i 9,749,810 shares of our Common Stock, respectively, at an average price of $ i 28.48 and $ i 28.51, respectively.

Note 13. i Earnings Per Share

The basic and diluted income (loss) per share calculations were determined based on the following share data:

Three Months Ended

Nine Months Ended

Weighted average outstanding shares of Common Stock basic

i 84,519,095

i 95,783,839

i 87,121,448

i 98,562,479

Restricted stock units, performance share units, and options to purchase Common Stock

i —

i 2,039,819

i 895,401

i 2,068,646

Weighted average outstanding shares of Common Stock diluted

i 84,519,095

i 97,823,658

i 88,016,849

i 100,631,125

For the three months ended September 24, 2022, we had net losses from operations. As a result, no potentially dilutive securities were included in the denominator for computing diluted loss per share as their inclusion would be antidilutive.

The following table provides the securities that could potentially dilute basic earnings per share in the future but were not included in the computation of diluted income per share as their inclusion would be anti-dilutive:

Three Months Ended

Nine Months Ended

Common Stock options

i 1,720,071

i 1,289,635

i 1,704,101

i 1,157,780

Restricted stock units

i 1,585,315

i 11,123

i 560,922

i 9,699

Performance share units

i 133,684

i —

i 108,933

i 134,402

Note 14. i Stock Compensation

i i

The activity under our incentive plans for the periods presented are reflected in the following tables:

Three Months Ended

Weighted Average Exercise Price Per Share

Options granted

i —

Options canceled

i 575,698

i 26.08

i 24,434

i 30.30

Options exercised

i —

i 217,409

i 13.89

Weighted Average Grant Date Fair Value

RSUs granted

i 227,828

i 14.73

i 8,046

i 24.85

PSUs granted

i —

Nine Months Ended

Weighted Average Exercise Price Per Share

Options granted

i 310,554

i 24.17

i 309,902

i 29.01

Options canceled

i 753,723

i 26.23

i 50,036

i 29.20

Options exercised

i 156,380

i 11.91

i 370,982

i 14.35

Weighted Average Grant Date Fair Value

RSUs granted

i 1,367,828

i 21.64

i 650,655

i 29.10

PSUs granted

i 158,587

i 29.24

i 165,749

i 30.70

/ /

Stock-based compensation expense was ($ i 0.3) million and $ i 10.9 million for the three and nine months ended September 24, 2022, respectively, and $ i 6.3 million and $ i 20.7 million for the three and nine months ended September 25, 2021, respectively. The decrease in stock-based compensation expense during the three and nine months ended September 24, 2022 as compared to the respective prior year periods was primarily due to increased forfeitures across all equity awards from the departure of the CEO and corporate restructuring during the third quarter 2022, as disclosed in Note 15 - Impairment and Restructuring Charges in our financial statements. As of September 24, 2022, we had $ i 18.5 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the remaining weighted-average vesting period of i 1.48 years.

Note 15. i Impairment and Restructuring Charges

We engage in restructuring activities intended to improve productivity, operating margins, and working capital levels. Restructuring costs primarily relate to workforce reductions, repositioning of management structure, and costs associated with plant consolidations and closures. Asset impairments primarily relate to ROU assets and property and equipment held by operations impacted by restructuring.

The following table summarizes the restructuring and impairment charges for the periods indicated:

(amounts in thousands)

North
America

Europe

Australasia

Corporate
and
Unallocated
Costs

Total
Consolidated

Three Months Ended September 24, 2022

Restructuring costs

i 814

i 3,411

i 26

i 2,328

i 6,579

Impairments

i —

Total impairment and restructuring charges

i 814

i 3,411

i 26

i 2,328

i 6,579

Three Months Ended September 25, 2021

Restructuring costs

( i 30)

( i 191)

i 77

( i 21)

( i 165)

Impairments

i 144

i 505

i 92

i —

i 741

Total impairment and restructuring charges

i 114

i 314

i 169

( i 21)

i 576

(amounts in thousands)

North
America

Europe

Australasia

Corporate
and
Unallocated
Costs

Total
Consolidated

Nine Months Ended September 24, 2022

Restructuring costs

i 5,565

i 3,411

i 79

i 2,287

i 11,342

Impairments

i —

i 534

i —

i 534

Total impairment and restructuring charges

i 5,565

i 3,945

i 79

i 2,287

i 11,876

Nine Months Ended September 25, 2021

Restructuring costs

( i 34)

i 681

i 161

( i 76)

i 732

Impairments

i 1,064

i 760

i 92

i —

i 1,916

Total impairment and restructuring charges

i 1,030

i 1,441

i 253

( i 76)

i 2,648

/ i

The following is a summary of the restructuring accruals recorded and charges incurred:

(amounts in thousands)

Balance as of January 1

i 171

i 1,377

Current period charges

i 11,342

i 732

Payments

( i 6,396)

( i 1,653)

Currency translation

( i 183)

( i 50)

Balance at period end

i 4,934

i 406

Restructuring accruals are expected to be paid within the next 12 months and are included within accrued expenses and other current liabilities in the consolidated balance sheet.

Note 16. i Held for Sale

During 2021, the Company ceased the appeal process for its litigation with Steves & Sons, Inc. (“Steves”) further described in Note 20 - Commitments and Contingencies. As a result, we are required to divest the Company’s Towanda, PA operations (“Towanda”). As of September 24, 2022 and December 31, 2021, the assets and liabilities associated with the sale of Towanda qualify as held for sale. Since the Company will continue manufacturing door skins for its internal needs, the divestiture decision did not represent a strategic shift thereby precluding the divestiture as qualifying as a discontinued operation.

The assets and liabilities included within the summary below are expected to be disposed of within the next twelve months and are included in assets held for sale and liabilities held for sale in the accompanying balance sheet. The results of Towanda will continue to be reported within our North America operations until the divestiture is finalized.

In addition to Towanda, we have immaterial assets held for sale at points in time, primarily relating to property, plant and equipment from restructuring efforts, which have been classified as held for sale as of December 31, 2021.


(amounts in thousands)	September 24, 2022		December 31, 2021
Assets
Inventory	$	i 17,582	$	i 15,520
Other current assets	i 156		i 105
Property and equipment	i 39,243		i 35,870
Intangible assets	i 1,471		i 1,471
Goodwill	i 65,000		i 65,000
Operating lease assets	i 1,138		i 1,458
Assets held for sale	$	i 124,590	$	i 119,424

Liabilities
Accrued payroll and benefits	$	i 1,091	$	i 907
Accrued expenses and other current liabilities	i 6,064		i 3,945
Current maturities of long term debt	i 3		i 10
Long-term debt	i —		i 2
Operating lease liability	i 616		i 1,004
Liabilities held for sale	$	i 7,774	$	i 5,868

Note 17. i Other Income

The table below summarizes the amounts included in other income in the accompanying unaudited consolidated statements of operations:

Three Months Ended

Nine Months Ended

(amounts in thousands)

Foreign currency gains

( i 3,301)

( i 3,195)

( i 8,686)

( i 12,131)

Insurance Reimbursement

( i 1,500)

i —

( i 6,343)

i —

Pension income

( i 1,348)

( i 34)

( i 4,210)

( i 110)

Recovery of cost from interest received on impaired notes

( i 541)

i —

( i 13,953)

i —

Loss on sale or disposal of property and equipment

i 76

i 561

i 265

i 923

Governmental pandemic assistance reimbursement

( i 71)

( i 828)

( i 550)

( i 1,327)

Loss on extinguishment of debt

i —

i 1,342

i —

i 1,342

Other items

( i 1,005)

( i 1,097)

( i 2,437)

( i 2,637)

Total other income

( i 7,690)

( i 3,251)

( i 35,914)

( i 13,940)

Note 18. i Derivative Financial Instruments

Foreign currency derivatives – We are exposed to the impact of foreign currency fluctuations in certain countries in which we operate. In most of these countries, the exposure to foreign currency movements is limited because the operating revenues and expenses of our business units are substantially denominated in the local currency. To the extent borrowings, sales, purchases, or other transactions are not executed in the local currency of the operating unit, we are exposed to foreign currency risk. In addition, to mitigate the exposure, we may enter into a variety of foreign currency derivative contracts, such as forward contracts, option collars, and cross-currency hedges. To manage the effect of exchange fluctuations on forecasted sales, purchases, acquisitions, inventory, capital expenditures, and certain intercompany transactions that are denominated in foreign currencies, we have foreign currency derivative contracts with a total notional amount of $ i 99.9 million. To mitigate the impact to the consolidated earnings of the Company from the effect of the translation of certain subsidiaries’ local currency results into U.S. dollars, we have foreign currency derivative contracts with a total notional amount of $ i 94.8 million. We do not use derivative financial instruments for trading or speculative purposes. We have not elected hedge accounting for any foreign currency derivative contracts. We record mark-to-market changes in the values of these derivatives in other income. We recorded mark-to-market losses relating to foreign currency derivatives of $ i 3.3 million in the three months ended September 24, 2022 and gains of $ i 7.7 million in the nine months ended September 24, 2022, respectively, and gains of $ i 3.0 million and $ i 8.8 million in the three and nine months ended September 25, 2021, respectively.

Interest rate derivatives – We are exposed to interest rate risk in connection with our variable rate long-term debt and we partially mitigate this risk through interest rate derivatives such as swaps and caps. In May 2020, we entered into interest rate swap agreements to manage this risk. The interest rate swaps have outstanding notional amounts aggregating to $ i 370.0 million and mature in December 2023 with a weighted average fixed rate of i 0.395% swapped against one-month USD LIBOR floored at i 0.00%. The interest rate swap agreements are designated as cash flow hedges and effectively fix the interest rate on a corresponding portion of the aggregate debt outstanding under our Term Loan Facility.

No portion of these interest rate contracts were deemed ineffective during the three and nine months ended September 24, 2022. We recorded pre-tax mark-to-market gains of $ i 4.8 million and $ i 17.1 million during the three and nine months ended September 24, 2022, respectively, in other comprehensive income. We recorded pre-tax mark-to-market losses of $ i 0.1 million and pre-tax mark-to-market gains of $ i 1.3 million during the three and nine months ended September 25, 2021, respectively, in other comprehensive income. We reclassified gains previously recorded in other comprehensive income to interest income of $ i 1.6 million and $ i 1.7 million during the three and nine months ended September 24, 2022, respectively, and losses to interest expense of $ i 0.2 million and $ i 0.7 million during the three and nine months ended September 25, 2021, respectively.

As of September 24, 2022, approximately $ i 14.8 million is expected to be reclassified to interest income over the next twelve months.

Other derivative instruments – From time to time, we may enter into other types of derivative instruments immaterial to the business. Unless otherwise disclosed, these instruments are not designated as hedging instruments and mark-to-market adjustments are recorded in the statement of operations each period.

The derivative agreements each contain a provision whereby we could be declared in default on our derivative obligations if we either default or, in certain cases, are capable of being declared in default of any of our indebtedness greater than specified thresholds. These agreements also contain a provision where we could be declared in default subsequent to a merger or restructuring type event if the creditworthiness of the resulting entity is materially weaker.

The fair values of derivative instruments held are as follows:

Derivative assets

(amounts in thousands)

Balance Sheet Location

Derivatives designated as hedging instruments:

Interest rate contracts

Other current assets

i 13,705

i 263

Interest rate contracts

Other assets

i 4,958

i 3,036

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Other current assets

i 10,531

i 6,297

Derivatives liabilities

(amounts in thousands)

Balance Sheet Location

Derivatives not designated as hedging instruments:

Foreign currency forward contracts

Accrued expenses and other current liabilities

i 2,218

i 5,527

Other derivative instruments

Accrued expenses and other current liabilities

i 1,196

i —

Note 19. i Fair Value of Financial Instruments

We record financial assets and liabilities at fair value based on FASB guidance related to fair value measurements. The guidance requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Three levels of inputs may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Quoted market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs that are not corroborated by market data.

The recorded carrying amounts and fair values of these instruments were as follows:

(amounts in thousands)

Carrying Amount

Total
Fair Value

Level 1

Level 2

Level 3

Assets:

Cash equivalents

i 3,608

i —

i 3,608

i —

Derivative assets, recorded in other current assets

i 24,236

i —

i 24,236

i —

Derivative assets, recorded in other assets

i 4,958

i —

i 4,958

i —

Liabilities:

Debt, recorded in long-term debt and current maturities of long-term debt

i 1,826,770

i 1,602,016

i —

i 1,602,016

i —

Derivative liabilities, recorded in accrued expenses and other current liabilities

i 3,414

i —

i 3,414

i —

(amounts in thousands)

Carrying Amount

Total
Fair Value

Level 1

Level 2

Level 3

Assets:

Cash equivalents

i 33,143

i —

i 33,143

i —

Derivative assets, recorded in other current assets

i 6,560

i —

i 6,560

i —

Liabilities:

Debt, recorded in long-term debt and current maturities of long-term debt

i 1,720,883

i 1,751,353

i —

i 1,751,353

i —

Derivative liabilities, recorded in accrued expenses and other current assets

i 5,527

i —

i 5,527

i —

Derivative liabilities, recorded in deferred credits and other liabilities

i —

Derivative assets and liabilities reported in level 2 include foreign currency and interest rate contracts. See Note 18- Derivative Financial Instruments for additional information about our derivative assets and liabilities.

There are no material non-financial assets or liabilities as of September 24, 2022 or December 31, 2021.

Note 20. i Commitments and Contingencies

Litigation – We are involved in various legal proceedings, claims, and government audits arising in the ordinary course of business. We record our best estimate of a loss when the loss is considered probable and the amount of such loss can be reasonably estimated. When a loss is probable and there is a range of estimated loss with no best estimate within the range, we record the minimum estimated liability related to the lawsuit or claim. As additional information becomes available, we reassess the potential liability and revise our accruals, if necessary. Because of uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ materially from our estimates.

Other than the matters described below, there were no proceedings or litigation matters involving the Company or its property as of September 24, 2022 that we believe would have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our operating results for a particular reporting period.

Steves & Sons, Inc. vs JELD-WEN, Inc. – We sell molded door skins to certain customers pursuant to long-term contracts, and these customers in turn use the molded door skins to manufacture interior doors and compete directly against us in the marketplace. We gave notice of termination of one of these contracts and, on June 29, 2016, the counterparty to the agreement, Steves and Sons, Inc. (“Steves”) filed a claim against JWI in the U.S. District Court for the Eastern District of Virginia, Richmond Division (the “Eastern District of Virginia”). The complaint alleged that our acquisition of CMI, a competitor in the molded door skins market, together with subsequent price increases and other alleged acts and omissions, violated antitrust laws, and constituted a breach of contract and breach of warranty. Specifically, the complaint alleged that our acquisition of CMI substantially lessened competition in the molded door skins market. The complaint sought declaratory relief, ordinary and treble damages, and injunctive relief, including divestiture of certain assets acquired in the CMI acquisition.

In February 2018, a jury in the Eastern District of Virginia returned a verdict that was unfavorable to JWI with respect to Steves’ claims that our acquisition of CMI violated Section 7 of the Clayton Act, and found that JWI breached the supply agreement between the parties (the “Original Action”). The verdict awarded Steves $ i 12.2 million for past damages under both the Clayton Act and breach of contract claims and $ i 46.5 million in future lost profits under the Clayton Act claim.

During the course of the proceedings in the Eastern District of Virginia, we discovered certain facts that led us to conclude that Steves, its principals, and certain former employees of the Company had misappropriated Company trade secrets, violated the terms of various agreements between the Company and those parties, and violated other laws. On May 11, 2018, a jury in the Eastern District of Virginia returned a verdict on our trade secrets claims against Steves and awarded damages in the amount of $ i 1.2 million. The presiding judge entered a judgment in our favor for those damages, and the entire amount has been paid by Steves. On August 16, 2019, the presiding judge granted Steves’ request for an injunction, prohibiting us from pursuing certain claims against individual defendants pending in Bexar County, Texas (the “Steves Texas Trade Secret Theft Action”). On September 11, 2019, JELD-WEN filed a notice of appeal of the Eastern District of Virginia’s injunction to the Fourth Circuit Court of Appeals (the “Fourth Circuit”).

On March 13, 2019, the presiding judge entered an Amended Final Judgment Order in the Original Action, awarding $ i 36.5 million in past damages under the Clayton Act (representing a trebling of the jury’s verdict) and granting divestiture of

certain assets acquired in the CMI acquisition, subject to appeal. The judgment also conditionally awarded damages in the event the judgment was overturned on appeal. Specifically, the court awarded $ i 139.4 million as future antitrust damages in the event the divestiture order was overturned on appeal and $ i 9.9 million as past contract damages in the event both the divestiture and antitrust claims were overturned on appeal.

On April 12, 2019, Steves filed a petition requesting an award of its fees and a bill of costs, seeking $ i 28.4 million in attorneys’ fees and $ i 1.7 million in costs in connection with the Original Action. On November 19, 2019, the presiding judge entered an order for further relief awarding Steves an additional $ i 7.1 million in damages for pricing differences from the date of the underlying jury verdict through May 31, 2019 (the “Pricing Action”). We also appealed that ruling. On April 14, 2020, Steves filed a motion for further supplemental relief for pricing differences from the date of the prior order and going forward through the end of the parties’ current supply agreement (the “Future Pricing Action”). We opposed that request for further relief.

JELD-WEN filed a supersedeas bond and notice of appeal of the judgment, which was heard by the Fourth Circuit on May 29, 2020. On February 18, 2021, the Fourth Circuit issued its decision on appeal in the Original Action, affirming the Amended Final Judgment Order in part and vacating and remanding in part. The Fourth Circuit vacated the Eastern District of Virginia’s alternative $ i 139.4 million lost-profits award, holding that award was premature because Steves has not suffered the purported injury on which its claim for future lost profits rests. The Fourth Circuit also vacated the Eastern District of Virginia’s judgment for Sam Steves, Edward Steves, and John Pierce on JELD-WEN’s trade secrets claims. The Fourth Circuit affirmed the Eastern District of Virginia’s finding of antitrust injury and its award of $ i 36.5 million in past antitrust damages. It also affirmed the Eastern District of Virginia’s divestiture order, while clarifying that JELD-WEN retains the right to challenge the terms of any divestiture, including whether a sale to any particular buyer will serve the public interest, and made clear that the Eastern District of Virginia may need to revisit its divestiture order if the special master who has been appointed by the presiding judge cannot locate a satisfactory buyer. JELD-WEN then filed a motion for rehearing en banc with the Fourth Circuit that was denied on March 22, 2021.

Following a thorough review, and consistent with our practice, we concluded that it is in the best interest of the Company and its stakeholders to move forward with the divestiture of Towanda and certain related assets. Although the Company did not seek Supreme Court review of the Fourth Circuit’s February 18, 2021 decision, the Company retains the legal right to challenge the divestiture process and the final divestiture order. We made estimates related to the divestiture in the preparation of our financial statements; however, there can be no guarantee that the divestiture will be consummated. The divestiture process is ongoing, and the special master is overseeing this process. Although the Company has decided to divest, we continue to believe that Steves’ claims lacked merit and that it was not entitled to the extraordinary remedy of divestiture. We continue to believe that the judgment in accordance with the verdict was improper under applicable law.

During the pendency of the Original Action, on February 14, 2020, Steves filed a complaint and motion for preliminary injunction in the Eastern District of Virginia alleging that we breached the long-term supply agreement between the parties, including, among other claims, by incorrectly calculating the allocation of door skins owed to Steves (the “Allocation Action”). Steves sought an additional allotment of door skins and damages for violation of antitrust laws, tortious interference, and breach of contract. On April 10, 2020, the presiding judge granted Steves’ motion for preliminary injunction, and the parties settled the issues underlying the preliminary injunction on April 30, 2020 and the Company reserved the right to appeal the ruling in the Fourth Circuit. The Company believed all the claims lacked merit and moved to dismiss the antitrust and tortious interference claims.

On June 2, 2020, we entered into a settlement agreement with Steves to resolve the Pricing Action, the Future Pricing Action, and the Allocation Action. As a result of the settlement, Steves filed a notice of satisfaction of judgment in the Pricing Action, withdrew its Future Pricing Action with prejudice, and filed a stipulated dismissal with prejudice in the Allocation Action. The Company also withdrew its appeal of the Pricing Action. The parties agreed to bear their own respective attorneys’ fees and costs in these actions. In partial consideration of the settlement, JWI and Steves entered into an amended supply agreement satisfactory to both parties that, by its terms, ended on September 10, 2021. This settlement had no effect on the Original Action between the parties except to agree that certain specific terms of the Amended Final Judgment Order in the Original Action would apply to the amended supply agreement during the pendency of the appeal of the Original Action. On April 2, 2021, JWI and Steves filed a stipulation regarding the amended supply agreement in the Original Action, stating that regardless of whether the case remains on appeal as of September 10, 2021, and absent further order of the court, the amended supply agreement would be extended until the divestiture of Towanda and certain related assets is complete and Steves’ new supply agreement with the company that acquires Towanda is in effect.

We continue to believe the claims in the settled actions lacked merit and made no admission of liability in these matters.

On October 7, 2021, we entered into a settlement agreement with Steves to resolve the following: (i) Steves’ past and any future claims for attorneys’ fees, expenses, and costs in connection with the Original Action, except that Steves and JWI each reserved the right to seek attorneys’ fees arising out of any challenge of the divestiture process or the final divestiture order; (ii) the Steves Texas Trade Secret Theft Action and the related Fourth Circuit appeal of the Eastern District of Virginia’s injunction in the Original Action; (iii) the past damages award in the Original Action; and (iv) any and all claims

and counterclaims, known or unknown, that were asserted or could have been asserted against each other from the beginning of time through the date of the settlement agreement. As a result of the settlement, the parties filed a stipulated notice of satisfaction of the past antitrust damages judgment and a stipulated notice of settlement of Steves’ claim for attorneys’ fees, expenses, and costs against JWI in the Original Action, and Steves filed a notice of withdrawal of its motion for attorneys’ fees and expenses and bill of costs in the Original Action. The Company also filed a notice of dismissal with prejudice and agreed to take no judgment in the Steves Texas Trade Secret Theft Action, and the parties filed a joint agreement for dismissal of the injunction appeal in the Fourth Circuit. On November 3, 2021, we paid $ i 66.4 million to Steves under the settlement agreement.

In re JELD-WEN Holding, Inc. Derivative Litigation – On February 2, 2021, Jason Aldridge, on behalf of the Company, filed a derivative action in the U.S. District Court for the District of Delaware against certain current and former executives and directors of the Company, alleging that the individual defendants breached their fiduciary duties by allowing the wrongful acts alleged in the Steves, as well as violations of Section 14(a) and 20(a) of the Exchange Act, unjust enrichment, and waste of corporate assets among other allegations (the “Aldridge Action”). The lawsuit seeks compensatory damages, equitable relief, and an award of attorneys’ fees and costs. The parties sought a stay of the Aldridge Action. On April 19, 2021, the court denied the parties’ motion to stay and, instead, ordered the plaintiff to file an amended complaint that complied with court rules or the matter would be dismissed. The plaintiff filed an amended complaint on May 10, 2021.

On June 21, 2021, prior to a response from the Company in the Aldridge Action, Shieta Black and the Board of Trustees of the City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, on behalf of the Company, filed a derivative action in the U.S. District Court for the District of Delaware against certain current and former executives and directors of the Company and Onex Corporation (“Onex”), alleging that the defendants breached their fiduciary duties by allowing the wrongful acts alleged in the Steves, as well as insider trading, and unjust enrichment among other allegations (the “Black Action”). The lawsuit seeks compensatory damages, corporate governance reforms, restitution, equitable relief, and an award of attorneys’ fees and costs. The plaintiffs in the Black and Aldridge Actions sought to consolidate the lawsuits on July 16, 2021, which was granted by the court on the same day. On August 16, 2021, the plaintiffs designated the Black complaint as the operative complaint in the consolidated derivative action. On October 15, 2021, JELD-WEN and Onex moved to dismiss the complaint. On January 14, 2022, the plaintiffs moved for leave to amend the complaint. On January 28, 2022, the JELD-WEN defendants opposed the motion for leave to amend the complaint. On April 28, 2022, the court granted the plaintiffs leave to amend the complaint, and the plaintiffs filed their amended complaint the same day. As a result, on April 29, 2022, the Court denied JELD-WEN’s and Onex’s motions to dismiss as moot.

On June 20, 2022, the parties executed a settlement term sheet pertaining to the derivative litigation and notified the Court that a settlement had been reached. On June 22, 2022, the Court stayed the derivative litigation pending approval of the settlement. On September 8, 2022, the parties executed a stipulation and agreement of settlement. The Court entered an order preliminarily approving the settlement on September 11, 2022, and scheduled the final approval hearing for December 19, 2022. Notice of the settlement and schedule has been posted on the Company’s website and is being mailed to shareholders as specified in the Court’s preliminary approval order.

Canadian Antitrust Litigation – On May 15, 2020, Développement Émeraude Inc., on behalf of itself and others similarly situated, filed a putative class action lawsuit against us and Masonite in the Superior Court of the Province of Quebec, Canada, which was served on us on September 18, 2020 (“the Quebec Action”). The putative class consists of any person in Canada who, since October 2012, purchased one or more interior molded doors from us or Masonite. The suit alleges an illegal conspiracy between us and Masonite to agree on prices, the distribution of market shares and/or the production levels of interior molded doors and that the plaintiffs suffered damages in that they were charged and paid higher prices for interior molded doors than they would have had to pay but for the alleged anti-competitive conduct. The plaintiffs are seeking compensatory and punitive damages, attorneys’ fees and costs. On September 9, 2020, Kate O’Leary Swinkels, on behalf of herself and others similarly situated, filed a putative class action against JELD-WEN and Masonite in the Federal Court of Canada, which was served on us on September 29, 2020 (the “Federal Court Action”). The Federal Court Action makes substantially similar allegations to the Quebec Action and the putative class is represented by the same counsel. In February 2021, the plaintiff in the Federal Court Action issued a proposed Amended Statement of Claim that replaced the named plaintiff, Kate O’Leary Swinkels, with David Regan. The plaintiff has sought a stay of the Quebec Action while the Federal Court Action proceeds. We anticipate a hearing on the certification of the Federal Court Action in 2023. The Company believes both the Quebec Action and the Federal Court Action lack merit and intends to vigorously defend against them.

We have evaluated the claims against us and recorded provisions based on management’s judgment about the probable outcome of the litigation and have included our estimates in accrued expenses in the accompanying balance sheets. See Note 7 - Accrued Expenses and Other Current Liabilities. While we expect a favorable resolution to these matters, the dispute resolution process could be lengthy, and if the plaintiffs were to prevail completely or substantially in the

respective matters described above, such an outcome could have a material adverse effect on our operating results, consolidated financial position, or cash flows.

Self-Insured Risk – We self-insure substantially all of our domestic business liability risks including general liability, product liability, warranty, personal injury, auto liability, workers’ compensation, and employee medical benefits. Excess insurance policies from independent insurance companies generally cover exposures between $ i 5.0 million and $ i 200.0 million for domestic product liability risk and exposures between $ i 3.0 million and $ i 200.0 million for auto, general liability, personal injury, and workers’ compensation. We have no stop loss insurance covering our self-insured employee medical plan and are responsible for all claims thereunder. We estimate our provision for self-insured losses based upon an evaluation of current claim exposure and historical loss experience. Actual self-insurance losses may vary significantly from these estimates. At September 24, 2022 and December 31, 2021, our accrued liability for self-insured risks was $ i 92.1 million and $ i 88.4 million, respectively.

Indemnifications – At September 24, 2022, we had commitments related to certain representations made in contracts for the purchase or sale of businesses or property. These representations primarily relate to past actions such as responsibility for transfer taxes if they should be claimed, and the adequacy of recorded liabilities, warranty matters, employment benefit plans, income tax matters, or environmental exposures. These guarantees or indemnification responsibilities typically expire within one to i three years. We are not aware of any material amounts claimed or expected to be claimed under these indemnities. From time to time and in limited geographic areas, we have entered into agreements for the sale of our products to certain customers that provide additional indemnifications for liabilities arising from construction or product defects. We cannot estimate the potential magnitude of such exposures, but to the extent specific liabilities have been identified related to product sales, liabilities have been provided in the warranty accrual in the accompanying consolidated balance sheets.

Other Financing Arrangements – At times we are required to provide letters of credit, surety bonds, or guarantees to meet various performance, legal, warranty, environmental, workers compensation, licensing, utility, and governmental requirements. Stand-by letters of credit are provided to certain customers and counterparties in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers, and future funding commitments. The stated values of these letters of credit agreements, surety bonds, and guarantees were $ i 72.3 million and $ i 116.9 million at September 24, 2022 and December 31, 2021, respectively. The decrease is primarily due to the cancellation of bonds related to the Steves’ legal matter.

Environmental Contingencies – We periodically incur environmental liabilities associated with remediating our current and former manufacturing sites as well as penalties for not complying with environmental rules and regulations. We record a liability for remediation costs when it is probable that we will be responsible for such costs and the costs can be reasonably estimated. These environmental liabilities are estimated based on current available facts and current laws and regulations. Accordingly, it is likely that adjustments to the estimated liabilities will be necessary as additional information becomes available. Short-term environmental liabilities and settlements are recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets and totaled $ i i 0.5 / million at September 24, 2022 and December 31, 2021. Long-term environmental liabilities are recorded in deferred credits and other liabilities in the accompanying consolidated balance sheets and totaled $ i i 11.8 / million at September 24, 2022 and December 31, 2021.

Everett, Washington WADOE Action – In 2007, we were identified by the WADOE as a PLP with respect to our former manufacturing site in Everett, Washington. In 2008, we entered into an Agreed Order with the WADOE to assess historic environmental contamination and remediation feasibility at the site. As part of the order, we agreed to develop a CAP, arising from the feasibility assessment. In December 2020, we submitted to the WADOE a draft feasibility assessment with an array of remedial alternatives, which we considered substantially complete. During 2021, several comment rounds were completed as well as the identification of the Port of Everett and W&W Everett Investment LLC as additional PLPs, with respect to this matter with each PLP being jointly and severally liable for the cleanup costs. The WADOE received the final feasibility assessment on December 31, 2021, containing various remedial alternatives with its preferred remedial alternatives totaling $ i 23.4 million. Based on this study, we have determined our range of possible outcomes to be $ i 11.8 million to $ i 33.4 million. On March 1, 2022, we delivered a draft CAP to the WADOE consistent with its preferred alternatives, and on May 16, 2022, we received the WADOE’s initial comments on the draft CAP. On June 13, 2022, we responded to the WADOE’s comments. The WADOE continues reviewing the draft and will provide comments that will be incorporated into the draft CAP. At that time, the WADOE will release the documents for tribal consultation and comment followed by a public comment period. The final CAP will ultimately be formalized in an Agreed Order or Consent Decree with the WADOE, the Company, and the other PLPs. We have made provisions within our financial statements within the range of possible outcomes; however, the contents and cost of the final CAP and allocation of the responsibility between the identified PLPs could vary materially from our estimates.

Towanda, Pennsylvania Consent Order – In December 2020, we entered into a COA with the PaDEP to remove a pile of wood fiber waste from our site in Towanda, Pennsylvania, which we acquired in connection with our acquisition of CMI in

2012, by using it as fuel for a boiler at that site. The COA replaced a 2018 Consent Decree between PaDEP and us. Under the COA, we are required to achieve certain periodic removal objectives and ultimately remove the entire pile by August 31, 2025. There are currently $ i 2.3 million in bonds posted in connection with these obligations. If we are unable to remove this pile by August 31, 2025, then the bonds will be forfeited, and we may be subject to penalties by PaDEP. We currently anticipate meeting all applicable removal deadlines; however, if our operations should change, additional alternatives would be evaluated to meet the prescribed removal timeline.

Note 21. i Supplemental Cash Flow Information

Nine Months Ended

(amounts in thousands)