2018
ANNUAL REPORT
AWARDS
#1 in Brand Familiarit y in Ex ternal Doors
Hanley Wood Brand Use Study
#1 in Brand Familiarit y in Interior Doors
Hanley Wood Brand Use Study
For 3 years straight, JELD -WEN Canada
has been recognized as the ENERGY STAR ®
Manufac turer of the Year for the Window
and Door categor y
L aCantina’s Interac tive Videos earned
a Cr ystal Achievement Award in the
Best Marketing Program categor y
L aCantina awarded Best of Houzz 2018
in Design categor y
L aCantina’s Interac tive Videos received
an American Adver tising Award (ADDY )
NEW PRODUCTS
DOO R S
North America
• Birkdale™ 3-Panel Molded Interior Door
Australasia
• A&L – Boutique French Door and Bifold Door
• Corinthian Doors – The Blonde Oak Collection
• Corinthian Doors – The Moda White Oak Collection
• Corinthian Doors – Perfect Fit Door Installation Service
Europe
• Door Kits
• Superior Line Interior Doors
• Eco (Sustainability) Doors
W I N DOWS
North America
• Siteline ® Pocket Double-Hung and Casement
• Premium Atlantic™ Vinyl Laminated Products
• Premium™ Vinyl Tilt Single-Hung and Tilt Double-Hung
Wind Zone 2 & 3 Impact Windows
• Premium™ Vinyl Multi-Slide Patio Door expansions
Breez way – Winner, 2018 Australian Window
to the Northeast and West Coast
A ssociation Design Award, Most Innovative
• Flush handle hardware for Premium™ Vinyl Multi-Slide Patio Door
Window System for Dualair™
Australasia
• Breezway – Dualair™ Secondary Glazed Altair ®
Breez way, Aneeta and A&L – Named in
Louvre System
the 2018 Architec ture and Design
Top 10 0 Trusted Brands
• Trend – Botanica Timber Series of Windows and Doors
WA RD ROB ES & SHOW E R SC REENS
Australasia
• Stegbar & Regency – Galleria
• Stegbar & Regency – Matte Black Showerscreens
• Stegbar & Regency – Create Printed Glass Splashbacks
DEAR CURRENT AND
PROSPECTIVE SHAREHOLDE R S ,
One of the great privileges I have had since joining
JELD-WEN in June 2018 has been the time spent
personally getting to know many of our associates,
customers, and investors. I chose to join JELD-WEN
because I believe we have a fantastic set of assets
comprised of a well-known portfolio of brands, a broad
product offering, and an unmatched global operating
platform that allows us to serve the needs of our
customers. I am more convinced than ever we have the
right strategy, business operating system, and team of
associates to transform JELD-WEN into a world-class
manufacturing company and drive industry-leading,
long-term shareholder value.
DEL I V E R I N G P ROF I TA B L E G ROW T H
In 2018, JELD-WEN delivered revenue and adjusted EBITDA growth of 15.5% and 6.3%, respectively,
continuing the strong performance that has characterized the last five years. We made three new
additions to the JELD-WEN family of brands in 2018, which allowed us to grow in each of our three
geographic regions. The acquisition of ABS in North America enhances our distribution strategy and
value-added service capabilities while providing a platform for our footprint rationalization program.
In Europe, our acquisition of Domoferm expands our portfolio for steel frames and doors solutions.
Our A&L acquisition in Australia provides best-in-class window manufacturing capabilities we can
leverage worldwide while growing our local market penetration. Each of these acquisitions is aligned
with our strategic and financial objectives. We also strengthened relationships with key channel
partners that will enable future organic growth.
While we celebrate these accomplishments, we recognize that 2018 also presented its fair share of
challenges. I am disappointed that we did not always meet the expectations of our customers from a
service perspective, nor did we meet the financial objectives that we committed to our shareholders
regarding core revenue growth and EBITDA margin expansion. Softening demand trends in certain
global markets and inconsistent customer service performance impacted our topline growth. In
addition, increased transportation costs and trade tensions contributed to significant input cost
inflation that negatively impacted our profitability.
Despite these challenges, I could not be more proud of how our team responded and what they have
accomplished this year. I am confident we are better equipped to tackle the uncertainties we will
face in the future. We are more focused than ever on creating long-term shareholder value through
investments in organic innovation and modernization, new acquisitions and partnerships in key
strategic channels, all while maintaining a capital allocation strategy that is flexible and balanced.
*Adjusted EBITDA is a non-GA AP financial measure. For a reconciliation of net income, the most comparable GA AP financial measure,
to adjusted EBITDA, see page 42 of the Annual Report on Form 10 -K contained herein.
D R I V I N G P RODUC T I V I T Y A N D O PE R AT I O N A L E XC EL L EN C E
T H ROUG H J EM A N D FAC I L I T Y M ODE R N IZ AT I O N
We have accelerated the deployment of the JELD-WEN Excellence Model, known as JEM. It is our business
operating system centered on building a culture of continuous improvement. JEM utilizes problem-solving tools
and implements standard work globally. In 2018, we made significant progress deploying JEM tools such as
visual management, A3 problem solving, and 3P process. The JEM culture is critical to achieving our productivity
target of 3% net reduction in Cost of Goods Sold (COGS) annually. It is the cornerstone of our business,
and it begins with a simple philosophy of eliminating waste in all aspects of our operations and processes.
In 2019, we plan to implement the first phase of our manufacturing footprint rationalization plan, an integral
step on the path towards achieving our long-term 15% EBITDA margin target. We have a detailed strategy
to modernize and consolidate our facilities over the next several years using standard work. We are utilizing
the collective knowledge from our 40+ acquisitions and nearly 60 years in business to develop the best way
to manufacture our products. Our standard processes will improve cost, flexibility, quality, and safety, while
reducing cycle time and waste – all leading to higher-quality products and a better customer experience.
D I SC I PL I N ED A N D BA L A N C ED C A P I TA L DE PLOYMEN T
Over the last several years we have developed a successful track record deploying capital to maximize
shareholder value. Since 2014, we have completed 13 strategic bolt-on acquisitions that are outperforming
our expectations on a cumulative basis. In 2018, our board of directors authorized a $250 million share
repurchase program – the first such plan since our IPO – under which we repurchased 5.3 million of our shares
during the year. We will continue to manage our disciplined capital allocation priorities and commitments
to drive long-term value for shareholders, balancing returns between organic growth, strategic M& A, share
repurchases, and net debt reduction.
LOOK I N G A HE A D
I am confident we have the assets, people, and operating strategy in place to win in any market environment.
While 2019 will undoubtedly produce its own unique set of challenges, we will focus on and improve what
we can control – the quality and innovation of our products, the level of service we provide our customers,
and driving productivity and safety throughout the organization – while we maintain the highest level of
stewardship on how we deploy capital across the business.
The fundamental measures of our long-term success will be the solutions and satisfaction we bring to our
customers, the engagement of our associates, and the long-term value we create for you, our shareholders.
Sincerely,
Gary S. Michel
President and CEO
JEM CULTURE
T H RO U G H O N G O I N G CO N T I N U O U S
I M P ROV E M E N T, W E A R E :
Improving our safety
Increasing accountability
Optimizing productivity
Delighting customers
Delivering on our promises
Engaging associates
Living our values
“JEM is the cornerstone of
our business, and it begins
with a simple philosophy
of eliminating waste in all
aspects of our operations
and processes.”
G A RY S . M I C HEL
PRESIDENT AND CEO
JELD-WEN EXCELLENCE MODEL
T O O LS
GOAL S
RES ULT S
• Problem solving (A3)
• Safety
• Standard work
• Service and quality
• Visual management
• Cost savings
• Value streams
• Productivity
• Goal deployment
• Engagement
• Doubled JEM tool
deployment locations
• 90%+ facilities improved service
• 58% increase in productivity
project pipeline
20K
R
E
V
O
EMPLOYEES
WORLDWIDE
#1
OR
#2
POSITION BY NET
REVENUES IN THE MAJORITY
OF THE COUNTRIES AND
MARKETS WE SERVE
R 135
E
V
O
MANUFACTURING
FACILITIES IN
20 COUNTRIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-K
__________________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-38000
__________________________________
JELD-WEN Holding, Inc.
(Exact name of registrant as specified in its charter)
__________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
93-1273278
(I.R.S. Employer
Identification No.)
2645 Silver Crescent Drive
Charlotte, North Carolina 28273
(Address of principal executive offices, zip code)
(704) 378-5700
(Registrant’s telephone number, including area code)
__________________________________
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Common Stock (par value $0.01 per share)
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
Accelerated filer
Smaller reporting company
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the common stock held by non-affiliates of the registrant was $2.0 billion as of the end of the registrant's second fiscal quarter (based on the closing sale price for
the common stock on the New York Stock Exchange on June 29, 2018). Shares of the registrant's voting stock held by each executive officer and director and by each entity or person that, to
the registrant's knowledge, owned 10% or more of the registrant's outstanding common stock as of June 30, 2018 have been excluded from this number in that these persons may be deemed
affiliates of the registrant. This determination of possible affiliate status is not necessarily a conclusive determination for other purposes
The registrant had 100,739,266 shares of common stock, par value $0.01 per share, issued and outstanding as of February 27, 2019.
Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the registrant's definitive proxy statement relating to its 2019 annual meeting of stockholders to be filed with
the Securities and Exchange Commission within 120 days after the close of the registrant's fiscal year.
DOCUMENTS INCORPORATED BY REFERENCE
JELD-WEN HOLDING, Inc.
- Table of Contents –
Part I.
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II.
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV.
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Consolidated Financial Statements
Page No.
6
15
34
35
35
37
38
40
42
63
64
64
64
66
67
68
68
69
69
70
72
72
F-4
2
When the following terms and abbreviations appear in the text of this report, they have the meaning indicated below:
Glossary of Terms
2016 Dividend
A&L
ABL Facility
ABS
Adjusted EBITDA
ASC
ASU
AUD
Australia Senior Secured Credit
Facility
BBSY
Breezway
Bylaws
CAP
Charter
Class B-1 Common Stock
CMI
COA
CODM
Common Stock
Corporate Credit Facilities
Credit Facilities
D&K
DKK
Domoferm
Dooria
EPA
ERP
ESOP
E.U.
Means (i) the borrowing of an additional $375 million under our Term Loan Facility and (ii)
the application of approximately $35 million in cash and borrowings under our ABL Facility
for the purpose of making payments of approximately $400 million to holders of our
outstanding common stock, Series A Convertible Preferred Stock, Class B-1 Common Stock,
options, and Restricted Stock Units, or “RSUs”
A&L Windows Pty. Ltd.
Our $400 million asset-based loan revolving credit facility, dated as of October 15, 2014 and
as amended from time to time, with JWI (as hereinafter defined) and JELD-WEN of Canada,
Ltd., as borrowers, the guarantors party thereto, a syndicate of lenders, and Wells Fargo Bank,
N.A., as administrative agent
American Building Supply, Inc.
A supplemental non-GAAP financial measure of operating performance not based on any
standardized methodology prescribed by GAAP that we define 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 non-cash items; other
items; and costs related to debt restructuring and debt refinancing.
Accounting Standards Codification
Accounting Standards Update
Australian Dollar
Our senior secured credit facility, dated as of October 6, 2015 and as amended from time to
time, with certain of our Australian subsidiaries, as borrowers, and Australia and New Zealand
Banking Group Limited, as lender
Bank Bill Swap Bid Rate
Breezway Australia Pty. Ltd.
Amended and Restated Bylaws of JELD-WEN Holding, Inc.
Cleanup Action Plan
Restated Certificate of Incorporation of JELD-WEN Holding, Inc.
Shares of our Class B-1 common stock, par value $0.01 per share, all of which were converted
into shares of our Common Stock on February 1, 2017
CraftMaster Manufacturing, Inc.
Consent Order and Agreement
Chief Operating Decision Maker
The 900,000,000 shares of common stock, par value $0.01 per share, authorized under our
Charter
Collectively, our ABL Facility and our Term Loan Facility
Collectively, our Corporate Credit Facilities, our Australia Senior Secured Credit Facility, and
our Euro Revolving Facility as well as other acquired term loans and revolving credit facilities
D&K Home Security Pty. Ltd.
Danish Krone
The Domoferm Group of companies
Dooria AS
The U.S. Environmental Protection Agency
Enterprise Resource Planning
JELD-WEN, Inc. Employee Stock Ownership and Retirement Plan
European Union
Euro Revolving Facility
Our €39 million revolving credit facility, dated as of January 30, 2015 and as amended from
time to time, with JELD-WEN ApS, as borrower, Danske Bank A/S and Nordea Bank
Danmark A/S as lenders
3
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
10-K
GAAP
GILTI
IBOR
IPO
JELD-WEN
JEM
JWA
JWH
JWI
Kolder
LIBOR
M&A
Mattiovi
MMI Door
MD&A
NAV
NRD
NYSE
Onex
PaDEP
Preferred Stock
PSU
R&R
RSU
Sarbanes-Oxley
SEC
Securities Act
Senior Notes
Financial Accounting Standards Board
Annual Report on Form 10-K for the fiscal year ended December 31, 2018
Generally Accepted Accounting Principles in the United States
Global Intangible Low-Taxed Income
Interbank Offered Rate
The initial public offering of shares of our common stock, as further described in this report on
Form 10-K
JELD-WEN Holding, Inc., together with its consolidated subsidiaries where the context
requires
JELD-WEN Excellence Model
JELD-WEN of Australia Pty. Ltd.
JELD-WEN Holding, Inc., a Delaware corporation
JELD-WEN, Inc., a Delaware corporation
Kolder Group
London Interbank Offered Rate
Mergers & Acquisitions
Mattiovi Oy
Milliken Millwork, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Net asset value
Natural Resource Damage Trustee Council
New York Stock Exchange
Onex Partners III LP and certain affiliates
Pennsylvania Department of Environmental Protection
90,000,000 shares of Preferred Stock, par value $0.01 per share, authorized under our Charter
Performance stock unit
Repair and remodel
Restricted stock unit
Sarbanes-Oxley Act of 2002, as amended
Securities and Exchange Commission
Securities Act of 1933, as amended
$800.0 million of unsecured notes issued in December 2017 in a private placement in two
tranches: $400.0 million bearing interest at 4.625% and maturing in December 2025 and
$400.0 million bearing interest at 4.875% and maturing in December 2027
Series A Convertible Preferred Stock Our Series A-1 Convertible Preferred Stock, par value $0.01 per share, Series A-2 Convertible
Preferred Stock, par value $0.01 per share, Series A-3 Convertible Preferred Stock, par value
$0.01 per share, and Series A-4 Convertible Preferred Stock, par value $0.01 per share, all of
which were converted into shares of our common stock on February 1, 2017
SG&A
Tax Act
Term Loan Facility
Trend
U.K.
U.S.
WADOE
Selling, general, and administrative expenses
Tax Cuts and Jobs Act
Our term loan facility, dated as of October 15, 2014, as amended from time to time with JWI,
as borrower, the guarantors party thereto, a syndicate of lenders, and Bank of America, N.A.,
as administrative agent
Trend Windows & Doors Pty. Ltd.
United Kingdom
United States of America
Washington State Department of Ecology
4
CERTAIN TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This 10-K includes trademarks, trade names, and service marks owned by us. Our U.S. window and door trademarks include
JELD-WEN®, AuraLast®, MiraTEC®, Extira®, LaCANTINATM, MMI DoorTM, KaronaTM, ImpactGard®, JW®, Aurora®, IWP®, and True
BLUTM, ABSTM. Our trademarks are either registered or have been used as common law trademarks by us. The trademarks we use
outside the U.S. include the Stegbar®, Regency®, William Russell Doors®, Airlite®, Trend®, The Perfect FitTM, Aneeta®, Breezway®,
KolderTM , Corinthian® and A<M marks in Australia, and Swedoor®, Dooria®, DANA®, MattioviTM, Alupan® and Domoferm® marks in
Europe. ENERGY STAR® is a registered trademark of the U.S. Environmental Protection Agency. This 10-K contains additional
trademarks, trade names, and service marks of others, which are, to our knowledge, the property of their respective owners. Solely for
convenience, trademarks, trade names, and service marks referred to in this 10-K appear without the ®, ™ or SM symbols, but such
references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the
right of the applicable licensor to these trademarks, trade names, and service marks. We do not intend our use of other parties’
trademarks, trade names, or service marks to imply, and such use or display should not be construed to imply, a relationship with, or
endorsement or sponsorship of us by, these other parties.
5
PART I - FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Form 10-K contains “forward-looking statements” within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, which are subject to the “safe harbor” created by those sections. All
statements, other than statements of historical facts, included in this Form 10-K are forward-looking statements. You can generally
identify forward-looking statements by our use of forward-looking terminology such as “anticipate”, “believe”, “continue”, “could”,
“estimate”, “expect”, “intend”, “may”, “might”, “plan”, “potential”, “predict”, “seek”, or “should”, or the negative thereof or other
variations thereon or comparable terminology. In particular, statements about the markets in which we operate, including growth of
our various markets, and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions, or future events or
performance contained under the headings Item 1A- Risk Factors, Item 7- Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and Item 1- Business are forward-looking statements. In addition, statements regarding the
potential outcome of pending litigation are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates, and projections. While
we believe these expectations, assumptions, estimates, and projections are reasonable, such forward-looking statements are only
predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other
important factors, including those discussed under the headings Item 1A- Risk Factors, Item 7- Management’s Discussion and
Analysis of Financial Condition and Results of Operations, and Item 1- Business, may cause our actual results, performance or
achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking
statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-
looking statements include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
negative trends in overall business, financial market and economic conditions, and/or activity levels in our end
markets;
our highly competitive business environment;
failure to timely identify or effectively respond to consumer needs, expectations or trends;
failure to maintain the performance, reliability, quality, and service standards required by our customers;
failure to implement our strategic initiatives, including JEM;
acquisitions or investments in other businesses that may not be successful;
declines in our relationships with and/or consolidation of our key customers;
increases in interest rates and reduced availability of financing for the purchase of new homes and home
construction and improvements;
fluctuations in the prices of raw materials used to manufacture our products;
delays or interruptions in the delivery of raw materials or finished goods;
seasonal business and varying revenue and profit;
changes in weather patterns;
political, economic, and other risks that arise from operating a multinational business;
exchange rate fluctuations;
disruptions in our operations;
manufacturing realignments and cost savings programs resulting in a decrease in short-term earnings;
our new Enterprise Resource Planning system that we anticipate implementing in the future proving ineffective;
security breaches and other cybersecurity incidents;
increases in labor costs, potential labor disputes, and work stoppages at our facilities;
changes in building codes that could increase the cost of our products or lower the demand for our windows and
doors;
compliance costs and liabilities under environmental, health, and safety laws and regulations;
compliance costs with respect to legislative and regulatory proposals to restrict emission of GHGs;
6
•
•
•
•
•
•
•
•
•
lack of transparency, threat of fraud, public sector corruption, and other forms of criminal activity involving
government officials;
product liability claims, product recalls, or warranty claims;
inability to protect our intellectual property;
loss of key officers or employees;
pension plan obligations;
our current level of indebtedness;
risks associated with the material weaknesses that have been identified;
the extent of Onex’ control of us; and
other risks and uncertainties, including those listed under Item 1A- Risk Factors.
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements contained in this Form 10-K are not guarantees of future performance and our actual results of operations,
financial condition, and liquidity, and the development of the industry in which we operate, may differ materially from the forward-
looking statements contained in herein. In addition, even if our results of operations, financial condition, and liquidity, and events in
the industry in which we operate, are consistent with the forward-looking statements contained in this Form 10-K, they may not be
predictive of results or developments in future periods.
Any forward-looking statement in this Form 10-K speaks only as of the date of this Form 10-K or as of the date such
statement was made. We do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of
the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Unless the context requires otherwise, references in this Form 10-K to “we,” “us,” “our,” “the Company,” or “JELD-WEN”
mean JELD-WEN Holding, Inc., together with our consolidated subsidiaries where the context requires, including our wholly owned
subsidiary JWI.
7
Item 1 - Business.
Our Company
We are one of the world’s largest door and window manufacturers. 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 and R&R of
residential homes and, to a lesser extent, non-residential buildings.
We market our products globally under the JELD-WEN brand, along with several market-leading regional brands such as
Swedoor and DANA in Europe and Corinthian, Stegbar, and Trend in Australia. Our customers include wholesale distributors and
retailers as well as individual contractors and consumers. As a result, our business is highly diversified by distribution channel,
geography, and construction application, as illustrated in the charts below:
2018 Net Revenues $4,347 million
Distribution Channel
Geography
Construction Application(1)
(1) Percentage of net revenues by construction application is a management estimate based on the end markets into which our customers sell.
As one of the largest door and window companies in the world, we have invested significant capital to build a business
platform that we believe is unique among our competitors. We operate 135 manufacturing facilities in 20 countries, located primarily
in North America, Europe, and Australia. Our global manufacturing footprint is strategically sized and located to meet the delivery
requirements of our customers. 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 us with supply chain, transportation, and working
capital savings. We believe that our manufacturing network allows us to deliver our broad portfolio of products to a wide range of
customers across the globe, improves our customer service, and strengthens our market positions.
Our History
We were founded in 1960 by Richard L. Wendt, when he, together with four business partners, bought a millwork plant in
Oregon. The subsequent decades were a time of successful expansion and growth as we added different businesses and product
categories such as interior doors, exterior steel doors, and vinyl windows. Our first overseas acquisition was Norma Doors in Spain in
1992 and since then we acquired or established numerous businesses in Europe, Australia, Asia, Canada, Mexico, and Chile, making
us a truly global company.
In October 2011, certain funds managed by affiliates of Onex acquired a majority of the combined voting power in the
Company through the acquisition of convertible debt and convertible preferred equity. After the Onex investment, we began the
transformation of our business from a family-run operation to a global organization with independent, professional management. The
transformation accelerated after 2013 with the hiring of a new senior management team strategically recruited from a number of
world-class industrial companies. Our new management team has decades of experience driving operational improvement, innovation,
and growth, both organically and through acquisitions.
On February 1, 2017, we closed an IPO of 28.75 million shares of our common stock at a public offering price of $23.00 per
share. We sold 22.27 million shares and Onex sold 6.48 million shares from which we did not receive any proceeds. We received
$472.4 million after deducting underwriters’ discounts and commissions and other offering expenses. We used a portion of the net
proceeds from the IPO to repay $375.0 million of indebtedness outstanding under our Term Loan Facility and used the remaining net
8
proceeds for working capital and other general corporate purposes, including sales and marketing activities, general and administrative
matters, capital expenditures, and to invest in or acquire complementary businesses, products, services, technologies, or other assets.
In May and November 2017, we completed secondary public offerings of 16.1 million and $14.4 million shares, respectively,
of our Common Stock, substantially all of which were owned by Onex.
As of December 31, 2018, Onex owned approximately 32.4% of our outstanding shares of common stock.
Our Business Strategy and Operating Model
We seek to achieve best-in-industry financial performance through the disciplined execution of:
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operational excellence programs, including JEM and our facility rationalization and modernization
initiative to improve our profit margins and free cash flow;
initiatives to drive profitable organic sales growth, including new product development, investments in
our brands and marketing, channel management, and pricing optimization; and
disciplined and balanced capital allocation with a focus on maximizing returns.
The execution of our strategy is supported and enabled by a relentless focus on talent management. Over the long
term, we believe that the implementation of our strategy is largely within our control and is less dependent on external
factors. The key elements of our strategy are described further below.
Expand Our Margins and Free Cash Flow Through Operational Excellence
With 135 manufacturing facilities around the world and approximately 23,000 dedicated employees, we have a
global manufacturing footprint that is unique in the door and window industry. We believe we have identified a substantial
opportunity to improve our profitability by building a culture of operational excellence and continuous improvement across
all aspects of our business through our JEM initiative. Due to our history of growth through acquisitions, historically, we
were not centrally managed and had a limited focus on standard work, cost reduction, operational improvement, and strategic
material sourcing. This resulted in profit margins that were lower than our building products peers and far lower than what
would typically be expected of a world-class industrial company.
Our senior management team has a proven track record of implementing operational excellence programs at some
of the world’s leading industrial manufacturing businesses, and we believe the same successes can be realized at JELD-
WEN. Key areas of focus of our operational excellence program include:
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reducing labor costs, overtime, and waste by optimizing planning and manufacturing processes;
reducing or minimizing increases in material costs through strategic global sourcing and value-added re-
engineering of components, in part by leveraging our significant spend and the global nature of our
purchases;
reducing warranty costs by improving quality; and
a JEM-enabled facility rationalization and modernization initiative that will reduce overhead costs and
complexity, while increasing our overall capacity and improving our service levels.
Drive Profitable Organic Sales Growth
We seek to deliver profitable organic revenue growth through several strategic initiatives, including new product
development, brand and marketing investment, channel management, and continued pricing optimization. These strategic
initiatives will drive our sales mix to include more value-added, higher margin products.
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New Product Development: Our management team has renewed our focus on innovation and new
product development. We believe that leading the market in innovation will enhance demand for our
products, increase the rate at which our products are specified into home and non-residential designs, and
allow us to sell a higher margin product mix.
Brand and Marketing Investment: We recently began to make meaningful investments in new marketing
initiatives designed to enhance the positioning of the JELD-WEN family of brands. Our new initiatives
include marketing campaigns focused on the distributor, builder, architect, and consumer communities.
Channel Management: We are implementing initiatives and investing in tools and technology to enhance
our relationships with key customers, make it easier for them to source from JELD-WEN, and support their
ability to sell our products in the marketplace. These incentives help our customers grow their businesses
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in a profitable manner while also improving our sales volumes and the margin of our product mix.
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Pricing Optimization: We are focused on profitable growth and will continue to employ a strategic
approach to pricing our products. Pricing discipline is an important element of our effort to improve our
profit margins and earn an appropriate return on our invested capital.
Disciplined and Balanced Capital Allocation
We believe there is a significant opportunity to increase shareholder value by deploying our free cash flow in a
balanced manner between strategic M&A and share repurchases. Our approach to capital allocation includes a disciplined,
returns-focused evaluation of opportunities.
Collectively, our senior management team has acquired and integrated more than 100 companies during their
careers. Leveraging this collective experience, we have developed a disciplined governance process for identifying,
evaluating, and integrating acquisitions. Since 2015, we have completed 13 acquisitions across North America, Europe, and
Australasia. Our M&A focuses on three types of opportunities:
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Expansion in Existing Markets: The competitive landscape in several of our key markets remains highly
fragmented, which creates an opportunity for us to acquire businesses that will, enhance our market-
leading positions and realize synergies through the elimination of duplicate costs. Our acquisitions of
Mattiovi (Finland), Dooria (Norway), Kolder (Australia), Trend (Australia) and A&L (Australia) are
examples of this strategy.
Enhancing Our Portfolio of Products and Service Offerings: We strive to provide the broadest range of
doors and windows to our customers so that we can enhance our share of their overall spend. Along with
our organic new product development pipeline, we seek to expand our door and window product and
service portfolio by acquiring companies that have developed unique products, technologies, or value-
added services. Our acquisitions of Karona (stile and rail doors), LaCantina (folding and sliding wall
systems), Aneeta (sashless windows), Breezway (louver windows), MMI Door (value-added supplier of
customized door systems), Domoferm (steel frames and doors), and ABS (value-added supplier of
millwork to both residential and commercial channels) are examples of this strategy.
Product Adjacencies and New Geographies: Opportunities also exist to expand our company through the
acquisition of complementary door and window manufacturers in new geographies as well as providers of
product adjacencies. While this has not been a major focus in recent years, we expect it to be a key element
in our long-term growth.
In addition to M&A, we seek opportunities to create value by opportunistically repurchasing our own common stock. In 2018, our
board of directors approved a $250.0 million share repurchase authorization, under which we repurchased $125.0 million during 2018.
We will consistently balance the growth, strategic fit, and returns potential of acquisition opportunities against the return potential of
purchasing our own shares.
Our Products
We provide a broad portfolio of interior and exterior doors, windows, and related products, manufactured from a variety of
wood, metal, and composite materials and offered across a full spectrum of price points. In the year ended December 31, 2018, our
door sales accounted for 66% of net revenues, our window sales accounted for 21% of net revenues, and our other ancillary products
and services accounted for 13% of net revenues.
Doors
We are a leading global manufacturer of residential doors. We offer a full line of residential interior and exterior door
products, including patio doors and folding or sliding wall systems. Our non-residential door product offering is concentrated in
Europe, where we are a leading non-residential door provider by net revenues in Germany, Austria, Switzerland, and Scandinavia. In
order to meet the style, design, and durability needs of our customers across a broad range of price points, our product portfolio
encompasses many types of materials, including wood veneer, composite wood, steel, glass, and fiberglass. Our interior and exterior
residential door models generally retail at prices ranging from $30 to $40 for our most basic products to several thousand dollars for
our high-end exterior doors. Our highest volume products include molded interior doors, which are made from two composite molded
door skins joined by a wooden frame and filled with a hollow honey-cell core or other solid core materials. These low-cost doors are
the most popular choice for interior residential applications in North America and also are prevalent in France and the U.K. In Europe,
we also sell highly engineered non-residential doors, with features such as soundproofing, fire resistance, radiation resistance, and
added security. We also manufacture stile and rail doors in our Southeast Asia and U.S. manufacturing facilities. In the U.S.we also
manufacture folding and sliding wall systems. Additionally, we offer profitable value-added distribution services in all of our markets,
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including customizable configuration services, specialized component options, and multiple finishing options. These services are
valued by labor constrained customers and allow us to capture more profit from the sale of our door products. In the U.S., our recent
acquisitions of ABS and MMI Door are examples of our increased focus on value-added services. Our newest door product offerings
include steel doors, steel door frames, and fire doors for commercial and residential markets through our recent acquisition of
Domoferm, which closed in February 2018.
Windows
We are a leading global manufacturer of residential windows. We manufacture wood, vinyl, and aluminum windows in North
America, wood and aluminum windows in Australia, and wood windows in the U.K. Our window product lines comprise a full range
of styles, features, and energy-saving options in order to meet the varied needs of our customers in each of our regional end markets.
For example, our high performance wood and vinyl windows with multi-pane glazing and superior energy efficiency properties are in
greater demand in Canada and the northern U.S. By contrast, our lower-cost aluminum framed windows are popular in some regions
of the southern U.S., while in coastal Florida certain local building codes require windows that can withstand the impact of debris
propelled by hurricane-force winds. Wood windows are prevalent as a high-end option in all of our markets because they possess both
insulating qualities and the beauty of natural wood. In North America, our wood windows and patio doors include our proprietary
AuraLast treatment, which is a unique water-based wood protection process that provides protection against wood rot and decay. We
believe AuraLast is unique in its ability to penetrate and protect the wood through to the core, as opposed to being a shallow or
surface-only treatment. Our most recent window product offerings include sashless window systems through our 2015 acquisition of
Aneeta and louver window systems through our 2016 acquisition of Breezway. Our windows typically retail at prices ranging from
$100 to $200 for a basic vinyl window to over $1,000 for a custom energy-efficient wood window. We believe that our innovative
energy-efficient windows position us to benefit from increasing environmental awareness among consumers and from changes in local
building codes. In recognition of our expansive energy-efficient product line, we have been an ENERGY STAR partner since 1998.
Other Ancillary Products and Services
In certain regions, we sell a variety of other products that are ancillary to our door and window offerings, which we do not
classify as door or window sales. These products include shower enclosures and wardrobes, moldings, trim board, lumber, cutstock,
glass, staircases, hardware and locks, cabinets, and screens. 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. Miscellaneous installation and other services are also included in this category.
Our Segments
We operate within the global market for residential and non-residential doors and windows with sales spanning
approximately 100 countries. While we operate globally, the markets for doors and windows are regionally distinct with suppliers
manufacturing finished goods in proximity to their customers. Finished doors and windows are generally bulky, expensive to ship,
and, in the case of windows, fragile. Designs and specifications of doors and windows also vary from country to country due to
differing construction methods, building codes, certification requirements, and consumer preferences. Customers also demand short
delivery times and can require special order customizations. We believe that we are well-positioned to meet the global demands of our
customers due to our market leadership, strong brands, broad product line, and strategically located manufacturing and distribution
facilities.
Our operations are managed and reported in 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 three reportable segments include the nature of business activities, the
management structure accountable directly to the CODM for operating and administrative activities, the discrete financial information
available and the information regularly presented to the CODM.
North America
In our North America segment, we compete primarily in the market for residential doors and windows in the U.S. and
Canada. We are the only manufacturer that offers a full line of interior and exterior door and window products, allowing us to offer a
more complete solution to our customer base. We believe that our leading position in the North American market will enable us to
benefit from continued recovery in residential construction activity over the next several years. We believe that our total market
opportunity in North America also includes non-residential applications, other related building products, and value-added services.
Europe
The European market for doors is highly fragmented and we have the only platform in the industry capable of serving nearly
all European countries. In our Europe segment, we compete primarily in the market for residential and non-residential doors in
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Germany, the U.K., France, Austria, Switzerland, and Scandinavia. We believe that our total market opportunity in Europe also
includes other European countries, other door product lines, related building products, and value-added services. Although
construction activity in Europe has been slower to recover compared to construction activity in North America, new construction and
R&R activity is expected to increase across Europe over the next several years.
Australasia
In our Australasia segment, we compete primarily in the market for residential doors and windows in Australia, where we
hold a leading position by net revenues. We believe that our total market opportunity in the Australasia region also includes non-
residential applications and other countries in the region, as well as other related building products, and value-added services. For
example, we also sell a full line of shower enclosures and closet systems throughout Australia.
Financial information regarding our segments is included in Note 18 - Segment Information to our financial statements
included in this Form 10-K.
Materials
Historically our sourcing function operated primarily in a regional, decentralized model. With our recent leadership
transformation, we have increased our focus on making global sourcing a competitive advantage, as evidenced by our hiring in early
2016 of an experienced procurement executive to lead our global sourcing function. Under his leadership, our focus has been and will
continue to be on minimizing material costs through strategic global sourcing and value-added re-engineering of components. We
believe leveraging our significant spending and the global nature of our purchases will allow us to achieve these goals.
We generally maintain a diversified supply base for the materials used in our manufacturing operations. Materials represented
approximately 51% of our cost of sales in the year ended December 31, 2018. The primary materials used for our door business
include wood, wood veneers, wood composites, steel, glass, internally produced door skins, fiberglass compound, and hardware, as
well as petroleum-based products such as resin and binders. The primary materials for our window business include wood, wood
components, glass, hardware, aluminum extrusions, and vinyl extrusions. Wood components for our window operations are sourced
primarily from our own manufacturing plants, which allow us to improve margins and take advantage of our proprietary technologies
such as our AuraLast wood treatment process.
We track commodities in order to understand our vendors’ costs, realizing that our costs are determined by the broader
competitive market as well as by increases in the inputs to our vendors. In order to manage the risk in material costs, we develop
strategic relationships with suppliers, routinely evaluate substitute components, develop new products, vertically integrate where
applicable and seek alternative sources of supply from multiple vendors and often from multiple geographies.
Seasonality
In a typical year, our operating results are impacted by seasonality. Historically, peak season for home construction and
remodeling in our North America and Europe segments, which represent the substantial majority of our revenues, generally
corresponds with the second and third calendar quarters, and therefore our sales volume is usually higher during those quarters.
Seasonal variations in operating results may be impacted by inclement weather conditions, such as cold or wet weather, which can
delay construction projects.
Sales and Marketing
We actively market and sell our products directly to our customers around the world through our global sales force and
indirectly through our marketing and branding initiatives. Our global sales force, which is organized and managed regionally, focuses
on building and maintaining relationships with key customers as well as managing customer supply needs and arranging in-store
promotional initiatives. In North America, we also have a dedicated team that focuses on our large home center customers. We have
recently made significant investments in tools and technologies to enhance the effectiveness of our sales force and improve ease of
doing business. For example, we are in the process of deploying Salesforce.com on a global basis, which will provide us with a
common global customer relationship management platform. In addition, we are in the process of simplifying our order entry process
by implementing online configuration tools. We have introduced an electronic ordering system for easy order placement, and we
intend to expand our online retail sales. Our new strategy also includes initiatives focused on expanding our market through the use of
social media.
We have restructured the commission and incentive plans of our sales team to drive focus on achieving profitable growth. We
have also invested significantly in our architectural sales force by adding staff and tools to increase the frequency with which our
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products are specified by architects. We believe these investments will increase sales force effectiveness, create pull-through demand,
and optimize sales force productivity.
We believe that our broad product portfolio of both doors and windows in North America and Australasia is a competitive
advantage as it allows us to cross-sell our door and window products to our end customers, many of whom find it more efficient to
choose one supplier for their door and window needs on a given project. None of our primary competitors in these regions offers a
similarly complete range of windows as well as interior and exterior doors.
Research and Development
Following a number of years during and after the global financial crisis of limited investment in new product development, a
core element of our strategy is a renewed focus on innovation and the development of new products and technologies. We believe that
leading the market in innovation will enhance demand for our products and allow us to sell a higher margin product mix. Our research
and development efforts encompass new product development, derivative product development, as well as value added re-engineering
of components in our existing products leading to reduced costs and manufacturing efficiencies. We have also designed a new
governance process that prioritizes the most impactful projects and is expected to improve the efficiency and quality of our research
and development efforts. The governance process is currently being deployed globally, such that we can leverage best practices from
region to region. Additionally, a substantial driver of our acquisition activity has been increasing access to new and innovative
products.
Although product specifications and certifications vary from country to country, the global nature of our operations allows us
to leverage our global innovation capabilities and share new product designs across our markets. We believe that the global nature of
our research and development capabilities is unique among our door and window competition. An example of global sharing of
innovation is the “soft close” door system, which is based on hardware originally designed and manufactured by our European
operations that is now being offered in North America and Australia. Additionally, we have successfully launched new door designs
into our North American and Australian markets that were originally developed in our European operations.
Customers
We sell our products worldwide and have well-established relationships with numerous customers throughout the door and
window distribution chain in each of our end markets, including retail home centers, wholesale distributors, and building product
dealers that supply homebuilders, contractors, and consumers. Our wholesale customers include such industry leaders as BMC/Stock
Building Supply, ProBuild/Builders First Source, Saint-Gobain, and the Holzring group. Our home center customers include, among
others, The Home Depot, Lowes, and Menards in North America; B&Q, Howdens, and Bauhaus in Europe; and Bunnings Warehouse
in Australia. We have maintained relationships with the majority of our top ten customers for over 20 years and believe that the
strength and tenure of our customer relationships is based on our ability to produce and deliver high-quality products quickly and in
the desired volumes for a reasonable price. Our top ten customers together accounted for approximately 35% of our net revenues in
the year ended December 31, 2018, and our largest customer, The Home Depot, accounted for approximately 14.2% of our net
revenues in the year ended December 31, 2018.
Competition
The door and window industry is highly competitive and includes a number of regional and international competitors.
Competition is largely based on the functional and aesthetic quality of products, service quality, distribution capability and price. We
believe that we are well-positioned in our industry due to our leading brands, our broad product lines, our consistently high product
quality and service, our global manufacturing and distribution capabilities, and our extensive multi-channel distribution. For North
American interior doors, our major competitors include Masonite and several smaller independent door manufacturers. For North
American exterior doors, competitors include Masonite, Therma-Tru (a division of Fortune Brands), and Plastpro. The North
American window market is highly fragmented, with sizable competitors including Andersen, Pella, Marvin, Ply-Gem (a division of
NCI Building Systems), and Milgard (a division of Masco). The door manufacturers that we primarily compete with in our European
markets include Huga, Prüm/Garant, Viljandi, Masonite, Keyor, and Herholz. The competitive landscape in Australia is varied across
the door and window markets. In the Australian door market, Hume Doors is our primary competitor, while in the window, shower
screen, and wardrobe markets we largely compete against a fragmented set of smaller companies.
Intellectual Property
We rely primarily on patent, trademark, copyright, and trade secret laws and contractual commitments to protect our
intellectual property and other proprietary rights. Generally, registered trademarks have a perpetual life, provided that they are
renewed on a timely basis and continue to be used properly as trademarks. We intend to maintain the trademark registrations listed
below so long as they remain valuable to our business.
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Our U.S. window and door trademarks include JELD-WEN, AuraLast, MiraTEC, Extira, LaCANTINA, Karona, ImpactGard,
JW, Aurora, MMI Door, IWP, and ABS. Our trademarks are either registered or have long been used as a common law trademark by
the Company. The trademarks we use outside the U.S. include the Stegbar, Regency, William Russell Doors, Airlite, Trend, The
Perfect Fit, Aneeta, Breezway, Kolder, Corinthian and A&L marks in Australia, and Swedoor, Dooria, DANA, Mattiovi, Alupan and
Domoferm in Europe.
Employees
As of December 31, 2018, we employed approximately 23,000 people. Of our total number of employees, approximately
11,500 are employed in operations included in our North America segment and corporate operations, approximately 6,700 are
employed in operations included in our Europe segment, and approximately 4,800 are employed in operations included in our
Australasia segment.
In total, approximately 1,120, or 10%, of our employees in the U.S. and Canada are unionized. Two facilities in the U.S.,
representing approximately 350 employees, are covered by collective bargaining agreements. In Canada, approximately 64% of our
employees work at facilities covered by collective bargaining agreements. As is common in Europe and Australia, the majority of our
facilities are covered by work councils and/or labor agreements. We believe we have satisfactory relationships with our employees and
our organized labor unions.
Environmental Matters
The geographic breadth of our facilities and the nature of our operations subject us to extensive environmental, health, and
safety laws and regulations in jurisdictions throughout the world. Such laws and regulations relate to, among other things, air
emissions, the treatment and discharge of wastewater, the discharge of hazardous materials into the environment, the handling,
storage, use and disposal of solid, hazardous and other wastes, worker health and safety, or otherwise relate to health, safety, and
protection of the environment. Many of our products are also subject to various laws and regulations such as building and construction
codes, product safety regulations, and regulations and mandates related to energy efficiency.
The nature of our operations, which involve the handling, storage, use, and disposal of hazardous wastes, exposes us to the
risk of liability and claims associated with contamination at our current and former facilities or sites where we have disposed of or
arranged for the disposal of waste, or with the impact of our products on human health and safety and the environment. Laws and
regulations with respect to the investigation and remediation of contaminated sites can impose joint and several liability for releases or
threatened releases of hazardous materials upon statutorily defined parties, including us, regardless of fault or the lawfulness of the
original activity or disposal. We have been subject to claims, including having been named as a potentially responsible party, in certain
proceedings initiated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, and
similar state and foreign laws, regulations, and statutes, and may be named a potentially responsible party in other similar proceedings
in the future. Unforeseen expenditures or liabilities may arise in connection with such matters.
We have also been the subject of certain environmental regulatory actions by the EPA and state regulatory agencies in the U.S. and
foreign governmental authorities in jurisdictions in which we operate, and are obligated to make certain expenditures in settlement of
those actions. We do not expect expenditures for compliance with environmental laws and regulations to have a material adverse effect
on our results of operations or competitive position. However, the discovery of a presently unknown environmental condition, changes
in environmental requirements or their enforcement, or other unanticipated events, may give rise to unforeseen expenditures and
liabilities which could be material.
For more information, see Item 1A - Risk Factors - We may be subject to significant compliance costs as well as liabilities
under environmental, health, and safety laws and regulations, Item 1A - Risk Factors - Risks Relating to Our Business and Industry,
Item 1A - Risk Factors -We may be subject to significant compliance costs with respect to legislative and regulatory proposals to
restrict emissions of GHGs.
Environmental Sustainability
We strive to conduct our business in a manner that is environmentally sustainable and demonstrates environmental
stewardship. Toward that end, we pursue processes that are designed to minimize waste, maximize efficient utilization of materials,
and conserve resources, including using recycled and reused materials to produce portions of our products. We continue to evaluate
and modify our manufacturing and other processes on an ongoing basis to further reduce our impact on the environment. We believe it
is important for our employees to share our commitment and we strive to recruit, educate, and train our employees in these values on
an ongoing basis throughout their careers with us.
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Environmental Regulatory Actions
In 2008, we entered into an Agreed Order with the WADOE, to assess historic environmental contamination and remediation
feasibility at our former manufacturing site in Everett, Washington. As part of this agreement, we also agreed to develop a CAP,
arising from the feasibility assessment. We are currently working with WADOE to finalize our RI/FS, and, once final, we will develop
the CAP. We estimate the remaining cost to complete our RI/FS (Remedial Investigation and Feasibility Study), and develop the CAP
at $0.5 million, which we have fully accrued. However, because we cannot at this time reasonably estimate the cost associated with
any remedial action we would be required to undertake, we have not provided accruals for any remedial actions in our consolidated
financial statements.
In 2015, 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 2013, by using it as fuel for a boiler at that site. The
COA replaced a 1995 Consent Decree between CMI’s predecessor Masonite, Inc. and PaDEP. Under the COA, we are required to
achieve certain periodic removal objectives and ultimately remove the entire pile by August 31, 2022. There are currently $11.0
million in bonds posted in connection with these obligations. If we are unable to remove this pile by August 31, 2022, 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 at this site decrease and we burn less fuel than currently anticipated, we may not be able to meet such
deadlines.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC. We are subject to the informational
requirements of the Exchange Act and file or furnish reports, proxy statements and other information with the SEC. Such reports and
other information filed by us with the SEC are available free of charge on our website at investors.jeld-wen.com when such reports are
made available on the SEC’s website at www.sec.gov. The contents of these websites are not incorporated into this filing. Further, our
references to the URLs for these websites are intended to be inactive textual references only.
Item 1A - Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following factors, as well
as other information contained or incorporated by reference in this 10-K, before deciding to invest in shares of our common stock.
The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment in
our common stock.
Risks Relating to Our Business and Industry
Negative trends in overall business, financial market and economic conditions, and/or activity levels in our end markets may
reduce demand for our products, which could have a material adverse effect on our business, financial condition, and results of
operations.
Negative trends in overall business, financial market, and economic conditions globally or in the regions where we
operate may reduce demand for our doors and windows, which is tied to activity levels in the R&R and new residential and non-
residential construction end markets. In particular, the following factors may have a direct impact on our business in the regions
where our products are marketed and sold:
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the strength of the economy;
employment rates and consumer confidence and spending rates;
the availability and cost of credit;
the amount and type of residential and non-residential construction;
housing sales and home values;
the age of existing home stock, home vacancy rates, and foreclosures;
interest rate fluctuations for our customers and consumers;
volatility in both debt and equity capital markets;
increases in the cost of raw materials or any shortage in supplies or labor, including as a result of tariffs or other
trade restrictions;
the effects of governmental regulation and initiatives to manage economic conditions;
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geographical shifts in population and other changes in demographics; and
changes in weather patterns.
Toward the end of the last decade, the global economy endured a significant recession followed by a prolonged period of
moderate recovery that had a substantial negative effect on sales across our end markets. In particular, beginning in mid-2006 and
continuing through late 2011, the U.S. residential and non-residential construction industry experienced one of the most severe
downturns of the last 40 years. While cyclicality in our new residential and non-residential construction end markets is moderated
to a certain extent by R&R activity, much R&R spending is discretionary and can be deferred or postponed entirely when
economic conditions are poor. We experienced sales declines in all of our end markets during the most recent economic downturn.
Although conditions in the U.S. improved in recent years, there can be no assurance that this improvement will be
sustained in the near or long-term. Uncertain economic and political conditions may make it difficult for us and our customers or
suppliers to accurately forecast and plan future business activities. For example, recent changes to U.S. policies related to global
trade and tariffs have resulted in uncertainty surrounding the future of the global economy as well as retaliatory trade measures
implemented by other countries. Increasing costs of steel and aluminum may impact customer spending as well as our raw
materials costs.
Moreover, uncertain economic conditions continue in our Australasia segment, which has been forecasting a housing
recession, and certain countries in our Europe segment. Negative business, financial market, and economic conditions globally
within the industries or regions we compete in may materially and adversely affect demand for our products, and our business,
financial condition, and results of operations could be materially negatively impacted as a result.
We operate in a highly competitive business environment. Failure to compete effectively could cause us to lose market share
and/or force us to reduce the prices we charge for our products. This competition could have a material adverse effect on our
business, financial condition, and results of operations.
We operate in a highly competitive business environment. Some of our competitors may have greater financial, marketing,
and distribution resources and may develop stronger relationships with customers in the markets where we sell our products. Some
of our competitors may be less leveraged than we are, providing them with more flexibility to invest in new facilities and processes
and also making them better able to withstand adverse economic or industry conditions.
In addition, some of our competitors, regardless of their size or resources, may choose to compete in the marketplace by
adopting more aggressive sales policies, including price cuts, or by devoting greater resources to the development, promotion, and
sale of their products. This could result in our loss of customers and/or market share to these competitors or being forced to reduce
the prices at which we sell our products to remain competitive.
As a result of competitive bidding processes, we may have to provide pricing concessions to our significant customers in
order for us to keep their business. Reduced pricing would result in lower product margins on sales to those customers. There is no
guarantee that a reduction in prices would be offset by sufficient gains in market share and sales volume to those customers.
The loss of, or a reduction in orders from, any significant customers, or decreases in the prices of our products, could have
a material adverse effect on our business, financial condition, and results of operations.
We may not identify or effectively respond to consumer needs, expectations, or trends in a timely fashion, which could adversely
affect our relationship with customers, our reputation, the demand for our brands, products, and services, and our market
share.
The quantity, type, and prices of products demanded by consumers and our customers have shifted over time. For
example, demand has increased for multi-family housing units such as apartments and condominiums, which typically require
fewer of our products, and we are experiencing growth in certain channels for products with lower price points. In certain cases,
these shifts have negatively impacted our sales and/or our profitability. Also, we must continually anticipate and adapt to the
increasing use of technology by our customers. Recent years have seen shifts in consumer preferences and purchasing practices
and changes in the business models and strategies of our customers. Consumers are increasingly using the internet and mobile
technology to research home improvement products and to inform and provide feedback on their purchasing and ownership
experience for these products. Trends towards online purchases could impact our ability to compete as we currently sell a
significant portion of our products through retail home centers, wholesale distributors, and building products dealers.
Accordingly, the success of our business depends in part on our ability to maintain strong brands and identify and respond
promptly to evolving trends in demographics, consumer preferences, and expectations and needs, while also managing inventory
levels. It is difficult to successfully predict the products and services our customers will demand. Even if we are successful in
anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our
continued ability to develop and introduce innovative, high-quality products and acquire or develop the intellectual property
necessary to develop new products or improve our existing products. There can be no assurance that the products we develop, even
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those to which we devote substantial resources, will be successful. While we continue to invest in innovation, brand building, and
brand awareness, and intend to increase our investments in these areas in the future, these initiatives may not be successful. Failure
to anticipate and successfully react to changing consumer preferences could have a material adverse effect on our business,
financial condition, and results of operations.
In addition, our competitors could introduce new or improved products that would replace or reduce demand for our
products or create new proprietary designs and/or changes in manufacturing technologies that may render our products obsolete or
too expensive for efficient competition in the marketplace. Our failure to competitively respond to changing consumer and
customer trends, demands, and preferences could cause us to lose market share, which could have a material adverse effect on our
business, financial condition, and results of operations.
Failure to maintain the performance, reliability, quality, and service standards required by our customers, or to timely deliver
our products, could have a material adverse effect on our business, financial condition, and results of operations.
If our products have performance, reliability, or quality problems, our reputation and brand equity, which we believe is a
substantial competitive advantage, could be materially adversely affected. We may also experience increased and unanticipated
warranty and service expenses. Furthermore, we manufacture a significant portion of our products based on the specific
requirements of our customers, and delays in providing our customers the products and services they specify on a timely basis
could result in reduced or canceled orders and delays in the collection of accounts receivable. Additionally, claims from our
customers, with or without merit, could result in costly and time-consuming litigation that could require significant time and
attention of management and involve significant monetary damages that could have a material adverse effect on our business,
financial condition, and results of operations.
We are in the early stages of implementing strategic initiatives, including JEM and our global footprint rationalization
initiatives. If we fail to implement these initiatives as expected, our business, financial condition, and results of operations
could be adversely affected.
Our future financial performance depends in part on our management’s ability to successfully implement our strategic
initiatives, including JEM and our global footprint rationalization initiatives. We cannot assure you that we will be able to continue
to successfully implement these initiatives and related strategies throughout the geographic regions in which we operate or be able
to continue improving our operating results. Similarly, these initiatives, even if implemented in all of our geographic regions, may
not produce similar results. Any failure to successfully implement these initiatives and related strategies could adversely affect our
business, financial condition, and results of operations. We may, in addition, decide to alter or discontinue certain aspects of our
business strategy at any time.
We may make acquisitions or investments in other businesses which may involve risks or may not be successful.
Generally, we seek to acquire businesses that broaden our existing product lines and service offerings or expand our
geographic reach. There can be no assurance that we will be able to identify suitable acquisition candidates or that our acquisitions
or investments in other businesses will be successful. These acquisitions or investments in other businesses may also involve risks,
many of which may be unpredictable and beyond our control, and which may have a material adverse effect on our business,
financial condition, and results of operations, including risks related to:
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the nature of the acquired company’s business;
any acquired business not performing as well as anticipated;
the potential loss of key employees of the acquired company;
any damage to our reputation as a result of performance or customer satisfaction problems relating to an acquired
business;
the failure of our due diligence procedures to detect material issues related to the acquired business, including
exposure to legal claims for activities of the acquired business prior to the acquisition;
unexpected liabilities resulting from the acquisition for which we may not be adequately indemnified;
our inability to enforce indemnification and non-compete agreements;
the integration of the personnel, operations, technologies, and products of the acquired business, and
establishment of internal controls, including the implementation of our enterprise resource planning system, into
the acquired company’s operations;
our failure to achieve projected synergies or cost savings;
our inability to establish uniform standards, controls, procedures, and policies;
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any requirement that we make divestitures of operations or properties in order to comply with applicable antitrust
laws in connection with future acquisitions;
the diversion of management attention and financial resources; and
any unforeseen management and operational difficulties, particularly if we acquire assets or businesses in new
foreign jurisdictions where we have little or no operational experience.
In furtherance of our strategy of growth through acquisitions, we routinely review and conduct investigations of potential
acquisitions, some of which may be material. When we believe a favorable opportunity exists, we seek to enter into discussions
with targets or sellers regarding the possibility of such acquisitions. At any given time, we may be in discussions with one or more
counterparties. There can be no assurances that any such negotiations will lead to definitive agreements, or if such agreements are
reached, that any transactions would be consummated.
Our inability to achieve the anticipated benefits of acquisitions and other investments could materially and adversely
affect our business, financial condition, and results of operations.
In addition, the means by which we finance an acquisition may have a material adverse effect on our business, financial
condition, and results of operations, including changes to our equity, debt, and liquidity position. If we issue convertible preferred
or common stock to pay for an acquisition, the ownership percentage of our existing shareholders may be diluted. Using our
existing cash may reduce our liquidity. Incurring additional debt to fund an acquisition may result in higher debt service and a
requirement to comply with additional financial and other covenants, including potential restrictions on future acquisitions and
distributions.
A decline in our relationships with our key customers or the amount of products they purchase from us, or a decline in our key
customers’ financial condition, could have a material adverse effect on our business, financial condition, and results of
operations.
Our business depends on our relationships with our key customers, which consist mainly of wholesale distributors and
retail home centers. Our top ten customers together accounted for approximately 35% of our net revenues in the year ended
December 31, 2018, and our largest customer, The Home Depot, accounted for approximately 14.2% of our net revenues in the
year ended December 31, 2018. Although we have established and maintain significant long-term relationships with our key
customers, we cannot assure you that all of these relationships will continue or will not diminish. We generally do not enter into
long-term contracts with our customers and they generally do not have an obligation to purchase products from us. Accordingly,
sales from customers that have accounted for a significant portion of our sales in past periods, individually or as a group, may not
continue in future periods, or if continued, may not reach or exceed historical levels in any period. For example, certain of our
large customers perform periodic line reviews to assess their product offering, which have in the past and may in the future lead to
loss of business and pricing pressures. Some of our large customers may also experience economic difficulties or otherwise default
on their obligations to us. Furthermore, our pricing optimization strategy, which requires maintaining pricing discipline in order to
improve profit margins, has in the past and may in the future lead to the loss of certain customers, including key customers, who do
not agree to our pricing terms. The loss of, or a diminution in our relationship with, any of our largest customers could lower our
sales volumes, which could increase our costs and lower our profitability. This could have a material adverse effect on our
business, financial condition, and results of operations.
Certain of our customers may expand through consolidation and internal growth, which may increase their buying power. The
increased size of our customers could have a material adverse effect on our business, financial condition, and results of
operations.
Certain of our significant customers are large companies with strong buying power, and our customers may expand
through consolidation or internal growth. Consolidation could decrease the number of potential significant customers for our
products and increase our reliance on key customers. Further, the increased size of our customers could result in our customers
seeking more favorable terms, including pricing, for the products that they purchase from us. Accordingly, the increased size of our
customers may further limit our ability to maintain or raise prices in the future. This could have a material adverse effect our
business, financial condition, and results of operations.
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We are subject to the credit risk of our customers.
We are subject to the credit risk of our customers because we provide credit to our customers in the normal course of
business. All of our customers are sensitive to economic changes and to the cyclical nature of the building industry. Especially
during protracted or severe economic declines and cyclical downturns in the building industry, our customers may be unable to
perform on their payment obligations, including their debts to us. Any failure by our customers to meet their obligations to us may
have a material adverse effect on our business, financial condition, and results of operations. In addition, we may incur increased
expenses related to collections in the future if we find it necessary to take legal action to enforce the contractual obligations of a
significant number of our customers.
Increases in interest rates used to finance home construction and improvements, such as mortgage and credit card interest
rates, and the reduced availability of financing for the purchase of new homes and home construction and improvements, could
have a material adverse impact on our business, financial condition, and results of operations.
Our performance depends in part upon consumers having the ability to access third-party financing for the purchase of
new homes and buildings and R&R of existing homes and other buildings. The ability of consumers to finance these purchases is
affected by the interest rates available for home mortgages, credit card debt, home equity or other lines of credit, and other sources
of third-party financing. Interest rates in the majority of the regions where we market and sell our products have generally
increased in recent years, most notably in the U.S. with the U.S. Federal Reserve raising the federal funds rate numerous times
since 2015. Each increase in the federal funds rate or applicable central bank’s prime rates could cause an increase in future interest
rates applicable to mortgages, credit card debt, and other sources of third-party financing. If interest rates continue to increase and,
consequently, the ability of prospective buyers to finance purchases of new homes or home improvement products is adversely
affected, our business, financial condition, and results of operations may be materially and adversely affected.
In addition to increased interest rates, the ability of consumers to procure third-party financing is impacted by such factors
as new and existing home prices, unemployment levels, high mortgage delinquency and foreclosure rates, and lower housing
turnover. Adverse developments affecting any of these factors could result in the imposition of more restrictive lending standards
by financial institutions and reduce the ability of some consumers to finance home purchases or R&R expenditures.
Prices and availability of the raw materials we use to manufacture our products are subject to fluctuations, and we may be
unable to pass along to our customers the effects of any price increases.
We use wood, glass, vinyl and other plastics, fiberglass and other composites, aluminum, steel and other metals, as well as
hardware and other components to manufacture our products. Materials represented approximately 51% of our cost of sales in the
year ended December 31, 2018. Prices and availability of our materials fluctuate for a variety of reasons beyond our control, many
of which cannot be anticipated with any degree of reliability. Our most significant raw materials include logs and lumber, vinyl
extrusions, glass, steel, and aluminum, each of which has been subject to periods of rapid and significant fluctuations in price. The
reasons for these fluctuations include, among other things, variable worldwide supply and demand across different industries,
speculation in commodities futures, general economic or environmental conditions, labor costs, competition, import duties, tariffs,
worldwide currency fluctuations, freight, regulatory costs, and product and process evolutions that impact demand for the same
materials.
The U.S. recently imposed tariffs on certain products imported into the U.S. from China and could impose additional
tariffs or trade restrictions. The imposition of tariffs may impact the prices of materials purchased outside of the U.S. and include
goods in transit as well as increasing the price of domestically sourced materials, including, in particular, steel and aluminum.
Impositions of tariffs by other countries could also impact pricing and availability of raw materials. As another example, as global
demand for key chemicals increases, the limited number of suppliers and investment in greater supply capacity drives increased
global pricing.
We have short-term supply contracts with certain of our largest suppliers that limit our exposure to short term fluctuations
in prices and availability of our materials, but we are susceptible to longer-term fluctuations in prices. We generally do not hedge
against commodity price fluctuations. Significant increases in the prices of raw materials for finished goods, including as a result
of significant or protracted material shortages, may be difficult to pass through to customers and may negatively impact our
profitability and net revenues. We may attempt to modify products that use certain raw materials, but these changes may not be
successful.
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Our business may be affected by delays or interruptions in the delivery of raw materials, finished goods, and certain component
parts. A supply shortage or delivery chain interruption could have a material adverse effect on our business, financial
condition, and results of operations.
We rely upon regular deliveries of raw materials, finished goods, and certain component parts. For certain raw materials
that are used in our products, we depend on a single or limited number of suppliers for our materials, and we typically do not have
long-term contracts with our suppliers. If we are not able to accurately forecast our supply needs, our limited number of suppliers
may make it difficult to quickly obtain additional raw materials to respond to shifting or increased demand. In addition, a supply
shortage could occur as a result of unanticipated increases in market demand, including as a result of accelerated demand in
reaction to the threat of tariffs or trade restrictions; difficulties in production or delivery; financial difficulties; or catastrophic
events in the supply chain. Furthermore, because our products and the components of some of our products are subject to
regulation, changes to these regulations could cause delays in delivery of raw materials, finished goods, and certain component
parts.
Until we can make acceptable arrangements with alternate suppliers, any interruption or disruption could impact our
ability to ship orders on time and could idle some of our manufacturing capability for those products. This could result in a loss of
revenues, reduced margins, and damage to our relationships with customers, which could have a material adverse effect on our
business, financial condition, and results of operations.
Our business is seasonal and revenue and profit can vary significantly throughout the year, which may adversely impact the
timing of our cash flows and limit our liquidity at certain times of the year.
Our business is seasonal, and our net revenues and operating results vary significantly from quarter to quarter based upon
the timing of the building season in our markets. Our sales typically follow seasonal new construction and R&R industry patterns.
The peak season for home construction and R&R activity in the majority of the geographies where we market and sell our products
generally corresponds with the second and third calendar quarters, and therefore our sales volume is typically higher during those
quarters. Our first and fourth quarter sales volumes are generally lower due to reduced R&R and new construction activity as a
result of less favorable climate conditions in the majority of our geographic end markets. Failure to effectively manage our
inventory in anticipation of or in response to seasonal fluctuations could negatively impact our liquidity profile during certain
seasonal periods.
Changes in weather patterns, including as a result of global climate change, could significantly affect our financial results or
financial condition.
Weather patterns may affect our operating results and our ability to maintain our sales volume throughout the year.
Because our customers depend on suitable weather to engage in construction projects, increased frequency or duration of extreme
weather conditions could have a material adverse effect on our financial results or financial condition. For example, unseasonably
cool weather or extraordinary amounts of rainfall may decrease construction activity, thereby decreasing our sales. Also, we cannot
predict the effects that global climate change may have on our business. In addition to changes in weather patterns, it might, for
example, reduce the demand for construction, destroy forests (increasing the cost and reducing the availability of wood products
used in construction), and increase the cost and reduce the availability of raw materials and energy. New laws and regulations
related to global climate change may also increase our expenses or reduce our sales.
We are exposed to political, economic, and other risks that arise from operating a multinational business.
We have operations in North America, South America, Europe, Australia, and Asia. In the year ended December 31, 2018,
our North America segment accounted for approximately 57% of net revenues, our Europe segment accounted for approximately
28% of net revenues, and our Australasia segment accounted for approximately 15% of our net revenues. Further, certain of our
businesses obtain raw materials and finished goods from foreign suppliers. Accordingly, our business is subject to political,
economic, and other risks that are inherent in operating in numerous countries.
These risks include:
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the difficulty of enforcing agreements and collecting receivables through foreign legal systems;
trade protection measures and import or export licensing requirements;
the imposition of, or increases in, tariffs or other restrictions;
required compliance with a variety of foreign laws and regulations, including the application of foreign labor
regulations;
tax rates in foreign countries and the imposition of withholding requirements on foreign earnings;
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difficulty in staffing and managing widespread operations;
the imposition of, or increases in, currency exchange controls;
potential inflation in applicable non-U.S. economies; and
changes in general economic and political conditions in countries where we operate, including as a result of the
impact of the planned withdrawal of the U.K. from the E.U.
The success of our business depends in part on our ability to anticipate and effectively manage these and other risks. We
cannot assure you that these and other factors will not have a material adverse effect on our international operations or ultimately
on our global business, financial condition, and results of operations.
The notice given by the U.K. of its intent to withdraw from the E.U. could have a material adverse effect on our business,
financial condition, and results of operations.
The notification by the U.K. of its intent to exit the E.U., or “Brexit”, has created volatility in the global financial markets.
The terms of the withdrawal remain subject to an ongoing negotiation. If the U.K. and the E.U. are unable to negotiate acceptable
withdrawal terms or if other E.U. member states pursue withdrawal, barrier-free access between the U.K. and other E.U. member
states or among the European Economic Area overall could be diminished or eliminated. The effects of the U.K.’s withdrawal from
the E.U. on the global economy, and on our business in particular, will depend on agreements the U.K. makes to retain access to
E.U. markets both during a transitional period and more permanently. Brexit could impair the ability of our operations in the E.U.
to transact business in the future in the U.K., as well as the ability of our U.K. operations to transact business in the future in the
E.U., including through the imposition of tariffs between the U.K. and other E.U. countries.
Volatility associated with Brexit could continue to adversely affect European and worldwide economic conditions and
may contribute to greater instability in the global financial markets. Among other things, Brexit could reduce consumer spending in
the U.K. and the E.U., which could result in decreased demand for our products within these regions. Similarly, housing sales and
home values in the U.K. and in the E.U. could be negatively impacted and Brexit could also influence foreign currency exchange
rates. For the year ended December 31, 2018, we derived 3% of our net revenues from our operations in the U.K., and our Europe
headquarters is located in the U.K. As a result, the effects of Brexit could inhibit the growth of our business and have a material
adverse effect on our business, financial condition, and results of operations.
Exchange rate fluctuations may impact our business, financial condition, and results of operations.
Our operations expose us to both transaction and translation exchange rate risks. In the year ended December 31, 2018,
49% of our net revenues came from sales outside of the U.S., and we anticipate that our operations outside of the U.S. will
continue to represent a significant portion of our net revenues for the foreseeable future. In addition, the nature of our operations
often requires that we incur expenses in currencies other than those in which we earn revenue. Because of the mismatch between
revenues and expenses, we are exposed to significant currency exchange rate risk and we may not be successful in achieving
balances in currencies throughout our operations. In addition, if the effective price of our products were to increase as a result of
fluctuations in foreign currency exchange rates, demand for our products could decline, which could adversely affect our business,
financial condition, and results of operations. Also, because our financial statements are presented in U.S. dollars, we must
translate the financial statements of our foreign subsidiaries and affiliates into U.S. dollars at exchange rates in effect during or at
the end of each reporting period, and increases or decreases in the value of the U.S. dollar against other major currencies will affect
our reported financial results, including the amount of our outstanding indebtedness. Exchange rates, net, had an impact of less
than 1% on our consolidated net revenues in the year ended December 31, 2018 as compared to a 1% positive impact in the year
ended December 31, 2017. We cannot assure you that fluctuations in foreign currency exchange rates, particularly the
strengthening of the U.S. dollar against major currencies, such as the Euro, the Australian dollar, the Canadian dollar, the British
pound, or the currencies of large developing countries, would not materially adversely affect our business, financial condition, and
results of operations.
A disruption in our operations due to natural disasters or acts of war could have a material adverse effect on our business,
financial condition, and results of operations.
We operate facilities worldwide. Many of our facilities are located in areas that are vulnerable to hurricanes, earthquakes,
and other natural disasters. In the event that a hurricane, earthquake, natural disaster, fire, or other catastrophic event were to
interrupt our operations for any extended period of time, it could delay shipment of merchandise to our customers, damage our
reputation, or otherwise have a material adverse effect on our business, financial condition, and results of operations.
In addition, our operations may be interrupted by terrorist attacks or other acts of violence or war. These attacks may
directly impact our suppliers’ or customers’ physical facilities. Furthermore, these attacks may make travel and the transportation
of our supplies and products more difficult and more expensive and ultimately have a material adverse effect on our business,
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financial condition, and results of operations. The U.S. has entered into armed conflicts, which could have an impact on our sales
and our ability to deliver product to our customers. Political and economic instability in some regions of the world may also
negatively impact the global economy and, therefore, our business. The consequences of any of these armed conflicts are
unpredictable, and we may not be able to foresee events that could have an adverse effect on our business or your investment.
More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in
the worldwide financial markets. They could also result in economic recessions. Any of these occurrences could have a material
adverse effect on our business, financial condition, and results of operations.
Manufacturing realignments and cost savings programs may result in a decrease in our short-term earnings and operating
efficiency.
We continually review our manufacturing operations to address market changes and to implement efficiencies presented
by acquisitions. Effects of periodic manufacturing integrations, realignments and cost savings programs have in the past and could
in the future result in a decrease in our short-term earnings and operating efficiency until the expected results are achieved. Such
programs may include the consolidation, integration, and upgrading of facilities, functions, systems, and procedures. Such
programs involve substantial planning, often require capital investments, and may result in charges for fixed asset impairments or
obsolescence and substantial severance costs. We also cannot assure you that we will achieve all of our cost savings. Our ability to
achieve cost savings and other benefits within expected time frames is subject to many estimates and assumptions. These estimates
and assumptions are subject to significant economic, competitive, and other uncertainties, some of which are beyond our control. If
these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our operations could
experience disruption, and our business, financial condition, and results of operations could be materially and adversely affected.
We are highly dependent on information technology, the disruption of which could significantly impede our ability to do
business.
Our operations depend on our network of information technology systems, which are vulnerable to damage from
hardware failure, fire, power loss, telecommunications failure, and impacts of terrorism, natural disasters, or other disasters. We
rely on our information technology systems to accurately maintain books and records, record transactions, provide information to
management and prepare our financial statements. We may not have sufficient redundant operations to cover a loss or failure in a
timely manner. Any damage to our information technology systems could cause interruptions to our operations that materially
adversely affect our ability to meet customers’ requirements, resulting in an adverse impact to our business, financial condition,
and results of operations. Periodically, these systems need to be expanded, updated, or upgraded as our business needs change. We
may not be able to successfully implement changes in our information technology systems without experiencing difficulties, which
could require significant financial and human resources. Moreover, our increasing dependence on technology may exacerbate this
risk.
We are implementing new systems, including a new Enterprise Resource Planning system, as part of our ongoing technology
and process improvements. If these new systems prove ineffective, we may be unable to timely or accurately prepare financial
reports, make payments to our suppliers and employees, or invoice and collect from our customers.
We are implementing new systems, including our continued implementation of a new ERP system, as part of our ongoing
technology and process improvements. This ERP system will provide a standardized method of accounting for, among other things,
order entry and inventory and should enhance our ability to implement our strategic initiatives. Any delay in the implementation, or
disruption in the upgrade, of these systems could adversely affect our ability to timely and accurately report financial information,
including the filing of our quarterly or annual reports with the SEC. Such delay or disruption could also impact our ability to timely
or accurately make payments to our suppliers and employees, and could also inhibit our ability to invoice and collect from our
customers. Data integrity problems or other issues may be discovered which could impact our business or financial results. In
addition, we may experience periodic or prolonged disruption of our financial functions arising out of this conversion, general use
of such systems, other periodic upgrades or updates, or other external factors that are outside of our control. If we encounter
unforeseen problems with our financial system or related systems and infrastructure, our business, operations, and financial
systems could be adversely affected. We may also need to implement additional systems or transition to other new systems that
require further expenditures in order to function effectively as a public company. There can be no assurance that our
implementation of additional systems or transition to new systems will be successful, or that such implementation or transition will
not present unforeseen costs or demands on our management.
Our systems and IT infrastructure may be subject to security breaches and other cybersecurity incidents.
We rely on the accuracy, capacity, and security of our IT systems, some of which are managed or hosted by third parties,
and the sale of our products may involve the transmission and/or storage of data, including in certain instances customers’ and
employees’ business and personally identifiable information. Maintaining the security of computers, computer networks, and data
storage resources is a critical issue for us and our customers, as security breaches could result in vulnerabilities and loss of and/or
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unauthorized access to confidential information. We have experienced and may in the future face attempts by experienced hackers,
cybercriminals, or others with authorized access to our systems to misappropriate our proprietary information and technology,
interrupt our business, and/or gain unauthorized access to confidential information. The reliability and security of our information
technology infrastructure and software, and our ability to expand and continually update technologies in response to our changing
needs is critical to our business. To the extent that any disruptions or security breaches result in a loss or damage to our data, it
could cause harm to our reputation or brand. This could lead some customers to stop purchasing our products and reduce or delay
future purchases of our products or use competing products. In addition, we could face enforcement actions by U.S. states, the U.S.
federal government, or foreign governments, which could result in fines, penalties, and/or other liabilities and which may cause us
to incur legal fees and costs, and/or additional costs associated with responding to the cyberattack. Increased regulation regarding
cybersecurity may increase our costs of compliance, including fines and penalties, as well as costs of cybersecurity audits. Any of
these actions could materially adversely impact our business and results of operations. Although we maintain insurance coverage to
protect us against some of the risks, those policies may be insufficient or may not cover us in the event of a loss caused by a
cyberattack or other cybersecurity breach.
In addition, as a result of our global operations, we are subject to foreign and international laws and regulations that apply
to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These privacy and data-
protection related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented
frequently and existing laws and regulations subject to new or different interpretations. In particular, the E.U. General Data
Protection Regulation (“GDPR”), which became effective in 2018, poses increased compliance challenges both for companies
operating within the E.U. and non-E.U. companies that administer or process certain personal data of E.U. residents. It is not
possible to predict the ultimate content, and therefore effect, of data protection regulation over time, and efforts to comply with
evolving regulation may result in additional costs.
We believe we have invested in industry-appropriate protections and monitoring practices for our data and information
technology to reduce these risks and continue to monitor our systems on an ongoing basis for compliance with applicable privacy
regulations and any current or potential threats. While we have not experienced any material breaches in security in our recent
history, there can be no assurance that our efforts will prevent breakdowns or breaches to databases or systems that could have a
material adverse effect on our business, financial condition, and results of operations, or that we will be subject to enforcement
actions or penalties in connection with a failure or alleged failure to comply with applicable laws.
Increases in labor costs, potential labor disputes, and work stoppages at our facilities or the facilities of our suppliers could
have a material adverse effect on our business, financial condition, and results of operations.
Our financial performance is affected by the availability of qualified personnel and the cost of labor. As of December 31,
2018, we had approximately 23,000 employees worldwide, including approximately 10,900 employees in the U.S. and Canada.
Approximately 1,120, or 10%, of our employees in the U.S. and Canada are unionized workers, and the majority of our workforce
in other countries belong to work councils or are otherwise subject to labor agreements. U.S. and Canada employees represented
by these unions are subject to collective bargaining agreements that are subject to periodic negotiation and renewal. If we are
unable to enter into new, satisfactory labor agreements with our unionized employees upon expiration of their agreements, we
could experience a significant disruption of our operations, which could cause us to be unable to deliver products to customers on a
timely basis. Such disruptions could result in a loss of business and an increase in our operating expenses, which could reduce our
net revenues and profit margins. In addition, our non-unionized labor force may become subject to labor union organizing efforts,
which could cause us to incur additional labor costs and increase the related risks that we now face.
We believe many of our direct and indirect suppliers also have unionized workforces. Strikes, work stoppages, or
slowdowns experienced by suppliers could result in slowdowns or closures of facilities where components of our products are
manufactured or delivered. Any interruption in the production or delivery of these components could reduce sales, increase costs,
and have a material adverse effect on us.
Changes in building codes and standards (including ENERGY STAR standards) could increase the cost of our products, lower
the demand for our windows and doors, or otherwise adversely affect our business.
Our products and markets are subject to extensive and complex local, state, federal, and foreign statutes, ordinances, rules,
and regulations. These mandates, including building design and safety and construction standards and zoning requirements, affect
the cost, selection, and quality requirements of building components like windows and doors.
These regulations often provide broad discretion to governmental authorities as to the types and quality specifications of
products used in new residential and non-residential construction and home renovations and improvement projects, and different
governmental authorities can impose different standards. Compliance with these standards and changes in such regulations may
increase the costs of manufacturing our products or may reduce the demand for certain of our products in the affected geographical
areas or product markets. Conversely, a decrease in product safety standards could reduce demand for our more modern products if
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less expensive alternatives that did not meet higher standards became available for use in that market. All or any of these changes
could have a material adverse effect on our business, financial condition, and results of operations.
In addition, in order for our products to obtain the “ENERGY STAR” certification, they must meet certain requirements
set by the EPA. Changes in the energy efficiency requirements established by the EPA for the ENERGY STAR label, such as those
announced in August 2018, could increase our costs, and a lapse in our ability to label our products as such or to comply with the
new standards, may have a material adverse effect on our business, financial condition, and results of operations.
The elimination of the ENERGY STAR program could lower the demand for our products or otherwise adversely affect our
business.
Many of our products comply with the federal government’s ENERGY STAR program. We believe that marketing our
products with the ENERGY STAR label gives us a competitive advantage as compared to competing products that are not labeled
as ENERGY STAR products. The current U.S. presidential administration has proposed discontinuing or privatizing the use of the
ENERGY STAR program. Eliminating or privatizing the ENERGY STAR program could diminish any competitive advantage for
ENERGY STAR compliant products and result in a material adverse effect on our business, financial condition and results of
operations.
Domestic and foreign governmental regulations applicable to general business operations could increase the costs of operating
our business and adversely affect our business.
We are subject to a variety of regulations from U.S. and foreign governmental authorities relating to wage requirements,
employee benefits, and other workplace matters. Changes in local minimum or living wage requirements, rights of employees to
unionize, healthcare regulations, and other requirements relating to employee benefits could increase our labor costs, which would
in turn increase our cost of doing business. In addition, our international operations are subject to laws applicable to foreign
operations, trade protection measures, foreign labor relations, differing intellectual property rights, privacy regulations, other legal
and regulatory constraints, and currency regulations of the countries or regions in which we currently operate or where we may
operate in the future. These factors may restrict the sales of, or increase costs of, manufacturing and selling our products.
We may be subject to significant compliance costs, as well as liabilities under environmental, health, and safety laws and
regulations.
Our past and present operations, assets, and products are subject to extensive environmental laws and regulations at the
federal, state, and local level worldwide. These laws regulate, among other things, air emissions, the discharge or release of
materials into the environment, the handling and disposal of wastes, remediation of contaminated sites, worker health and safety,
and the impact of products on human health and safety and the environment. Under certain of these laws, liability for contaminated
property may be imposed on current or former owners or operators of the property or on parties that generated or arranged for
waste sent to the property for disposal. Liability under these laws may be joint and several and may be imposed without regard to
fault or the legality of the activity giving rise to the contamination. Notwithstanding our compliance efforts we may still face
material liability, limitations on our operations, fines, or penalties for violations of environmental, health, and safety laws and
regulations, including releases of regulated materials and contamination by us or previous occupants at our current or former
properties or at offsite disposal locations we use.
The applicable environmental, health, and safety laws and regulations, and any changes to them or in their enforcement,
may require us to make material expenditures with respect to ongoing compliance with or remediation under these laws and
regulations or require that we modify our products or processes in a manner that increases our costs and/or reduces our
profitability. For example, additional pollution control equipment, process changes, or other environmental control measures may
be needed at some of our facilities to meet future requirements. In addition, discovery of currently unknown or unanticipated soil
or groundwater conditions at our properties could result in significant liabilities and costs. Accordingly, we are unable to predict
the exact future costs of compliance with or liability under environmental, health, and safety laws and regulations.
We may be subject to significant compliance costs with respect to legislative and regulatory proposals to restrict emissions of
greenhouse gasses, or “GHGs”.
Various legislative, regulatory, and inter-governmental proposals to restrict emissions of GHGs, such as carbon dioxide
(“CO 2”), are under consideration by governmental legislative bodies and regulators in the jurisdictions where we operate. The EPA
promulgated regulations in 2015 to reduce GHG emissions from new and existing power plants. The regulations applicable to
existing power plants in the U.S., commonly referred to as the Clean Power Plan, would require states to develop strategies to
reduce GHG emissions within the states that may include reductions at other sources in addition to electric utilities. The EPA has
delayed implementation of the Clean Power Plan while legal challenges to such regulations are addressed by lower courts and the
current presidential administration has taken steps to repeal or replace the Clean Power Plan, resulting in uncertainty regarding
CO2 reduction commitments in the U.S. However, many states and nations, comprising the world’s 20 largest economies (the
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“G20”), including other jurisdictions in which we operate, have also continued to commit to limiting emissions of GHGs, most
prominently through an agreement reached in Paris in December 2015 at the 21st Conference of the Parties to the United Nations
Framework Convention on Climate Change. The Paris Agreement sets out a new process for achieving global GHG reductions. On
June 1, 2017, President Trump announced that the U.S. plans to withdraw from the Paris Agreement and to seek negotiations either
to reenter the Paris Agreement on different terms or to establish a new framework agreement. The earliest permitted exit date under
the Paris Agreement is four years from when it took effect in November 2016, or November 2020. Since some of our
manufacturing facilities operate boilers or other process equipment that emit GHGs, such regulatory and global initiatives may
require us to modify our operating procedures or production levels, incur capital expenditures, change fuel sources, or take other
actions that may adversely affect our financial results. However, given the high degree of uncertainty about the ultimate parameters
of any such regulatory or global initiative, whether the U.S. will adhere to the Paris Agreement’s exit process, and the terms on
which the U.S. may reenter the Paris Agreement or a separately negotiated agreement, and because proposals like the Clean Power
Plan are currently subject to legal challenges and reconsideration, we cannot predict at this time the ultimate impact of such
initiatives on our operations or financial results.
A significant portion of our U.S. GHG emissions are from biomass-fired boilers, which emit biogenic CO2 . Biogenic
CO2 is generally considered carbon neutral. In November 2014, the EPA released its Framework for Assessing Biogenic CO2
Emissions From Stationary Sources along with an accompanying memo that generally supports carbon neutrality for biomass
combustion, but left open the possibility that it may not always be characterized as carbon neutral.
In Europe, EU member states have agreed to reduce CO2 emissions by 2030 by 30%. Focus is currently upon reducing
emissions from power plants and diesel engines; however, future actions taken by individual Member States to substantially reduce
or capture carbon emissions, or develop, manufacture, and expand alternative fuel sources, may affect the cost of energy needed to
operate our manufacturing facilities.
Similarly, Australia has stated a commitment to reduce CO2 emissions to 2005 levels by 2030 (a 50-52% reduction).
Currently, Australia is focusing their efforts, to achieve these reductions, on low emission technologies and practices.
Increasing regulations to reduce GHG emissions, as proposed throughout all of our operating regions, would be expected
to increase energy costs, increase price volatility for petroleum, and reduce petroleum production levels, which in turn could
impact the prices of those raw materials. In addition, laws and regulations relating to forestry practices limit the volume and
manner of harvesting timber to mitigate environmental impacts such as deforestation, soil erosion, damage to riparian areas, and
GHG levels. The extent of these regulations and related compliance costs has grown in recent years and will increase our materials
costs and may increase other aspects of our production costs.
Changes to legislative and regulatory policies that currently promote home ownership may have a material adverse effect on
our business, financial condition, and results of operations.
Our markets are also affected by legislative and regulatory policies, such as U.S. tax rules allowing for deductions of
mortgage interest and the mandate of government-sponsored entities like Freddie Mac and Fannie Mae to promote home
ownership through mortgage guarantees on certain types of home loans. The Tax Act passed in the U.S. in December 2017 made
significant changes to some of these historical benefits of home ownership. The specific changes which could affect our markets
are, among others, (i) a reduction of the maximum amount of home mortgage indebtedness for which a tax deduction for interest
paid may be claimed from $1 million to $750,000, (ii) an elimination of the deduction for interest paid on home equity
indebtedness, and (iii) a limitation on the amount of state and local taxes which may be deducted annually as itemized deductions
which may limit certain individuals’ deduction for local property taxes. These changes to the tax code and any future policy
changes may adversely impact demand for our products and have a material adverse effect on our business, financial condition,
and results of operations.
Changes in legislation, regulation and government policy, including as a result of U.S. presidential and congressional elections,
may have a material adverse effect on our business in the future.
The recent midterm congressional elections in the U.S. could result in significant changes in, and uncertainty with respect
to, legislation, regulation and government policy. While it is not possible to predict whether and when any such changes will occur,
changes at the local, state and federal level could significantly impact our business. Specific legislative and regulatory proposals
that could have a material impact on us include, but are not limited to, infrastructure renewal programs; changes to immigration
policy; modifications to international trade policy, including renegotiation of or withdrawal from trade agreements; the imposition
of tariffs or trade restrictions; and changes to financial legislation and public company reporting requirements.
In addition, U.S. lawmakers have made substantial changes to U.S. fiscal and tax policies, including the adoption of the
Tax Act, which introduced a variety of tax reforms that significantly impact U.S. taxation of multi-national corporations. These
include, among others, reductions in the U.S. corporate tax rate, repeal of the corporate alternative minimum tax, introduction of
immediate cost recovery for capital investments, the limitation of the interest deduction, the limitation of certain deductions for
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executive compensation and changes to the international tax system, including the adoption of a territorial tax system and taxation
of the accumulated foreign earnings of U.S. multinational corporations. The specific provisions of the Tax Act, while generally
favorable to our U.S. operations, may have certain negative implications, such as the GILTI provisions, which could materially
impact our financial performance. In accordance with SEC guidance, we made provisional estimates of the effects of these tax law
changes in our financial statements for the year ended December 31, 2017. Our analysis was finalized during the year ended
December 31, 2018 and any adjustments to our provisional estimates have been recorded as a component of income tax expense
from continuing operations. Certain aspects of the Tax Act took effect during fiscal year 2018 including, among other things, the
GILTI, Base Erosion Anti-Abuse Tax (“BEAT”), and limitations on business interest, executive compensation and employer-
provided parking. These provisions will continue to have a significant impact on our future performance.
Lack of transparency, threat of fraud, public sector corruption, and other forms of criminal activity involving government
officials increases the risk of potential liability under anti-bribery/anti-corruption or anti-fraud legislation, including the U.S.
Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws and regulations.
We operate manufacturing facilities in 20 countries and sell our products in approximately 100 countries around the
world. As a result of the international nature of our operations, we may enter from time to time into negotiations and contractual
arrangements with parties affiliated with foreign governments and their officials in the ordinary course of business. In connection
with these activities, we may be subject to anti-corruption laws in various jurisdictions, including the U.S. Foreign Corrupt
Practices Act, or the “FCPA”, the U.K. Bribery Act and other anti-bribery laws applicable to jurisdictions where we do business
that prohibit improper payments or offers of payments to foreign governments and their officials and political parties for the
purpose of obtaining or retaining business, or otherwise receiving discretionary favorable treatment of any kind, and require the
maintenance of internal controls to prevent such payments. In particular, we may be held liable for actions taken by agents in
foreign countries where we operate, even though such parties are not always subject to our control. We have established anti-
bribery/anti-corruption policies and procedures and offer several channels for raising concerns in an effort to comply with the laws
and regulations applicable to us. However, there can be no assurance that our policies and procedures will effectively prevent us
from violating these laws and regulations in every transaction in which we may engage. Any determination that we have violated
the FCPA or other anti-bribery/anti-corruption laws (whether directly or through acts of others, intentionally or through
inadvertence) could result in sanctions that could have a material adverse effect on our business, reputation, financial condition,
and results of operations.
As we continue to expand our business globally, including through foreign acquisitions, we may have difficulty
anticipating and effectively managing these and other risks that our international operations may face, which may adversely impact
our business outside of the U.S. and our financial condition and results of operations. In addition, any acquisition of businesses
with operations outside of the U.S. may exacerbate this risk.
We may be the subject of product liability claims or product recalls and we may not accurately estimate costs related to warranty
claims. Expenses associated with product liability claims and lawsuits and related negative publicity or warranty claims in
excess of our reserves could have a material adverse effect on our business, financial condition, and results of operations.
Our products are used in a wide variety of residential, non-residential, and architectural applications. We face the risk of
exposure to product liability or other claims, including class action lawsuits, in the event our products are alleged to be defective or
have resulted in harm to others or to property. We may in the future incur liability if product liability lawsuits against us are
successful. Moreover, any such lawsuits, whether or not successful, could result in adverse publicity to us, which could cause our
sales to decline materially. In addition, it may be necessary for us to recall defective products, which would also result in adverse
publicity, as well as resulting in costs connected to the recall and loss of sales. We maintain insurance coverage to protect us
against product liability claims, but that coverage may not be adequate to cover all claims that may arise or we may not be able to
maintain adequate insurance coverage in the future at an acceptable cost. Any liability not covered by insurance could have a
material adverse effect on our business, financial condition, and results of operations.
In addition, consistent with industry practice, we provide warranties on many of our products and we may experience
costs associated with warranty claims if our products have defects in manufacture or design or they do not meet contractual
specifications. We estimate our future warranty costs based on historical trends and product sales, but we may fail to accurately
estimate those costs and thereby fail to establish adequate warranty reserves for them. If warranty claims exceed our estimates, it
may have a material adverse effect on our business, financial condition, and results of operations.
We may be unable to protect our intellectual property, and we may face claims of intellectual property infringement.
We rely on a combination of patent, copyright, trademark, and trade secret laws, as well as confidentiality agreements,
nondisclosure agreements, and other contractual commitments, to protect our intellectual property rights. However, these measures
may not be adequate or sufficient, and third parties may not always respect these legal protections even if they are aware of them.
In addition, our competitors may develop similar technologies and know-how without violating our intellectual property rights.
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Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S.
The failure to obtain worldwide patent and trademark protection may result in other companies copying and marketing products
based on our technologies or under brand or trade names similar to ours outside the jurisdictions in which we are protected. This
could impede our growth in existing regions, create confusion among consumers, and result in a greater supply of similar products
that could erode prices for our protected products.
Litigation may be necessary to protect our intellectual property rights. Intellectual property litigation can result in
substantial costs, could distract our management, and could impinge upon other resources. Our failure to enforce and protect our
intellectual property rights may cause us to lose brand recognition and result in a decrease in sales of our products.
Moreover, while we are not aware that any of our products or brands infringes upon the proprietary rights of others, third
parties may make such claims in the future. From time to time, third parties may claim that we have infringed upon their
intellectual property rights and we may receive notices from such third parties asserting such claims. Any such infringement claims
are thoroughly investigated and, regardless of merit, could be time-consuming and result in costly litigation or damages, undermine
the exclusivity and value of our brands, decrease sales, or require us to enter into royalty or licensing agreements that may not be
on acceptable terms and that could have a material adverse effect on our business, financial condition, and results of operations.
Our business will suffer if certain key officers or employees discontinue employment with us or if we are unable to recruit and
retain highly skilled staff at a competitive cost.
The success of our business depends upon the skills, experience, and efforts of our key officers and employees. In recent
years, we have hired key executives who have and will continue to be integral in the continuing transformation of our business.
The loss of key personnel could have a material adverse effect on our business, financial condition, and results of operations. We
do not maintain key-man life insurance policies on any members of management. Our business also depends on our ability to
continue to recruit, train, and retain skilled employees, particularly skilled sales personnel. The loss of the services of any key
personnel, or our inability to hire new personnel with the requisite skills, could impair our ability to develop new products or
enhance existing products, sell products to our customers or manage our business effectively. Should we lose the services of any
member of our senior management team, our board of directors would have to conduct a search for a qualified replacement. This
search may be prolonged, and we may not be able to locate and hire a qualified replacement. A significant increase in the wages
paid by competing employers could result in a reduction of our qualified labor force, increases in the wage rates that we must pay,
or both.
Our pension plan obligations are currently not fully funded, and we may have to make significant cash payments to these plans,
which would reduce the cash available for our businesses.
Although we have closed our U.S. pension plan to new participants and have frozen future benefit accruals for current
participants, we continue to have unfunded obligations under that plan. The funded levels of our pension plan depend upon many
factors, including returns on invested assets, certain market interest rates, and the discount rate used to determine pension
obligations. The projected benefit obligation and unfunded liability included in our consolidated financial statements as of
December 31, 2018 for our U.S. pension plan were approximately $383.9 million and $81.2 million, respectively. Unfavorable
returns on the plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount
of required plan funding, which would reduce the cash available for our operations. In addition, a decrease in the discount rate used
to determine pension obligations could increase the estimated value of our pension obligations, which would affect the reported
funding status of our pension plans and would require us to increase the amounts of future contributions. Additionally, we have
foreign defined benefit plans, some of which continue to be open to new participants. As of December 31, 2018, our foreign
defined benefit plans had unfunded pension liabilities of approximately $31.6 million and overfunded pension assets of
approximately $1.5 million.
Under the Employee Retirement Income Security Act of 1974, as amended, or “ERISA”, the U.S. Pension Benefit
Guaranty Corporation, or the “PBGC”, also has the authority to terminate an underfunded tax-qualified U.S. pension plan under
certain circumstances. In the event our tax-qualified U.S. pension plans were terminated by the PBGC, we could be liable to the
PBGC for an amount that exceeds the underfunding disclosed in our consolidated financial statements. In addition, because our
U.S. pension plan has unfunded obligations, if we have a substantial cessation of operations at a U.S. facility and, as a result of
such cessation of operations an event under ERISA Section 4062(e) is triggered, additional liabilities that exceed the amounts
disclosed in our consolidated financial statements could arise, including an obligation for us to provide additional contributions or
alternative security for a period of time after such an event occurs. Any such action could have a material adverse effect on our
business, financial condition, and results of operations.
Changes in accounting standards, new interpretations of existing standards and subjective assumptions, estimates, and
judgments by management related to complex accounting matters could significantly affect our financial results or financial
condition.
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Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and
interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset
impairment, impairment of goodwill and other intangible assets, inventories, lease obligations, self-insurance, tax matters, and
litigation, are highly complex and involve many subjective assumptions, estimates, and judgments. Changes in these rules or their
interpretation or changes in underlying assumptions, estimates, or judgments could significantly change our reported results.
Risks Relating to our Indebtedness
Our indebtedness could adversely affect our financial flexibility and our competitive position.
Financial information regarding our indebtedness is included in Note 15 - Notes Payable and Long-Term Debt to our
financial statements included in this 10-K.
Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in
respect of our indebtedness and could have other material consequences, including:
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limiting our ability to obtain financing in the future for working capital, capital expenditures, acquisitions, debt
service, or other general corporate purposes;
requiring us to use a substantial portion of our available cash flow to service our debt, which will reduce the
amount of cash flow available for working capital, capital expenditures, acquisitions, and other general corporate
purposes;
increasing our vulnerability to general economic downturns and adverse industry conditions;
limiting our flexibility in planning for, or reacting to, changes in our business and in our industry in general;
limiting our ability to invest in and develop new products;
placing us at a competitive disadvantage compared to our competitors that are not as highly leveraged, as we
may be less capable of responding to adverse economic conditions, general economic downturns, and adverse
industry conditions;
restricting the way we conduct our business because of financial and operating covenants in the agreements
governing our existing and future indebtedness;
increasing the risk of our failing to satisfy our obligations with respect to borrowings outstanding under our
Credit Facilities and Senior Notes and/or being able to comply with the financial and operating covenants
contained in our debt instruments, which could result in an event of default under the credit agreements
governing our Credit Facilities and the agreements governing our other debt, including the indenture governing
the Senior Notes, that, if not cured or waived, could have a material adverse effect on our business, financial
condition, and results of operations; and
increasing our cost of borrowing.
The credit agreements governing our Credit Facilities and the indenture governing the Senior Notes impose significant
operating and financial restrictions on us that may prevent us from capitalizing on business opportunities.
The credit agreements governing our Credit Facilities and the indenture governing the Senior Notes impose significant
operating and financial restrictions on us. These restrictions limit our ability, among other things, to:
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incur or guarantee additional indebtedness;
make certain loans or investments or restricted payments, including dividends to our shareholders;
repurchase or redeem capital stock;
engage in certain transactions with affiliates;
sell certain assets (including stock of subsidiaries) or merge with or into other companies; and
create or incur liens.
Under the terms of the ABL Facility, we will at times be required to comply with a specified fixed charge coverage ratio
when the amount of certain unrestricted cash balances of the U.S. and Canadian loan parties plus the amount available for
borrowing by the U.S. borrowers and Canadian borrowers is less than a specified amount. The Australia Senior Secured Credit
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Facility also contains financial maintenance covenants. Our ability to meet the specified covenants could be affected by events
beyond our control, and our failure to meet these covenants will result in an event of default as defined in the applicable facility.
In addition, our ability to borrow under the ABL Facility is limited by the amount of the borrowing base applicable to U.S.
dollar and Canadian dollar borrowings. Any negative impact on the elements of our borrowing base, such as eligible accounts
receivable and inventory, will reduce our borrowing capacity under the ABL Facility. Moreover, the ABL Facility provides
discretion to the agent bank acting on behalf of the lenders to impose additional requirements on what accounts receivable and
inventory may be counted toward the borrowing base availability and to impose other reserves, which could materially impair the
amount of borrowings that would otherwise be available to us. There can be no assurance that the agent bank will not impose such
reserves or, were it to do so, that the resulting impact of this action would not materially and adversely impair our liquidity.
As a result of these covenants and restrictions, we are limited in how we conduct our business, and we may be unable to
raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities or engage in
other activities that may be in our long-term best interests. The terms of any future indebtedness we may incur could include more
restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if
we fail to do so, we may be unable to obtain waivers from the lenders or amend the covenants.
Our failure to comply with the credit agreements governing our Credit Facilities and indenture governing the Senior Notes,
including as a result of events beyond our control, could trigger events of default and acceleration of our indebtedness. Defaults
under our debt agreements could have a material adverse effect on our business, financial condition, and results of operations.
If there were an event of default under the credit agreements governing our Credit Facilities, the indenture governing the
Senior Notes, or other indebtedness that we may incur, the holders of the defaulted indebtedness could cause all amounts
outstanding with respect to that indebtedness to be immediately due and payable. It is likely that our cash flows would not be
sufficient to fully repay borrowings under our Credit Facilities and principal amount of the Senior Notes, if accelerated upon an
event of default. If we are unable to repay, refinance, or restructure our secured debt, the holders of such indebtedness may proceed
against the collateral securing that indebtedness.
Furthermore, any event of default or declaration of acceleration under one debt instrument may also result in an event of
default under one or more of our other debt instruments. In exacerbated or prolonged circumstances, one or more of these events
could result in our bankruptcy or liquidation. Accordingly, any default by us on our debt could have a material adverse effect on
our business, financial condition, and results of operations.
We require a significant amount of liquidity to fund our operations, and borrowing has increased our vulnerability to negative
unforeseen events.
Our liquidity needs vary throughout the year. If our business experiences materially negative unforeseen events, we may
be unable to generate sufficient cash flow from operations to fund our needs or maintain sufficient liquidity to operate and remain
in compliance with our debt covenants, which could result in reduced or delayed purchases of raw materials, planned capital
expenditures and other investments and adversely affect our financial condition or results of operations. Our ability to borrow
under the ABL Facility may be limited due to decreases in the borrowing base as described above.
Despite our current debt levels, we may incur substantially more indebtedness. This could further exacerbate the risks
associated with our substantial leverage.
We may incur substantial additional indebtedness in the future. Although the covenants under the credit agreements
governing our Credit Facilities and indenture governing the Senior Notes provide certain restrictions on our ability to incur
additional debt, the terms of such agreements permit us to incur significant additional indebtedness. To the extent that we incur
additional indebtedness, the risk associated with our substantial indebtedness described above, including our possible inability to
service our indebtedness, will increase.
Risks Relating to Ownership of Our Common Stock
The market price of our common stock may be highly volatile.
Our common stock has only been listed for public trading since January 27, 2017. Since that date, the price of our
common stock, as reported by the NYSE, has ranged from a high of $42.27 on January 5, 2018 to a low of $13.28 on
December 26, 2018. The trading price of our common stock may be volatile. Securities markets worldwide experience significant
price and volume fluctuations. This market volatility, as well as other general economic, market or political conditions, could
reduce the market price of our shares in spite of our operating performance. The following factors may have a significant impact on
the market price of our common stock:
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negative trends in global economic conditions and/or activity levels in our end markets;
increases in interest rates used to finance home construction and improvements;
our ability to compete effectively against our competitors;
changes in consumer needs, expectations, or trends;
our ability to maintain our relationships with key customers;
our ability to implement our business strategy;
our ability to complete and integrate new acquisitions;
variations in the prices of raw materials used to manufacture our products;
adverse changes in building codes and standards or governmental regulations applicable to general business
operations;
product liability claims or product recalls;
any legal actions in which we may become involved, including disputes relating to our intellectual property;
our ability to recruit and retain highly skilled staff;
actual or anticipated fluctuations in our quarterly or annual operating results;
trading volume of our common stock;
sales of our common stock by us, our executive officers and directors, or our shareholders (including certain
affiliates of Onex) in the future; and
general economic and market conditions and overall fluctuations in the U.S. equity markets.
In addition, broad market and industry factors, including the trading prices of the securities of our publicly-traded
competitors, may negatively affect the market price of our common stock, regardless of our actual operating performance, and
factors beyond our control may cause our stock price to decline rapidly and unexpectedly. Furthermore, the stock market has
experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of
particular companies.
Publishing earnings guidance subjects us to risks, including increased stock volatility, that could lead to potential lawsuits by
investors.
Because we publish earnings guidance, we are subject to a number of risks. Actual results may vary from the guidance we
provide investors from time to time, such that our stock price may decline following, among other things, any earnings release or
guidance that does not meet market expectations. It has become increasingly commonplace for investors to file lawsuits against
companies following a rapid decrease in market capitalization. We have been in the past, and may be in the future, named in these
types of lawsuits. These types of lawsuits can be costly and divert management attention and other resources away from our
business, regardless of their merits, and could result in adverse settlements or judgments.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our share price may be volatile and, in the past, companies that have experienced volatility in the market price of their
stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of
this type could result in substantial costs and diversion of management’s attention and resources, which could have a material
adverse effect on our business, financial condition, and results of operations. Any adverse determination in litigation could also
subject us to significant liabilities.
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Because Onex owns a substantial portion of our common stock, it may influence major corporate decisions and its interests
may conflict with the interests of other holders of our common stock.
Onex beneficially owns approximately 32.9 million shares of our common stock representing approximately 32.4% of our
outstanding shares. Although we are no longer a controlled company, Onex will continue to be able to influence matters requiring
approval by our shareholders and/or our board of directors, including the election of directors and the approval of business
combinations or dispositions and other extraordinary transactions. They may also have interests that differ from other shareholders
and may vote in a way with which other shareholders disagree and which may be adverse to their interests. The concentration of
ownership may have the effect of delaying, preventing, or deterring a change of control of our company, could deprive our
shareholders of an opportunity to receive a premium for their common stock as part of a sale of our company and may materially
and adversely affect the market price of our common stock. In addition, Onex may in the future own businesses that directly
compete with ours. Further, for so long as Onex owns at least 5% of our outstanding shares, Onex has the right to purchase its pro
rata portion of the primary shares offered in any future public offering. This right could result in Onex continuing to maintain a
substantial ownership of our common stock.
Our directors who have relationships with Onex may have conflicts of interest with respect to matters involving our Company.
Two of our eleven directors are affiliated with Onex. These persons have fiduciary duties to both us and Onex. As a result,
they may have real or apparent conflicts of interest on matters affecting both us and Onex, which in some circumstances may have
interests adverse to ours. Onex is in the business of making or advising on investments in companies and may hold, and may from
time to time in the future acquire, interests in, or provide advice to, businesses that directly or indirectly compete with certain
portions of our business or that are suppliers or customers of ours. In addition, as a result of Onex’ ownership interest, conflicts of
interest could arise with respect to transactions involving business dealings between us and Onex including potential acquisitions
of businesses or properties, the issuance of additional securities, the payment of dividends by us, and other matters.
In addition, our restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply
with respect to us, to Onex or certain related parties or any of our directors who are employees of Onex or its affiliates in a manner
that would prohibit them from investing in competing businesses or doing business with our customers. To the extent they invest in
such other businesses, Onex may have differing interests than our other shareholders.
The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and
the requirements of the Sarbanes-Oxley Act of 2002, and the NYSE, may strain our resources, increase our costs and distract
management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
As a public company, we are subject to the reporting requirements of the Exchange Act and the corporate governance
standards of the Sarbanes-Oxley Act of 2002 and the NYSE and SEC rules and requirements. As a result, we have incurred and
will continue to incur significant legal, regulatory, accounting, investor relations, and other costs that we did not incur as a private
company. These requirements may also place a strain on our management, systems, and resources. The Exchange Act requires us to
file annual, quarterly, and current reports with respect to our business and financial condition within specified time periods and to
prepare proxy statements with respect to our annual meeting of shareholders. The Sarbanes-Oxley Act requires that we maintain
effective disclosure controls and procedures and internal controls over financial reporting. The NYSE requires that we comply with
various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures
and internal controls over financial reporting and comply with the Exchange Act and NYSE requirements, significant resources
and management oversight will be required. As a public company, we are required to:
•
•
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•
•
•
•
expand the roles and duties of our board of directors and committees of the board;
institute more formal comprehensive financial reporting and disclosure compliance functions;
supplement our internal accounting and auditing function;
enhance and formalize closing procedures for our accounting periods;
enhance our investor relations function;
enhance our regulatory and corporate compliance function;
establish new or enhanced internal policies, including those relating to disclosure controls and procedures; and
involve and retain to a greater degree outside counsel and accountants in the activities listed above.
These activities may divert management’s attention from revenue producing activities to management and administrative
oversight. Any of the foregoing could have a material adverse effect on us and the price of our common stock. In addition, failure
to comply with any laws or regulations applicable to us may result in legal proceedings and/or regulatory investigations.
31
Material weaknesses in our internal control over financial reporting or our failure to remediate such material weaknesses
could result in a violation of Section 404 of the Sarbanes-Oxley Act, or in a material misstatement in our financial statements
not being prevented or detected, and could affect investor confidence in the accuracy and completeness of our financial
statements, as well as our common stock price.
As a public company, we are required to comply with Section 404 of the Sarbanes-Oxley Act. We made our first annual
assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act with our annual
report for the fiscal year ended December 31, 2018 and included an auditor attestation on management’s internal controls report in
with this Form 10-K. If we fail to abide by the applicable requirements of Section 404, regulatory authorities, such as the SEC,
might subject us to sanctions or investigation, and our independent registered public accounting firm may not be able to certify as
to the effectiveness of our internal control over financial reporting pursuant to an audit of our controls. Even effective internal
controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Accordingly, our internal control over financial reporting may not prevent or detect misstatements because of their inherent
limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.
During the preparation of our financial statements for the year ended December 31, 2018, we concluded that we did not
maintain a sufficient complement of personnel in our Europe operations with the appropriate level of knowledge, experience and
training in internal control over financial reporting commensurate with our financial reporting requirements to allow for the
consistent execution of control activities. Further, monitoring controls maintained at the Europe operations and corporate levels did
not operate with a sufficient degree of precision to provide for the appropriate level of oversight of activities related to our internal
control over financial reporting. These material weaknesses contributed to the following additional material weaknesses in that we
did not design and maintain effective controls within certain of our Europe operations related to the review and approval of
customer pricing, the review and approval of manual journal entries, and the reconciliation of subsidiary ledger financial
information used in the consolidated financial statements. Specifically, we did not design and maintain controls to ensure (i) the
review and approval of the initial set-up, and subsequent changes/modifications, of customer pricing related to revenue
arrangements; (ii) that journal entries were properly prepared with sufficient supporting documentation, were reviewed and
approved to ensure accuracy and completeness of the journal entries, and were reviewed by an appropriate individual separate from
the preparer of such journal entry; and (iii) the subsidiary financial information used in the preparation of the consolidated financial
statements agreed to the financial information recorded in the subsidiary ledger, and to the extent there were differences, that they
were appropriately validated.
While we continue to address these material weaknesses and to strengthen our overall internal control over financial
reporting, we may discover other material weaknesses going forward that could result in inaccurate reporting of our financial
condition or results of operations. Inadequate internal control over financial reporting may cause investors to lose confidence in our
reported financial information. Any loss of confidence in the reliability of our financial statements or other negative reaction to our
failure to develop timely or adequate disclosure controls and procedures or internal controls could result in a decline in the price of
our common stock and may restrict access to the capital markets and may adversely affect the price of our common stock.
Future sales, or the perception of future sales, of shares of our common stock in the public market by us or our existing
shareholders could cause our stock price to fall.
The sales of a substantial number of shares of our common stock in the public market, or the perception that such sales
could occur, including sales by Onex, could materially adversely affect the prevailing market price of our common stock. As of
December 31, 2018, we had 101,310,862 shares of common stock outstanding.
Shares held by Onex and certain of our directors, officers and existing shareholders are eligible for resale, subject to
volume, manner of sale and other limitations under Rule 144. In addition, pursuant to the Registration Rights Agreement (as
defined below), each have the right, subject to certain conditions, to require us to register the sale of shares owned by such persons
under the federal securities laws. By exercising their registration rights, and selling a large number of shares, these holders could
cause the prevailing market price of our common stock to decline. In addition, shares issued or issuable upon exercise of options
and vested RSUs and PSUs will be eligible for sale from time to time.
In addition, as of December 31, 2018 we had 2,430,705 shares reserved for issuance pursuant to equity awards
outstanding under our 2011 Stock Incentive Plan and 5,632,850 shares reserved for issuance pursuant to equity awards under our
2017 Omnibus Equity Plan. These shares have been registered by us on Form S-8 and, upon exercise of options and vesting of
RSUs and PSUs, will be eligible for sale from time to time or, will be eligible for sale immediately following exercise of such
options.
Our employees, officers, and directors may elect to sell shares of our common stock in the public market. Sales of a
substantial number of shares of our common stock in the public market could depress the market price of our common stock and
impair our ability to raise capital through the sale of additional equity securities.
32
The ESOP and the JELD-WEN, Inc. KSOP (“KSOP”), are designed as a tax-qualified retirement plans and employee
stock ownership plans under the Code. Participants whose employment with us or our subsidiaries is terminated are entitled to
receive distributions of accounts held under the ESOP and KSOP at specified times and in specified forms. In addition, each plan
permits diversification of our common stock held in participants’ accounts. The ESOP and KSOP may sell shares in the open
market to fund hardship distributions and diversifications or participants may sell shares received as part of their distributions. In
the year ended December 31, 2018, 644,054 shares were either sold by the plans to cover cash distributions and diversifications or
distributed to participants.
In the future, we may issue securities to raise cash for acquisitions or otherwise. We may also acquire interests in other
companies by using a combination of cash and our common stock or just our common stock.
We may also issue securities convertible into our common stock. Any of these events may dilute your ownership interest
in our company and have an adverse impact on the price of our common stock.
If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they adversely
change their recommendations or publish negative reports regarding our business or our stock, our stock price and trading
volume could decline.
The trading market for our common stock can be influenced by the research and reports that industry or securities analysts
may publish about us, our business, our market, or our competitors. We do not have any control over these analysts and we cannot
provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely
change their recommendation regarding our stock, or provide more favorable relative recommendations about our competitors, our
stock price could decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to
decline.
Because we have no current plans to pay cash dividends on our shares of common stock, shareholders must rely on
appreciation of the value of our common stock for any return on their investment.
We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business
and have no current plans to declare or pay any cash dividends in the foreseeable future. In addition, the terms of our Credit
Facilities, Senior Notes and any future debt agreements may preclude us from paying dividends. As a result, we expect that only
appreciation of the price of our common stock, if any, will provide a return to shareholders for the foreseeable future.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an
acquisition of us by others, even if an acquisition would be beneficial to our shareholders, and may prevent attempts by our
shareholders to replace or remove our current management.
Provisions in our restated certificate of incorporation and our amended and restated bylaws, as well as provisions of the
Delaware General Corporation Law, or the “DGCL”, could make it more difficult for a third party to acquire us or increase the cost
of acquiring us, even if doing so would benefit our shareholders, including transactions in which shareholders might otherwise
receive a premium for their shares. Among other things, our restated certificate of incorporation and amended and restated bylaws:
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•
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divide our board of directors into three classes with staggered three-year terms;
limit the ability of shareholders to remove directors only “for cause”;
provide that our board of directors is expressly authorized to adopt, alter, or repeal our bylaws;
authorize the issuance of blank check preferred stock that our board of directors could issue to increase the
number of outstanding shares and to discourage a takeover attempt;
prohibit shareholder action by written consent, which requires all shareholder actions to be taken at a meeting of
our shareholders;
prohibit our shareholders from calling a special meeting of shareholders ;
establish advance notice requirements for nominations for election to our board of directors or for proposing
matters that can be acted upon by shareholders at shareholder meetings; and
require the approval of holders of at least two-thirds of the outstanding shares of common stock to amend our
bylaws and certain provisions of our certificate of incorporation.
We have also opted out of Section 203 of the DGCL, which, subject to some exceptions, prohibits business combinations
between a Delaware corporation and an interested shareholder, which is generally defined as a shareholder who becomes a
beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the date that the
33
shareholder became an interested shareholder. At some time in the future, we may again be governed by Section 203. Section 203
could have the effect of delaying, deferring or preventing a change in control that our shareholders might consider to be in their
best interests.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our
company. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect
directors of your choosing and cause us to take corporate actions other than those you desire.
Our restated certificate of incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of
Delaware will be the exclusive forum for substantially all disputes between us and our shareholders, which could limit our
shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our restated certificate of incorporation provides, unless we consent to an alternative forum, that the Court of Chancery of
the State of Delaware (or, if such court does not have jurisdiction, the Superior Court of the State of Delaware, or, if such other
court does not have jurisdiction, the U.S. District Court for the District of Delaware) shall be the exclusive forum for any claims,
including claims on behalf of JWH, brought by a shareholder (i) that are based upon a violation of a duty by a current or former
director or officer or shareholder in such capacity or (ii) as to which the DGCL confers jurisdiction upon the Court of Chancery of
the State of Delaware. This provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers, and other employees. Alternatively, if a court were to find the provision contained in our restated certificate of
incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action
in other jurisdictions, which could adversely affect our business and financial condition.
Because we are a holding company with no operations of our own, we rely on dividends, distributions, and transfers of funds
from our subsidiaries and we could be harmed if such distributions were not made in the future.
We are a holding company that conducts all of our operations through subsidiaries and the majority of our operating
income is derived from JWI, our main operating subsidiary. Consequently, we rely on dividends or advances from our subsidiaries.
We have no current plans to declare or pay dividends on our common stock for the foreseeable future; however, to the extent that
we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds
available to us for the payment of dividends. The ability of such subsidiaries to pay dividends to us is subject to applicable local
law and may be limited due to terms of other contractual arrangements, including our indebtedness. Such laws and restrictions
would restrict our ability to continue operations. In addition, Delaware law may impose requirements that may restrict our ability
to pay dividends to holders of our common stock.
Item 1B - Unresolved Staff Comments.
None.
34
Item 2 - Properties
Our principal executive offices are located in Charlotte, North Carolina. We also own and lease other properties, including
sales offices, closed facilities, and administrative office space in Klamath Falls, Oregon, which we own, as well as Charlotte, North
Carolina; Birmingham, U.K.; and Sydney, Australia, each of which we lease.
Manufacturing
Distribution
Showrooms
North America
United States
Canada
St. Kitts
Chile
Peru
Mexico
Europe
United Kingdom
France
Austria
Croatia
Switzerland
Hungary
Germany
Sweden
Denmark
Latvia
Estonia
Finland
Australasia
Australia
New Zealand
Indonesia
Malaysia
Total JELD-WEN
45
4
—
1
1
2
53
5
2
3
—
1
1
4
3
3
3
3
5
33
46
—
2
1
49
135
10
2
1
—
—
—
13
1
—
—
—
—
—
1
—
—
—
—
—
2
6
1
—
—
7
22
1
—
—
—
—
—
1
—
—
3
1
3
—
—
—
—
—
—
—
7
48
—
—
—
48
56
35
Item 3 - Legal Proceedings
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. Legal
judgments and estimated settlements have been included in accrued expenses in our consolidated balance sheets included in this
report. 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 assess the potential liability related
to pending litigation and claims 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. In the opinion of management, other than as described below,
as of December 31, 2018, there are no current proceedings or litigation matters involving the Company or its property 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.
(cid:54)(cid:87)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:9)(cid:3)(cid:54)(cid:82)(cid:81)(cid:86)(cid:3)(cid:47)(cid:76)(cid:87)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)
(cid:58)(cid:72)(cid:3)(cid:86)(cid:72)(cid:79)(cid:79)(cid:3)(cid:80)(cid:82)(cid:79)(cid:71)(cid:72)(cid:71)(cid:3)(cid:71)(cid:82)(cid:82)(cid:85)(cid:3)(cid:86)(cid:78)(cid:76)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:83)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:79)(cid:71)(cid:72)(cid:71)(cid:3)
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 (“Eastern District of Virginia”). The complaint alleges
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 had breached the supply
agreement between the parties. The verdict awarded Steves $12.2 million for past damages under both the Clayton Act and breach of
contract claims and $46.5 million in future lost profits under the Clayton Act claim.
In October 2018, the presiding judge vacated a portion of the jury verdict, reducing the contract damages award by $2.2
million. We expect that Steves will be required to elect to recover its past damages either under the Clayton Act claims or the contract
claims, but not both. If a judgment is entered under the Clayton Act, any damages awarded will be trebled. In addition, if a judgment is
entered under either theory in accordance with the verdict, Steves will be entitled to an award of attorney’s fees, which amounts have
not yet been quantified. We asserted a position that, because future lost profits were awarded, Steves is not permitted to pursue its
claim for divestiture of certain assets acquired in the CMI acquisition. An evidentiary hearing on equitable remedies, including
divestiture, was held in April 2018. On October 5, 2018, the presiding judge issued an opinion finding that a remedy of divestiture is
an appropriate remedy. On December 7, 2018, the presiding judge granted in part and denied in part Steves’ request for declaratory
relief. On December 20, 2018, the presiding judge entered a Final Judgment Order, granting divestiture and conditionally awarding
monetary damages in the event the divestiture order is overturned. Steves moved to amend on January 11, 2019.
JELD-WEN has filed a renewed motion for judgment as a matter of law and a motion for a new trial, and we intend to
vigorously oppose entry of an adverse judgment, and to appeal any adverse judgment that may be entered. We continue to believe that
Steves’ claims lack merit, Steves’ damages calculations are speculative and excessive, and Steves is not entitled in any event to the
extraordinary remedy of divestiture. We believe that multiple pretrial and trial rulings were erroneous and improperly limited the
Company’s defenses, and that judgment in accordance with the verdict would be improper for several reasons under applicable law.
However, based upon the rulings described above, in the third quarter of 2018 the Company recorded a charge of $76.5 million
associated with this loss contingency. The charge reflects the judgment anticipated to be entered against the Company, including the
trebling of $12.2 million of past damages under the Clayton Act, and estimated legal fees. The charge does not include any amount for
lost profits or divestiture. Steves has indicated its intention to elect divestiture, rather than lost profits. Any judgment entered that
awards lost profits, if ultimately upheld after exhaustion of our appellate remedies could have a material adverse effect on our
financial position, operating results, or cash flows, particularly for the reporting period in which a loss is recorded. Because the
operations acquired from CMI have been fully integrated into the Company’s other operations, divestiture of those operations would
be difficult if not impossible and, therefore, it is not possible to estimate the cost of any final divestiture order or the extent to which
such an order would have a material adverse effect on our financial position, operating results or cash flows.
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 $1.2 million.
The presiding judge has entered a judgment in our favor for those amounts. On November 30, 2018, the presiding judge denied our
request for a permanent injunction. Our other claims remain pending in Bexar County, Texas.
36
In Re: Interior Molded Doors Antitrust Litigation
On October 19, 2018, Grubb Lumber Company, on behalf of itself and others similarly situated, filed a putative class action
lawsuit against us and one of our competitors in the doors market, Masonite Corporation (“Masonite”) in the Eastern District of
Virginia. We subsequently received additional complaints from and on behalf of direct and indirect purchasers of interior molded
doors. The suits have been consolidated into two separate actions, a Direct Purchaser Action and an Indirect Purchaser Action. The
suits allege that Masonite and we violated Section 1 of the Sherman Act, and, in the Indirect Purchaser Action, related state law
antitrust and consumer protection laws, by engaging in a scheme to artificially raise, fix, maintain, or stabilize the prices of interior
molded doors in the United States. The complaints seek unquantified ordinary and treble damages, declaratory relief, interest, costs
and attorneys’ fees. The Company believes the claims lack merit and intends to vigorously defend against the actions. At this early
stage of the proceedings, we are unable to conclude that a loss is probable or to estimate the potential magnitude of any loss in the
matters, although a loss could have a material adverse effect on our operating results, consolidated financial position or cash flows.
Item 4 - Mine Safety Disclosures.
Not applicable.
37
PART II - OTHER INFORMATION
Item 5 - Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.
MARKET INFORMATION
Our common stock has been listed and traded on the NYSE under the symbol “JELD” since January 27, 2017. Prior to that
time, there was no public trading market for our stock.
HOLDERS
As of February 27, 2019, there were 1,169 shareholders of record of our common stock. The number of record holders does
not include a substantially greater number of holders whose shares are held of record in nominee or “street name” accounts through
banks, brokers and other financial institutions.
38
STOCK PERFORMANCE GRAPH
The following graph depicts the total return to shareholders from January 27, 2017, the date our common shares became
listed on the NYSE, through December 31, 2018, relative to the performance of the Standard & Poor's 500 Index and the Standard &
Poor's 1500 Building Products Index. The graph assumes an investment of $100 in our common stock and each index on January 27,
2017, and the reinvestment of dividends paid since that date. The stock performance shown in the graph is not necessarily indicative of
future price performance.
*$100 invested on 1/27/17 in stock or 12/31/16 in index, including reinvestment of dividends.
Fiscal year ended December 31.
Copyright© 2018 Standard & Poor's, a division of S&P Global. All rights reserved.
1/27/2017
3/31/2017
6/30/2017
9/30/2017
12/31/2017
3/31/2018
6/30/2018
9/30/2018
12/31/2018
JELD-WEN Holding, Inc.
S&P 500
S&P 1500 Building Products Index
$100.00
$100.00
$100.00
$125.77
$106.07
$101.36
$124.27
$109.34
$106.76
$135.99
$114.24
$106.55
$150.73
$121.83
$110.00
$117.23
$120.91
$104.60
$109.46
$125.06
$100.63
$94.41
$134.7
$104.84
$54.40
$116.49
$86.71
EQUITY COMPENSATION PLANS
See “Item 12- Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters” for the
information required by Item 201(d) of Regulation S-K regarding equity compensation plans.
DIVIDENDS
In November 2016, we paid an aggregate cash dividend of approximately $73.8 million to holders of our then-outstanding
common stock, approximately $0.9 million to holders of our then-outstanding Class B-1 Common Stock, and approximately $307
million to holders of our then-outstanding Series A Convertible Preferred Stock. The payment to holders of our outstanding Series A
Convertible Preferred Stock represented payment for (i) preferred dividends accrued from May 31, 2016 through November 3, 2016
and (ii) a dividend on an as-if-converted-to common basis based on the original principal amount of the Series A Convertible Preferred
Stock investment plus preferred dividends accrued through May 30, 2016. In conjunction with our IPO, these securities converted into
39
shares of our Common Stock as described below in “Part II-Item 8. Financial Statements and Supplementary Data, Note 1 -
Description of Company and Summary of Significant Accounting Policies.”
We do not currently expect to pay any further cash dividends on our common stock for the foreseeable future. Instead, we
intend to retain future earnings, if any, for the future operation and expansion of our business and the repayment of debt. Any
determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our results of
operations, cash requirements, financial condition, contractual restrictions, restrictions imposed by applicable laws and other factors
that our board of directors may deem relevant.
The terms of the agreements governing our existing or future indebtedness may limit our ability to further pay dividends and
make distributions to our shareholders. Our business is conducted through our subsidiaries and dividends from, and cash generated by,
our subsidiaries will be our principal sources of cash to repay indebtedness, fund operations, and pay any dividends. Accordingly, our
ability to pay dividends to our shareholders is dependent on the earnings and distributions of funds from our subsidiaries (which
distributions may be restricted by the terms of our Corporate Credit Facilities and Senior Notes).
ISSUER PURCHASES OF EQUITY SECURITIES
A summary of our repurchases of Common Stock during the fourth quarter of 2018 is as follows (in thousands, except share
and per share amounts):
(a)
(b)
(c)
Total Number
of Shares (or
Units)
Purchased 1
492,139
Average Price
Paid Per
Share (or
Unit) 2
$23.24
1,342,627
372,604
2,207,370
$17.98
$15.73
$18.77
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
492,139
1,342,627
372,604
2,207,370
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) That May Yet Be
Purchased Under The
Plans or Programs
$154,971
$130,830
$124,971
Period
September 30, 2018 - October 27, 2018
October 28, 2018 - November 24, 2018
November 25, 2018 - December 31, 2018
Total
1 In April 2018, our Board of Directors authorized a $250.0 million share repurchase program that extends through December 31, 2019. Certain
purchases made in the fiscal quarter ended December 31, 2018 were made in open market transactions pursuant to a trading plan meeting the
requirements of Rule 10b5-1 under the Exchange Act.
2 Average price paid per share includes costs associated with the repurchases.
Item 6 - Selected Financial Data
Our historical results are not necessarily indicative of the results expected for any future period. Since the year ended
December 31, 2014, we have completed several acquisitions. See Acquisitions, included in our Management’s Discussion and
Analysis of Financial Condition and Results of Operations below. The results of these acquired entities are included in our
consolidated statements of operations for the periods subsequent to the respective acquisition date. During the fourth quarter of 2016,
we released a valuation allowance in the U.S. totaling $278.4 million resulting in an increase in tax benefit and net income for the
period. During the fourth quarter of 2017, the Tax Act lowered our U.S. federal tax rate which reduced the valuation of our net
deferred tax assets, resulting in an additional tax expense of approximately $21.1 million and we provisionally recorded an additional
foreign repatriation tax charge of $11.3 million. During 2018, we finalized our accounting for all of the enactment-date income tax
effects of the Tax Act and recognized a tax benefit of $40.2 million due to changes in the provisional amounts recorded at December
31, 2017 and included these adjustments as a component of income tax expense from continuing operations. See Note 17 - Income
Taxes for further detail.
40
The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified by
reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and our consolidated
financial statements and related notes thereto included elsewhere in this Form 10-K.
Net revenues
Income (loss) from continuing operations, net of tax
Income (loss) per common share from continuing operations:
Basic
Diluted
Cash dividends per common share
Other financial data:
Capital expenditures
Depreciation and amortization
Adjusted EBITDA(1)
Consolidated balance sheet data:
Total assets
Total debt
Redeemable convertible preferred stock
Year Ended December 31,
2018
2017
2016
2015
2014
(dollars in thousands, except per share data)
4,346,703
$
3,763,749
$
3,666,942
$
3,381,060
$
3,507,206
143,535
7,152
376,714
91,390
(78,275)
$
$
$
1.38
1.36
0.00
118,700
125,100
465,346
$
$
$
0.00
0.00
0.00
63,049
111,273
437,613
(0.90) $
(15.72) $
$
$
(0.90)
4.09
79,497
107,995
393,682
$
$
(15.72)
4.73
77,687
95,196
310,986
(8.75)
(8.75)
0.00
70,846
100,026
229,849
$
$
$
$
$
3,051,055
$
2,862,940
$
2,536,046
$
2,182,373
$
2,184,059
1,477,892
1,273,703
1,620,035
1,260,320
—
—
150,957
481,937
806,228
817,121
___________________________
(1)
In addition to our consolidated financial statements presented in accordance with GAAP, we use Adjusted EBITDA to measure our financial
performance. Adjusted EBITDA is a supplemental non-GAAP financial measure of operating performance and is not based on any
standardized methodology prescribed by GAAP. Adjusted EBITDA should not be considered in isolation or as an alternative to net income
(loss), cash flows from operating activities, or other measures determined in accordance with GAAP. Also, Adjusted EBITDA is not necessarily
comparable to similarly titled measures presented by other companies. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by
net revenues.
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 non-cash items; other items; and costs related to
debt restructuring and debt refinancing.
We use this non-GAAP measure in assessing our performance in addition to net income (loss) determined in accordance with GAAP. We
believe Adjusted EBITDA is an important measure to be used in evaluating operating performance because it allows management and investors
to better evaluate and compare our core operating results from period to period by removing the impact of our capital structure (net interest
income or expense from our outstanding debt), asset base (depreciation and amortization), tax consequences, other non-operating items, and
share-based compensation. Furthermore, the instruments governing our indebtedness use Adjusted EBITDA to measure our compliance with
certain limitations and covenants. We reference this non-GAAP financial measure frequently in our decision-making because it provides
supplemental information that facilitates internal comparisons to the historical operating performance of prior periods. In addition, executive
incentive compensation is based in part on Adjusted EBITDA, and we base certain of our forward-looking estimates and budgets on Adjusted
EBITDA.
We also believe Adjusted EBITDA is a measure widely used by securities analysts and investors to evaluate the financial performance of our
company and other companies. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a
substitute for analysis of our results as reported under GAAP. Adjusted EBITDA eliminates the effect of certain items on net income and thus
has certain limitations. Some of these limitations are: Adjusted EBITDA does not reflect the interest expense, or the cash requirements
necessary to service interest or principal payments, on our debt; Adjusted EBITDA does not reflect any income tax payments we are required
to make and although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be
replaced in the future; and Adjusted EBITDA does not reflect any cash requirements for such replacement. Other companies may calculate
Adjusted EBITDA differently, and, therefore, our Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
41
The following is a reconciliation of our net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA:
Net income (loss)
Adjustments:
Loss from discontinued operations, net of tax
Equity (earnings) loss of non-consolidated entities
Income tax (benefit) expense
Depreciation and amortization
Interest expense, net(a)
Impairment and restructuring charges(b)
Gain on previously held shares of equity investment
Loss (gain) on sale of property and equipment
Share-based compensation expense
Non-cash foreign exchange transaction/translation (income) loss
Other non-cash items(c)
Other items(d)
Costs relating to debt restructuring, debt refinancing, and the
Onex investment(e)
Year Ended December 31,
2018
2017
2016
2015
2014
(dollars in thousands)
$
144,273
$
10,791
$
377,181
$
90,918
$
(84,109)
—
(738)
(7,958)
125,100
70,818
17,328
(20,767)
144
15,052
8
3,859
117,933
294
—
(3,639)
138,603
111,273
79,034
13,057
—
(299)
19,785
(2,181)
526
47,000
23,663
3,324
(3,791)
(246,394)
107,995
77,590
18,353
—
(3,275)
22,464
5,734
2,843
30,585
1,073
2,856
(2,384)
(5,435)
95,196
60,632
31,031
—
(416)
15,620
2,697
1,141
18,893
237
5,387
447
18,942
100,026
69,289
38,645
—
(23)
7,968
(528)
2,334
20,278
51,193
Adjusted EBITDA
$
465,346
$
437,613
$
393,682
$
310,986
$
229,849
____________________________
(a)
Interest expense for the year ended December 31, 2017 includes $6,097 related to the write-off of a portion of the unamortized debt issuance
costs and original issue discount associated with the Term Loan Facility.
(b)
Impairment and restructuring charges consist of (i) impairment and restructuring charges that are included in our consolidated statements of
operations plus (ii) additional charges of $0, $1, $4,506, $9,687, and $257, for the years ended December 31, 2018, 2017, 2016, 2015, and
2014, respectively. These additional charges are primarily comprised of non-cash changes in inventory valuation reserves, such as excess and
obsolete reserves. For further explanation of impairment and restructuring charges that are included in our consolidated statements of
operations, see Note 24 - Impairment and Restructuring Charges of Continuing Operations in our financial statements for the years ended
December 31, 2018, 2017 and 2016 included in Item 8 of this 10-K.
(c) Other non-cash items include, among other things, (i) charges of $3,740, $439, $357, $893, and $2,496, for the years ended December 31,
2018, 2017, 2016, 2015, and 2014, respectively, relating to (1) the fair value adjustment for inventory acquired as part of the acquisitions
referred to in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Acquisitions” and (2) other non-cash
items include charges of $2,153 for the out-of-period European warranty liability adjustment for the year ended December 31, 2016.
(d) Other items include: (i) in the year ended December 31, 2018, (1) $76,500 in litigation contingency accruals, (2) $25,444 in legal costs, (3)
$10,324 in acquisition costs, (4) $3,381 in costs related to the departure of the former CEO and CFO, (5) $2,901 in entity consolidation and
reorganization costs, and (6) $(5,396) in realized gain on hedges; (ii) in the year ended December 31, 2017, (1) $34,178 in legal costs, (2)
$4,176 in realized loss on hedges, (3) $3,484 in acquisition costs, (4) $2,202 in secondary offering costs, (5) $754 in tax consulting fee, (6)
$678 in legal entity consolidation costs, (7) $649 in taxes related to equity-based compensation, (8) $578 in facility ramp down costs, and (9)
$(2,247) gain on settlement of contract escrow; (iii) in the year ended December 31, 2016, (1) $20,695 in payments to holders of vested options
and restricted shares in connection with the November 2016 dividend, (2) $3,721 of professional fees related to the IPO of our common stock,
(3) $1,626 of acquisition costs, (4) $584 in legal costs associated with disposition of non-core properties, (5) $507 of dividend-related costs, (6)
$500 of costs related to the recruitment of executive management employees, (7) $450 in legal costs, and (8) $346 in Dooria plant closure
costs; (iv) in the year ended December 31, 2015, (1) $11,446 payment to holders of vested options and restricted shares in connection with the
July 2015 dividend, (2) $5,510 related to a U.K. legal settlement, (3) $1,825 in acquisition costs, (4) $1,833 of recruitment costs related to the
recruitment of executive management employees, (5) $1,082 of legal costs related to non-core property disposal, and partially offset by (6)
($5,678) of realized gain on foreign exchange hedges related to an intercompany loan; and (v) in the year ended December 31, 2014, (1)
$5,000 legal settlement related to our ESOP plan, (2) $3,657 of legal costs associated with noncore property disposal, (3) $3,443 production
ramp-down costs, (4) $2,769 of consulting fees in Europe, and (5) $1,250 of costs related to a prior acquisition.
(e)
Included in the year ended December 31, 2017 is a loss on debt extinguishment of $23,262 associated with the refinancing of our term loan.
Included in the year ended December 31, 2014 is a loss on debt extinguishment of $51,036 associated with the refinancing of our 12.25%
secured notes.
42
Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
This MD&A contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking
Statements” in Item 1- Business and Item 1A- Risk Factors in this Form 10-K for a discussion of the uncertainties, risks and
assumptions associated with these statements. This discussion should be read in conjunction with our historical financial
statements and related notes thereto and the other disclosures contained elsewhere in this 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 and included elsewhere in this Form 10-K.
This MD&A is a supplement to our financial statements and notes thereto included elsewhere in this 10-K 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 and Background. This section provides a general description of our Company and reportable segments,
business and industry trends, our key business strategies and background information on other matters discussed
in this MD&A.
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.
Overview and Background
We are one of the world’s largest door and window manufacturers, and we hold a leading position by net revenues in the
majority of the countries and markets we serve. 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.
We operate manufacturing facilities in 20 countries, located primarily in North America, Europe and Australia. 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.
In October 2011, Onex acquired a majority of the combined voting power in the Company through the acquisition of
convertible debt and convertible preferred equity.
In February 2017, we closed on the IPO of 28.75 million shares of our common stock at a public offering price of $23.00,
resulting in net proceeds to us of $472.4 million after deducting underwriters’ discounts and commissions and other offering
expenses. We used a portion of the net proceeds from the offering to repay $375.0 million of indebtedness outstanding under our
Term Loan Facility and used the remaining net proceeds for working capital and other general corporate purposes, including sales
and marketing activities, general and administrative matters, capital expenditures, and to invest in or acquire complementary
businesses, products, services, technologies, or other assets.
In May and November 2017, we completed secondary public offerings of 16.1 million and 14.4 million shares,
respectively, of our Common Stock, substantially all of which were owned by Onex.
As of December 31, 2018, Onex owned approximately 32.4% of our outstanding shares of common stock.
43
Business Segments
Our business is organized in geographic regions to ensure integration across operations serving common end markets and
customers. We have three reportable segments: North America (which includes limited activity in Chile and Peru), Europe, and
Australasia. Financial information related to our business segments can be found in Note 18 - Segment Information of our financial
statements included elsewhere in this 10-K.
Acquisitions
In April 2018, we acquired the assets of D&K, a long-standing supplier of cavity sliders to our Corinthian Doors business.
D&K is now part of our Australasia segment.
In March 2018, we acquired the remaining issued and outstanding shares and membership interests of ABS, headquartered
in Sacramento, California. ABS is a premier supplier of value-added services for the millwork industry. ABS is now part of our
North America segment.
In February 2018, we acquired A&L, a leading Australian manufacturer of residential aluminum windows and patio doors.
A&L has a network of manufacturing facilities across the eastern seaboard of Australia, which we expect will deliver synergies
through operational savings from the implementation of JEM and by leveraging the benefits of our combined supply chain. A&L is
now part of our Australasia segment.
In February 2018, we acquired Domoferm, headquartered in Gänserndorf, Austria. Domoferm is a leading European
provider of steel doors, steel door frames, and fire doors for commercial and residential markets with four manufacturing sites in
Austria, Germany, and the Czech Republic. Domoferm is now part of our Europe segment.
In August 2017, we acquired the Kolder Group, headquartered in Smithfield, Australia. Kolder is a leading Australian
provider of shower enclosures, closet systems, and related building products, with leading positions in both the commercial and
residential markets. Kolder is part of our Australasia segment. The acquisition significantly enhances our existing Australian
capabilities in glass shower enclosures and built-in closet systems, and supports our strategy to build leadership positions in
attractive markets.
In August 2017, we acquired MMI Door, headquartered in Sterling Heights, Michigan. MMI Door is a leading provider of
doors and related value-added services in the Midwest region of the U.S. and is part of our North America segment. The
acquisition complements our North America door business and allows us to improve service offerings and lead times to our
channel partners.
In June 2017, we acquired Mattiovi, headquartered in Finland. Mattiovi is a leading manufacturer of interior doors and
door frames in Finland and is part of our Europe segment. The acquisition enhances our market position in the Nordic region,
increases our product offering, and also provides us with additional door frame capacity to support growth in the region.
In August 2016, we acquired the shares of Arcpac Building Products Limited, which includes its primary operating
subsidiary Breezway, headquartered in Brisbane, Australia. Breezway is a manufacturer of louver window systems for the
residential and commercial window markets and is part of our Australasia segment. Breezway’s primary sales market is Australia
and it also maintains a presence in Malaysia and Hawaii. The acquisition of Breezway is expected to strengthen our position in the
Australian window market and expand our product portfolio with new and innovative window designs as well as other
complementary products.
In February 2016, we acquired Trend, headquartered in Sydney, Australia. Trend is a leading manufacturer of doors and
windows in Australia and is now part of our Australasia segment. The acquisition of Trend strengthened our market position in the
Australian window market and expanded our product portfolio with new and innovative window designs.
We paid an aggregate of approximately $384.9 million in cash (net of cash acquired) for the 2016, 2017, and 2018
acquisitions. In addition, we assumed debt of approximately $70.6 million associated with our 2018 acquired companies.
For additional information on acquisition activity, see Note 2 - Acquisitions.
44
Factors and Trends Affecting Our Business
Drivers of Net Revenues
The key components of our net revenues include core net revenues (which we define to include the impact of pricing and
volume/mix, as discussed further under the heading, “Product Pricing and Volume/Mix” below), contribution from acquisitions
made within the prior twelve months, and the impact of foreign exchange. Our core net revenues are impacted by the relative and
fluctuating currency values in the geographies in which we operate, which we refer to as the impact of foreign exchange.
Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, percentage changes
in pricing are based on management schedules and are not derived directly from our accounting records.
Product Demand
General business, financial market, and economic conditions globally and in the regions where we operate influence
overall demand in our end markets and for our products. In particular, the following factors may have a direct impact on demand
for our products in the countries and regions where our products are marketed and sold:
•
•
•
•
•
•
•
•
•
•
•
the strength of the economy;
employment rates and consumer confidence and spending rates;
the availability and cost of credit;
the amount and type of residential and non-residential construction;
housing sales and home values;
the age of existing home stock, home vacancy rates, and foreclosures;
interest rate fluctuations for our customers and consumers;
increases in the cost of raw materials or any shortage in supplies or labor;
the effects of governmental regulation and initiatives to manage economic conditions;
geographical shifts in population and other changes in demographics; and
changes in weather patterns.
In addition, we seek to drive demand for our products through the implementation of various strategies and initiatives. We
believe we can enhance demand for our new and existing products by:
•
•
•
innovating and developing new products and technologies;
investing in branding and marketing strategies, including marketing campaigns in both print and social media, as
well as our investments in new training centers and mobile training facilities; and
implementing channel initiatives to enhance our relationships with key channel partners and customers, including
the True BLU dealer management program in North America.
Product Pricing and Volume/Mix
The price and mix of products that we sell are important drivers of our net revenues and net income. Under the heading
“Results of Operations” references to (i) “pricing” refer to the impact of price increases or decreases, as applicable, for particular
products between periods and (ii) “volume/mix” refer to the combined impact of both the number of products we sell in a
particular period and the types of products sold, in each case, on net revenues. While we operate in competitive markets, pricing
discipline is an important element of our strategy to achieve profitable growth through improved margins. Our strategies also
include incentivizing our channel partners to sell our higher margin products, and we believe a renewed focus on innovation and
the development of new technologies will increase our sales volumes and the overall profitability of our product mix.
Cost Reduction Initiatives
Prior to the ongoing operational transformation being executed by our senior executive team, our operations were
managed in a decentralized manner with varying degrees of emphasis on cost efficiency and limited focus on continuous
improvement or strategic sourcing. Our senior management team has a proven track record of implementing operational excellence
programs at some of the world’s leading industrial manufacturing businesses, and we believe the same successes can be realized at
JELD-WEN. Key areas of focus of our operational excellence and footprint rationalization programs include:
45
•
•
•
•
reducing labor, overtime, and waste costs by reducing facility count while optimizing manufacturing capacity
and improving planning and manufacturing processes;
reducing or minimizing increases in material costs through strategic global sourcing and value-added re-
engineering of components, in part by leveraging our significant spend and the global nature of our purchases;
reducing warranty costs by improving quality; and
a JEM-enabled facility rationalization and modernization initiative that will reduce overhead costs and
complexity, while increasing our overall capacity and improving our service levels.
We are in the early stages of implementing our strategic initiatives enabled by JEM, to develop the culture and processes
of operational excellence and continuous improvement. These cost reduction initiatives, which include plant closures and
consolidations, headcount reductions, and various initiatives aimed at lowering production and overhead costs, may not produce
the intended results within the intended timeframe.
Raw Material Costs
Commodities such as vinyl extrusions, glass, aluminum, wood, steel, plastics, fiberglass, and other composites are major
components in the production of our products. Changes in the underlying prices of these commodities have a direct impact on the
cost of products sold. While we attempt to pass on a substantial portion of such cost increases to our customers, we may not be
successful in doing so. In addition, our results of operations for individual quarters may be negatively impacted by a delay between
the time of raw material cost increases and a corresponding price increase. Conversely, our results of operations for individual
quarters may be positively impacted by a delay between the time of a raw material price decrease and a corresponding competitive
pricing decrease.
Freight Costs
We incur substantial freight costs to third party logistics providers to transport raw materials and work-in-process
inventory to our manufacturing facilities and to deliver finished goods to our customers. Changes in freight rates and the
availability of freight services can have a significant impact on our cost of goods sold. Freight costs have risen significantly due to
a number of factors that have affected the supply and demand of trucking services including increased regulation, such as data
logging of miles, increases in general economic activity, and an aging workforce. We attempt to mitigate some of these cost
increases through various internal initiatives and to pass a substantial portion of these increases to our customers; however, we may
not realize the intended results within the intended timeframe.
Working Capital and Seasonality
Working capital, which is defined as accounts receivable plus inventory less accounts payable, fluctuates throughout the
year and is affected by seasonality of sales of our products and of customer payment patterns. The peak season for home
construction and remodeling in our North America and Europe segments, which represent the substantial majority of our revenues,
generally corresponds with the second and third calendar quarters, and therefore our sales volume is usually higher during those
quarters. Typically, working capital increases at the end of the first quarter and beginning of the second quarter in conjunction with,
and in preparation for, our peak season, and working capital decreases starting in the third quarter as inventory levels and accounts
receivable decline. Inventories fluctuate for some raw materials with long delivery lead times, such as steel, as we work through
prior shipments and take delivery of new orders.
Foreign Currency Exchange Rates
We report our consolidated financial results in U.S. dollars. Due to our international operations, the weakening or
strengthening of foreign currencies against the U.S. dollar can affect our reported operating results and our cash flows as we
translate our foreign subsidiaries’ financial statements from their reporting currencies into U.S. dollars. In the year ended
December 31, 2018 compared to the year ended December 31, 2017, the depreciation or appreciation of the U.S. dollar relative to
the reporting currencies of our foreign subsidiaries resulted in higher or lower reported results in such foreign reporting entities. In
particular, the exchange rates used to translate our foreign subsidiaries’ financial results for the year ended December 31, 2018
compared to the year ended December 31, 2017 reflected, on average, the U.S. dollar weakening against the Euro and Canadian
dollar by 5% and less than 1%, respectively, and strengthening against the Australia dollar by 3%. See Item 1A- Risk Factors-
Risks Relating to Our Business and Industry, Item 1A- Risk Factors- Exchange rate fluctuations may impact our business, financial
condition, and results of operations, and Item 7A- Quantitative and Qualitative Disclosures About Market Risk- Exchange Rate
Risk.
46
Public Company Costs
Following our IPO, we have incurred, and will continue to incur, additional legal, accounting, board compensation, and
other expenses that we did not previously incur, including costs associated with SEC, reporting and corporate governance
requirements, and other requirements associated with operating as a public company. These requirements include compliance with
the Sarbanes-Oxley Act of 2002, as amended, as well as other rules implemented by the SEC and the national securities exchanges.
Our financial statements following our IPO reflect the impact of these expenses.
Components of our Operating Results
Net Revenues
Our net revenues are a function of sales volumes and selling prices, each of which is a function of product mix, and
consist primarily of:
•
•
•
sales of a wide variety of interior and exterior doors, including patio doors, for use in residential and non-
residential applications, with and without frames, to a broad group of wholesale and retail customers in all of our
geographic markets;
sales of a wide variety of windows for both residential and certain non-residential uses, to a broad group of
wholesale and retail customers primarily in North America, Australia, and the U.K.; and
other sales, including sales of moldings, trim board, cut-stock, glass, stairs, hardware and locks, door skins,
shower enclosures, wardrobes, window screens, and miscellaneous installation and other services revenue.
Net revenues do not include internal transfers of products between our component manufacturing, product manufacturing
and assembly, and distribution facilities.
Cost of Sales
Cost of sales consists primarily of material costs, direct labor and benefit costs, including payroll taxes, repair and
maintenance, depreciation, utility, rent and warranty expenses, outbound freight, and insurance and benefits, supervision and tax
expenses. Detail for each of these items is provided below.
•
•
•
Material Costs. The single largest component of cost of sales is material costs, which include raw materials,
components and finished goods purchased for use in manufacturing our products or for resale. Our most
significant material costs include glass, wood, wood components, doors, door facings, door parts, hardware,
vinyl extrusions, steel, fiberglass, packaging materials, adhesives, resins and other chemicals, core material, and
aluminum extrusions. The cost of each of these items is impacted by global supply and demand trends, both
within and outside our industry, as well as commodity price fluctuations, conversion costs, energy costs, and
transportation costs. The imposition of new tariffs on imports, new trade restrictions, or changes in tariff rates or
trade restrictions may further impact material costs. See Item 7A- Quantitative and Qualitative Disclosures
About Market Risk- Raw Materials Risk.
Direct Labor and Benefit Costs. Direct labor and benefit costs reflect a combination of production hours, average
headcount, general wage levels, payroll taxes, and benefits provided to employees. Direct labor and benefit costs
include wages, overtime, payroll taxes, and benefits paid to hourly employees at our facilities that are involved in
the production and/or distribution of our products. These costs are generally managed by each facility and
headcount is adjusted according to overall and seasonal production demand. We run multi-shift operations in
many of our facilities to maximize return on assets and utilization. Direct labor and benefit costs fluctuate with
headcount, but generally tend to increase with inflation due to increases in wages and health benefit costs.
Repair and Maintenance, Depreciation, Utility, Rent, and Warranty Expenses.
Repairs and maintenance costs consist of equipment and facility maintenance expenses, purchases of
maintenance supplies, and the labor costs involved in performing maintenance on our equipment and
facilities.
Depreciation includes depreciation expense associated with our production assets and plants.
47
Rent is predominantly comprised of lease costs for facilities we do not own as well as vehicle fleet and
equipment lease costs. Facility leases are typically multi-year and may include increases tied to certain
measures of inflation.
Warranty expenses represent all costs related to servicing warranty claims and product issues and are
mostly related to our window products sold in the U.S. and Canada.
•
•
Outbound Freight. Outbound freight includes payments to third-party carriers for shipments of orders to our
customers, as well as driver, vehicle, and fuel expenses when we deliver orders to customers. The majority of our
products are shipped by third-party carriers.
Insurance and Benefits, Supervision, and Tax Expenses.
Insurance and benefit costs are the expenses relating to our insurance programs, health benefits, retirement
benefit programs (including the pension plan), and other benefits that are not included in direct labor and
benefits costs.
Supervision costs are the wages and bonus expenses related to plant managers. Both insurance and benefits
and supervision expenses tend to be influenced by headcount and wage levels.
Tax costs are mostly payroll taxes for employees not included in direct labor and benefit costs, and property
taxes. Tax expenses are impacted by changes in tax rates, headcount and wage levels, and the number and
value of properties owned.
In addition, an appropriate portion of each of the insurance and benefits, supervision and tax expenses are allocated to
SG&A expenses.
Selling, general, and administrative expenses
SG&A expenses consist primarily of research and development, sales and marketing, and general and administrative
expenses.
Research and Development. Research and development expenses consist primarily of personnel expenses related to
research and development, consulting and contractor expenses, tooling and prototype materials, and overhead costs allocated to
such expenses. Substantially all of our research and development expenses are related to developing new products and services and
improving our existing products and services. To date, research and development expenses have been expensed as incurred,
because the period between achieving technological feasibility and the release of products and services for sale has been short and
development costs qualifying for capitalization have been insignificant.
We expect our research and development expenses to increase in absolute dollars as we continue to make significant
investments in developing new products and enhancing existing products.
Sales and Marketing. Sales and marketing expenses consist primarily of advertising and marketing promotions of our
products and services and related personnel expenses, as well as sales incentives, trade show and event costs, sponsorship costs,
consulting and contractor expenses, travel, display expenses, and related amortization. Sales and marketing expenses are generally
variable expenses and not fixed expenses. We expect our sales and marketing expenses to increase in absolute dollars as we
continue to actively promote our products and services.
General and Administrative. General and administrative expenses consist of personnel expenses for our finance, legal,
human resources, and administrative personnel, as well as the costs of professional services, any allocated overhead, information
technology, amortization of intangible assets acquired, and other administrative expenses. We expect our general and
administrative expenses to increase in absolute dollars due to the anticipated growth of our business and related infrastructure as
well as legal, accounting, insurance, investor relations, and other costs associated with being a public company.
Impairment and Restructuring Costs
Impairment and restructuring costs consist primarily of all salary-related severance benefits that are accrued and expensed
when a restructuring plan has been put into place, the plan has received approval from the appropriate level of management and the
benefit is probable and reasonably estimable. In addition to salary-related costs, we incur other restructuring costs when facilities
are closed or capacity is realigned within the organization. Upon termination of an employment or commercial contract we record
48
liabilities and expenses pursuant to the terms of the relevant agreement. For non-contractual restructuring activities, liabilities and
expenses are measured and recorded at fair value in the period in which they are incurred.
Interest Expense, Net
Interest expense, net relates primarily to interest payments on our then-outstanding credit facilities (and debt securities) as
well as amortization of any original issue discount or debt issuance costs. Debt issuance costs are included as an offset to long-term
debt in the accompanying consolidated balance sheets and are amortized to interest expense over the life of the applicable facility
using the effective interest method. For additional details, see Note 15 - Long-Term Debt in our financial statements for the year
ended December 31, 2018 included elsewhere in this 10-K.
Other Income (Expense), Net
Other income (expense), net includes profit and losses related to various miscellaneous non-operating expenses including
loss on extinguishment of debt and certain foreign currency related gains and losses.
Income Taxes
Income taxes are recorded using the asset and liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are recognized for the deferred tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in
income in the period that includes the date of enactment. We recognize the effect of income tax positions only if those positions are
more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than
50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment
occurs. We record interest related to unrecognized tax benefits in income tax expense. As of December 31, 2018, our U.S. federal,
state, and foreign net operating loss (“NOL”) carryforwards were $1,477.7 million in the aggregate and $85.6 million of such NOL
carryforwards do not expire.
The Tax Act passed in December 2017 had significant effects on our financial statements. In accordance with Staff
Accounting Bulletin #118 issued by the SEC in December 2017 immediately following the passage of the Tax Act, we made
provisional estimates for certain direct and indirect effects of the Tax Act for the year ended December 31, 2017. In the fourth
quarter of 2018, we completed our accounting for all of the enactment-date income tax effects of the Tax Act and included any
adjustments as a component of income tax expense from continuing operations. The Tax Act subjects a U.S. shareholder to current
tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, “Accounting for Global Intangible
Low-Taxed Income”, provides that we are permitted to make an accounting policy election to either recognize deferred taxes for
temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to such income in
the year the tax is incurred. We have elected to account for the impact of GILTI in the period in which it is incurred. For additional
details, see Note 17 - Income Taxes in our financial statements for the year ended December 31, 2018 included elsewhere in this
10-K.
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 reclassified certain immaterial
amounts in our statement of operations for the year ended December 31, 2017. See Note 1 - Description of Company and Summary
of Significant Accounting Policies in our consolidated financial statements included elsewhere in this 10-K.
49
Comparison of the Year Ended December 31, 2018 to the Year Ended December 31, 2017
(amounts in thousands)
Net revenues
Cost of sales
Gross margin
Selling, general and administrative
Impairment and restructuring charges
Operating income
Interest expense, net
Other (income) expense
Income before taxes, equity earnings and discontinued
operations
Income tax (benefit) expense
Income from continuing operations, net of tax
Equity earnings of non-consolidated entities
Net income
Consolidated Results
Year Ended
December 31, 2018
December 31, 2017
% of Net
Revenues
% of Net
Revenues
$
4,346,703
100.0 % $
3,763,749
3,422,969
923,734
733,748
17,328
172,658
70,818
(33,737)
135,577
(7,958)
143,535
738
144,273
$
78.7 %
21.3 %
16.9 %
0.4 %
4.0 %
1.6 %
(0.8)%
3.1 %
(0.2)%
3.3 %
— %
3.3 % $
2,914,327
849,422
572,458
13,056
263,908
79,034
39,119
145,755
138,603
7,152
3,639
10,791
100.0%
77.4%
22.6%
15.2%
0.3%
7.0%
2.1%
1.0%
3.9%
3.7%
0.2%
0.1%
0.3%
Net Revenues – Net revenues increased $583.0 million, or 15.5%, to $4,346.7 million in the year ended December 31,
2018 from $3,763.7 million in the year ended December 31, 2017. The increase was due to a 15% contribution from recent
acquisitions and a 1% increase in core revenue growth. Core growth included a 2% increase in price, partially offset by a 1%
decrease in volume/mix.
Gross Margin – Gross margin increased $74.3 million, or 8.7%, to $923.7 million in the year ended December 31, 2018
from $849.4 million in the year ended December 31, 2017. Gross margin as a percentage of net revenues was 21.3% in the year
ended December 31, 2018 and 22.6% in the year ended December 31, 2017. The increase in gross margin was due to favorable
pricing, and the contribution from our recent acquisitions, partially offset by material and freight inflation. The decrease in gross
margin as a percentage of sales was due primarily to the dilutive impact of our acquisitions, material and freight inflation, and
operational inefficiencies due to lower volumes and favorable mix, partially offset by price.
SG&A Expense – SG&A expense increased $161.3 million, or 28.2%, to $733.7 million in the year ended December 31,
2018 from $572.5 million in the year ended December 31, 2017. SG&A expense as a percentage of net revenues was 16.9% for the
year ended December 31, 2018 and 15.2% for the year ended December 31, 2017. The increase in SG&A expense was primarily
due to a litigation contingency accrual of $76.5 million, SG&A associated with our recent acquisitions and increased professional
fees. Excluding the impact of the litigation contingency accrual and SG&A associated with our recent acquisitions, SG&A expense
would have been $588.3 million, or 15.4% of net revenues on a comparative basis to 2017.
Impairment and Restructuring Charges – Impairment and restructuring charges increased $4.3 million, or 32.7%, to $17.3
million in the year ended December 31, 2018 from $13.1 million in the year ended December 31, 2017. The 2018 charges
consisted primarily of personnel restructuring costs in our North America, Europe and Australasia segments as well as plant
consolidations in our North America and Australasia segments. The 2017 charges consisted primarily of a reduction in workforce
in our North American segment as well as ongoing restructuring costs in our Europe segment.
Interest Expense, Net – Interest expense, net, decreased $8.2 million, or 10.4%, to $70.8 million in the year ended
December 31, 2018 from $79.0 million in the year ended December 31, 2017. The decrease was primarily due to additional interest
expense incurred in the prior year resulting from the write-offs of a portion of the unamortized debt issuance costs and original
issue discount totaling approximately $6.1 million in connection with the repayment of $375.0 million of outstanding term loans
with proceeds from our IPO and higher pre-IPO debt levels.
50
Other (Income) Expense – Other (income) expense increased $72.9 million, to income of $33.7 million in the year ended
December 31, 2018 from expense of $39.1 million in the year ended December 31, 2017. The Other income in the year ended
December 31, 2018 was primarily due to a fair value adjustment of $20.8 million associated with our acquisition of the remaining
shares outstanding of an equity investment, foreign currency income of $10.2 million, and legal settlement income of $7.5 million,
partially offset by pension expense of $7.0 million. Other expense in the year ended December 31, 2017 primarily consisted of a
loss on extinguishment of debt of $23.3 million associated with our Term Loan, pension expense of $12.6 million and foreign
currency losses of $10.4 million, partially offset by a beneficial contract settlement of $2.2 million and legal settlement income of
$2.5 million.
Income Taxes – Income tax benefit in the year ended December 31, 2018 was $8.0 million, compared to expense of
$138.6 million in the year ended December 31, 2017. The effective tax rate in the year ended December 31, 2018 was a benefit of
5.9% compared to an expense of 95.1% in the year ended December 31, 2017. The 2018 tax benefit of $8.0 million was primarily
due to the $40.2 million of deferred tax benefit related to finalizing our provisional estimates connected to the Tax Act, $19.6
million of deferred tax benefit related to the Steves’ litigation, and $10.2 million of benefit related to our investment in ABS, offset
by tax expense of $5.4 million for a net increase to uncertain tax positions including interest, as well as tax expense associated with
strong business results of our foreign subsidiaries such as Australia, Canada, and UK. The effective tax rate for the year ended
December 31, 2018 includes the impact of the new GILTI tax. As discussed above, we have elected to account for the impact of
GILTI in the period in which it is incurred.
Tax expense for the year ended December 31, 2017 included a provisional estimate of the change in the U.S. corporate
income tax rate from 35% to 21% and the one-time deemed repatriation tax. As a result of the lowering of the U.S. federal tax rate,
we revalued our net deferred tax assets in the U.S. reflecting the lower expected benefit in the U.S. in the future. This estimate of
the revaluation resulted in additional non-cash tax expense totaling approximately $21.1 million. The provisional estimate of the
one-time deemed repatriation tax, which effectively subjected the Company’s net aggregate historic foreign earnings to taxation in
the U.S., resulted in a further tax charge of $11.3 million. While this repatriation tax is measured as of December 31, 2017,
taxpayers are permitted to pay the tax over an 8-year period which resulted in an increase to our non-current liabilities. During the
fourth quarter of 2018, the Company undertook certain transactions which premised the repatriation of certain earnings from
foreign subsidiaries. While these transactions were not undertaken as a direct result of tax reform, the U.S. tax implications were
heavily impacted due to the timing of the transactions and the measurement dates as outlined in the Tax Act. We recorded a
provisional estimate of the effects of these transactions resulting in a net increase to tax expense of $65.8 million related to these
transactions and their impacts under the Tax Act.
Comparison of the Year Ended December 31, 2017 to the Year Ended December 31, 2016
(dollars in thousands)
Net revenues
Cost of sales
Gross margin
Selling, general and administrative
Impairment and restructuring charges
Operating income
Interest expense, net
Other expense
Income before taxes, equity earnings and discontinued
operations
Income tax expense (benefit)
Income from continuing operations, net of tax
Equity earnings of non-consolidated entities
Loss from discontinued operations, net of tax
December 31, 2017
December 31, 2016
% of Net
Revenues
% of Net
Revenues
$
3,763,749
100.0% $
3,666,942
2,914,327
849,422
572,458
13,056
263,908
79,034
39,119
145,755
138,603
7,152
3,639
—
77.4%
22.6%
15.2%
0.3%
7.0%
2.1%
1.0%
3.9%
3.7%
0.2%
0.1%
—%
2,890,894
776,048
552,881
13,847
209,320
77,590
1,410
130,320
(246,394)
376,714
3,791
(3,324)
377,181
100.0 %
78.8 %
21.2 %
15.1 %
0.4 %
5.7 %
2.1 %
0.0 %
3.6 %
(6.7)%
10.3 %
0.1 %
(0.1)%
10.3 %
Net income
$
10,791
0.3% $
51
Consolidated Results
Net Revenues—Net revenues increased $96.8 million, or 2.6%, to $3,763.7 million in the year ended December 31, 2017
from $3,666.9 million in the year ended December 31, 2016. The increase in net revenues was primarily due to our recent
acquisitions which provided a 2% increase as well as a favorable foreign exchange impact of 1%. Our core net revenues were
unchanged with a 1% benefit from pricing offset by a 1% decrease in volume/mix.
Gross Margin—Gross margin increased $73.4 million, or 9.5%, to $849.4 million in the year ended December 31, 2017
from $776.0 million in the year ended December 31, 2016. Gross margin as a percentage of net revenues was 22.6% in the year
ended December 31, 2017 and 21.2% in the year ended December 31, 2016. The increase in gross margin and gross margin
percentage was due to favorable pricing, cost savings initiatives and contribution from recent acquisitions, partially offset by
operational inefficiencies in our North American windows business.
SG&A Expense—SG&A expense increased $19.6 million, or 3.5%, to $572.5 million in the year ended December 31,
2017 from $552.9 million in the year ended December 31, 2016. SG&A expense as a percentage of net revenues was 15.2% for the
year ended December 31, 2017 and 15.1% for the year ended December 31, 2016. The increase in SG&A expense was primarily
due to increased professional fees, costs associated with our IPO and secondary offerings, SG&A expense associated with
acquisitions, and increased wages, partially offset by a decrease in share-based compensation associated with the 2016 Dividend.
Impairment and Restructuring Charges—Impairment and restructuring charges decreased $0.8 million, or 5.7%, to $13.1
million in the year ended December 31, 2017 from $13.8 million in the year ended December 31, 2016. The charges in the year
ended December 31, 2017 consisted primarily of a reduction in workforce in our North American segment as well as ongoing
restructuring costs in our Europe segment. The charges for the year ended December 31, 2016 consisted primarily of ongoing
personnel restructuring in our Europe and North America segment.
Interest Expense, Net—Interest expense, net increased $1.4 million, or 1.9%, to an expense of $79.0 million in the year
ended December 31, 2017 from an expense of $77.6 million in the year ended December 31, 2016. The increase was primarily due
to interest expense resulting from the write-offs of a portion of the unamortized debt issuance costs and original issue discount
totaling approximately $6.1 million in connection with the repayment of $375.0 million of outstanding term loans with proceeds
from our IPO. In addition, interest expense increased due to higher long-term debt levels for the first month of the period as a result
of borrowings of $375.0 million under our Term Loan Facility, partially offset by reductions in the applicable margin which
became effective in March 2017 and December 2017.
Other Expense (Income) – Other expense increased $37.7 million, to a $39.1 million expense in the year ended
December 31, 2017 from $1.4 million in the year ended December 31, 2016. The expense in the year ended December 31, 2017
was primarily a loss on the extinguishment of debt of $23.3 million associated with our Term Loan, pension expense of $12.6
million, foreign currency losses of $10.4 million, partially offset by legal settlement income of $2.5 million and contract settlement
of $2.2 million. The expense in the year ended December 31, 2016 primarily consisted of pension expense of $12.7 million,
partially offset by $8.4 million received in a confidential settlement agreement on a commercial matter in our North America
segment.
Income Taxes— On December 22, 2017, the Tax Act was enacted in the U.S. The specific provisions of the Tax Act had
both direct and indirect impacts on our 2017 results and will continue to have significant effects on our future performance. The
direct impacts were due primarily to the change in the U.S. corporate income tax rate from 35% to 21% for tax years beginning
after December 31, 2017 and the one-time deemed repatriation tax. As a result of the lowering of the U.S. federal tax rate, we
revalued our net deferred tax assets in the U.S. reflecting the lower expected benefit in the U.S. in the future. This revaluation
resulted in additional non-cash tax expense totaling approximately $21.1 million. The one-time deemed repatriation tax, which
effectively subjected the Company’s net aggregate historic foreign earnings to taxation in the U.S., resulted in a further tax charge
of $11.3 million. While this repatriation tax is measured as of December 31, 2017, taxpayers can pay the tax over an 8-year period
resulting in an increase to our non-current liabilities.
During the fourth quarter of 2017, the Company undertook certain transactions which premised the repatriation of certain
earnings from foreign subsidiaries. While these transactions were not undertaken as a direct result of tax reform, the U.S. tax
implications were heavily impacted due to the timing of the transactions and the measurement dates as outlined in the Tax Act. We
recorded a net increase to tax expense of $65.8 million related to these transactions and their impacts under the Tax Act.
While we recorded provisional estimates of the tax impact of the above transactions as of December 31, 2017 based on
information available to us, we had not yet completed our full analysis of the net effects of the Tax Act.
52
Income tax benefit in the year ended December 31, 2017 was $138.6 million, compared to a benefit of $246.4 million in
the year ended December 31, 2016. The effective tax rate in the year ended December 31, 2017 was 95.1% compared to an
effective tax rate of (189.1)% in the year ended December 31, 2016. The prior year tax benefit of $246.4 million was due primarily
to the net release of our valuation allowance of $236.5 million
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 have
determined that we have 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. 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 non-cash
items; other items; and costs related to debt restructuring and debt refinancing. For additional information on segment Adjusted
EBITDA, see Note 18 - Segment Information to our consolidated financial statements included in this 10-K.
We reclassified certain immaterial amounts for year ended December 31, 2017 impacting “Net revenues from external
customers - North America” line below to conform to our 2018 presentation. See Note 1 - Description of Company and Summary
of Significant Accounting Policies in our consolidated financial statements included in this 10-K.
Comparison of the Year Ended December 31, 2018 to the Year Ended December 31, 2017
(amounts in thousands)
Net revenues from external customers
North America
Europe
Australasia
Total Consolidated
Percentage of total consolidated net revenues
North America
Europe
Australasia
Total Consolidated
Adjusted EBITDA(1)
North America
Europe
Australasia
Corporate and unallocated costs
Total Consolidated
Adjusted EBITDA as a percentage of segment net revenues
North America
Europe
Australasia
Total Consolidated
Year Ended
December 31,
2018
December 31,
2017
$
$
$
$
$
$
$
$
2,460,987
1,215,801
669,915
4,346,703
56.6%
28.0%
15.4%
100.0%
278,975
129,202
91,172
(34,003)
465,346
11.3%
10.6%
13.6%
10.7%
2,157,898
1,042,767
563,084
3,763,749
% Variance
14.0 %
16.6 %
19.0 %
15.5 %
57.3%
27.7%
15.0%
100.0%
273,594
132,929
74,706
(43,616)
437,613
12.7%
12.7%
13.3%
11.6%
2.0 %
(2.8) %
22.0 %
(22.0) %
6.3 %
(1)
Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA, see
Note 18 - Segment Information in our consolidated financial statements
53
North America
Net revenues in North America increased $303.1 million, or 14.0%, to $2,461.0 million in the year ended December 31,
2018 from $2,157.9 million in the year ended December 31, 2017. The increase was primarily due to a 14% increase attributable to
the acquisitions of MMI Door and ABS.
Adjusted EBITDA in North America increased $5.4 million, or 2.0%, to $279.0 million in the year ended December 31,
2018 from $273.6 million in the year ended December 31, 2017. The increase was primarily due to the MMI Door and ABS
acquisitions partially offset by the impact of a lag in pricing to offset inflation in material and freight and lower core volumes and
mix shift to lower margin products.
Europe
Net revenues in Europe increased $173.0 million, or 16.6%, to $1,215.8 million in the year ended December 31, 2018
from $1,042.8 million in the year ended December 31, 2017. The increase was primarily due to a 13% increase attributable to the
acquisitions of Mattiovi and Domoferm, core revenue growth of 1%, and a favorable foreign exchange impact of 3%.
Adjusted EBITDA in Europe decreased $3.7 million, or 2.8%, to $129.2 million in the year ended December 31, 2018
from $132.9 million in the year ended December 31, 2017. The decrease was primarily due to inflation and unfavorable product
mix, partially offset by favorable pricing and our acquisitions of Mattiovi and Domoferm.
Australasia
Net revenues in Australasia increased $106.8 million, or 19.0%, to $669.9 million in the year ended December 31, 2018
from $563.1 million in the year ended December 31, 2017. The increase was due primarily to a 20% increase attributable to the
acquisitions of Kolder and A&L, core revenue growth of 2%, consisting of an increase in volume/mix of 1% and favorable pricing
of 1%, offset by unfavorable foreign exchange rates of 3%.
Adjusted EBITDA in Australasia increased $16.5 million, or 22.0%, to $91.2 million in the year ended December 31,
2018 from $74.7 million in the year ended December 31, 2017. The increase was primarily due to the acquisitions of Kolder and
A&L and pricing initiatives, partially offset by material inflation.
54
Comparison of the Year Ended December 31, 2017 to the Year Ended December 31, 2016
(dollars in thousands)
Net revenues from external customers
North America
Europe
Australasia
Total Consolidated
Percentage of total consolidated net revenues
North America
Europe
Australasia
Total Consolidated
Adjusted EBITDA(1)
North America
Europe
Australasia
Corporate and Unallocated costs
Total Consolidated
Adjusted EBITDA as a percentage of segment net revenues
North America
Europe
Australasia
Total Consolidated
Year Ended
December 31,
2017
December 31,
2016
$
$
$
$
$
$
$
$
2,157,898
1,042,767
563,084
3,763,749
57.3%
27.7%
15.0%
100.0%
273,594
132,929
74,706
(43,616)
437,613
12.7%
12.7%
13.3%
11.6%
2,149,311
1,008,729
508,902
3,666,942
% Variance
0.4%
3.4%
10.6%
2.6%
58.6%
27.5%
13.9%
100.0%
251,831
122,574
59,519
(40,242)
393,682
11.7%
12.2%
11.7%
10.7%
8.6%
8.4%
25.5%
8.4%
11.2%
(1)
Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA, see
Note 18 - Segment Information in our consolidated financial statements.
North America
Net revenues in North America increased $8.6 million, or 0.4%, to $2,157.9 million in the year ended December 31, 2017
from $2,149.3 million in the year ended December 31, 2016. The increase in net revenues was primarily due to the acquisition of
MMI Door which provided a 2% increase. This was partially offset by a decrease in core net revenues of 1% comprised of
favorable pricing of 2%, offset by a decrease in volume/mix of 3%. The decrease in volume/mix was primarily driven by activity in
our retail channel, including the impact of the previously announced business line rationalization in Florida and reduced volume in
our windows business.
Adjusted EBITDA in North America increased $21.8 million, or 8.6%, to $273.6 million in the year ended December 31,
2017 from $251.8 million in the year ended December 31, 2016. The increase in Adjusted EBITDA was due to the acquisition of
MMI Door, as well as favorable pricing and cost saving initiatives, partially offset by operational inefficiencies in our windows
business.
Europe
Net revenues in Europe increased $34.0 million, or 3.4%, to $1,042.8 million in the year ended December 31, 2017 from
$1,008.7 million in the year ended December 31, 2016. The increase in net revenues was primarily due to an increase in core net
revenues of 2% which was comprised of an increase in volume/mix of approximately 1% and favorable pricing of approximately
1%. The acquisition of Mattiovi provided an additional 1% increase.
Adjusted EBITDA in Europe increased $10.4 million, or 8.4%, to $132.9 million in the year ended December 31, 2017
from $122.6 million in the year ended December 31, 2016. The increase in Adjusted EBITDA was primarily due to the additional
shipping days in the first quarter of 2017, favorable pricing, our Mattiovi acquisition and our cost saving initiatives.
55
Australasia
Net revenues in Australasia increased $54.2 million, or 10.6%, to $563.1 million in the year ended December 31, 2017
from $508.9 million in the year ended December 31, 2016. The increase in net revenues was primarily due to the acquisitions of
Trend, Breezway and Kolder which provided a 7% increase in net revenues. Core net revenues increased 1%, primarily due to
favorable pricing of 1%. Favorable foreign exchange rates added an additional 3% increase in net revenues.
Adjusted EBITDA in Australasia increased $15.2 million, or 25.5%, to $74.7 million in the year ended December 31,
2017 from $59.5 million in the year ended December 31, 2016. The increase in Adjusted EBITDA was primarily due to the
acquisitions of Trend, Breezway and Kolder as well as our pricing initiatives, and favorable foreign exchange impact.
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 and Senior Notes. Working capital, which we
define as accounts receivable plus inventory less accounts payable, fluctuates throughout the year and is affected by the seasonality
of sales of our products, customer payment patterns, and the translation of the balance sheets of our foreign operations into the U.S.
dollar, which is our reporting currency. 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, which represent the substantial majority of our revenues, and working capital decreases starting in
the fourth quarter as inventory levels and accounts receivable decline. Inventories fluctuate for some raw materials with long
delivery lead times, such as steel, as we work through prior shipments and take delivery of new orders.
As of December 31, 2018, we had total liquidity (a non-GAAP measure) of $380.2 million, which included $117.0 million
in unrestricted cash, $208.6 million available for borrowing under the ABL Facility, AUD $15.0 million ($10.6 million) available
for borrowing under the Australia Senior Secured Credit Facility, and €38.4 million ($44.0 million) available for borrowing under
the Euro Revolving Facility, which we let expire in January 2019. This compares to total liquidity of $512.2 million as of
December 31, 2017. The decrease in total liquidity at December 31, 2018 was primarily due to cash used to repurchase our shares,
increased capital expenditures and cash paid for acquisitions.
As of December 31, 2018, our cash balances, including $0.6 million of restricted cash, consisted of $23.7 million in the
U.S. and $93.9 million in non-U.S. subsidiaries. Based on our current level of operations, the seasonality of our business and
anticipated growth, we believe that cash provided by operations and other sources of liquidity, including cash, cash equivalents and
borrowings 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, re-priced, 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. Our affiliates may also purchase our debt from time to time, through open market purchases or
other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with
the terms of the debt, and we would continue to reflect the debt as outstanding in our consolidated balance sheets.
A hypothetical increase or decrease in interest rates of 1.0% (based on variable rate debt if our revolving credit facilities
were fully drawn) would have increased or decreased our interest expense by $9.7 million for the year ended December 31, 2018.
56
Borrowings and Refinancings
In November 2016, we borrowed an additional $375.0 million under the Corporate Credit Facilities primarily to fund
distributions to our shareholders and in February 2017, we repaid $375.0 million under our Corporate Credit Facilities. In March
2017, we amended the Term Loan Facility to reduce the interest rate applicable to all outstanding terms loans. In December 2017,
we issued $800.0 million of unsecured Senior Notes, re-priced and amended the Term Loan Facility, and repaid $787.4 million of
outstanding term loan borrowings with the net proceeds from the Senior Notes. The December 2017 refinancing transactions
reduced our overall interest rates and modified other terms and provisions, including providing for additional covenant flexibility
and additional capacity under the Term Loan Facility. Our results have been and will continue to be impacted by substantial
changes in our net interest expense throughout the periods presented and in the future. In December 2018, we amended the ABL
Facility, providing for a $100.0 million increase in the U.S. revolving credit commitments. In February 2018, we amended the
Australia Senior Secured Credit Facility to include an additional AUD $55.0 million floating rate term loan facility. See Note 15 -
Long-Term Debt in our consolidated financial statements for additional details.
Cash Flows
The following table summarizes the changes to our cash flows for the years ended December 31,:
(amounts in thousands)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of changes in exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash Flow from Operations
2018
2017
2016
$
$
$
219,653
(284,141)
(67,475)
(6,648)
(138,611) $
265,793
(189,793)
64,090
12,692
152,782
$
$
201,655
(156,782)
(52,001)
(3,697)
(10,825)
Net cash provided by operating activities decreased $46.1 million to $219.7 million in the year ended December 31, 2018
from $265.8 million in net cash provided by operating activities in the year ended December 31, 2017. The decrease in cash
provided by operating activities resulted primarily from increased accounts receivable due to increased sales volume and changes
in terms with customers, increases in inventory associated with our recent acquisitions and stock build program and to ensure
adequate raw material availability, and a decrease in accounts payable.
Net cash provided by operating activities increased $64.1 million to $265.8 million in the year ended December 31, 2017
from $201.7 million in the year ended December 31, 2016. This increase was primarily due to improved profitability and the
impact of acquisitions, partially offset by increased inventory levels.
Cash Flow from Investing Activities
Net cash used in investing activities increased $94.3 million to $284.1 million in the year ended December 31, 2018 from
$189.8 million in the year ended December 31, 2017. The increase was primarily due to cash used for acquisitions and capital
expenditures compared to the prior period.
Net cash used in investing activities increased $33.0 million to $189.8 million in the year ended December 31, 2017 from
$156.8 million in the year ended December 31, 2016. The increase was primarily due to acquisitions during the year, partly offset
by reduction in capital expenditures compared to the prior period due to the completion of the glass plant in Australia in January
2017.
Cash Flow from Financing Activities
Net cash used in financing activities was $67.5 million in the year ended December 31, 2018 and was comprised primarily
of repurchases of our common stock of $125.0 million and payments to tax authorities for employee share-based compensation of
$9.5 million, offset by increased borrowings of $70.5 million,
Net cash provided by financing activities in the year ended December 31, 2017 was $64.1 million and comprised
primarily of proceeds from the IPO of $480.3 million of which $375.0 million of proceeds were used to partially repay outstanding
debt.
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Net cash used in financing activities in the year ended December 31, 2016 was $52.0 million and was comprised primarily
of $404.2 million of distributions to shareholders, $16.1 million of short-term and long-term debt borrowings, and $8.1 million of
debt issuance costs payments, partially offset by $374.1 million of net proceeds from issuance of new debt as well as $2.3 million
in employee note repayment.
Holding Company Status
We are a holding company that conducts all of our operations through subsidiaries. The majority of our operating income
is derived from JWI, our main operating subsidiary. Consequently, we rely on dividends or advances from our subsidiaries. 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 and the Senior Notes.
The Australia Senior Secured Credit Facility also contain restrictions on dividends that limit the amount of cash that the
obligors under these facilities can distribute to JWI. Obligors under the Australia Senior Secured Credit Facility may pay dividends
only to the extent they do not exceed 80% of after tax net profits (with a one-year carryforward of unused amounts) and only while
no default is continuing under such agreement. For further information regarding the Australia Senior Secured Credit Facility, see
Note 15 - Long-Term Debt in our consolidated financial statements.
The amount of our consolidated net assets that were available to be distributed under our credit facilities as of
December 31, 2018 was $457.6 million.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material
effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources.
Contractual Obligations
The following table summarizes our significant contractual obligations at December 31, 2018:
Contractual Obligations(1)
Long-term debt obligations
Capital lease obligations
Operating lease obligations
Purchase obligations(2)
Interest on long-term debt obligations(3)
Totals:
Total
Less Than
1 Year
Payments Due By Period
1-3 Years
3-5 Years
(dollars in thousands)
More Than
5 Years
$
$
1,378,978
98,914
201,122
9,009
450,692
2,138,715
$
$
9,590
45,752
49,128
6,475
64,156
175,101
$
$
12,138
22,737
74,679
2,534
127,626
239,714
$
$
132,041
6,174
43,372
—
121,986
303,573
$
$
1,225,209
24,251
33,943
—
136,924
1,420,327
____________________________
(1)
Not included in the table above are our unfunded pension liabilities totaling $112.8 million and uncertain tax position liabilities of $19.0
million as of December 31, 2018, for which the timing of payment is unknown.
(2)
(3)
Purchase obligations are defined as purchase agreements that are enforceable and legally binding and that specify all significant terms,
including quantity, price, and the approximate timing of the transaction. The obligations reflected in the table relates primarily to raw
materials purchase agreements and software hosting services.
Interest on long-term debt obligations is calculated based on debt outstanding and interest rates in effect on December 31, 2018, taking into
account scheduled maturities and amortization payments.
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
58
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 fully disclosed
in our annual consolidated financial statements included elsewhere in this Form 10-K. The following discussion highlights the
estimates we believe are critical and should be read in conjunction with the consolidated financial statements included in Part II, Item
8 of this Form 10-K.
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs
with the transfer of control of our products or services. Revenue is measured as the amount of consideration we expect to receive in
exchange for transferring goods or providing services. The taxes we collect concurrent with revenue-producing activities (e.g., sales
tax, value added tax, and other taxes) are excluded from revenue. Incentive payments to customers that directly relate to future
business are recorded as a reduction of net revenues over the periods benefited.
Shipping and handling costs and the related expenses are reported as fulfillment revenues and expenses for all customers.
Therefore all shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are included in
cost of sales. The expected costs associated with our base warranties and field service actions continue to be recognized as expense
when the products are sold (see Note 14 - Warranty Liabilities). Since payment is due at or shortly after the point of sale, the contract
asset is classified as a receivable.
We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect,
at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays
for that product or service will be one year or less. We do not typically include extended payment terms in our contracts with
customers. Incidental items that are immaterial in the context of the contract are recognized as expense.
Acquisitions
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets
acquired based on their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration
transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. If the fair value of the
acquired assets exceeds the purchase price the difference is recorded as a bargain purchase in other income (expense). Such valuations
require us to make significant estimates and assumptions, especially with respect to intangible assets. As a result, during the
measurement period, which may be up to one year from the acquisition date, material adjustments must be reflected in the
comparative consolidated financial statements in the period in which the adjustment amount will be determined. Upon the conclusion
of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded to our consolidated statements of operations. Newly acquired entities are included in our results
from the date of their respective acquisitions.
Allowance for Doubtful Accounts
Substantially all accounts receivable arise from sales to customers in our manufacturing and distribution businesses and are
recognized net of offered cash discounts. Credit is extended in the normal course of business under standard industry terms that
normally reflect 60 day or less payment terms and do not require collateral. An allowance is recorded based on a variety of factors,
including the length of time receivables are past due, the financial health of our customers, unusual macroeconomic conditions and
historical experience. If the customer’s financial conditions were to deteriorate resulting in the inability to make payments, additional
allowances may need to be recorded which would result in additional expenses being recorded for the period in which such
determination was made.
Inventories
Inventories are valued at the lower of cost or market or net realizable value and are determined by the FIFO or average cost
methods. We record provisions to write-down obsolete and excess inventory to estimated net realizable value. The process for
evaluating obsolete and excess inventory requires us to make subjective judgments and estimates concerning future sales levels,
quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal
process or incorrect estimates of future sales potential may cause actual results to differ from the estimates at the time such inventory
is disposed or sold.
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Intangible Assets
Definite lived intangible assets are amortized on a straight-line basis over their estimated useful lives that typically range
from 5 to 40 years. The lives of definite lived intangible assets are reviewed and reduced if necessary whenever changes in their
planned use occur. Legal and registration costs related to internally developed patents and trademarks are capitalized and amortized
over the lesser of their expected useful life or the legal patent life. We review the carrying value of intangible assets to assess their
recoverability when facts and circumstances indicate that the carrying value may not be recoverable.
Long-Lived Assets
Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of such assets may not be recoverable. Such events or circumstances include, but are not limited to, a significant
decrease in the fair value of the underlying business or a change in utilization of property and equipment.
We group assets to test for impairment at the lowest level for which identifiable cash flows are largely independent of the
cash flows of other groups of assets and liabilities. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the assets.
When evaluating long-lived assets and definite lived intangible assets for potential impairment, the first step to review for
impairment is to forecast the expected undiscounted cash flows generated from the anticipated use and eventual disposition of the
asset. If the expected undiscounted cash flows are less than the carrying value of the asset, then an impairment charge is required to
reduce the carrying value of the asset to fair value. If we recognize an impairment loss, the carrying amount of the asset is adjusted to
fair value based on the discounted estimated future net cash flows. For a depreciable long-lived asset, the new cost basis will be
depreciated over the remaining useful life of that asset. For an amortizable intangible asset, the new cost basis will be amortized over
the remaining useful life of the asset. Our impairment loss calculations require management to apply judgments in estimating future
cash flows to determine asset fair values, including forecasting useful lives of the assets and selecting the discount rate that represents
the risk inherent in future cash flows.
Goodwill
Goodwill is tested for impairment on an annual basis during the fourth quarter and between annual tests if indicators of
potential impairment exist, using a fair-value-based approach. Current accounting guidance provides an entity the option to perform a
qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is
required. If it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill
impairment test is not required.
If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying
amount (including attributable goodwill). If the fair value of the reporting unit exceeds its carrying amount, step two does not need to
be performed. If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the
reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is
recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The
implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price
allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the
reporting unit is determined using a discounted cash flow analysis.
We estimated the fair value of our reporting units using a discounted cash flow model (implied fair value measured on a non-
recurring basis using level 3 inputs). Inherent in the development of the discounted cash flow projections are assumptions and
estimates of our future revenue growth rates, profit margins, business plans, cost of capital and tax rates. Our judgments with respect
to these metrics are based on historical experience, current trends, consultations with external specialists, and other information.
Changes in assumptions or estimates used in our goodwill impairment testing could materially affect the determination of the fair
value of a reporting unit, and therefore, could eliminate the excess of fair value over carrying value of a reporting unit and, in some
cases, could result in impairment. Such changes in assumptions could be caused by items such as a loss of one or more significant
customers, decline in the demand for our products due to changing economic conditions or failure to control cost increases above what
can be recouped in sale price increases. These types of changes would negatively affect our profits, revenues and growth over the long
term and such a decline could significantly affect the fair value assessment of our reporting units and cause our goodwill to become
impaired.
As of December 31, 2018, the fair value of our North America, Europe and Australasia reporting units would have to decline
by approximately 16%, 53% and 57%, respectively, to be considered for potential impairment.
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As the carrying value and fair value of the North America reporting unit are closely aligned, a material change in the fair
value or carrying value would put the reporting unit at risk of goodwill impairment. For example, our ability to realize synergies,
revenue growth, and increased margins are key assumptions in our projections of revenue, earnings and cash flows. If our actual
experience in future years falls significantly below our current projections, the fair value of the reporting unit could be negatively
impacted. Similarly, an increase in interest rates would lower our discounted cash flows and negatively impact the fair value of the
reporting unit. We believe our projections and assumptions are reasonable, but it is possible they could change, impacting our fair
value estimate, or the carrying value could change.
Warranty Accrual
Warranty terms range primarily from one year to lifetime on certain window and door components. Warranties are normally
limited to replacement or service of defective components for the original customer. Some warranties are transferable to subsequent
owners and are generally limited to ten 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 we periodically adjust these
provisions to reflect actual experience.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. We evaluate both the positive and negative evidence that is relevant in assessing whether we will realize
the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not
be realized. This projected realization is directly related to our future projections of the performance of our business and
management’s planning initiatives at any point in time. As a result, valuation allowances are subject to change as proven business
trends and planning initiatives develop.
The Tax Act passed in December 2017 had significant effects on our financial statements. In accordance with Staff
Accounting Bulletin No.118 issued by the SEC in December 2017 immediately following the passage of the Tax Act, we made
provisional estimates for certain direct and indirect effects of the Tax Act based on information available to us for the year ended
December 31, 2017. In the fourth quarter of 2018, we completed our accounting for all of the enactment-date income tax effects of the
Tax Act and recorded any adjustments as a component of income tax expense from continuing operations. The Tax Act subjects a U.S.
shareholder to current tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for
Global Intangible Low-Taxed Income, states that we are permitted to make an accounting policy election to either recognize deferred
taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to such
income in the year the tax is incurred. We have elected to account for the impact of GILTI in the period in which it is incurred.
The tax effects from an uncertain tax position can be recognized in the consolidated financial statements only if the position
is more likely than not to be sustained, based on the technical merits of the position and the jurisdiction. We recognize the financial
statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position
following an audit and the tax related to the position would be due to the entity and not the owners. For tax positions meeting the more
likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50
percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. We apply this accounting standard to all
tax positions for which the statute of limitations remains open. Changes in recognition or measurement are reflected in the period in
which the change in judgment occurs.
We file a consolidated federal income tax return in the U.S. and various states. For financial statement purposes, we calculate
the provision for federal income taxes using the separate return method. Certain subsidiaries file separate tax returns in certain
countries and states. Any U.S. federal, state and foreign income taxes refundable and payable are reported in other current assets and
accrued income taxes payable in the consolidated balance sheets as of December 31, 2018 and in deferred credits and other liabilities
as of December 31, 2017. The income taxes refundable and payable relating to the U.S. federal transition tax is reported in other assets
in our consolidated balance sheets. We record interest and penalties on amounts due to tax authorities as a component of income tax
expense in the consolidated statements of operations.
61
Derivative Financial Instruments
We utilize derivative financial instruments to manage foreign currency exposures related to subsidiaries that operate outside
the U.S. and use their local currency as the functional currency. We record all derivative instruments in the consolidated balance sheets
at fair value. Changes in a derivative’s fair value are recognized in earnings unless specific hedge criteria are met and we elect hedge
accounting prior to entering into the derivative. If a derivative is designated as a fair value hedge, the changes in fair value of both the
derivative and the hedged item attributable to the hedged risk are recognized in the results of operations. If the derivative is designated
as a cash flow hedge, changes in the fair value of the derivative are recorded in consolidated other comprehensive income (loss) and
subsequently classified to the consolidated statements of operations when the hedged item impacts earnings. At the inception of a fair
value or cash flow hedge transaction, we formally document the hedge relationship and the risk management objective for undertaking
the hedge. In addition, we assess both at inception of the hedge and on an ongoing basis, whether the derivative in the hedging
transaction has been highly effective in offsetting changes in fair value or cash flows of the hedged item and whether the derivative is
expected to continue to be highly effective. The impact of any ineffectiveness is recognized in our consolidated statements of
operations.
Contingent Liabilities
Contingent liabilities require significant judgment in estimating potential losses for legal claims. Each quarter, we review
significant new claims and litigation for the probability of an adverse outcome. Estimates are recorded as liabilities when it is probable
that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable
possibility that the ultimate loss will materially exceed the recorded provision. Contingent liabilities are often resolved over long time
periods. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by
third parties such as regulators, and the estimated loss can change materially as individual claims develop.
Share-based Compensation Plan
We have share-based compensation plans that provide for compensation to employees through various grants of share-based
instruments. We apply the fair value method of accounting using the Black-Scholes option pricing model to determine the
compensation expense for stock appreciation rights. The compensation expense for RSU awarded is based on the fair value of the
RSU at the date of grant. Compensation expense is recorded in the consolidated statements of operations and is recognized over the
requisite service period. The determination of obligations and compensation expense requires the use of several mathematical and
judgmental factors, including stock price, expected volatility, the anticipated life of the option, and estimated risk-free rate and the
number of shares or share options expected to vest. Any difference in the number of shares or share options that actually vest can
affect future compensation expense. Other assumptions are not revised after the original estimate. For stock options granted, we
prepare the valuations with the assistance of a third-party valuation firm, utilizing approaches and methodologies consistent with the
AICPA Practice Aid.
The Black-Scholes option-pricing model requires the use of weighted average assumptions for estimated expected volatility,
estimated expected term of stock options, risk-free rate, estimated expected dividend yield, and the fair value of the underlying
common stock at the date of grant. We estimate the expected term of all stock options based on previous history of exercises. The risk-
free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the stock option. The expected
dividend yield rate is 0.00% which is consistent with the expected dividends to be paid on common stock. We estimate forfeitures
based on our historical analysis of actual stock option forfeitures. Actual forfeitures are recorded when incurred and estimated
forfeitures are reviewed and adjusted at least annually.
Employee Retirement and Pension Benefits
The obligations under our defined benefit pension plans are calculated using actuarial models and methods. The most critical
assumption and estimate used in the actuarial calculations is the discount rate for determining the current value of benefit obligations.
Other assumptions and estimates used in determining benefit obligations and plan expenses include expected return on plan assets,
inflation rates, and demographic factors such as retirement age, mortality, and turnover. These assumptions and estimates are evaluated
periodically and are updated accordingly to reflect our actual experience and expectations.
The discount rate used to determine the benefit obligations was computed through a projected benefit cash flow model. This
approach determines the discount rate as the rate that equates the present value of the cash flows (determined using that single rate) to
the present value of the cash flows where each cash flows' present value is determined using the spot rates from the Willis Towers
Watson RATE: Link 10:90 Yield Curve.
The discount rate utilized to calculate the projected benefit obligation at the measurement date for our U.S. pension plan
increased to 4.27% at December 31, 2018 from 3.47% at December 31, 2017. As the discount rate is reduced or increased, the pension
62
and post retirement obligation would increase or decrease, respectively, and future pension and post-retirement expense would
increase or decrease, respectively. Lowering the discount rate by 0.25% would increase the U.S. pension and post-retirement
obligation at December 31, 2018 by approximately $12.6 million and would increase estimated fiscal year 2019 expense by
approximately $1.2 million. Increasing the discount rate by 0.25% would decrease the U.S. pension and post-retirement obligation at
December 31, 2018 by approximately $11.9 million and would decrease estimated fiscal year 2019 expense by approximately $1.3
million.
We determine the expected long-term rate of return on plan assets based on the plan assets’ historical long-term investment
performance, current asset allocation, and estimates of future long-term returns by asset class. Holding all other assumptions constant,
a 1% increase or decrease in the assumed rate of return on plan assets would have decreased or increased, respectively, 2019 net
periodic pension expense by approximately $3.0 million.
The actuarial assumptions we use in determining our pension benefits may differ materially from actual results because of
changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. While we
believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions might materially affect
our financial position or results of operations.
Capital Expenditures
We expect that the majority of our capital expenditures will be focused on supporting our cost reduction and efficiency
improvement projects, certain growth initiatives, and to a lesser extent, on sustaining our current manufacturing operations. We are
subject to health, safety, and environmental regulations that may require us to make capital expenditures to ensure our facilities are
compliant with those various regulations.
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various types of market risks, including the effects of adverse fluctuations in foreign currency exchange
rates, adverse changes in interest rates, and adverse 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.
Exchange Rate Risk
We have global operations and therefore enter into transactions denominated in various foreign currencies. To mitigate cross-
currency transaction risk, we analyze significant forecast exposures where we expect receipts or payments in a currency other than the
functional currency of our operations, and from time to time we may strategically enter into short-term foreign currency forward
contracts to lock in some or all of the cash flows associated with these transactions. We also are subject to currency translation risk
associated with converting our foreign operations’ financial statements into U.S. dollars. We use short-term foreign currency forward
contracts and hedges to mitigate the impact of foreign exchange fluctuations on consolidated earnings. We use foreign currency
derivative contracts, with a total notional amount of $127.3 million, in order to manage the effect of exchange fluctuations on
forecasted sales, purchases, acquisitions, inventory and capital expenditures and certain intercompany transactions that are
denominated in foreign currencies. We use foreign currency derivative contracts, with a total notional amount of $72.1 million, to
hedge the effects of translation gains and losses on intercompany loans and interest. We also use foreign currency derivative contracts,
with a total notional amount of $185.3 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 do not use derivative financial instruments for
trading or speculative purposes.
By using derivative financial instruments to hedge exposures to foreign currency fluctuations, we are exposed to credit risk
and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value
of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative
contract is negative, we owe the counterparty and, therefore, we are not exposed to the counterparty’s credit risk in those
circumstances. We attempt to minimize counterparty credit risk in derivative instruments by entering into transactions with high-
quality counterparties whose credit rating is at least upper-medium investment grade. Our derivative instruments do not contain credit
risk related contingent features.
63
Interest Rate Risk
We are subject to interest rate market risk in connection with our long-term debt, some of which is based upon floating
interest rates. To manage our interest rate risk, we may enter into interest rate derivatives, such as interest rate swaps or caps when we
deem it to be appropriate. We do not use financial instruments for trading or other speculative purposes and are not a party to any
leveraged derivative instruments. Our net exposure to interest rate risk would primarily be based on the difference between
outstanding variable rate debt and the notional amount of any interest rate derivatives. We assess interest rate risk by continually
identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating
hedging opportunities. We maintain risk management control systems to monitor interest rate risk attributable to both our outstanding
or forecasted debt obligations as well as any offsetting hedge positions. The risk management control systems involve the use of
analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our
future cash flows.
Raw Materials Risk
Our major raw materials include glass, vinyl extrusions, aluminum, steel, wood, hardware, adhesives, and packaging. Prices
of these commodities can fluctuate significantly in response to, among other things, variable worldwide supply and demand across
different industries, speculation in commodities futures, general economic or environmental conditions, labor costs, competition,
import duties, tariffs, worldwide currency fluctuations, freight, regulatory costs, and product and process evolutions that impact
demand for the same materials. Increasing raw material prices directly impact our cost of sales, and our ability to maintain margins
depends on implementing price increases in response to increasing raw material costs. The market for our products may or may not
accept price increases, and as such there is no assurance that we can maintain margins in an environment of rising commodity prices.
See Item 1A- Risk Factors - Prices and availability of the raw materials we use to manufacture our products are subject to fluctuations,
and we may be unable to pass along to our customers the effects of any price increases.
We have not historically used derivatives or similar instruments to hedge commodity price fluctuations. We purchase from
multiple, geographically diverse companies mitigate the adverse impact of higher prices for our raw materials. We also maintain other
strategies to mitigate the impact of higher raw material, energy, and commodity costs, which typically offset only a portion of the
adverse impact.
Item 8 - Financial Statements
See Index to Consolidated Financial Statement beginning on page F-1 of the Form 10-K.
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A - Controls and Procedures
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 not effective as of December 31, 2018 because of the material weaknesses in our internal
control over financial reporting described below.
64
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the
Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s internal control over financial
reporting. The Company’s management used the framework in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations (COSO) to perform this evaluation. Based on this evaluation, management has concluded that
we did not maintain effective internal control over financial reporting as of December 31, 2018, due to the material weaknesses
identified below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or
detected on a timely basis. We did not maintain a sufficient complement of personnel in our Europe operations with the appropriate
level of knowledge, experience and training in internal control over financial reporting commensurate with our financial reporting
requirements to allow for the consistent execution of control activities. Further, monitoring controls maintained at the Europe
operations and corporate levels did not operate with a sufficient degree of precision to provide for the appropriate level of oversight of
activities related to our internal control over financial reporting. These material weaknesses contributed to the following additional
material weaknesses in that we did not design and maintain effective controls within certain of our Europe operations related to the
review and approval of customer pricing, the review and approval of manual journal entries, and the reconciliation of subsidiary
ledger financial information used in the consolidated financial statements. Specifically, we did not design and maintain controls to
ensure (i) the review and approval of the initial set-up, and subsequent changes/modifications, of customer pricing related to revenue
arrangements; (ii) that journal entries were properly prepared with sufficient supporting documentation, were reviewed and approved
to ensure accuracy and completeness of the journal entries, and were reviewed by an appropriate individual separate from the preparer
of such journal entry; and (iii) the subsidiary financial information used in the preparation of the consolidated financial statements
agreed to the financial information recorded in the subsidiary ledger, and to the extent there were differences, that they were
appropriately validated.
These material weaknesses did not result in any material misstatements of the Company’s financial statements or disclosures but did
result in immaterial out-of-period adjustments that were recorded in the quarter ended December 31, 2018. These material weaknesses
could result in a misstatement of substantially all account balances or disclosures within the European operations that would result in a
material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Management has excluded from its assessment of the Company’s internal control over financial reporting as of December 31, 2018
certain elements of the internal control over financial reporting of American Building Supply, Inc., A&L Windows Pty. Ltd., and The
Domoferm Group of companies, each wholly-owned subsidiaries of the Company, that were acquired by the Company in purchase
business combinations during 2018. Subsequent to the acquisition of each entity, certain elements of the acquired businesses’ internal
control over financial reporting and related functions, processes and systems were integrated into the Company’s existing internal
control over financial reporting and related functions, processes and systems. Those elements of the acquired businesses’ internal
control over financial reporting that were not integrated have been excluded from management’s assessment of the effectiveness of
internal control over financial reporting as of December 31, 2018. The excluded elements represent approximately 7.9% of
consolidated total assets and 11.7% of consolidated net revenues as of and for the year ended December 31, 2018. American Building
Supply, Inc. represents 4.2% of consolidated total assets and 6.7% of consolidated total revenue.
The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing under "Item 8.
Financial Statements and Supplementary Data".
Remediation Plan for Material Weaknesses as of December 31, 2018
Management has begun implementing a remediation plan to address the control deficiencies that led to the material weakness. The
remediation plan includes the following:
•
•
Enhance and supplement the finance team in Europe by increasing the number of roles, reassigning responsibilities, and
adding additional resources with an appropriate level of knowledge and experience in internal control over financial reporting
commensurate with the financial reporting complexities of the organization;
Enhance the tone, communication and overall awareness of the importance of internal control over financial reporting from
executive management;
65
•
•
•
•
•
•
Evaluate corporate and segment monitoring controls to ensure they are designed and operating at the appropriate level of
precision required to support risk mitigation;
Implement enhancements to the design of our customer pricing controls in Europe;
Implement enhancements to the design of our journal entry controls in Europe;
Implement enhancements to the design of our controls related to the reconciliation of subsidiary ledger financial information
used in the consolidated financial statements;
Strengthen procedures and set guidelines for documentation of controls throughout our domestic and international locations
for consistency of application;
Institute additional training programs that will continue on a regular basis related to internal control over financial reporting
for our world-wide finance and accounting personnel.
Remediation of Material Weaknesses as of December 31, 2017
In order to address the material weaknesses related to income taxes described in the Company’s 2017 Annual Report on Form 10-K,
the Company’s management began implementing a remediation plan in 2016 to address the control deficiencies that led to the material
weaknesses. The remediation plan included the following:
•
•
•
•
•
•
•
Engaged a third party to review our tax provision process and recommend process enhancements;
Implemented the enhancements to the quarterly and annual provision processes as recommended by the third party;
Redesigned controls related to the accounting for income tax process;
Undertook extensive training for key personnel in each reporting jurisdiction on ASC 740 reporting requirements and our
redesigned processes;
Engaged a third party to review our quarterly and annual tax calculations;
Hired experienced resources, including a new VP of Global Tax, with backgrounds in accounting for income taxes as well as
public company experience; and
Implemented a tax reporting solution enhancing our internal reporting requirements.
As of December 31, 2018, the remedial measures described above have been satisfactorily implemented and we have had sufficient
time to test the operating effectiveness of such remedial measures. We maintained internal control over financial reporting related to
accounting for income taxes, and as such, the material weaknesses identified in the Company’s internal control over financial
reporting related to accounting for income taxes have been remediated.
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 December 31, 2018 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B - Other Information
None.
66
Item 10 - Directors, Executive Officers and Corporate Governance
Executive Officers
Set forth below is certain information about our executive officers. Ages are as of March 1, 2019. There are no family relationships
among the following executive officers.
Gary S. Michel, President and Chief Executive Officer. Mr. Michel, age 56, joined the Company as President and Chief Executive
Officer and our Board of Directors in June 2018. Mr. Michel joined the Company from Honeywell International, Inc., where he served
as the president and chief executive officer of the Home and Building Technologies strategic business group since October 2017. Prior
to that, he spent 32 years at Ingersoll Rand, most recently as senior vice president and president of its residential heating, ventilation
and air conditioning business and as a member of Ingersoll Rand’s enterprise leadership team from 2011 to 2017. He began his career
there in 1985 as an application engineer and held various product, sales and business management roles before moving into a series of
leadership positions across various geographic and market segments. Mr. Michel holds a B.S. in mechanical engineering from Virginia
Tech and an M.B.A. from the University of Phoenix. He has served as a member of the board of directors of Cooper Tire & Rubber
Company since 2015.
John Linker, Executive Vice President and Chief Financial Officer. Mr. Linker, age 43, joined the Company in December 2012 and
has held the position of Executive Vice President and Chief Financial Officer since November 2018. Previously, he served as the
Company’s Senior Vice President, Corporate Development and Investor Relations from 2015 to 2018, and as Treasurer from 2012 to
2014. Prior to joining the Company, Mr. Linker held leadership positions in corporate development and finance with United
Technologies Corporation’s Aerospace Systems Division, and its predecessor, Goodrich Corporation, from 2008 to 2012. Mr. Linker
began his career in investment banking for Wells Fargo and consulting for Accenture PLC. Mr. Linker holds a B.A. in Economics and
International Studies from Duke University and a M.B.A. from The Fuqua School of Business at Duke University.
Laura W. Doerre, Executive Vice President, General Counsel and Chief Compliance Officer. Ms. Doerre, age 51, joined the Company
in September 2016 and is responsible for the Company’s global legal affairs and global risk and compliance functions. Prior to joining
the Company, Ms. Doerre served as Vice President and General Counsel for Nabors Industries Ltd. from 2008 to August 2016. From
1996 to 2008, she held positions of increasing responsibility with Nabors. Prior to joining Nabors in 1996, Ms. Doerre practiced
commercial litigation with the law firm Mayor, Day, Caldwell & Keeton LLP. Ms. Doerre received her B.S. with distinction in
Accounting from the University of North Carolina at Chapel Hill and graduated with honors from the University of Texas School of
Law. She is admitted to practice law in the state of Texas.
Timothy Craven, Executive Vice President, Human Resources. Mr. Craven, age 50, was appointed Vice President, Employee Relations
of the Company in July 2015 and was promoted to his current role as Executive Vice President, Human Resources in February 2016.
Mr. Craven is responsible for global human resources and employee relation activities. His duties include talent acquisition, training
and development, wage and benefit reviews, and employee engagement. Previously, Mr. Craven was employed at Eaton Corporation
(formerly Cooper Industries) where he held a number of senior-level human resources roles since 2007. Immediately prior to joining
the Company, Mr. Craven served as Vice President, Human Resources at the Crouse-Hinds Division of Eaton Corporation in Syracuse,
New York. Earlier in his career, Mr. Craven served in a number of human resources positions of increasing responsibility at both
corporate and operating locations with Xerox’s Affiliated Computer Services Business and Honeywell, Inc. Mr. Craven earned a B.S.
in human resource management from Western Illinois University.
Peter Farmakis, Executive Vice President and President, Australasia. Mr. Farmakis, age 51, joined the Company as Chief Operating
Officer, Australia in September 2013 and was promoted to Executive Vice President and President, Australasia in June 2014. Prior to
joining the Company, Mr. Farmakis served as Chief Executive Officer of Dexion Limited (which was acquired by GUD Holdings
Limited in 2012) from 2007 until August 2013. Mr. Farmakis also served in a variety of key leadership roles with numerous
companies, including as Executive General Manager of Smorgon Steel Group Limited, Distribution Business; Global Vice President
of Huntsman Corporation, Advanced Materials division; Americas Regional President of Vantico Inc.; and Strategy & Corporate
Planning Manager for Ciba-Geigy AG in Switzerland. He began his career in research and development with ICI (Dulux) and Bayer
AG. Mr. Farmakis earned a B.S. from the University of Wollongong and a postgraduate degree in Marketing and Finance from the
University of Technology, Sydney in Australia.
Peter Maxwell, Executive Vice President and President, Europe. Mr. Maxwell, age 56, joined the Company as Executive Vice
President and President, Europe in September 2015. Prior to joining the Company, Mr. Maxwell served as a Vice President and
General Manager at MTL Instruments Group, Eaton Corporation from September 2008 to August 2015. Previously, Mr. Maxwell
worked for Cooper Industries (which was acquired by Eaton Corporation in 2012) for nearly 20 years and held various general
management roles of increasing responsibility within Cooper Industries and Eaton Corporation serving the commercial and industrial
building sector and the as Vice President and General Manager in the Crouse-Hinds Division. He served as the Chief Financial Officer
of Cooper Industries’ Safety Division based in Europe from 1998 to 2002. Mr. Maxwell graduated with a B.Sc. in Civil Engineering
67
from the University of Edinburgh before qualifying as a Chartered Accountant with Coopers & Lybrand, now PricewaterhouseCoopers
LLP.
Information to be provided in Items 10, 11, 12, 13 and 14 of this Form 10-K and not otherwise included herein is incorporated by
reference to the Company’s Proxy Statement for its 2019 Annual Meeting of the Shareholders to be held on May 9, 2019, which will
be filed with the SEC within 120 days of the Company’s fiscal year end covered by this Form 10-K.
Item 11 - Executive Compensation.
Refer to Item 10.
68
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Equity Compensation Plan Information
The following table sets forth information with respect to shares of our common stock that may be issued under our existing
equity compensation plans, as of December 31, 2018:
(a)
(b)
Number of Securities
to be Issued Upon
Exercise of Outstanding
Options, Warrants, and
Rights
Weighted Average
Exercise Price of
Outstanding Options,
Warrants, and Rights(1)
(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column (a))
4,268,579(2)
—
4,268,579
$18.22
5,632,850(3)
—
—
$18.22
5,632,850
Plan Category
Equity compensation plans approved by
security holders(1)
Equity compensation plans not approved by
security holders
Total
(1) Excludes RSUs and PSUs, which have no exercise price.
(2) Consists of shares underlying 3,332,705 stock options, 673,868 RSUs and 262,006 PSUs outstanding under the 2011 Stock Incentive Plan and 2017 Omnibus
Equity Plan.
(3) Number of securities remaining for future issuances includes only shares available under the 2017 Omnibus Equity Plan.
Refer to Item 10 for additional information required by this item.
Item 13 - Certain Relationships and Related Transactions, and Director Independence.
Refer to Item 10.
Item 14 - Principal Accounting Fees and Services.
Refer to Item 10.
69
Item 15 - Exhibits and Financial Statement Schedules.
1. Financial Statements
The financial statements are set forth under Item 8- Financial Statements and Supplementary Data of this Form 10-K.
2. Financial Statement Schedules
The following financial statement schedules are attached to this report.
Schedule I - Condensed Financial Information of the Registrant
All other schedules are omitted because they are not applicable, not required, or the information is included in the financial
statements or the notes thereto.
3. Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this 10-K and such
Exhibit Index is incorporated herein by reference.
Exhibit No. Exhibit Description
Form
File No.
Exhibit
Filing Date
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
10.4
Restated Certificate of Incorporation of JELD-WEN Holding, Inc.,
filed February 1, 2017.
Amended and Restated Bylaws of JELD-WEN Holding, Inc.
Specimen Common Stock Certificate of JELD-WEN Holding Inc.
Amended and Restated Registration Rights Agreement, among JELD-
WEN Holding, Inc., Onex Partners III LP, Onex Advisor III LLC,
Onex Partners III GP LP, Onex Partners III PV LP, Onex Partners III
Select LP, Onex US Principals LP, Onex Corporation, Onex American
Holdings II LLC, BP EI LLC, 1597257 Ontario Inc. and the other
parties thereto, dated January 24, 2017.
Amendment No. 1 to Amended and Restated Registration Rights
Agreement, among JELD-WEN Holding, Inc., Onex Partners III LP,
Onex Advisor III LLC, Onex Partners III GP LP, Onex Partners III PV
LP, Onex Partners III Select LP, Onex US Principals LP, Onex
Corporation, Onex American Holdings II LLC, BP EI LLC, 1597257
Ontario Inc. and the other parties thereto, dated May 12, 2017.
Amendment No. 2 to Amended and Restated Registration Rights
Agreement, among JELD-WEN Holding, Inc., Onex Partners III LP,
Onex Advisor III LLC, Onex Partners III GP LP, Onex Partners III PV
LP, Onex Partners III Select LP, Onex US Principals LP, Onex
Corporation, Onex American Holdings II LLC, BP EI LLC, 1597257
Ontario Inc. and the other parties thereto, dated November 12, 2017.
First Supplemental Indenture, dated as of December 21, 2018, among
American Building Supply, Inc., J B L Hawaii, Limited and
Wilmington Trust, National Association, as Trustee.
Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN,
Inc., JELD-WEN of Canada, Ltd., the other guarantors party thereto,
Wells Fargo Bank, National Association, and the lenders party thereto,
dated October 15, 2014.
Amendment No. 1 to Credit Agreement, among JELD-WEN Holding,
Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., the subsidiary
guarantors party thereto, Wells Fargo Bank, National Association, and
the lenders party thereto, dated July 1, 2015.
Amendment No. 2 to Credit Agreement, among JELD-WEN Holding,
Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., Karona, Inc., the
subsidiary guarantors party thereto, Wells Fargo Bank, National
Association, and the lenders party thereto, dated November 1, 2016.
Amendment No. 3 to Credit Agreement, among JELD-WEN, Inc.,
JELD-WEN Holding, Inc., JELD-WEN of Canada, Ltd., the other
borrowers party thereto, the subsidiary guarantors party thereto, the
lenders party thereto, Wells Fargo Bank, National Association, as
administrative agent, issuing bank and swingline lender and the other
parties thereto, dated as of December 14, 2017.
8-K
001-38000
S-1/A
S-1/A
333-211761
333-211761
3.1
3.4
4.1
February 3, 2017
January 5, 2017
January 5, 2017
10-K
001-38000
4.2
March 3, 2017
S-1
333-221538
4.3
May 15, 2017
S-1
333-221538
4.4
November 13, 2017
8-K
001-38000
4.1
December 27, 2018
S-1
333-211761
10.1
June 1, 2016
S-1
333-211761
10.1.1
June 1, 2016
S-1/A
333-211761
10.1.2
November 17, 2016
8-K
001-38000
10.1
December 15, 2017
70
Exhibit No.(cid:3) Exhibit Description
Form
File No.
Exhibit
Filing Date
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
10.24+
10.25+
10.26+
10.27+
Term Loan Credit Agreement, among JELD-WEN Holding, Inc.,
JELD-WEN, Inc., Onex BP Finance LP, the other guarantors party
thereto, Bank of America, N.A. and the lenders party thereto, dated
October 15, 2014.
Amendment No. 1 to Term Loan Credit Agreement, among JELD-
WEN Holding, Inc., JELD-WEN, Inc., Onex BP Finance LP, the
subsidiary guarantors party thereto, Bank of America, N.A., and the
lenders party thereto, dated July 1, 2015.
Amendment No. 2 to Term Loan Credit Agreement, among JELD-
WEN Holding, Inc., JELD-WEN, Inc. the subsidiary guarantors party
thereto, Onex BP Finance LP, Bank of America, N.A., and the lenders
party thereto, dated November 1, 2016.
Amendment No. 3 to Term Loan Credit Agreement, among JELD-
WEN Holding, Inc., JELD-WEN, Inc. the subsidiary guarantors party
thereto, Onex BP Finance LP, Bank of America, N.A., and the lenders
party thereto, dated March 7, 2017.
Amendment No. 4, by and among JELD-WEN, Inc., JELD-WEN
Holding, Inc., the subsidiary guarantors party thereto, the lenders party
thereto, Bank of America, N.A., as administrative agent and the other
parties thereto, dated as of December 14, 2017.
Stock Purchase Agreement, among JELD-WEN Holding, Inc., Onex
Partners III LP and the other investors party thereto, dated August 30,
2012.
Amendment to Stock Purchase Agreements, among JELD-WEN
Holding, Inc. and Onex Partners III LP, dated April 3, 2013.
Amendment to Stock Purchase Agreement, among JELD-WEN
Holding, Inc. and Onex Partners III LP, dated May 31, 2016.
Form of Joinder to Stock Purchase Agreement, among JELD-WEN
Holding, Inc., Onex Partners III LP and the other investors party
thereto.
Amended and Restated Stock Purchase Agreement, among JELD-
WEN Holding, Inc., Onex Partners III LP, Onex Advisor III LLC,
Onex Partners III GP LP, Onex Partners III PV LP, Onex Partners III
Select LP, Onex US Principals LP, Onex Corporation, Onex American
Holdings II LLC, BP EI LLC and 1597257 Ontario Inc., dated July 29,
2011.
Amendment No. 1 to Amended and Restated Stock Purchase
Agreement, among JELD-WEN Holding, Inc. and Onex Partners III
LP, dated September 1, 2011.
Amendment to Amended and Restated Stock Purchase Agreement,
among JELD-WEN Holding, Inc. and Onex Partners III LP, dated May
31, 2016.
JELD-WEN Holding, Inc. Amended and Restated Stock Incentive
Plan, dated May 31, 2016.
JELD-WEN Holding, Inc. Amended and Restated Stock Incentive
Plan, dated January 30, 2017.
Form of Nonstatutory Common Stock Option Agreement under JELD-
WEN Holding, Inc. Amended and Restated Stock Incentive Plan.
Form of Nonstatutory Class B-1 Common Stock Option Agreement
under JELD-WEN Holding, Inc. Amended and Restated Stock
Incentive Plan.
Form of Restricted Stock Unit Award Agreement under JELD-WEN
Holding, Inc. Amended and Restated Stock Incentive Plan.
Employment Agreement, by and between JELD-WEN Holding, Inc.,
JELD-WEN, Inc. and Mark A. Beck, dated November 10, 2015.
Management Employment Agreement, by and between JELD-WEN,
Inc. and L. Brooks Mallard, dated October 30, 2014.
Management Employment Agreement, by and between JELD-WEN
Holding, Inc., JELD-WEN, Inc. and Laura Doerre, dated September 6,
2016.
Letter Agreement, by and between JELD-WEN, Inc. and Laura
Doerre, dated July 25, 2016.
S-1
333-211761
10.2
June 1, 2016
S-1
333-211761
10.2.1
June 1, 2016
S-1/A
333-211761
10.2.2
November 17, 2016
8-K
001-38000
10.1
March 8, 2017
8-K
001-38000
10.2
December 15, 2017
S-1/A
333-211761
10.3
December 16, 2016
S-1/A
333-211761
10.3.1
December 16, 2016
S-1/A
333-211761
10.3.2
December 16, 2016
S-1/A
333-211761
10.3.3
December 16, 2016
S-1/A
333-211761
10.4
December 16, 2016
S-1/A
333-211761
10.4.1
December 16, 2016
S-1/A
333-211761
10.4.2
December 16, 2016
S-1/A
333-211761
10.6
December 16, 2016
10-Q
001-38000
10.14
May 12, 2017
S-1/A
333-211761
10.7
December 16, 2016
S-1/A
333-211761
10.8
December 16, 2016
S-1/A
333-211761
10.9
December 16, 2016
S-1/A
333-211761
10.11
January 5, 2017
S-1/A
333-211761
10.13
January 5, 2017
S-1/A
333-211761
10.15
January 5, 2017
S-1/A
333-211761
10.15.1
January 5, 2017
Form of Management Transition Agreement.
JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan.
S-1/A
S-1/A
333-211761
333-211761
10.16
10.17
January 5, 2017
January 5, 2017
71
Exhibit No. Exhibit Description
Form
File No.
Exhibit
Filing Date
10.28+
10.29+
Form of Nonqualified Stock Option Agreement under JELD-WEN
Holding, Inc. 2017 Omnibus Equity Plan.
Form of Restricted Stock Unit Award Agreement under JELD-WEN
Holding, Inc. 2017 Omnibus Plan.
S-1/A
333-211761
10.18
January 5, 2017
S-1/A
333-211761
10.19
January 5, 2017
10.30+
JELD-WEN Holding, Inc. 2017 Management Incentive Plan.
S-1/A
333-211761
10.20
January 5, 2017
10-K
001-38000
10.36
March 6, 2018
10-K
001-38000
10.37
March 6, 2018
10-K
001-38000
10.38
March 6, 2018
10-K
S-1
001-38000
333-211761
10.39
10.25
March 6, 2018
June 1, 2016
8-K
001-38000
10.1
December 27, 2018
10-Q
001-38000
10.0
May 9, 2018
10.31+
10.32+
10.33+
10.34+
Letter Agreement, by and between JELD-WEN Holding, Inc. and the
shareholders party thereto, dated January 24, 2017.
Amendment to Form of Nonqualified Stock Option Agreement under
JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan.
Amendment to Form of Restricted Stock Unit Award Agreement under
JELD-WEN Holding, Inc. 2017 Omnibus Plan.
Form of Performance Share Unit Award Agreement under JELD-WEN
Holding, Inc. 2017 Omnibus Plan.
10.35
Form of Indemnification Agreement.
10.36
Amendment No. 4, dated as of December 21, 2018, among JELD-
WEN, Inc., American Building Supply, Inc., J B L Hawaii, Limited,
the other borrowers party thereto, the subsidiary guarantors party
thereto, the lenders party thereto and Wells Fargo Bank, National
Association, as administrative agent.
10.37+
Consulting Services Agreement between JELD-WEN Holding, Inc.
and Kirk Hachigian, effective February 27, 2018.
10.38+*
10.39+*
10.40+*
21.1*
23.1*
24.1*
31.1*
31.2*
32.1*
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
*
+
Form of Executive Employment Agreement between JELD-WEN
Holding, Inc. and each of John Linker, Laura W. Doerre, Mark A.
Beck, and L. Brooks Mallard, effective August 7, 2017 and October 1,
2018.
Executive Employment Agreement, by and between JELD-WEN UK
Limited and Peter Maxwell, dated February 1, 2018
Executive Employment Agreement between JELD-WEN Australia Pty
Ltd and Perter Farmakis, dated March 1, 2018
List of subsidiaries of JELD-WEN Holding, Inc.
Consent of PricewaterhouseCoopers LLP, independent registered
public accounting firm.
Power of Attorney (included on the Signatures page of this Annual
Report on Form 10-K).
Certification of Periodic Report by Chief Executive Officer under
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Periodic Report by Chief Financial Officer under
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
Filed herewith.
Indicates management contract or compensatory plan.
Item 16 - Form 10-K Summary.
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
72
JELD-WEN HOLDING, INC.
(Registrant)
By:
/s/ John Linker
John Linker
Chief Financial Officer
Date: March 1, 2019
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
John Linker and Laura W. Doerre, jointly and severally, his attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this 10-K has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Gary S. Michel
Gary S. Michel
/s/ John Linker
John Linker
/s/ Scott Vining
Scott Vining
/s/ Kirk Hachigian
Kirk Hachigian
/s/ Roderick C. Wendt
Roderick C. Wendt
/s/ William Banholzer
William Banholzer
/s/ Martha Byorum
Martha (Stormy) Byorum
/s/ Greg G. Maxwell
Greg G. Maxwell
/s/ Anthony Munk
Anthony Munk
/s/ Matthew Ross
Matthew Ross
/s/ Suzanne Stefany
Title
Date
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 1, 2019
Chief Financial Officer (Principal Financial
Officer)
March 1, 2019
Chief Accounting Officer (Principal Accounting
Officer)
March 1, 2019
Chairman
March 1, 2019
Vice Chairman
March 1, 2019
Director
Director
Director
Director
Director
Director
73
March 1, 2019
March 1, 2019
March 1, 2019
March 1, 2019
March 1, 2019
March 1, 2019
Signature
Suzanne Stefany
/s/ Bruce Taten
Bruce Taten
/s/ Steven E. Wynne
Steven E. Wynne
Title
Director
Director
Date
March 1, 2019
March 1, 2019
74
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2017 and 2016
Consolidated Balance Sheets as of December 31, 2018 and 2017
Consolidated Statements of Equity for the Years Ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Index to Financial Statement Schedules
Schedule I - Parent Company Information as of December 31, 2018 and 2017 and for the Years Ended December 31,
2018, 2017 and 2016
F-2
F-4
F-5
F-6
F-7
F-9
F-10
F-61
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of JELD-WEN Holding, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of JELD-WEN Holding, Inc. and its subsidiaries (the “Company”) as
of December 31, 2018 and 2017, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash
flows for each of the three years in the period ended December 31, 2018, including the related notes and financial statement schedule
listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December
31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material
weaknesses in internal control over financial reporting existed as of that date related to (1) the ineffective control environment in its
Europe operations due to a lack of a sufficient complement of personnel with the appropriate level of knowledge, experience and
training, (2) ineffective monitoring controls at the Europe operations and corporate levels as they did not operate with a sufficient
degree of precision to provide for the appropriate level of oversight of activities, (3) a lack of controls designed and maintained to
ensure the review and approval of the initial set-up, and subsequent changes/modifications, of customer pricing related to revenue
arrangements at certain European locations, (4) a lack of controls designed and maintained to ensure journal entries were properly
prepared with sufficient supporting documentation, were reviewed and approved to ensure accuracy and completeness of the journal
entries, and were reviewed by an appropriate individual separate from the preparer of such journal entry at certain European locations,
and (5) a lack of controls designed and maintained to ensure the subsidiary financial information used in the preparation of the
consolidated financial statements agreed to the financial information recorded in the subsidiary ledger, and to the extent there were
differences, that they were appropriately validated at certain European locations.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a
timely basis. The material weaknesses referred to above are described in Management's Report on Internal Control over Financial
Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit
tests applied in our audit of the 2018 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s
internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's
report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
F-2
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded certain elements of the
internal control over financial reporting of American Building Supply, Inc., A&L Windows Pty. Ltd. and The Domoferm Group of
companies from its assessment of the Company’s internal control over financial reporting as of December 31, 2018 because they were
acquired by the Company in purchase business combinations during 2018. Subsequent to the acquisitions, certain elements of
American Building Supply, Inc., A&L Windows Pty. Ltd., and The Domoferm Group of companies’ internal control over financial
reporting and related processes were integrated into the Company’s existing systems and internal control over financial reporting.
Those controls that were not integrated have been excluded from management’s assessment of the effectiveness of internal control
over financial reporting as of December 31, 2018. We have also excluded these elements of the internal control over financial
reporting of American Building Supply, Inc., A&L Windows Pty. Ltd., and The Domoferm Group of companies from our audit of the
Company’s internal control over financial reporting. The excluded elements represent controls over approximately 7.9% of
consolidated total assets and 11.7% of the consolidated net revenues as of and for the year ended December 31, 2018. American
Building Supply, Inc. represents 4.2% and 6.7% of the related consolidated financial statements amounts, respectively.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
March 1, 2019
We have served as the Company’s auditor since 2000.
F-3
Item 1 - Financial Statements
JELD-WEN HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
Net revenues
Cost of sales
Gross margin
Selling, general and administrative
Impairment and restructuring charges
Operating income
Interest expense, net
Loss on debt extinguishment
Gain on previously held shares of an equity investment
Other (income) expense
Income before taxes, equity earnings
Income tax (benefit) expense
Income from continuing operations, net of tax
Equity earnings of non-consolidated entities
Loss from discontinued operations, net of tax
Net income
Less net loss attributable to non-controlling interest
Convertible preferred stock dividends
Net income (loss) attributable to common shareholders
Weighted average common shares outstanding
Basic
Diluted
Income (loss) per share from continuing operations
Basic
Diluted
Loss per share from discontinued operations
Basic
Diluted
Net income (loss) per share
Basic
Diluted
For the Years Ended December 31,
2017
2016
2018
$
4,346,703
$
3,763,749
$
3,666,942
3,422,969
2,914,327
2,890,894
849,422
572,458
13,056
263,908
79,034
23,262
—
15,857
145,755
138,603
7,152
3,639
—
776,048
552,881
13,847
209,320
77,590
—
—
1,410
130,320
(246,394)
376,714
3,791
(3,324)
$
10,791
$
377,181
923,734
733,748
17,328
172,658
70,818
—
(20,767)
(12,970)
135,577
(7,958)
143,535
738
—
144,273
(87)
—
—
10,462
—
396,647
(19,466)
144,360
$
329
$
104,530,572
97,460,676
106,360,657
101,462,135
17,992,879
17,992,879
1.38
1.36
0.00
0.00
1.38
1.36
$
$
$
$
$
$
0.00
0.00
0.00
0.00
0.00
0.00
$
$
$
$
$
$
(0.90)
(0.90)
(0.18)
(0.18)
(1.08)
(1.08)
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-4
JELD-WEN HOLDING, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
Net income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net of tax of ($1,892), $0, and
$0, respectively
Interest rate hedge adjustments, net of tax (benefit) expense of ($538),
$5,001 and $0, respectively
Defined benefit pension plans, net of tax expense (benefit) of $4,214,
$5,357 and ($419), respectively
Total other comprehensive (loss) income, net of tax
Comprehensive income
For the Years Ended December 31,
2017
2016
2018
$
144,273
$
10,791
$
377,181
(64,349)
87,934
(32,383)
2,636
12,237
(49,476)
94,797
$
4,486
9,415
101,835
$
112,626
$
(2,679)
868
(34,194)
342,987
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
JELD-WEN HOLDING, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventories
Other current assets
Total current assets
Property and equipment, net
Deferred tax assets
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
Accrued payroll and benefits
Accrued expenses and other current liabilities
Notes payable and current maturities of long-term debt
Total current liabilities
Long-term debt
Unfunded pension liability
Deferred credits and other liabilities
Deferred tax liabilities
Total liabilities
Commitments and contingencies (Note 29)
Shareholders’ equity
Preferred Stock, par value $0.01 per share, 90,000,000 shares authorized; no shares
issued and outstanding
Common Stock: 900,000,000 shares authorized, par value $0.01 per share, 101,310,862
shares outstanding as of December 31, 2018; 900,000,000 shares authorized, par value
$0.01 per share, 105,990,483 shares outstanding as of December 31, 2017
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity attributable to common shareholders
Non-controlling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2018
December 31,
2017
$
116,991
$
632
471,655
513,238
48,961
220,175
36,059
453,251
405,353
30,403
1,151,477
1,145,241
843,403
207,065
585,942
225,553
37,615
756,711
183,726
549,063
166,313
61,886
$
3,051,055
$
2,862,940
$
250,281
$
114,784
250,274
54,930
670,269
1,422,962
107,522
72,038
10,457
259,934
122,212
186,605
8,770
577,521
1,264,933
116,586
102,614
9,249
2,283,248
2,070,903
—
—
1,013
1,060
658,593
253,041
(144,823)
767,824
(17)
767,807
652,666
233,658
(95,347)
792,037
—
792,037
$
3,051,055
$
2,862,940
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
JELD-WEN HOLDING, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(amounts in thousands, except share and per share amounts)
Preferred stock, $0.01 par value per share
Shares
—
Amount
Shares
Amount
$
—
— $
—
Shares
—
Amount
$
—
December 31, 2018
December 31, 2017
December 31, 2016
Common stock, $0.01 par value per share
Common stock
Balance as of January 1
105,990,483
$
1,060
17,894,393
$
178
17,829,240
$
178
Shares issued for exercise/vesting of share-
based compensation awards
907,068
9
2,047,668
Shares repurchased
(5,287,964)
Shares issued upon conversion of Class B-1
Common Stock
Shares issued upon conversion of convertible
preferred stock to Common Stock
Shares surrendered for tax obligations for
employee share-based transactions
—
—
Shares issued in initial public offering
—
— 22,272,727
(298,725)
(3)
(742,615)
(53)
—
(2,266)
309,404
— 64,211,172
21
—
3
642
(7)
223
65,153
—
—
—
—
—
Balance at period end
Class B-1 Common Stock
Balance as of January 1
Shares issued for exercise of stock options
Class B-1 Common Stock converted to common
Balance at period end
Balance at period end
Additional paid-in capital
Balance as of January 1
101,310,862
1,013
105,990,483
1,060
17,894,393
—
—
—
—
—
—
—
—
177,221
—
(177,221)
—
2
—
(2)
—
68,046
109,175
—
177,221
Shares issued for exercise/vesting of share-based
compensation awards
Shares repurchased
Shares surrendered for tax obligations for employee share-
based transactions
Conversion of convertible preferred stock
Initial public offering proceeds, net of underwriting fees and
commissions
Costs associated with initial public offering
Distributions on common stock and Class B-1 common stock
Amortization of share-based compensation
Balance at period end
Director notes
Balance as of January 1
Net issuances, payments and accrued interest on notes
Balance at period end
Employee stock notes
Balance as of January 1
Net issuances, payments and accrued interest on notes
Balance at period end
Balance at period end
$
1,013
$ 653,327
192
—
(8,887)
—
—
—
—
14,609
659,241
—
—
—
(661)
13
(648)
$
$
1,060
37,205
1,008
(183)
(25,897)
150,901
480,306
(7,923)
—
17,910
653,327
—
—
—
(843)
182
(661)
$
$
$
$
—
—
—
—
—
—
178
1
1
—
2
180
89,101
1,187
—
(982)
—
—
—
(73,957)
21,856
37,205
(2,068)
2,068
—
(1,011)
168
(843)
$ 658,593
$ 652,666
$
36,362
(continued on next page)
F-7
JELD-WEN HOLDING, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(continued)
December 31, 2018
Shares
Amount
December 31, 2017
Shares
Amount
December 31, 2016
Shares
Amount
Retained earnings
Balance as of January 1
Share repurchased
Adoption of new accounting standard ASU 2016-09
Net income
Balance at period end
Accumulated other comprehensive (loss) income
Foreign currency adjustments
Balance as of January 1
Change during period
Balance at period end
Unrealized (loss) gain on interest rate hedges
Balance as of January 1
Change during period
Balance at period end
Net actuarial pension (loss) gain
Balance as of January 1
Change during period
Balance at period end
Balance at period end
Non-controlling interest
Balance as of January 1
Acquisition of non-controlling interest
Net loss
Foreign currency translation
Balance at period end
Total shareholders’ equity at period end
$
$
$
$
$
$
$
233,658
(124,977)
—
144,360
253,041
21,985
(64,349)
(42,364)
(8,810)
2,636
(6,174)
(108,522)
12,237
(96,285)
(144,823)
—
51
(87)
19
(17)
767,807
$
$
222,232
—
635
10,791
233,658
$
(65,949)
87,934
21,985
(13,296)
4,486
(8,810)
(117,937)
9,415
(108,522)
(95,347)
—
—
—
—
—
792,037
$
$
$
$
$ (154,949)
—
377,181
$ 222,232
$ (33,575)
(32,374)
(65,949)
(10,617)
(2,679)
(13,296)
(118,805)
868
(117,937)
$ (197,182)
$
$
$
—
—
—
—
—
61,592
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-8
JELD-WEN HOLDING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization
Deferred income taxes
(Gain) loss on sale of business units, property and equipment
Adjustment to carrying value of assets
Equity earnings in non-consolidated entities
Amortization of deferred financing costs
Loss on extinguishment of debt
Non-cash gain on previously held shares of an equity investment
Stock-based compensation
Contributions to U.S. pension plan
Amortization of U.S. pension expense
Other items, net
Net change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable
Inventories
Other assets
Accounts payable and accrued expenses
Change in short term and long term tax liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Purchases of property and equipment
Proceeds from sale of business units, property and equipment
Purchase of intangible assets
Purchases of businesses, net of cash acquired
Cash received for notes receivable
Net cash used in investing activities
FINANCING ACTIVITIES
Distributions paid
Change in long-term debt
Payments of notes payable
Employee note repayments
Contingent consideration for acquisitions
Common stock issued for exercise of options
Common stock repurchased
Payments to tax authority for employee share-based compensation
Proceeds from sale of common stock, net of underwriting fees and commissions
Payments associated with initial public offering
Net cash provided by financing activities
Effect of foreign currency exchange rates on cash
Net (decrease) increase in cash and cash equivalents
Cash, cash equivalents and restricted cash, beginning
Cash, cash equivalents and restricted cash, ending
For further information see Footnote 31 - Supplemental Cash Flow.
For the Years Ended December 31,
2018
2017
2016
$
144,273
$
10,791
$
377,181
125,100
(34,676)
845
1,230
(738)
2,107
—
(20,767)
15,052
(4,125)
9,314
3,158
16,792
(35,529)
(19,865)
37,230
(19,748)
219,653
(97,399)
1,973
(21,301)
(167,688)
274
(284,141)
—
70,468
—
39
(3,701)
201
(125,030)
(9,452)
—
—
(67,475)
(6,648)
(138,611)
256,234
111,273
96,776
206
1,479
(3,639)
9,422
23,262
—
19,785
(10,000)
12,680
(8,170)
660
(32,028)
(5,657)
26,714
12,239
265,793
(59,599)
2,713
(3,450)
(131,448)
1,991
(189,793)
—
(389,665)
(205)
26
—
1,029
—
(25,335)
480,306
(2,066)
64,090
12,692
152,782
103,452
$
117,623
$
256,234
$
107,995
(265,756)
(3,275)
5,221
(3,791)
3,980
—
—
22,464
—
12,264
(5,283)
(79,860)
14,749
(10,799)
27,569
(1,004)
201,655
(74,033)
7,614
(5,464)
(85,866)
967
(156,782)
(404,198)
349,836
(180)
2,336
1,187
—
(982)
—
—
(52,001)
(3,697)
(10,825)
114,277
103,452
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-9
JELD-WEN HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. 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 and doors that derives substantially all of 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, Mexico, and South America, and 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 of our geographic end markets.
Basis of Presentation – As a result of our retrospective application of ASU 2017-07, Improving the Presentation of Net
Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, we reclassified certain amounts in our statement of
operations for the year ended December 31, 2017 and December 31, 2016 as noted below. See “Recently Adopted
Accounting Standards” below for additional information.
In addition, to conform with current-period presentation of revenues, we reclassified certain amounts in our statement of
operations for the year ended December 31, 2017 and December 31, 2016. The reclassification was not material to our
previously issued financial statements and is summarized in the “Reclassification” column in the table below.
(amounts in thousands, except per share data)
Consolidated Statement of Operations:
Net revenues
Cost of sales
Gross margin
Selling, general and administrative
Operating income
Other expense
(amounts in thousands, except per share data)
Consolidated Statement of Operations:
Net revenues
Cost of sales
Gross margin
Selling, general and administrative
Operating income
Other expense
Year Ended
December 31, 2017
As Reported
ASU 2017-07
Re-
classification*
As Revised
(185) $ 3,763,749
2,914,327
$ 3,763,934
$
2,915,736
848,198
585,074
250,068
2,017
— $
—
—
(12,616)
12,616
12,616
(1,409)
1,224
—
1,224
1,224
849,422
572,458
263,908
15,857
Year Ended
December 31, 2016
As Reported
ASU 2017-07
Re-
classification*
As Revised
$ 3,666,799
$
2,892,248
— $
—
774,551
565,619
195,085
(12,825)
—
(12,738)
12,738
12,738
143
(1,354)
1,497
—
1,497
1,497
$ 3,666,942
2,890,894
776,048
552,881
209,320
1,410
* Note: reclassification relates entirely to revenue in our North America segment.
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All U.S. dollar and other currency amounts, except per share amounts, are presented in thousands unless otherwise noted.
Ownership – On October 3, 2011, Onex invested $700.0 million in return for shares of our Series A Convertible Preferred
Stock. Concurrent with the investment, Onex provided $171.0 million in the form of a convertible bridge loan due in April
2013. In October 2012, Onex invested an additional $49.8 million in return for additional shares of our Series A
Convertible Preferred Stock to fund an acquisition. In April 2013, the $71.6 million outstanding balance of the convertible
bridge loan was converted into additional shares of our Series A Convertible Preferred Stock. In March 2014, Onex
purchased $65.8 million in common stock from another investor. As part of the IPO, Onex sold 6,477,273 shares of our
Common Stock. In May 2017 and November 2017, Onex sold a total of 15,693,139 and 14,211,736 shares of our Common
Stock, respectively, in secondary offerings. We did not receive any proceeds from the shares of Common Stock sold by
Onex, in any offering. As of December 31, 2018, Onex owned approximately 32.4% of the outstanding shares of our
Common Stock.
Stock Split – On January 3, 2017, our shareholders approved amendments to our then-existing certificate of incorporation
increasing the authorized number of shares and effecting an 11-for-1 stock split of our then-outstanding common stock and
Class B-1 Common Stock. Accordingly, all share and per share amounts for all periods presented in these consolidated
financial statements and notes thereto have been adjusted to reflect this stock split.
Stock Conversion and Initial Public Offering – Prior to the IPO, we had the authority to issue up to 8,750,000 shares of
preferred stock, par value of $0.01, of which 8,749,999 shares were designated as Series A Convertible Preferred Stock and
one share was designated as Series B Preferred Stock. Series A Convertible Preferred Stock consisted of 2,922,634 shares
of Series A-1 Stock, 208,760 shares of Series A-2 Stock, 843,132 shares of Series A-3 Stock, and 4,775,473 shares of
Series A-4 Stock.
On February 1, 2017, immediately prior to the closing of our IPO, the outstanding shares of our Series A Convertible
Preferred Stock and all accumulated and unpaid dividends converted into 64,211,172 shares of our Common Stock, and all
of the outstanding shares of our Class B-1 Common Stock converted into 309,404 shares of our Common Stock. In
addition, the one outstanding share of our Series B Preferred Stock was canceled. We filed our Charter with the Secretary
of State of the State of Delaware, and our Bylaws became effective, each as contemplated by the registration statement we
filed as part of our IPO. The Charter, among other things, provided that our authorized capital stock consists of
900,000,000 shares of Common Stock, par value $0.01 per share and 90,000,000 shares of preferred stock, par value $0.01
per share.
On February 1, 2017, we closed our IPO and received $472.4 million in proceeds, net of underwriting discounts, fees and
commissions and $7.9 million of offering expenses from the issuance of 22,272,727 shares of our Common Stock.
Share Repurchases – In April 2018, our Board of Directors authorized the repurchase of up to $250.0 million of our
Common Stock. Share repurchases are recorded 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. We have repurchased 5,287,964 shares for total consideration of $125.0 million through December 31,
2018.
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.
Use of Estimates – The preparation of consolidated financial statements in conformity with GAAP requires management
to make estimates and assumptions 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.
Segment Reporting – Our reportable segments are organized and managed principally by geographic region: North
America, Europe and Australasia. We report all other business activities in Corporate and unallocated costs. In addition to
similar economic characteristics, we also consider the following factors in determining the reportable segments: the nature
of business activities, the management structure directly accountable to our chief operating decision maker for operating
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and administrative activities, the discrete financial information regularly reviewed by the chief operating decision maker,
and information presented to the Board of Directors and investors. No segments have been aggregated for our presentation.
Acquisitions – We apply the provisions of FASB ASC Topic 805, Business Combinations, in the accounting for our
acquisitions. It requires us to recognize separately from goodwill the assets acquired and the liabilities assumed, at their
acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and
the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates
and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent
consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the
measurement period, which may be up to one year from the acquisition date, material adjustments must be reflected in the
reporting period in which the adjustment amount is determined. Upon the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are
recorded in the current period in our consolidated statements of operations.
For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend
our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain
sufficient information to assess whether we include these contingencies as a part of the fair value estimates of assets
acquired and liabilities assumed and, if so, to determine their estimated amounts.
If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of
the measurement period, we will recognize an asset or a liability for such pre-acquisition contingency if: (a) it is probable
that an asset existed or a liability had been incurred at the acquisition date and (b) the amount of the asset or liability can be
reasonably estimated. Subsequent to the measurement period, changes in our estimates of such contingencies will affect
earnings and could have a material effect on our results of operations and financial position.
In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business
combination are initially estimated as of the acquisition date. We re-evaluate these items quarterly based upon facts and
circumstances that existed as of the acquisition date. Subsequent to the measurement period or our final determination of
the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and
tax related valuation allowances will affect our provision for income taxes in our consolidated statements of operations and
could have a material impact on our results of operations and financial position.
Cash and Cash Equivalents – We consider all highly-liquid investments purchased with an original or remaining maturity
at the date of purchase of three months or less to be cash equivalents. Our cash management system is designed to maintain
zero bank balances at certain banks. Checks written and not presented to these banks for payment are reflected as book
overdrafts and are a component of accounts payable.
Restricted Cash – Restricted cash consists primarily of cash deposits required to meet certain bank guarantees and
projected self-insurance obligations. New funding is generated from employees’ portion of contributions and is added to
the deposit account weekly as claims are paid.
Accounts Receivable – Accounts receivable are recorded at their net realizable value. Our customers are primarily
retailers, distributors and contractors. As of December 31, 2018, one customer accounted for 16.0% of the consolidated
accounts receivable balance. As of December 31, 2017, one customer accounted for 16.9% of the consolidated accounts
receivable balance. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. We estimate the allowance for doubtful accounts based on a variety of factors
including the length of time receivables are past due, the financial health of our customers, unusual macroeconomic
conditions and historical experience. If the financial condition of a customer deteriorates or other circumstances occur that
result in an impairment of a customer’s ability to make payments, we record additional allowances as needed. We write off
uncollectible trade accounts receivable against the allowance for doubtful accounts when collection efforts have been
exhausted and/or any legal action taken by us has concluded.
Inventories – Inventories in the accompanying consolidated balance sheets are valued at the lower of cost or net realizable
value and are determined by the first-in, first-out (“FIFO”) or average cost methods. We record provisions to write-down
obsolete and excess inventory to its estimated net realizable value. The process for evaluating obsolete and excess
inventory requires us to make subjective judgments and estimates concerning future sales levels, quantities and prices at
which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or
incorrect estimates of future sales potential may cause actual results to differ from the estimates at the time such inventory
is disposed or sold. We classify certain inventories that are available for sale directly to external customers or used in the
manufacturing of a finished good within raw materials.
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Notes Receivable – Notes receivable are recorded at their net realizable value. The balance consists primarily of
installment notes and affiliate notes. The allowance for doubtful notes is based upon historical loss trends and specific
reviews of delinquent notes. We write off uncollectible note receivables against the allowance for doubtful accounts when
collection efforts have been exhausted and/or any legal action taken by us has been concluded. Current maturities and
interest, net of short-term allowance are reported as other current assets.
Customer Displays – Customer displays include all costs to manufacture, ship and install the displays of our products in
retail store locations. Capitalized display costs are included in other assets and are amortized over the life of the product
lines, typically 3 to 4 years. Related amortization is included in SG&A expense in the accompanying consolidated
statements of operations and was $9.0 million in 2018, $8.6 million in 2017, and $8.8 million in 2016.
Property and Equipment – Property and equipment are recorded at cost. The cost of major additions and betterments are
capitalized and depreciated using the straight-line method over their estimated useful lives while replacements,
maintenance and repairs that do not improve or extend the useful lives of the related assets or adapt the property to a new
or different use are expensed as incurred. Interest over the construction period is capitalized as a component of cost of
constructed assets. Upon sale or retirement of property or equipment, cost and related accumulated depreciation are
removed from the accounts and any gain or loss is charged to income.
Leasehold improvements are amortized over the shorter of the useful life of the improvement, the lease term, or the life of
the building. Depreciation is generally provided over the following estimated useful service lives:
Land improvements
Buildings
Machinery and equipment
10 - 20 years
15 - 45 years
3 - 20 years
Intangible Assets –Intangible assets are accounted for in accordance with ASC 350, Intangibles – Goodwill and Other.
Definite lived intangible assets are amortized based on the pattern of economic benefit over the following estimated useful
lives:
Trademarks and trade names
Software
Licenses and rights
Customer relationships
Patents
3 - 40 years
2 - 20 years
5 - 15 years
2 - 20 years
5 - 25 years
The lives of definite lived intangible assets are reviewed and reduced if necessary whenever changes in their planned use
occur. Legal and registration costs related to internally-developed patents and trademarks are capitalized and amortized
over the lesser of their expected useful life or the legal patent life. Cost and accumulated amortization are removed from
the accounts in the period that an intangible asset becomes fully amortized. The carrying value of intangible assets is
reviewed by management to assess the recoverability of the assets when facts and circumstances indicate that the carrying
value may not be recoverable. The recoverability test requires us to first compare undiscounted cash flows expected to be
generated by that definite lived intangible asset or asset group to its carrying amount. If the carrying amounts of the
definite lived intangible assets are not recoverable on an undiscounted cash flow basis, an impairment charge is recognized
to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques.
Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time
of acquisition, using income and market approaches to determine fair value. We do not amortize our indefinite-lived
intangible assets, but test for impairment annually, or when indications of potential impairment exist. For intangible assets
other than goodwill, if the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the
excess. No material impairments were identified during fiscal years 2018, 2017 and 2016.
We capitalize certain qualified internal use software costs during the application development stage and subsequently
amortize these costs over the estimated useful life of the asset. Costs incurred during the preliminary project stage and post-
implementation operation stage are expensed as incurred.
Long-Lived Assets – Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of such assets may not be recoverable. The first step in an impairment review is
to forecast the expected undiscounted cash flows generated from the anticipated use and eventual disposition of the asset. If
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the expected undiscounted cash flows are less than the carrying value of the asset, then an impairment charge is required to
reduce the carrying value of the asset to fair value. Long-lived assets currently available for sale and expected to be sold
within one year are classified as held for sale in other current assets.
Goodwill – Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential
impairment exist, using a fair-value-based approach. Current accounting guidance provides an entity the option to perform
a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its
carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill
impairment test is required. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying
amount, the two-step goodwill impairment test is not required.
If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying
amount (including attributable goodwill). If the fair value of the reporting unit is less than its carrying amount, an
indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test
(measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting
unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating
the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this
allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a
discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to
be performed.
We estimated the fair value of our reporting units using a discounted cash flow model (implied fair value measured on a
non-recurring basis using level 3 inputs). Inherent in the development of the discounted cash flow projections are
assumptions and estimates derived from a review of our expected revenue growth rates, profit margins, business plans, cost
of capital and tax rates. Changes in assumptions or estimates used in our goodwill impairment testing could materially
affect the determination of the fair value of a reporting unit, and therefore, could eliminate the excess of fair value over
carrying value of a reporting unit and, in some cases, could result in impairment. Such changes in assumptions could be
caused by items such as a loss of one or more significant customers, decline in the demand for our products due to
changing economic conditions or failure to control cost increases above what can be recouped in sale price increases. These
types of changes would negatively affect our profits, revenues and growth over the long term and such a decline could
significantly affect the fair value assessment of our reporting units and cause our goodwill to become impaired.
We have completed the required annual testing of goodwill for impairment for all reporting units and have determined that
goodwill was not impaired in any years presented.
Warranty Accrual – Warranty terms range primarily from one year to lifetime on certain window and door components.
Warranties are normally limited to replacement or service of defective components for the original customer. Some
warranties are transferable to subsequent owners and are generally limited to ten 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 we periodically adjust these provisions to reflect actual experience.
Restructuring – Costs to exit or restructure certain activities of an acquired company or our internal operations are
accounted for as one-time termination and exit costs as required by the provisions of FASB ASC 420, Exit or Disposal
Cost Obligations, and are accounted for separately from any business combination. A liability for costs associated with an
exit or disposal activity is recognized and measured at its fair value in our consolidated statements of operations in the
period in which the liability is incurred. When estimating the fair value of facility restructuring activities, assumptions are
applied regarding estimated sub-lease payments to be received, which can differ materially from actual results. This may
require us to revise our initial estimates which may materially affect our results of operations and financial position in the
period the revision is made.
Derivative Financial Instruments – Derivative financial instruments have been used to manage interest rate risk
associated with our borrowings and foreign currency exposures related to transactions denominated in currencies other than
the U.S. dollar, or in the case of our non-U.S. companies, transactions denominated in a currency other than their functional
currency. We record all derivative instruments in the consolidated balance sheets at fair value. Changes in a derivative’s fair
value are recognized in earnings unless specific hedge criteria are met and we elect hedge accounting prior to entering into
the derivative. If a derivative is designated as a fair value hedge, the changes in fair value of both the derivative and the
hedged item attributable to the hedged risk are recognized in the results of operations. If the derivative is designated as a
cash flow hedge, changes in the fair value of the derivative are recorded in consolidated other comprehensive income (loss)
and subsequently classified to the consolidated statements of operations when the hedged item impacts earnings. At the
inception of a fair value or cash flow hedge transaction, we formally document the hedge relationship and the risk
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management objective for undertaking the hedge. In addition, we assess both at inception of the fair value or cash flow
hedge and on an ongoing basis, whether the derivative in the hedging transaction has been highly effective in offsetting
changes in fair value or cash flows of the hedged item and whether the derivative is expected to continue to be highly
effective. The impact of any ineffectiveness is recognized in our consolidated statements of operations.
Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our customer are
satisfied. Generally, this occurs with the transfer of control of our products or services. Revenue is measured as the amount
of consideration we expect to receive in exchange for transferring goods or providing services. The taxes we collect
concurrent with revenue-producing activities (e.g., sales tax, value added tax, and other taxes) are excluded from revenue.
Incentive payments to customers that directly relate to future business are recorded as a reduction of net revenues over the
periods benefited.
Shipping and handling costs and the related expenses are reported as fulfillment revenues and expenses for all customers.
Therefore all shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are
included in cost of sales. The expected costs associated with our base warranties and field service actions continue to be
recognized as expense when the products are sold (see Note 14 - Warranty Liabilities). Since payment is due at or shortly
after the point of sale, the contract asset is classified as a receivable.
We do not adjust the promised amount of consideration for the effects of a significant financing component when we
expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when
the customer pays for that product or service will be one year or less. We do not typically include extended payment terms
in our contracts with customers. Incidental items that are immaterial in the context of the contract are recognized as
expense.
Shipping Costs – Shipping costs charged to customers are included in net revenues. The cost of shipping is included in
cost of sales.
Advertising Costs – All costs of advertising our products and services are charged to expense as incurred. Advertising and
promotion expenses included in SG&A expenses were $43.2 million in 2018, $48.4 million in 2017 and $49.1 million in
2016.
Interest Expense and Extinguishment of Debt Costs – We record the debt extinguishment cost separately in the
consolidated statements of operations. During 2016, interest expense was allocated to discontinued operations based on
debt that was specifically attributable to those operations.
Foreign Currency Translation and Adjustments – Typically, our foreign subsidiaries maintain their accounting records
in their local currency. All of the assets and liabilities of these subsidiaries (including long-term assets, such as goodwill)
are converted to U.S. dollars at the exchange rate in effect at the balance sheet date, income and expense accounts are
translated at average rates for the period, and shareholder’s equity accounts are translated at historical rates. The effects of
translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation
adjustment in consolidated other comprehensive income (loss). This balance is net of tax, where applicable.
The effects of translating financial statements of foreign operations in which the U.S. dollar is their functional currency are
included in the consolidated statements of operations. The effects of translating intercompany debt are recorded in the
consolidated statements of operations unless the debt is of a long-term investment nature in which case gains and losses are
recorded in consolidated other comprehensive income (loss).
Foreign currency transaction gains or losses are credited or charged to income as incurred.
Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment date. We evaluate both the positive
and negative evidence that is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is
recorded when it is more likely than not that some of the deferred tax assets will not be realized. The tax effects from an
uncertain tax position can be recognized in the consolidated financial statements, only if the position is more likely than not
to be sustained, based on the technical merits of the position and the jurisdiction taxes of the Company. We recognize the
financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than
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not sustain the position following an audit and the tax related to the position would be due to the entity and not the owners.
For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial
statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement
with the relevant tax authority. We apply this accounting standard to all tax positions for which the statute of limitations
remains open. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Tax Act passed in December 2017 had significant effects on our financial statements. In accordance with Staff
Accounting Bulletin No. 118 issued by the SEC in December 2017 immediately following the passage of the Tax Act, we
made provisional estimates for certain direct and indirect effects of the Tax Act based on information available to us at that
time. In the fourth quarter of 2018, we completed our accounting for all of the enactment-date income tax effects of the Tax
Act and recorded adjustments as a component of income tax expense from continuing operations. The Tax Act subjects a
U.S. shareholder to current tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5,
Accounting for Global Intangible Low-Taxed Income, states that we are permitted to make an accounting policy election to
either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for
the tax expense related to such income in the year the tax is incurred. We have elected to account for the impact of GILTI in
the period in which it is incurred.
We file a consolidated federal income tax return in the U.S. and various states. For financial statement purposes, we
calculate the provision for federal income taxes using the separate return method. Certain subsidiaries file separate tax
returns in certain countries and states. Any U.S. federal, state and foreign income taxes refundable and payable are reported
in other current assets and accrued income taxes payable in the consolidated balance sheets. The income taxes refundable
and payable relating to the U.S. federal transition tax is reported in other assets in the consolidated balance sheets as of
December 31, 2018 and in deferred credits and other liabilities as of December 31, 2017.
We record interest and penalties on amounts due to tax authorities as a component of income tax expense (benefit) in the
consolidated statements of operations.
Contingent Liabilities – Contingent liabilities require significant judgment in estimating potential losses for legal claims.
Each quarter, we review significant new claims and litigation for the probability of an adverse outcome. Estimates are
recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably
estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will materially exceed the
recorded provision. Contingent liabilities are often resolved over long time periods. Estimating probable losses requires
analysis of multiple forecasts that often depend on judgments about potential actions by third parties such as regulators,
and the estimated loss can change materially as individual claims develop.
Employee Retirement and Pension Benefits – We have a defined benefit plan available to certain U.S. hourly employees
and several other defined benefit plans located outside of the U.S. that are country specific. The most significant of these
plans is in the U.S. which is no longer open to new employees. Amounts relating to these plans are recorded based on
actuarial calculations, which use various assumptions, such as discount rates and expected return on assets. See Note 30 -
Employee Retirement and Pension Benefits.
Recently Adopted Accounting Standards – In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock
Compensation (Topic 718): Scope of Modification Accounting. The ASU provides guidance as to which changes to the
terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. We
adopted this ASU in the first quarter of 2018 and the adoption of this standard did not impact our consolidated financial
statements; however, modification accounting is now required only if the fair value, the vesting conditions, or the
classification of the award (as equity or liability) changes as a result of the change in terms or conditions.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost, which changes how employers that sponsor defined benefit pension or other
postretirement benefit plans present the net periodic benefit cost in the income statement. We adopted this ASU using the
retrospective transition method in the first quarter of 2018 and applied the practical expedient that permits an employer to
use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the
estimation basis for applying the retrospective presentation requirements. We report the service cost component of the net
periodic pension and post-retirement costs in the same line item in our statement of operations as other compensation costs
arising from services rendered by the employees during the period for both our U.S. and Non-U.S. plans. The other
components of net periodic pension and post-retirement costs are presented in other income in the consolidated statements
of operations. We adjusted our consolidated statements of operations in all comparative periods presented as noted in
“Basis of Presentation,” above and within Note 32 - Quarterly Financial Data (unaudited).
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In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business. The amendments in this ASU provide new guidance to determine when a set of transferred assets and activities is
a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is
concentrated in an identifiable asset or group of similar identifiable assets. If this threshold is met, the set of transferred
assets is not a business. If the threshold is not met, the entity then must evaluate whether the set includes, at a minimum, an
input and a substantive process that together significantly contribute to the ability to create outputs. This ASU removes the
evaluation of whether a market participant could replace missing elements. The amendments also narrow the definition of
the term output so that the term is consistent with how outputs are described in Topic 606. We adopted this standard
prospectively in the first quarter of 2018.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other
Than Inventory. The standard requires an entity to recognize the income tax consequences of an intra-entity transfer of an
asset other than inventory when the transfer occurs. The amendments in this update eliminate the exception for an intra-
entity transfer of an asset other than inventory. The amendments do not include new disclosure requirements; however,
existing disclosure requirements might be applicable when accounting for the current and deferred income taxes for an
intra-entity transfer of an asset other than inventory. We adopted this ASU in the first quarter of 2018 on a modified
retrospective basis and the adoption did not have a material impact on our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities. This ASU enhances the reporting model for financial
instruments to provide users of financial statements with more decision-useful information by requiring equity investments
to be measured at fair value with changes in fair value recognized in net income. It simplifies the impairment assessment of
equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment
and eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities
that are not public business entities. It also requires an entity to present separately in other comprehensive income (loss) the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when
the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments
and requires separate presentation of financial assets and financial liabilities by measurement category and form of
financial asset on the balance sheet or the accompanying notes to the consolidated financial statements. We adopted this
ASU in the first quarter of 2018 and the adoption did not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606) as modified by
subsequently issued ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) and
ASU Nos. 2015-14, 2016-10, 2016-12 and 2016-20 (collectively ASU No. 2014-09). ASU No. 2014-09 superseded
existing revenue recognition standards with a single model unless those contracts were within the scope of other standards.
ASC 606 is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict
the transfer of goods or services and satisfaction of performance obligations to a customer at an amount that reflects the
consideration expected to be received in exchange for those goods or services.
We adopted ASU No. 2014-09 in the first quarter of 2018, using the modified retrospective transition practical expedient
that allows us to evaluate the impact of contracts as of the adoption date rather than evaluating the impact of the contracts
at the time they occurred prior to the adoption date. There was no material effect associated with the election of this
practical expedient. As a practical expedient, shipping and handling fee revenues and the related expenses are reported as
fulfillment revenues and expenses for all customers. Therefore, all shipping and handling costs associated with outbound
freight are accounted for as fulfillment costs and are included in cost of sales. As a practical expedient, we do not adjust the
promised amount of consideration for the effects of a significant financing component when we expect, at contract
inception, that the period between our transfer of a promised product or service to a customer and when the customer pays
for that product or service will be one year or less. We do not typically include extended payment terms in our contracts
with customers. We have also elected not to provide the remaining performance obligations disclosures related to service
contracts in accordance with the practical expedient in ASC 606-10-50-14. We recognize revenue in the amount to which
the entity has a right to invoice and have adopted this election to not provide the remaining performance obligations related
to service contracts. See Note 21 - Revenue Recognition for additional information.
Recent Accounting Standards Not Yet Adopted – In August 2018, the FASB issued ASU No. 2018-15, Intangibles -
Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred
in a Cloud Computing Arrangement That is a Service Contract, which clarifies the accounting treatment for
implementation costs for cloud computing arrangements (hosting arrangements) that are service contracts. This guidance is
effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early
adoption is permitted. We are currently assessing the effect that this ASU will have on our financial statements and
disclosures.
F-17
In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General
(Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans, which
adds, modifies and clarifies several disclosure requirements for employers that sponsor defined benefit pension or other
post retirement plans. This guidance is effective for fiscal years ending after December 15, 2020. Early adoption is
permitted. We are currently assessing the effect that this ASU will have on our disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement, which adds, modifies and removes several
disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair
Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim
periods within that fiscal year. Early adoption is permitted. We are currently assessing the effect that this ASU will have on
our disclosures.
In June 2018, the FASB issued ASU No. 2018-07 - Compensation - Stock Compensation (Topic 718) Improvements to Non-
employee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to
nonemployees for goods and services. Under ASU No. 2018-07, most of the guidance on such payments to non-employees
would be aligned with the requirements for share-based payments granted to employees. The standard is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted
for any interim and annual financial statements that have not yet been issued. The adoption of this guidance is not expected
to have a material impact on our consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification
from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax
Act. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. The
adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities. The targeted amendments help simplify certain aspects of hedge accounting and result
in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. For cash
flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. In
October 2018, the FASB issued ASU No. 2018-16, ASU 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the
Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge
Accounting Purposes, which adds the overnight index swap rate (OIS) rate based on the secured overnight financing rate as
a fifth U.S. benchmark interest rate. The guidance is effective for annual periods beginning after December 15, 2018 and
interim periods within those years, with early adoption permitted. The adoption of this guidance is not expected to have a
material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test
for Goodwill Impairment. To simplify the measurement of goodwill impairments, this ASU eliminates Step 2 from the
goodwill impairment test, which required the calculation of the implied fair value of goodwill. Instead, under the
amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair
value of a reporting unit with its carrying amount. The guidance will be effective for annual or any interim goodwill
impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected
to have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments. The standard requires the measurement and recognition of expected credit losses
for financial assets held at amortized cost and adds an impairment model that is based on expected losses rather than
incurred losses. This guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted.
We are currently assessing the effect that this ASU will have on internal processes and our disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Section A - Leases: Amendments to the FASB
Accounting Standards Codification. The standard requires lessees to recognize the assets and liabilities arising from leases
on the balance sheet and retains a distinction between finance leases and operating leases. The classification criteria for
distinguishing between finance leases and operating leases are substantially similar to the classification criteria for
distinguishing between capital leases and operating leases in the previous lease guidance. The accounting standard is
effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with
F-18
early adoption permitted. We are currently finalizing our lease population, reviewing key terms and information of lease
data included within our technology solution and evaluating and testing financial outputs that will impact our financial
statements. We will adopt the practical expedients outlined in ASU 2018-01, Leases (Topic 842) Land Easement Practical
Expedient for transition to ASC 842, the additional transition method outlined in ASU 2018-11, Leases (Topic 842)
Targeted Improvements, and the accounting policy election outlined in ASU 2018-20, Leases (Topic 842) Narrow-scope
Improvements for Lessors. Under this new transition method, we will apply the new standard at the adoption date and
recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The
adoption of this standard will result in the recognition of a lease liability and related right-of-use asset (at their present
values) related to predominantly all of the annual minimum lease payments disclosed in Note 29 - Commitments and
Contingencies. These balances will be materially adjusted for renewal options applied on the date of adoption relating to
leases we plan to extend beyond the minimum term on the lease. We expect the adoption of this standard will materially
impact our consolidated balance sheet.
Note 2. Acquisitions
For the year ended December 31, 2018, we completed the following acquisitions:
•
•
•
•
In April 2018, we acquired the assets of D&K, a long-standing supplier of cavity sliders to our Corinthian Doors
business. D&K is now part of our Australasia segment.
In March 2018, we acquired the remaining issued and outstanding shares and membership interests of ABS, a
premier supplier of value-added services for the millwork industry located in Sacramento, California. ABS is
now part of our North America segment.
In February 2018, we acquired all of the issued and outstanding shares of A&L, a leading manufacturer of
residential aluminum windows and patio doors. A&L is now part of our Australasia segment.
In February 2018, we acquired the Domoferm Group of companies from Domoferm International GmbH. The
Domoferm Group of companies is a leading provider of steel doors, steel door frames, and fire doors for
commercial and residential markets. Domoferm is now part of our Europe segment.
F-19
The preliminary fair values of the assets and liabilities acquired of the completed acquisitions are summarized below:
(amounts in thousands)
Fair value of identifiable assets and liabilities:
Accounts receivable
Inventories
Other current assets
Property and equipment
Identifiable intangible assets
Goodwill
Other assets
Total assets
Accounts payable
Current maturities of long-term debt
Other current liabilities
Long-term debt
Other liabilities
Non-controlling interest
Total liabilities
Purchase price:
Cash consideration, net of cash acquired
Contingent consideration
Gain on previously held shares
Existing investment in acquired entity
Non-cash consideration related to acquired intercompany balances
Total consideration, net of cash acquired
Preliminary
Allocation
Measurement
Period
Adjustment
Revised
Preliminary
Allocation
$
$
$
$
$
58,714
97,305
14,910
53,128
70,057
64,950
7,283
366,347
29,512
17,278
27,595
47,369
17,735
(184)
139,305
169,002
3,898
20,767
33,483
(108)
227,042
$
$
$
$
$
(1,016) $
(8,069)
(6,137)
26,170
(1,363)
(4,600)
(2,993)
1,992
(6,097)
803
4,041
5,129
(805)
235
3,306
$
$
(1,314) $
—
—
—
—
(1,314) $
57,698
89,236
8,773
79,298
68,694
60,350
4,290
368,339
23,415
18,081
31,636
52,498
16,930
51
142,611
167,688
3,898
20,767
33,483
(108)
225,728
Preliminary goodwill of $60.4 million, calculated as the excess of the purchase price over the fair value of net assets,
represents operational efficiencies and sales synergies, and no amount is expected to be tax-deductible. The intangible
assets include customer relationships, tradenames, patents and software and will be amortized over a preliminary
estimated weighted average amortization period of 16 years. Acquisition-related costs of $8.1 million were expensed as
incurred and are included in SG&A expense in our accompanying consolidated statements of operations for the year
ended December 31, 2018. The contingent consideration relating to the A&L acquisition was based on underlying
business performance through June 2018 and was paid in the third quarter of 2018 in the amount of $3.7 million. The
gain on previously held shares relates to the remeasurement of our existing 50% ownership interest to fair value for one
of the recent acquisitions. Since their dates of acquisition, the cumulative net revenues and net loss of our 2018
acquisitions were $508.9 million and $26.8 million, respectively. In December 2018, upon further analysis of the
purchase price allocation accounting for the ABS acquisition, we recorded a measurement period adjustment to reverse
a $11.4 million previously amortized inventory step-up which had been recorded in the initial purchase price allocation
for ABS. This amount had previously been amortized to cost of sales during the second quarter. The impact of this
adjustment was an increase in goodwill attributed to our acquisition of ABS and a decrease in cost of sales in the fourth
quarter of $11.4 million. Further, we reclassified purchased finished goods to raw materials in order to conform ABS’s
classification with our existing inventory accounting policy.
We evaluated these acquisitions quantitatively and qualitatively and determined them to be insignificant both
individually and in the aggregate. Therefore, certain pro forma disclosures under ASC 805-10-50 have been omitted.
During the second and third quarters of 2017, we completed three acquisitions for total consideration of approximately
$131.7 million, net of cash acquired. The excess purchase price over the fair value of net assets acquired of $25.1
million and $46.7 million was allocated to goodwill and intangible assets, respectively. Goodwill is the excess of the
purchase price over the fair value of net assets acquired in business combinations and represents operational efficiencies
and sales synergies, and $14.2 million is expected to be tax-deductible. The intangible assets include tradenames,
F-20
software, and customer relationships and will be amortized over an estimated weighted average amortization period of
18 years. There were $1.8 million of acquisition-related costs included in SG&A expense in the accompanying
consolidated statements of operations for the year ended December 31, 2017. In 2017, the measurement period
adjustment reduced the preliminary allocation of goodwill by $23.6 million and increased the preliminary allocation of
property and equipment, intangible assets, and cash consideration, net of cash acquired by $16.7 million, $16.3 million
and $7.7 million, respectively, with the remaining preliminary allocation changes related to other working capital
accounts. In 2018, the measurement period adjustment increased the preliminary allocation of goodwill by $0.9 million
with the offset primarily to working capital accounts. The purchase price allocation was considered completed within
the appropriate remeasurement period for all three acquisitions.
During 2016, we completed two acquisitions for total consideration of approximately $85.9 million, net of cash
acquired. The excess purchase price over the fair value of net assets acquired of $16.8 million and $48.0 million was
allocated to goodwill and intangible assets, respectively. Goodwill is the excess of the purchase price over the fair value
of net assets acquired in business combinations and represents cost savings from reduced overhead and operational
expenses by leveraging our manufacturing footprint, supply chain savings and sales synergies and is not expected to be
fully tax-deductible. The intangible assets include technology, tradenames, trademarks, software, permits and customer
relationships and are being amortized over a weighted average amortization period of 20 years. Acquisition-related
costs of $1.3 million were expensed as incurred and are included in SG&A expense in our consolidated statements of
operations. In 2016, the measurement period adjustment reduced the preliminary allocation of goodwill and deferred tax
liabilities by $5.9 million and $2.2 million, respectively, and increased the preliminary allocation of intangible assets
and property and equipment by $3.1 million and $1.5 million, respectively, with the remaining preliminary allocation
changes related to other working capital accounts. As of September 30, 2017, the purchase price allocation was
considered complete for both acquisitions.
The results of the acquisitions are included in our consolidated financial statements from the date of their acquisition.
Note 3. Discontinued Operations and Divestitures
Our discontinued operations consisted primarily of our Silver Mountain resort and real estate located in Idaho which was
sold in November 2016 and was included in our Corporate and unallocated cost segment’s assets presented in the
accompanying consolidated financial statements. The results of these operations have been removed from the results of
continuing operations for all periods presented. As of December 31, 2016, there were no remaining assets or liabilities of
discontinued operations separately presented in the consolidated balance sheets.
The results of discontinued operations including the loss on sale of discontinued operations are summarized as follows for
the years ended December 31:
(amounts in thousands)
Net revenues
Loss before tax and non-controlling interest
Loss from discontinued operations, net of tax
Note 4. Accounts Receivable
2018
2017
2016
$
— $
— $
—
—
—
—
7,593
(3,513)
(3,324)
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 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 primarily collateralized by inventory or other
collateral. One window and door customer from our North America segment represents 14.2%, 16.8% , and 16.3% of net
revenues in 2018, 2017, and 2016, respectively.
F-21
The following is a roll forward of our allowance for doubtful accounts as of December 31:
(amounts in thousands)
Balance as of January 1,
Acquisitions (Note 2)
Additions charged to expense
Deductions
Currency translation
Balance at period end
Note 5. Inventories
2018
2017
2016
$
$
(4,446) $
(1,668)
(2,470)
2,210
384
(5,990) $
(3,839) $
(268)
(1,227)
1,260
(372)
(4,446) $
(3,664)
(755)
(410)
1,057
(67)
(3,839)
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)
Raw materials
Work in process
Finished goods
Total inventories
2018
2017
371,168
$
42,822
99,248
513,238
$
283,772
35,734
85,847
405,353
$
$
The increase in inventories was due primarily to our recent acquisitions. For further information, see Note 2 - Acquisitions.
Note 6. Other Current Assets
(amounts in thousands)
Prepaid assets
Refundable income taxes
Fair value of derivative instruments (Note 27)
Other
Total other current assets
Note 7. Property and Equipment, Net
(amounts in thousands)
Land improvements
Buildings
Machinery and equipment
Total depreciable assets
Accumulated depreciation
Land
Construction in progress
Total property and equipment, net
2018
2017
30,974
$
22,782
9,677
8,234
76
4,234
2,235
1,152
48,961
$
30,403
$
$
2018
$
$
34,060
501,659
1,306,555
1,842,274
(1,138,898)
703,376
69,188
70,839
2017
33,026
468,355
1,237,915
1,739,296
(1,106,913)
632,383
68,312
56,016
$
843,403
$
756,711
We monitor all property and equipment for any indicators of potential impairment. We recorded impairment charges of
$1.1 million, $1.5 million and $3.0 million during the years ended December 31, 2018, 2017 and 2016 respectively.
The effect on our carrying value of property and equipment due to currency translations for foreign assets was a decrease
of $23.1 million and an increase of $27.9 million for the years ended December 31, 2018 and 2017, respectively.
F-22
In November 2016, we entered into a 17-year, non-cancelable build-to-suit arrangement for a corporate headquarters
facility in Charlotte, North Carolina that is accounted for under the build-to-suit guidance contained in ASC 840,
Leases. The lease commenced upon completion of construction in February 2018. Since we were involved in the
construction of structural improvements prior to the commencement of the lease and took some level of construction risk,
we were considered the accounting owner of the assets and land during the construction period. Further, since certain terms
of the lease do not meet normal sale-leaseback criteria, we are considered the accounting owner after the construction
period as well. During the first quarter of 2018, we recorded $20.0 million of build-to-suit assets included in property and
equipment, net, and set up a corresponding financial obligation of $20.4 million included in long-term debt in the
accompanying consolidated balance sheet. In the second quarter of 2018, we received a tenant improvement allowance,
increasing long-term debt by $4.2 million. The build-to-suit asset is being depreciated over its estimated useful life and
lease payments are being applied as debt service against the liability.
Depreciation expense was recorded as follows:
(amounts in thousands)
Cost of sales
Selling, general and administrative
Total depreciation expense
Note 8. Goodwill
2018
2017
2016
$
$
85,357
8,699
94,056
$
$
78,975
7,835
86,810
$
$
78,608
7,839
86,447
The following table summarizes the changes in goodwill by reportable segment:
(amounts in thousands)
Balance as of December 31, 2016
Acquisitions
Acquisition remeasurements
Currency translation
North
America
Europe
Australasia
$
187,376
$
229,977
$
69,567
$
30,251
(16,504)
437
8,569
(2,734)
32,350
8,934
(4,376)
5,216
Balance as of December 31, 2017
$
201,560
$
268,162
$
79,341
$
Acquisitions - preliminary allocation
Acquisition remeasurements
Currency translation
Balance as of December 31, 2018
$
17,645
4,881
(524)
223,562
$
30,167
(3,317)
(15,324)
279,688
$
17,138
(5,227)
(8,560)
82,692
$
Total
Reportable
Segments
486,920
47,754
(23,614)
38,003
549,063
64,950
(3,663)
(24,408)
585,942
We have recorded impairments in prior periods related to the divestiture of certain operations. Cumulative impairments of
goodwill totaled $1.6 million at December 31, 2018, 2017 and 2016.
In accordance with current accounting guidance, we identified three reporting units for the purpose of conducting our
goodwill impairment review. In determining our reporting units, we considered (i) whether an operating segment or a
component of an operating segment was a business, (ii) whether discrete financial information was available, and (iii)
whether the financial information is regularly reviewed by management of the operating segment. We performed our
annual impairment assessment during the beginning of the December fiscal month of 2018. The excess of the fair value of
our reporting units over their respective carrying values for the three reporting units exceeded 16%. No impairment loss
was recorded in 2018, 2017 or 2016.
F-23
Note 9. Intangible Assets, Net
Changes in the carrying amount of intangible assets were as follows for the periods indicated:
(amounts in thousands)
Balance as of December 31, 2016
Acquisitions
Acquisition remeasurements
Additions, (net of $137 write-offs)
Amortization
Currency translation
Balance as of December 31, 2017
Acquisitions
Acquisition remeasurements
Additions, (net of $172 write-offs)
Amortization
Currency translation
Balance as of December 31, 2018
$
115,725
30,430
16,282
12,719
(15,896)
7,053
$
166,313
70,057
(1,363)
24,553
(22,208)
(11,799)
$
225,553
The cost and accumulated amortization values of our intangible assets were as follows as of December 31:
(amounts in thousands)
Customer relationships and agreements
Software
Trademarks and trade names
Patents, licenses and rights
Total amortizable intangibles
(amounts in thousands)
2018
Accumulated
Amortization
Net
Book Value
$
$
$
(45,418) $
(14,053)
(5,050) $
(12,389)
(76,910) $
89,581
48,094
52,463
35,415
225,553
Cost
$
134,999
62,147
57,513
47,804
$
302,463
2017
Accumulated
Amortization
Net
Book Value
Cost
Customer relationships and agreements
$
105,485
$
Software
Trademarks and trade names
Patents, licenses and rights
Total amortizable intangibles
35,191
38,600
47,385
$
226,661
$
(38,210) $
(10,814)
(3,544)
(7,780)
(60,348) $
67,275
24,377
35,056
39,605
166,313
We have capitalized $20.2 million and $8.2 million in 2018 and 2017, respectively, relating to the application
development stage for the implementation of our global ERP system.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying
amount of such assets may not be recoverable. 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:
(amounts in thousands)
Amortization expense
2018
2017
2016
$
22,208
$
15,896
$
12,733
F-24
Estimated future amortization expense (amounts in thousands):
2019
2020
2021
2022
2023
Thereafter
Note 10. Other Assets
(amounts in thousands)
Customer displays
Deposits
Long-term notes receivable
Overfunded pension benefit obligation
Other prepaid expenses
Other long-term accounts receivable
Debt issuance costs on unused portion of revolver facility
Long-term taxes receivable
Investments (Note 11)
Total other assets
$
$
23,510
24,045
23,001
21,981
20,379
112,637
225,553
2018
2017
$
15,069
$
12,702
6,627
4,902
1,517
5,331
1,451
1,552
800
366
$
37,615
$
3,640
4,984
1,903
1,869
1,556
2,045
—
33,187
61,886
As of December 31, 2017, our investments consisted primarily of one of our 50% owned investments that was accounted
for under the equity method as well as eight investments accounted for under the cost method. During the first quarter of
2018, we purchased the remaining outstanding shares of an acquired entity, and we recognized a gain of $20.8 million on
the previously held shares. This investment is now eliminated in consolidation.
Domestic debt issuance costs associated with revolving credit facilities are capitalized and amortized according to the
effective interest rate method over the life of the new debt agreements. Non-cash additions are disclosed in Note 31 -
Supplemental Cash Flow Information. Customer displays are amortized over the life of the product line and $9.0 million,
$8.6 million and $8.8 million of amortization is included in total depreciation and amortization in SG&A expense for the
years ended December 31, 2018, 2017 and 2016, respectively.
Prior period balances in the table above have been reclassified to conform to current-period presentation.
F-25
Note 11. Investments
As of December 31, 2018, our investments consist of six investments accounted for under the cost method. As of
December 31, 2017, our investments consisted primarily of a 50% owned investment that was accounted for under the
equity method as well as eight investments accounted for under the cost method. During the first quarter of 2018, we
purchased the remaining outstanding shares of that entity, and we recognized a gain of $20.8 million on the previously held
shares. This investment is now eliminated in consolidation.
A summary of our equity and cost method investments, which are included in other assets in the accompanying
consolidated balance sheets, is as follows:
(amounts in thousands)
Ending balance, December 31, 2016
Equity earnings
Additions
Other
Ending balance, December 31, 2017
Equity earnings
Acquired equity method investment
Other
Ending balance, December 31, 2018
Net loans and advances to affiliates at
December 31, 2017
December 31, 2018
Equity
Cost
Total
$
$
$
$
$
$
$
29,106
3,639
—
—
32,745
738
(33,483)
—
— $
$
720
— $
$
$
370
—
6
66
442
—
—
(76)
366
$
— $
— $
29,476
3,639
6
66
33,187
738
(33,483)
(76)
366
720
—
The combined financial position and results of operations for the equity method investment as of December 31 is
summarized below:
(amounts in thousands)
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net worth
(amounts in thousands)
Net sales
Gross profit
Net income
Adjustment for profit (loss) in inventory
Net income attributable to Company
$
$
$
$
$
2018
2017
— $
—
96,127
23,539
— $
119,666
— $
—
—
— $
18,151
35,632
53,783
65,883
2017
2016
$
354,964
74,399
6,870
204
3,639
314,036
66,417
7,750
(84)
3,791
$
2018
91,234
18,261
1,752
(138)
738
Sales to affiliates totaled $16.5 million in 2018, $59.3 million in 2017 and $61.7 million in 2016 and purchases from
affiliates totaled $1.0 million, $4.0 million and $3.5 million for 2018, 2017 and 2016, respectively.
No impairments were recorded during fiscal years 2018, 2017, or 2016.
F-26
Note 12. Accrued Payroll and Benefits
(amounts in thousands)
Accrued vacation
Accrued payroll and commissions
Accrued bonuses
Accrued payroll taxes
Other accrued benefits
Non-U.S. defined contributions and other accrued benefits
2018
2017
$
48,742
$
23,746
11,035
11,214
10,325
9,722
49,398
16,421
16,487
15,974
13,623
10,309
Total accrued payroll and benefits
$
114,784
$
122,212
Note 13. Accrued Expenses and Other Current Liabilities
(amounts in thousands)
2018
2017
Current portion of legal claims provision
Accrued sales and advertising rebates
Accrued expenses
Non-income related taxes
Current portion of warranty liability (Note 14)
Current portion of accrued claim costs relating to self-insurance programs
Current portion of deferred revenue (Note 21)
Current portion of restructuring accrual (Note 24)
Current portion of accrued income taxes payable
Accrued interest payable
Current portion of derivative liability (Note 27)
Total accrued expenses and other current liabilities
$
79,356
$
69,199
25,434
21,643
20,529
12,319
9,854
6,635
2,128
2,016
1,161
4,137
73,585
23,530
19,996
19,547
12,866
9,970
7,162
10,962
1,945
2,905
$
250,274
$
186,605
In the table above, the legal claims provision balance in the current period relates primarily to the $76.5 million litigation
contingency associated with the ongoing antitrust and trade secrets litigation with Steves & Sons, Inc. For further
information regarding this litigation, see Note 29 - Commitments and Contingencies.
The accrued sales and advertising rebates, accrued interest payable, 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 14. Warranty Liability
Warranty terms vary from one year to lifetime on certain window and door components. Warranties are normally limited to
servicing or replacing defective components for the original customer. Some warranties are transferable to subsequent
owners and are either limited to 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 we periodically
adjust these provisions to reflect actual experience.
F-27
An analysis of our warranty liability is as follows:
(amounts in thousands)
Balance as of January 1
Current period expense
Liabilities assumed due to acquisition
Experience adjustments
Payments
Currency translation
Balance at period end
Current portion
Long-term portion
2018
2017
2016
$
$
46,256
21,822
1,550
1,227
(23,410)
(977)
46,468
(20,529)
25,939
$
$
45,398
17,674
95
(614)
(17,255)
958
46,256
(19,547)
26,709
$
$
44,891
17,992
—
(3,846)
(13,527)
(112)
45,398
(18,240)
27,158
The most significant component of our warranty liability is in the North America segment, which totaled $40.9 million at
December 31, 2018 after discounting future estimated cash flows at rates between 0.76% and 4.75%. Without discounting,
the liability would have been higher by approximately $2.7 million.
Note 15. Long-Term Debt
Our long-term debt, net of original issue discount and unamortized debt issuance costs, consisted of the following:
(amounts in thousands)
Senior notes
Term loans
Installment notes
Revolving credit facilities
Mortgage notes
Installment notes for stock
Unamortized debt issuance costs
Current maturities of long-term debt
Long-term debt
Maturities by year:
2019
2020
2021
2022
2023
Thereafter
December 31, 2018
Interest Rate
December 31,
2018
December 31,
2017
4.63% - 4.88%
$
800,000
$
1.25% - 4.80%
1.90% - 8.10%
3.94% - 4.02%
1.65%
3.50% - 5.50%
474,058
98,914
85,000
30,375
962
(11,417)
1,477,892
(54,930)
1,422,962
$
800,000
440,568
10,290
—
33,517
1,944
(12,616)
1,273,703
(8,770)
$
1,264,933
$
54,930
15,223
20,063
94,968
43,247
1,249,461
$
1,477,892
Summaries of our outstanding debt agreements as of December 31, 2018 are as follows:
Senior Notes – In December 2017, we issued $800.0 million of unsecured Senior Notes in two tranches: $400.0 million
bearing interest at 4.63% and maturing in December 2025, and $400.0 million bearing interest at 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. Each tranche was issued at par. Interest is payable semiannually in arrears each June and December
through maturity. Debt issuance costs of $11.7 million are being amortized to interest expense over the life of the notes
using the effective interest method.
F-28
Term Loans
U.S. Facility - In November 2016, we borrowed $375.0 million, and refinanced and amended certain terms and
provisions of the Term Loan Facility. The proceeds, along with cash on hand and borrowings on our ABL Facility, were
used to fund a distribution to shareholders and holders of equity awards. We incurred $8.1 million of debt issuance costs
related to this amendment.
In February 2017, we prepaid $375.0 million of outstanding principal with the proceeds from our IPO. As a result, we
recorded a proportional write-off of $5.2 million of unamortized debt issuance costs and $0.9 million of original issue
discount to interest expense.
In March 2017, we amended the facility to reduce the interest rate and remove the cap on the amount of cash used in the
calculation of net debt. The offering price of the amended term loans was par. Pursuant to this amendment, certain
lenders converted their commitments in an aggregate amount, along with an additional commitment advanced by a
replacement lender. We incurred $1.1 million of debt issuance costs related to this term loan amendment, which is
included as an offset to long-term debt in the accompanying consolidated balance sheets.
In December 2017, along with the issuance of the Senior Notes, we re-priced and amended the facility and repaid
$787.4 million of outstanding borrowings with the net proceeds from the Senior Notes, which resulted in a principal
balance of $440.0 million. In connection with the debt extinguishment, we expensed the related unamortized original
discount of $5.9 million, unamortized debt issuance costs of $15.4 million, and bank fees of $1.7 million as a loss on
extinguishment of debt in our consolidated statements of operations.
The re-priced term loans were offered at par, will mature in December 2024 (extended from July 2022), and bear
interest at LIBOR (subject to a floor of 0.00%) plus a margin of 1.75% to 2.00%, determined by our corporate credit
ratings. This compares favorably to the previous rate of LIBOR (subject to a floor of 1.00%) plus a margin of 2.75% to
3.00%, determined by our net leverage ratio, under the prior amendment. This amendment also modifies other terms
and provisions, including providing for additional covenant flexibility and additional capacity under the facility, and
conforming to certain terms and provisions of the Senior Notes. This amendment requires that 0.25% (or $1.1 million)
of the aggregate principal amount be repaid quarterly prior to the final maturity date. The facility is secured by the same
collateral and guaranteed by the same guarantors as it was under each of the prior amendments, and we incurred $0.7
million of debt issuance costs related to this amendment, which are being amortized to interest expense over the life of
the facility using the effective interest method. At December 31, 2018, the outstanding principal balance under the
facility was $435.6 million.
In February 2019, the Company purchased interest rate caps in order to effectively fix a 3.0% per annum ceiling on the
LIBOR component of an aggregate $150 million of its term loans. The caps become effective March 29, 2019 and
expire December 31, 2021.
Australia Facility - In February 2018, we amended the Australia Senior Secured Credit Facility to include an additional
AUD $55.0 million floating rate term loan facility with a base rate of BBSY plus a margin ranging from 1.00% to
1.10% which matures in February 2023. We pay a commitment fee of 1.25% on the unused portion of the facility. This
facility is secured by guarantees of JWA and had an outstanding principal balance of $35.2 million as of December 31,
2018.
Other Acquired Facilities - We acquired a $11.6 million term loan facility associated with our ABS acquisition, as well
as $9.6 million in various term loan facilities associated with our Domoferm acquisition. As of December 31, 2018, we
have closed the ABS facility with no outstanding borrowings and have $2.9 million outstanding under the Domoferm
term loan facilities.
Revolving Credit Facilities
ABL Facility - In December 2017, along with the offering of the Senior Notes and repricing of the Term Loan Facility,
we amended our $300.0 million ABL Facility. The facility will mature in December 2022 (extended from October
2019) and bears interest primarily at LIBOR (subject to a floor of 0.00%) plus a margin of 1.25% to 1.75%, determined
by availability. This compares favorably to the rate of LIBOR (subject to a floor of 0.00%) plus a margin of 1.50% to
2.00% under the previous amendment. This amendment also made certain adjustments to the borrowing base and
modified other terms and provisions, including providing for additional covenant flexibility and additional flexibility
under the facility, and conforming to certain terms and provisions of the Senior Notes and Term Loan Facility. In
connection with the amendment to the ABL Facility, we expensed $0.2 million of unamortized loan fees as a loss on
F-29
extinguishment of debt in our consolidated statements of operations. Debt issuance costs related to the ABL Facility are
reclassified to other assets in the consolidated balance sheets, in proportion to the commitment amount, less loan
utilization. In December 2018, we amended this facility, providing for a $100.0 million increase in the U.S. revolving
credit commitments.
Extensions of credit under the ABL Facility are limited by a borrowing base calculated periodically based on specified
percentages of the value of eligible accounts receivable and eligible inventory, subject to certain reserves and other
adjustments. We pay a fee of 0.25% on the unused portion of the commitments under the facility. As of December 31,
2018, we had $85.0 million in borrowings, $39.2 million in letters of credit and $208.6 million available under the ABL
Facility.
The ABL Facility has a minimum fixed charge coverage ratio that we are obligated to comply with under certain
circumstances. The ABL Facility has various non-financial covenants, including restrictions on liens, indebtedness, and
dividends, customary representations and warranties, and customary events of defaults and remedies.
Australia Senior Secured Credit Facility - In February 2018, we amended the Australia Senior Secured Credit Facility
to provide for an AUD $15.0 million floating rate revolving loan facility, an AUD $12.0 million interchangeable facility
for guarantees and letters of credit, an AUD $7.0 million electronic payaway facility, an AUD $2.5 million asset finance
facility, an AUD $1.0 million commercial card facility and an AUD $5.0 million overdraft line of credit. Apart from the
AUD $55.0 million floating rate term loan facility mentioned above, the Australia Senior Secured Credit Facility
matures in June 2019. Loans under the revolving loan facility bear interest at BBSY plus a margin of 0.75%, and a line
fee of 1.15% is also paid on the revolving facility limit. Overdraft balances bear interest at the bank’s reference rate
minus a margin of 1.00%, and a line fee of 1.15% is paid on the overdraft facility limit. At December 31, 2018, we had
AUD $15.0 million (or $10.6 million) available under the revolving loan facility, AUD $1.9 million (or $1.3 million)
under the interchangeable facility, AUD $7.0 million (or $4.9 million) under the electronic payaway facility, AUD $0.6
million (or $0.4 million) under the asset finance facility, AUD $0.8 million (or $0.6 million) under the commercial card
facility and AUD $5.0 million (or $3.5 million) available under the overdraft line of credit. The credit facility is secured
by guarantees of the subsidiaries of JWA, fixed and floating charges on the assets of the JWA group, and mortgages on
certain real properties owned by the JWA group. The 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
acquisitions without the bank’s consent.
Euro Revolving Facility - In January 2015, we entered into the Euro Revolving Facility, a €39 million revolving credit
facility, which included an option to increase the commitment by an amount of up to €10 million, with a syndicate of
lenders and Danske Bank A/S, as agent. Loans under the Euro Revolving Facility bore interest at an IBOR, specific to
the borrowing currency, (subject to a floor of 0.00%), plus a margin of 2.50%. A commitment fee of 1.00% was paid on
the unutilized amount of the facility. As of December 31, 2018, we had no outstanding borrowings, €0.6 million (or
$0.6 million) of bank guarantees outstanding, and €38.4 million (or $44.0 million) available under this facility. The
facility required JELD-WEN ApS to maintain certain financial ratios, including a maximum ratio of senior leverage to
Adjusted EBITDA (as calculated therein), and a minimum ratio of Adjusted EBITDA (as calculated therein) to net
finance charges. In addition, the facility had various non-financial covenants including restrictions on liens,
indebtedness, and dividends, customary representations and warranties, and customary events of default and remedies.
In January 2019, we did not extend the Euro Revolving Facility and allowed it to expire due to our strong cash position
in Europe and expenses and restrictions associated with this facility.
Other Acquired Facilities - We acquired a $45.0 million revolving credit facility associated with our ABS acquisition
and €8.5 million in various overdraft facilities associated with our Domoferm acquisition. As of December 31, 2018, we
have closed these facilities and have no outstanding borrowings.
At December 31, 2018, we had combined borrowing availability of $263.2 million under our revolving facilities.
Mortgage Notes – In December 2007, we entered into thirty-year mortgage notes secured by land and buildings with
principal payments beginning in 2018. As of December 31, 2018, we had DKK 198.2 million (or $30.4 million)
outstanding under these notes.
Installment Notes – Installment notes represent insurance premium financing, capitalized lease obligations, and loans
secured by equipment. During 2018, we acquired $11.0 million in various installment notes associated with our
Domoferm and A&L acquisitions. These notes mature between 2019 and 2022, with both fixed and variable interest
F-30
rates which range from 1.90% to 4.87%. At December 31, 2018, we had $98.9 million outstanding in installment notes,
including $9.0 million from the notes acquired with the Domoferm and A&L acquisitions. The increase in installment
notes during 2018 was primarily due to the addition of the build-to-suit lease in the first quarter (Note 7 - Property and
Equipment, Net), and the addition of equipment and software financing that was entered into during the second, third
and fourth quarters. Maturities of installment notes range from 2019 to 2035.
Installment Notes for Stock – We entered into installment notes for stock representing amounts due to former or
retired employees for repurchases of our stock that are payable over 5 or 10 years depending on the amount, with
payments through 2020. As of December 31, 2018, we had $1.0 million outstanding under these notes.
As of December 31, 2018, we were in compliance with the terms of all of our credit facilities.
Note 16. Deferred Credits and Other Liabilities
Included in deferred credits and other liabilities is the long-term portion of the following liabilities as of December 31:
(amounts in thousands)
2018
2017
Warranty liability (Note 14)
Headquarter lease liability (Note 7)
Uncertain tax positions (Note 17)
Workers' compensation claims accrual
Other liabilities
Restructuring accrual (Note 24)
Over-market lease liabilities
Deferred income
Long term accrued income taxes payable (Note 17)
Total deferred credits and other liabilities
$
25,939
$
—
18,951
14,977
8,971
2,005
1,126
69
—
$
72,038
$
26,709
19,860
14,519
14,179
9,444
3,877
2,142
609
11,275
102,614
The over-market lease liabilities relate to our Melton operations in the U.K. and the related market value lease payments
are included in the minimum annual lease payments schedule. The non-cash impact to expense of the change in the lease
liability for the discount factor is reported in other income (expense) in the consolidated statements of operations and
totaled $0.5 million in each of the years ended 2018, 2017 and 2016.
The headquarter lease liability related to our build-to-suit arrangement and as of December 31, 2017, we recorded a
financial obligation of $19.9 million, including accrued interest. During the first quarter of 2018, this amount was
reclassified to long-term debt. For further information on this arrangement, see Note 7 - Property and Equipment, Net and
Note 15 - Long Term Debt.
The long term accrued income taxes payable related to a one-time deemed repatriation tax of $11.3 million as of
December 31, 2017. Due to changes in our provisional estimates related to the Tax Act this amount was adjusted to zero, in
the fourth quarter of 2018. See Note 17 - Income Taxes for further information.
Note 17. Income Taxes
Income (loss) before taxes, equity earnings and discontinued operations was comprised of the following for the years ended
December 31:
(amounts in thousands)
Domestic (loss) income
Foreign income
Total income before taxes, equity earnings
2018
2017
2016
$
$
(1,679) $
(7,346) $
137,256
153,101
135,577
$
145,755
$
25,042
105,278
130,320
F-31
Our foreign income is primarily driven by our subsidiaries in Australia, Canada and the U.K. The statutory tax rates are
30%, 27% and 19% respectively.
Significant components of the provision for income taxes are as follows for the years ended December 31:
(amounts in thousands)
2018
2017
2016
Federal
State
Foreign
Current taxes
Federal
State
Foreign
Deferred taxes
Total (benefit) provision for income taxes
$
$
(9,760) $
764
35,714
26,718
(23,475)
(12,847)
1,646
(34,676)
(7,958) $
11,699
$
667
29,461
41,827
60,618
27,241
8,917
96,776
138,603
$
1,015
72
18,274
19,361
(164,765)
(74,882)
(26,108)
(265,755)
(246,394)
On December 22, 2017, the Tax Act was enacted in the U.S. The specific provisions of the Tax Act had both direct and
indirect impacts on our 2017 and 2018 results and may continue to materially affect our financial results in the future as
regulations continue to be finalized. The direct impacts recorded as provisional estimates in 2017 were due primarily to the
change in the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017 and the
one-time deemed repatriation tax. As a result of the lowering of the U.S. federal tax rate, we revalued our net deferred tax
assets in the U.S. reflecting the lower expected benefit in the U.S. in the future. This revaluation resulted in an estimated
additional tax expense totaling approximately $21.1 million. Our provisional estimate of the one-time deemed repatriation
tax, which effectively subjected the Company’s net aggregate historic foreign earnings to taxation in the U.S., resulted in a
further tax charge of $11.3 million. During the fourth quarter of 2017, the Company undertook certain transactions which
premised the repatriation of certain earnings from foreign subsidiaries. While these transactions were not undertaken as a
direct result of tax reform, the U.S. tax implications were heavily impacted due to the timing of the transactions and the
measurement dates as outlined in the Tax Act. We recorded a provisional estimate of the effects of certain steps completed
in 2017 as well as further steps premised to be completed in 2018 which would have retroactive effect into 2017 resulting
in a net increase to tax expense of $65.8 million related to these transactions and their impacts under the Tax Act.
As of December 31, 2018, we have completed our accounting for the income tax effects of the Tax Act as of the enactment
date. As further discussed below, we recognized a tax benefit of $40.2 million in 2018 which effectively reduced the net
charges recorded at December 31, 2017. These adjustments were accounted for as a component of income tax expense
from continuing operations. The specific adjustments recorded were (i) an increase to the tax expense recorded related to
the revaluation of our net deferred tax assets from $21.1 million to $55.3 million resulting in an additional charge to 2018
earnings of $34.2 million, (ii) a reduction of the estimate of the one-time deemed repatriation tax from $11.3 million to
zero resulting in a tax benefit recorded in 2018 earnings of $11.3 million, (iii) a reduction of the additional tax expense
recorded related to the premised repatriation of funds from foreign subsidiaries from $65.8 million to $2.7 million resulting
in a tax benefit recorded in 2018 earnings of $63.1 million.
The completion of the Company’s accounting for the enactment of the Tax Act reflects, among other things, (i) the issuance
of guidance by the U.S. Treasury regarding provisions of the Tax Act, (ii) certain elections and accounting policy decisions
pursuant to the Tax Act, (iii) adjustments to historic foreign earnings and profits or the associated tax credit pools which are
significant factors in the calculation of the repatriation tax, and (iv) changes in interpretations and assumptions that we
have made. We note that final guidance and regulations surrounding the implementation of all provisions in the Tax Act
have not been issued to date. This guidance, once issued, may materially affect our conclusions regarding the net related
effects of the Tax Act on our financial statements.
Further, the Tax Act subjects a U.S. shareholder to current U.S. tax on GILTI earned by certain foreign subsidiaries. GILTI
had a material effect on our effective tax rate in 2018 and will likely continue to have such an effect in future periods. The
FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that we are permitted to
make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as
GILTI in future years or provide for the tax expense related to such income in the year the tax is incurred. We have elected
to account for the impact of GILTI in the period in which it is incurred.
F-32
The significant components of the deferred income tax benefit attributed to income from continuing operations for the year
ended December 31, 2018, were the adjustments related to the provisional amounts of the income tax effects of the Tax Act
and the additional release of valuation allowances, primarily in the U.S. The significant components of the deferred income
tax expense attributed to income from continuing operations for the year ended December 31, 2017, was the revaluation of
our U.S. deferred tax assets under the Tax Act and the increases in valuation allowances for deferred tax assets, primarily in
the U.S.
Reconciliation of the U.S. federal statutory income tax rate to our effective tax rate is as follows for the years ended
December 31:
(amounts in thousands)
Statutory rate
State income tax, net of federal benefit
Nondeductible expenses
Acquisition of ABS
Equity based compensation
Deferred benefit on acquisitions
Foreign tax rate differential
Tax rate differences and credits
Uncertain tax positions
Foreign source dividends and deemed
inclusions
Valuation allowance
IRS audit adjustments
Prior year correction
U.S. Tax Reform
Other
Effective rate for continuing operations
Effective rate including discontinued
operations
2018
Amount
$
28,471
(1,294)
1,097
(10,189)
54
—
3,426
96,231
5,443
17,657
%
21.0
(1.0)
0.8
(7.5)
—
—
2.5
71.0
4.0
13.0
(85,876)
(63.3)
—
—
—
—
(62,836)
(46.3)
(142)
(7,958)
(7,958)
$
$
(0.1)
(5.9)
(5.9)
2017
Amount
$
51,015
(4,784)
1,950
—
(12,718)
(6,201)
(17,959)
(91,109)
736
86,119
98,156
(699)
—
32,414
1,683
$
$
138,603
138,603
%
35.0
(3.3)
1.3
—
(8.7)
(4.2)
(12.3)
(62.5)
0.5
59.1
67.3
(0.5)
—
22.2
1.2
95.1
95.1
2016
Amount
$
45,612
221
1,797
—
826
—
(12,237)
382
406
1,992
%
35.0
0.2
1.4
—
0.6
—
(9.4)
0.3
0.3
1.5
(282,616)
113
(1,392)
—
(1,498)
$ (246,394)
(216.9)
0.1
(1.1)
—
(1.1)
(189.1)
$ (246,394)
(189.1)
In the current period, we recorded a tax benefit of $40.2 million to revise the provisional estimates recorded under the Tax
Act. Included in the “U.S. Tax Reform” line in the reconciliation of tax expense above is comprised of tax benefit of $11.3
million for the reduction of the estimated one-time deemed repatriation tax, tax benefit of $85.7 million attributed to the
restoration of the Company’s net operating losses, offset by tax expense of $34.2 million for the revaluation of our deferred
tax assets. The remaining tax expense is comprised of: additional tax expense of $97.6 million for the reduction of foreign
tax credits included in “Tax rate differences and credits”, offset by tax benefit of $75.0 million included above as
“Valuation allowance”.
We recorded a benefit of $10.2 million related to certain tax effects of ABS transitioning to a wholly-owned subsidiary and
the tax effects of the gain recognized on the acquisition.
For the year ended December 31, 2017, we recorded provisional estimates of the items directly impacted by the Tax Act
within the “U.S. Tax Reform” line in the reconciliation of tax expense above. The tax charge of $32.4 million is comprised
of (i) the repricing our U.S. deferred tax balances of $21.1 million from 35% to 21%, and (ii) one-time deemed repatriation
tax of $11.3 million. As previously, discussed, certain other transactions undertaken by the Company in the fourth quarter
of 2017 were indirectly impacted by the Tax Act and the measurement periods as outlined therein. The provisional
estimates of the following amounts are included in the Company’s tax expense for the year: additional tax expense of $85.5
million included as “Foreign Source Dividends”, a tax benefit of $90.8 million included as “Tax rate differences and
credits”, and additional tax expense of $71.1 million included as “Valuation allowance” above.
We recorded a benefit of $0.7 million and a charge of $0.1 million in 2017 and 2016, respectively, as a result of favorable
audit settlements in the U.S., which allowed the use of tax attributes that previously had a valuation allowance reserve.
F-33
We recorded a tax benefit of $6.2 million primarily relating to the change in disposition for certain intellectual property in
the “Deferred benefit on acquisitions” line and a corresponding tax charge in the same amount in the “Valuation
allowance” line, resulting in no impact to the effective rate for continuing operations in 2017. We did not incur or recognize
tax expense or benefit associated with these categories in 2018.
During the fourth quarter of 2016, we recorded an out-of-period correction to previously overstated international deferred
tax asset balances which resulted in a benefit of $5.4 million, $1.4 million of which is shown above on the line "Prior year
correction", and the remaining amount of which is within the "Valuation allowance" and “Other” line items in the
reconciliation of tax expense above. This correction was not material to 2016 or prior periods.
Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of our
assets, liabilities and operating loss carryforwards. Significant deferred tax assets and liabilities are as follows as of
December 31:
(amounts in thousands)
2018
2017
Allowance for doubtful accounts and notes receivable
$
1,573
$
Employee benefits and compensation
Net operating loss and tax credit carryforwards
Inventory
Deferred credits
Accrued liabilities and other
Gross deferred tax assets
Valuation allowance
Deferred tax assets
Depreciation and amortization
Investments and marketable securities
Deferred tax liabilities
Net deferred tax assets
Balance sheet presentation:
Long-term assets
Long-term liabilities
Net deferred tax assets
50,665
214,828
5,920
635
38,526
312,147
(57,571)
254,576
(58,441)
473
(57,968)
196,608
207,065
(10,457)
196,608
$
$
$
$
$
$
1,102
54,961
292,957
4,125
889
17,478
371,512
(144,701)
226,811
(42,632)
(9,702)
(52,334)
174,477
183,726
(9,249)
174,477
Impact of Divestitures and Acquisitions – As discussed in Note 2 - Acquisitions, we completed four acquisitions in fiscal
year 2018 and three acquisitions in fiscal 2017 that impacted our income tax assets and liabilities. As discussed in Note 3 -
Discontinued Operations and Divestitures, we sold the assets of our Silver Mountain resort and real estate development in
Idaho, which closed on October 20, 2016.
Valuation Allowance – The realization of deferred tax assets is based on historical tax positions and estimates of future
taxable income. We evaluate both the positive and negative evidence that we believe is relevant in assessing whether we
will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of
the deferred tax assets will not be realized.
Our valuation allowance was $57.6 million as of December 31, 2018, which represents a decrease of $87.1 million from
December 31, 2017 and was allocated to continuing operations. The decrease in the valuation allowance primarily relates
to the following: (i) a decrease of $75.0 million relating to the Company’s finalization of the accounting for the effects of
the Tax Act, (ii) a decrease of $2.2 million due to expiring foreign tax credits, (iii) a decrease of $8.3 million for state net
operating losses ("NOL") and credits due to the impact of increase in forecasted taxable income in the carry-forward
period, and (iv) other changes to existing valuations totaling approximately $1.6 million for changes in current year
earnings for certain other subsidiaries and foreign exchange.
The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in
which those temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including
the effect of available carryback and carryforward periods), and projected taxable income in making this assessment. To
F-34
fully utilize the NOL and tax credits carryforwards we will need to generate sufficient future taxable income in each
respective jurisdiction before the expiration of the deferred tax assets governed by the applicable tax code.
Our valuation allowance was $144.7 million as of December 31, 2017, which represents an increase of $104.6 million from
December 31, 2016 and was allocated to continuing operations. The increase in the valuation allowance primarily related to
the following: (i) an increase of $71.1 million relating to U.S. foreign tax credits generated in 2017 which constituted a
portion of the provisional charge recorded to the enactment of the Tax Act, (ii) an increase of $28.3 million for state NOL
and credits due to the impact of reductions in forecasted taxable income in the carry-forward period, (iii) a release of $2.0
million for our Canadian subsidiary due to its continued profitability in recent years, (iv) an increase of $6.7 million for our
Australian subsidiary relating to certain deferred tax assets recognized on capital assets, and (v) other changes to existing
valuations totaling approximately $0.5 million for changes in current year earnings for certain other subsidiaries and
foreign exchange.
The following is the activity in our valuation allowance:
(amounts in thousands)
Balance as of January 1,
Valuation allowances established
Changes to existing valuation allowances
Release of valuation allowances
Currency translation
Balance as of December 31,
2018
(144,701) $
(260)
85,828
—
1,562
(57,571) $
$
$
2017
2016
(40,118) $
—
(105,453)
2,006
(1,136)
(144,701) $
(318,480)
(1,489)
5,006
272,291
2,554
(40,118)
There were no valuation allowances included in discontinued operations for the years ended December 31, 2018,
December 31, 2017 and December 31, 2016, respectively.
Loss Carryforwards – We reduced our income tax payments by utilizing NOL carryforwards of $172.1 million in 2018,
$19.3 million in 2017 and $256.2 million in 2016. At December 31, 2018, our federal, state and foreign NOL carryforwards
totaled $1,477.7 million, of which $85.6 million does not expire and the remainder expires as follows (amounts in
thousands):
2019
2020
2021
2022
Thereafter
Total loss carryforwards
$
$
9,254
2,771
11,955
15,871
1,352,261
1,392,112
We utilized approximately $124.8 million of NOL carryforwards in the US in 2018; however, the deferred tax asset related
to these NOLs actually increased due to the restoration of certain loss carryforwards upon the finalization of the accounting
for effects of the Tax Act. We have revised the total amount of NOLs utilized in 2017 to reflect the reduced income
recognized under the Tax Act. We utilized $1.2 million capital loss carryforwards in 2016. We did not utilize capital loss
carryforwards in 2018 and 2017. At December 31, 2018, our capital loss carryforwards totaled $21.2 million. All of the
capital losses are foreign and do not expire.
Section 382 Net Operating Loss Limitation – On November 20, 2017 and October 3, 2011, we had a change in
ownership pursuant to Section 382 of the Internal Revenue Code of 1986 as amended (“Code”). Under this provision of the
Code, the utilization of any of our NOL or tax credit carryforwards, incurred prior to the date of ownership change, may be
limited. Analyses of the respective limits for each ownership change indicated no reason to believe the annual limitation
would impair our ability to utilize our NOL carryforward or net tax credit carryforwards as provided. We have concluded
the limitation under Section 382 should not prevent us from fully utilizing these historical NOLs.
F-35
Tax Credit Carryforwards – Our tax credit carryforwards expire as follows:
(amounts in thousands)
EZ Credit
R & E credit
Foreign Tax
Credit
Work
Opportunity
& Welfare to
Work Credit
State
Investment
Tax Credits
Tip Credit
TOTAL
2019
2020
2021
2022
2023
Thereafter
$
— $
— $
— $
— $
— $
— $
—
—
—
—
68
68
$
—
—
—
—
6,614
12,975
14,990
1,061
5,735
11,485
—
—
—
—
6,823
—
76
1
1,797
1,720
$
6,614
$
46,246
$
6,823
$
3,594
$
—
—
—
—
102
102
$
—
12,975
15,066
1,062
7,532
26,812
63,447
Earnings of Foreign Subsidiaries – Historically, the Company has not provided for US tax impacts of any unremitted
earnings of its foreign subsidiaries. The Tax Act made significant changes to the taxation of undistributed foreign earnings,
including that all previously untaxed earnings and profits of our controlled foreign corporations be subjected to a one-time
deemed repatriation tax in 2017. In its final analysis of the effects of the Tax Act, the Company provided for US income
taxes on approximately $121.0 million of earnings of our foreign subsidiaries deemed to be repatriated. Beginning in 2018,
the Tax Act provides for a 100% dividends received deduction for untaxed earnings received from most foreign
corporations. The repatriation tax substantially eliminated the basis difference that existed previously for purposes of ASC
Topic 740. Although dividend income is now generally exempt from U.S. federal income tax in the hands of U.S. corporate
shareholders, the guidance of ASC 740-30 still applies to account for the tax consequences of outside basis differences and
other tax impacts of investments in non-U.S. subsidiaries. Although likely not subject to U.S. federal taxation, there are
limited other taxes that could continue to apply such as foreign income and withholding as well as certain state taxes.
The Company completed its evaluation of its indefinite reinvestment assertion as a result of the Tax Act during the fourth
quarter of 2018. As of December 31, 2018, we have not recorded deferred tax liabilities or assets for the outside basis
difference, as we have concluded that the unremitted earnings of our foreign subsidiaries are indefinitely reinvested with
certain minor exceptions and do not anticipate the outside basis difference to reverse in the foreseeable future. We hold a
combined book-over-tax outside basis difference of $202.5 million in our investment in foreign subsidiaries and may incur
up to $5.7 million of local country income and withholding taxes in case of distribution of unremitted earnings.
Dual-Rate Jurisdiction – Estonia taxes the corporate profits of resident corporations at different rates depending upon
whether the profits are distributed. The undistributed profits of resident corporations are exempt from taxation while any
distributed profits are subject to a 20% corporate income tax rate. The liability for the tax on distributed profits is recorded
as an income tax expense in the period in which a dividend is declared. The amount of undistributed earnings at
December 31, 2018 and 2017 which, if distributed, would be subject to this tax was $68.1 million and $66.3 million,
respectively. During 2017, Latvia enacted a similar system in which an entity’s local earnings are not subject to tax until
distributed. The amount of undistributed earnings at December 31, 2018 for our Latvian subsidiary which, if distributed,
would be subject to a 20% corporate income tax rate is $19.9 million.
Tax Payments and Balances – We made tax payments of $49.7 million in 2018, $29.0 million in 2017 and $34.7 million
in 2016 primarily for foreign liabilities. We received tax refunds of $3.3 million in 2018, $6.5 million in 2017and $7.9
million in 2016 primarily related to U.S., Sweden and Estonia. We recorded receivables for U.S. federal, foreign and state
refunds of $9.7 million at December 31, 2018 and $4.2 million at December 31, 2017 which is included in other current
assets on the accompanying consolidated balance sheets. We recorded payables for U.S. federal, foreign and state taxes of
$2.1 million at December 31, 2018 and 11.0 million at December 31, 2017 which is included in accrued income taxes
payable in the accompanying consolidated balance sheets. We recorded a non-current U.S. receivable of $0.8 million at
December 31, 2018 and a non-current U.S. payables of $11.3 million at December 31, 2017, related to the one-time
deemed repatriation tax liability. This is included in other assets and long term liabilities in the accompanying consolidated
balance sheets.
F-36
Accounting for Uncertain Tax Positions – A reconciliation of the beginning and ending amounts of unrecognized tax
benefits excluding interest and penalties is as follows:
(amounts in thousands)
Balance as of January 1,
Increase for tax positions taken during the prior period
Decrease for settlements with taxing authorities
Increase for tax positions taken during the current period
Currency translation
Balance at period end - unrecognized tax benefit
Accrued interest and penalties
2018
2017
2016
$
14,519
$
12,054
$
11,634
2,620
(157)
300
(707)
16,575
2,376
252
(788)
107
1,626
13,251
1,268
$
18,951
$
14,519
$
359
—
—
(345)
11,648
406
12,054
Unrecognized tax benefits were $16.6 million, $13.3 million and $11.6 million at December 31, 2018, 2017 and 2016,
respectively. The changes during the current period relate to the establishment of an uncertain tax positions for certain tax
examinations offset by currency translation during the period. Interest and penalties related to uncertain tax positions are
reported as a component of tax expense and included in the total uncertain tax position balance within deferred credits and
other liabilities in the accompanying consolidated balance sheets.
A significant portion of our uncertain tax positions relates to the implementation of the Capacity Management Agreements
within the European business (“CMA”) which took place in January 1, 2015. The CMA changed the manner in which we
manage our manufacturing capacity and the distribution and sale of our products in Europe. The reorganization of our
Europe segment was part of our review of our operations structure and management that began in 2014 and resulted in
changes in taxable income for certain of our subsidiaries within that reportable segment. Effective January 1, 2015, our
subsidiary JELD-WEN U.K. Limited (the “Managing Subsidiary”) entered into an agreement (the “Managing Agreement”)
with several of our other subsidiaries in Europe (collectively, the “Operating Subsidiaries”). The Managing Agreement
provides that the Managing Subsidiary will receive a fee from the Operating Subsidiaries in exchange for performing
various management and decision-making services for the Operating Subsidiaries. As a result, the Managing Agreement
shifts certain risks (and correlated benefits) from the Operating Subsidiaries to the Managing Subsidiary. In exchange, the
Managing Subsidiary guarantees a specific return to each Operating Subsidiary on a before interest and taxes basis,
commensurate with such Operating Subsidiary’s functions and risk profile. While there is no impact on the consolidated
reporting of the Europe segment due to the Managing Agreement, there may be changes in taxable income of the Operating
Subsidiaries. Therefore, we have reserved for a potential loss resulting from such uncertainty.
Included in the balance of unrecognized tax benefits as of December 31, 2018, 2017, and 2016, are $16.6 million, $13.3
million, and $11.6 million respectively, of tax benefits that, if recognized, would affect the effective tax rate. We cannot
reasonably estimate the conclusion of certain non-US income tax examinations and its outcome at this time.
We operate in multiple foreign tax jurisdictions and are generally open to examination for tax years 2012 and forward. In
the U.S., we are open to examination at the federal level for tax years 2013 and forward and at state and local jurisdictions
for tax years 2013 and forward. We are under examination in the United Kingdom, Switzerland, the Czech Republic,
Austria, Denmark, France, Germany, Indonesia and Latvia for tax years 2011 through 2017, and generally remain open to
examination for other non-US jurisdictions for tax years 2012 forward.
Note 18. 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 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 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-
F-37
cash foreign exchange transaction/translation (income) loss; other non-cash items; other items; and costs related to debt
restructuring and debt refinancing.
Prior year balances have been revised with the activity being adjusted through the “Net revenues from external customers -
North America” line below. See detail in Note 1 - Description of Company and Summary of Significant Accounting
Policies.
The following tables set forth certain information relating to our segments’ operations.
(amounts in thousands)
Year Ended December 31, 2018
North
America
Europe
Australasia
Total
Operating
Segments
Corporate
and
Unallocated
Costs
Total
Consolidated
Total net revenues
Intersegment net revenues
$ 2,462,268
(1,281)
Net revenues from external customers
$ 2,460,987
$ 1,216,706
(905)
$ 1,215,801
Depreciation and amortization
$
71,945
$
31,132
Impairment and restructuring charges
Adjusted EBITDA
Capital expenditures
Segment assets
Year Ended December 31, 2017
4,933
278,975
57,805
6,111
129,202
25,369
$ 1,355,730
$
902,684
Total net revenues
Intersegment net revenues
$ 2,159,919
(2,021)
Net revenues from external customers
$ 2,157,898
$ 1,045,036
(2,269)
$ 1,042,767
Depreciation and amortization
$
66,990
$
27,979
Impairment and restructuring charges
Adjusted EBITDA
Capital expenditures
Segment assets
Year Ended December 31, 2016
8,471
273,594
34,769
3,592
132,929
14,889
$ 1,207,539
$
920,222
Total net revenues
Intersegment net revenues
$ 2,153,154
(3,843)
Net revenues from external customers
$ 2,149,311
$ 1,009,545
(816)
$ 1,008,729
Depreciation and amortization
$
68,207
$
26,657
$
$
$
$
$
$
$
$
$
$
$
Impairment and restructuring charges
Adjusted EBITDA
Capital expenditures
Segment assets
3,584
251,831
39,775
6,777
122,574
14,991
$
$
$
$
$
$
$
$
$
$
$
681,160
(11,245)
669,915
$ 4,360,134
(13,431)
$ 4,346,703
17,730
$
120,807
7,170
91,172
12,146
18,214
499,349
95,320
482,493
$ 2,740,907
572,518
(9,434)
563,084
$ 3,777,473
(13,724)
$ 3,763,749
13,248
(49)
74,706
6,019
$
108,217
12,014
481,229
55,677
447,734
$ 2,575,495
517,990
(9,088)
508,902
$ 3,680,689
(13,747)
$ 3,666,942
8,944
$
103,808
2,448
59,519
21,610
12,809
433,924
76,376
— $
4,360,134
—
(13,431)
— $
4,346,703
4,293
(886)
(34,003)
23,380
$
125,100
17,328
465,346
118,700
310,148
$
3,051,055
— $
3,777,473
—
(13,724)
— $
3,763,749
3,056
$
111,273
1,042
(43,616)
7,372
13,056
437,613
63,049
287,445
$
2,862,940
— $
3,680,689
—
(13,747)
— $
3,666,942
4,187
$
107,995
1,038
(40,242)
3,121
13,847
393,682
79,497
$ 1,099,845
$
751,749
$
377,410
$ 2,229,004
$
307,042
$
2,536,046
F-38
Reconciliations of net income to Adjusted EBITDA are as follows:
(amounts in thousands)
Net income
Loss from discontinued operations, net of tax
Equity earnings of non-consolidated entities
Income tax (benefit) expense
Depreciation and amortization
Interest expense, net (a)
Impairment and restructuring charges (b)
Gain on previously held shares of equity investment
Loss (gain) on sale of property and equipment
Share-based compensation expense
Non-cash foreign exchange transaction/translation loss (income)
Other non-cash items (c)
Other items (d)
Costs relating to debt restructuring and debt refinancing (e)
Years Ended December 31,
2017
2016
2018
$
144,273
$
10,791
$
377,181
—
(738)
(7,958)
125,100
70,818
17,328
(20,767)
144
15,052
8
3,859
117,933
294
—
(3,639)
138,603
111,273
79,034
13,057
—
(299)
19,785
(2,181)
526
47,000
23,663
3,324
(3,791)
(246,394)
107,995
77,590
18,353
—
(3,275)
22,464
5,734
2,843
30,585
1,073
Adjusted EBITDA
$
465,346
$
437,613
$
393,682
(a)
(b)
(c)
(d)
Interest expense for the year ended December 31, 2017 includes $6,097 related to the write-off of a portion of the unamortized
debt issuance costs and original issue discount associated with the Term Loan Facility.
Impairment and restructuring charges consist of (i) impairment and restructuring charges that are included in our 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 the accompanying consolidated statements of operations in the amount of $1 and $4,506 for the years ended
December 31, 2017, and 2016, respectively. There were no charges for the year ended December 31, 2018. For further
explanation of impairment and restructuring charges that are included in our consolidated statements of operations, see Note 24 -
Impairment and Restructuring Charges in our financial statements.
Other non-cash items include; (i) charges of $3,740 for the fair value adjustment to the inventory acquired as part of our
Domoferm acquisitions in the year ended December 31, 2018; (ii) charges of $439 for the fair value adjustment to the inventory
acquired as part of our Mattiovi acquisition in the year ended December 31, 2017; (iii) charges of $357 for the fair value
adjustment to the inventory acquired as part of our Trend acquisition in the year ended December 31, 2016 and (iv) other non-
cash items include charges of $2,153 for the out-of-period European warranty liability adjustment for the year ended
December 31, 2016.
Other items not core to business activity include: (i) in the year ended December 31, 2018 (1) $76,500 in litigation contingency
accruals, (2) $25,444 in legal costs, (3) $10,324 in acquisition costs, (4) $3,381 in costs related to the departure of the former
CEO and CFO, and (5) $2,901 in entity consolidation and reorganization costs, and (6) $(5,396) in realized gain on hedges; (ii) in
the year ended December 31, 2017 (1) $34,178 in legal costs, (2) $4,176 in realized loss on hedges, (3) $3,484 in acquisition
costs, (4) $2,202 in secondary offering costs, (5) $754 in tax consulting fees (6) $678 in legal entity consolidation costs, (7) $649
in taxes related to equity-based compensation, (8) $578 in facility shut down costs, and (9) $(2,247) gain on settlement of
contract escrow; and (iii) in the year ended December 31, 2016, (1) $20,695 in payments to holders of vested options and
restricted shares in connection with the November 2016 dividend, (2) $3,721 of professional fees related to the IPO of our
common stock, (3) $1,626 of acquisition costs, (4) $584 in legal costs associated with disposition of non-core properties, (5) $507
of dividend-related costs, (6) $500 of costs related to the recruitment of executive management employees, (7) $450 in legal
costs, and (8) $346 in Dooria plant closure costs.
(e)
Includes non-recurring fees and expenses related to professional advisors, financial advisors and financial monitors retained in
connection with the refinancing of our debt obligations. Included in the year ended December 31, 2017 is a loss on debt
extinguishment of $23,262 associated with the refinancing of our term loan.
F-39
Net revenues by locality are as follows for the years ended December 31,:
(amounts in thousands)
Net revenues by location of external customer
Canada
U.S.
South America (including Mexico)
Europe
Australia
Africa and other
Total
2018
2017
2016
$
201,134
$
219,877
$
218,947
2,228,102
1,904,754
1,893,728
34,422
35,280
34,518
1,240,234
1,063,344
1,035,398
634,976
7,835
530,521
9,973
476,251
8,100
$
4,346,703
$
3,763,749
$
3,666,942
Geographic information regarding property, plant, and equipment which exceed 10% of consolidated property, plant, and
equipment used in continuing operations is as follows for the years ended December 31,
(amounts in thousands)
North America:
U.S.
Other
Europe
Australasia:
Australia
Other
Corporate:
U.S.
Total property and equipment, net
Note 19. Series A Convertible Preferred Shares
2018
2017
2016
$
$
459,506
24,911
484,417
$
402,338
25,876
428,214
400,023
25,371
425,394
181,038
153,492
145,470
113,922
10,297
124,219
118,568
7,818
126,386
53,729
48,619
$
843,403
$
756,711
$
104,063
8,259
112,322
21,465
704,651
Prior to the IPO, we had the authority to issue up to 8,750,000 shares of preferred stock, par value of $0.01, of which
8,749,999 shares were designated as Series A Convertible Preferred Stock and one share was designated as Series B
Preferred Stock. Series A Convertible Preferred Stock consisted of 2,922,634 shares of Series A-1 Stock, 208,760 shares of
Series A-2 Stock, 843,132 shares of Series A-3 Stock, and 4,775,473 shares of Series A-4 Stock. At December 31, 2016, all
of the authorized shares of Series A-1, Series A-2, and Series A-3 Stock and one Series B Stock were issued and
outstanding.
Immediately prior to the closing of our IPO, the outstanding shares and accumulated and unpaid dividends of the Series A
Convertible Preferred Stock converted into 64,211,172 common shares by applying the applicable conversion rates as
prescribed in our then-existing certificate of incorporation.
Dividend - Prior to converting to common stock, the Series A Stock had a preferred annual dividend of 10% per annum on
the Equity Constant, with the Equity Constant being $21.77 for dividends accruing prior to April 30, 2013. The cumulative
dividends accrued continually and compounded annually at the rate of 10% whether or not they had been declared and
whether or not there were funds available for the payment.
In October of 2016, the Board of Directors authorized $256.3 million in distributions to the holders of the 3,974,525 shares
of Series A Stock (62,645,538 as-converted common shares) through participation in the $4.09 per share of Common Stock
distribution (see Note 20 - Capital Stock). The Board of Directors authorized an additional distribution of $51.0 million to
holders of Series A Stock representing dividends accruing between May 31, 2016 and November 3, 2016. Total
F-40
distributions paid to holders of our Series A Stock were $306.7 million and were paid on or about November 3, 2016.
Cumulative unpaid dividends were approximately $390.6 million at December 31, 2016. The Series A Stock and
cumulative unpaid dividends converted into 64,211,172 shares of our common stock on February 1, 2017.
Other - In June 2016, the Company, represented by directors not appointed by Onex, settled indemnification claims under
the 2011 and 2012 Stock Purchase Agreements with Onex. As a result of this settlement, we refunded $23.7 million of the
issuance price agreed to in the 2011 and 2012 Stock Purchase Agreements in August 2016. The refund was recorded as a
reduction in the carrying value of the Convertible Preferred shares in the accompanying consolidated balance sheets.
Note 20. Capital Stock
On February 1, 2017, immediately prior to the closing of the IPO, the Company filed its Charter with the Secretary of State
of the State of Delaware, and the Company’s Bylaws became effective, each as contemplated by the registration statement
we filed in connection with our IPO. The Charter, among other things, provides that the Company’s authorized capital
stock consists of 900,000,000 shares of common stock, par value $0.01 per share and 90,000,000 shares of preferred stock,
par value $0.01 per share.
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 - As of December 31, 2016, we were governed by our pre-IPO charter, which provided the authority to
issue 22,810,000 shares of common stock, with a par value of $0.01 per share, of which 22,379,800 shares were designated
common stock and 430,200 shares were designated as Class B-1 Common Stock. On January 3, 2017, our pre-IPO charter
was amended authorizing us to issue 904,732,200 shares of common stock, with a par value of $0.01 per share, of which
900,000,000 shares were designated common stock and 4,732,200 shares were designated as Class B-1 Common Stock.
Each share of common stock (whether common stock or Class B-1 Common Stock) had the same rights, privileges, interest
and attributes and was subject to the same limitations as every other share treating the Class B-1 Common Stock on an as-
converted basis. Each share of Class B-1 Common Stock was convertible at the option of the holder into shares of common
stock at the same ratio on the date of conversion as a share of Series A-1 Stock would have been convertible on such date
of conversion, assuming that no cash dividends had been paid on the Series A-1 Stock (or its predecessor security) since
the date of initial issuance. Immediately prior to the closing of our IPO, all of the outstanding shares of Class B-1 Common
Stock were converted into 309,404 shares of 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
193,941 shares at both December 31, 2018 and December 31, 2017 with a total original issuance value of $12.4 million.
On October 31, 2016, our Board of Directors authorized a distribution of $4.09 per share of common stock in which the
Series A Convertible Preferred Stock and Class B-1 Common Stock would participate on an as-converted basis. The record
date for the distribution was November 1, 2016 and totaled $74.0 million for holders of our common stock and Class B-1
Common Stock. We applied distributions totaling $0.2 million against principal and accrued interest on outstanding
employees. Participating in the distribution were 17,845,927 common shares and 136,565 B-1 Common shares (232,373
as-converted common shares). The distributions were paid on or about November 3, 2016.
On February 1, 2017, we closed our IPO and received $480.3 million in proceeds, net of underwriting discounts and
commissions. Costs associated with our initial public offering of $7.9 million, including $5.9 million of capitalized costs
included in “other assets” as of December 31, 2016 were charged to equity upon completion of the IPO.
In April 2018, our Board of Directors authorized the repurchase of up to $250.0 million of our Common Stock. Purchases
are made in accordance with all applicable securities laws and regulations and may be funded from available liquidity
including available cash or borrowings under existing or future credit facilities. The timing and amount of any repurchases
of Common Stock will be based on JELD-WEN’s liquidity, general business and market conditions and other factors,
including alternative investment opportunities. The term of the repurchase program extends through December 31, 2019.
As of December 31, 2018, we repurchased 5,287,964 shares of our Common Stock at an average purchase price per share
of $23.64.
F-41
Note 21. Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. Generally, this
occurs with the transfer of control of our products or services. Revenue is measured as the amount of consideration we
expect to receive in exchange for transferring goods or providing services. The taxes we collect concurrent with revenue-
producing activities (e.g., sales tax, value added tax, and other taxes) are excluded from revenue. Incentive payments to
customers that directly relate to future business are recorded as a reduction of net revenues over the periods benefited.
Shipping and handling costs and the related expenses are reported as fulfillment revenues and expenses for all customers.
Therefore all shipping and handling costs associated with outbound freight are accounted for as fulfillment costs and are
included in cost of sales. The expected costs associated with our base warranties and field service actions continue to be
recognized as expense when the products are sold (see Note 14 - Warranty Liabilities). Since payment is due at or shortly
after the point of sale, the contract asset is classified as a receivable.
We do not adjust the promised amount of consideration for the effects of a significant financing component when we
expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when
the customer pays for that product or service will be one year or less. We do not typically include extended payment terms
in our contracts with customers. Incidental items that are immaterial in the context of the contract are recognized as
expense.
We disaggregate revenues based on geographical location. See Note 18 - Segment Information for further information on
disaggregated revenue.
Deferred Revenue – We record deferred revenue when we collect pre-payments from customers for performance
obligations we expect to fulfill through future performance of a service or delivery of a product. We classify our deferred
revenue based on our estimate as to when we expect to satisfy the related performance obligations. Current deferred
revenues are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
Significant changes in the deferred revenue balances during the period are as follows:
(amounts in thousands)
Balance as of January 1
Increases due to cash received
Liabilities assumed due to acquisition
Revenue recognized during the period
Currency translation
Balance at period end
Note 22. Earnings Per Share
2018
9,970
74,936
2,374
(76,388)
(1,038)
9,854
$
$
Basic earnings per share is calculated by dividing net earnings attributable to common shareholders by the weighted
average shares outstanding during the period, without consideration for common stock equivalents. Diluted net earnings
per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common share
equivalents outstanding for the period, determined using the treasury-stock method. Common stock options, unvested
Common Restricted Stock Units and unvested Common Performance Share Units are considered to be common stock
equivalents included in the calculation of diluted net income (loss) per share.
F-42
The basic and diluted income (loss) per share calculations for the year ended December 31, are presented below:
(amounts in thousands, except share and per share amounts)
Earnings per share basic:
Income from continuing operations
Equity earnings of non-consolidated entities
Income from continuing operations and equity earnings of non-consolidated
entities
Undeclared Series A Convertible Preferred Stock dividends
Series A Convertible Preferred Stock distributions and dividends paid
Deemed Dividend on Series A Convertible Preferred Stock from
Settlement Agreement
Net loss attributable to non-controlling interest
Income (loss) attributable to common shareholders from continuing operations
Loss from discontinued operations, net of tax
2018
2017
2016
$
143,535
$
7,152
$
376,714
738
144,273
—
—
—
(87)
144,360
—
3,639
10,791
(10,462)
—
—
—
329
—
3,791
380,505
(65,667)
(307,279)
(23,701)
—
(16,142)
(3,324)
(19,466)
Net income (loss) attributable to common shareholders
$
144,360
$
329
$
Weighted average outstanding shares of common stock basic
104,530,572
97,460,676
17,992,879
Basic income (loss) per share
Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss) per share - basic
$
$
1.38
0.00
1.38
$
$
0.00
0.00
0.00
$
$
(0.90)
(0.18)
(1.08)
(amounts in thousands, except share and per share amounts)
Earnings per share diluted:
2018
2017
2016
Net income attributable to common shareholders - basic and diluted
$
144,360
$
329
$
(19,466)
Weighted average outstanding shares of common stock basic
104,530,572
97,460,676
17,992,879
Restricted stock units, performance share units and options to purchase
common stock
1,830,085
4,001,459
—
Weighted average outstanding shares of common stock diluted
106,360,657
101,462,135
17,992,879
Dilutive income (loss) per share
Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss) per share - diluted
$
$
1.36
0.00
1.36
$
$
0.00
0.00
0.00
$
$
(0.90)
(0.18)
(1.08)
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 earnings per share because to do so would have been anti-dilutive:
Series A Convertible Preferred Stock
Common stock options
Class B-1 Common Stock Options
Restricted stock units
Performance share units
2018
—
2017
—
1,019,390
545,693
—
87,720
84,809
—
537
—
2016
3,974,525
1,812,404
3,344,572
385,220
—
F-43
Note 23. Stock Compensation
Prior to the IPO, our Amended and Restated Stock Incentive Plan, (the “Stock Incentive Plan”), allowed us to offer
common options, B-1 common options and common RSUs for the benefit of our employees, affiliate employees and key
non-employees. Under the Stock Incentive Plan, we could award up to an aggregate of 2,761,000 common shares and
4,732,200 B-1 common shares. The Stock Incentive Plan provided for accelerated vesting of awards upon the occurrence
of certain events. Through December 31, 2016, we issued 5,156,976 options and 385,220 RSUs under the Stock Incentive
Plan.
In connection with our IPO, the Board adopted and our shareholders approved the JELD-WEN Holding, Inc. 2017
Omnibus Equity Plan, (the “Omnibus Equity Plan”). Under the Omnibus Equity Plan, equity awards may be made in
respect of 7,500,000 shares of our common stock and may be granted in the form of options, restricted stock, RSUs, stock
appreciation rights, dividend equivalent rights, share awards and performance-based awards (including performance share
units and performance-based restricted stock).
Share-based compensation expense included in SG&A expenses totaled $15.1 million in 2018, $19.8 million in 2017 and
$43.2 million in 2016. We recognized a windfall tax benefit of $12.7 million in 2017, which includes a benefit of $14.1
million in the U.S. offset by disallowances in our foreign subsidiaries of $1.4 million. There were no material related tax
benefits for the years 2018 or 2016. As of December 31, 2018, there were $21.2 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 2.0 years.
During the fourth quarter of 2016, we recorded $21.3 million of share-based compensation associated with cash payments
to participants of our stock incentive plan. These payments consisted of $4.09 per vested common option, $6.96 per vested
B-1 common option and $4.09 per restricted stock unit. In addition, we modified the terms of most unvested options,
reducing the exercise prices by $4.09 and $6.96 for common and B-1 common options, respectively, resulting in additional
share-based compensation expense of $0.9 million in 2016. Key assumptions used in valuing the option modification were
as follows:
Expected volatility range
Expected dividend yield rate
Weighted average term (in years)
Risk free rate
34.56% - 48.09%
0.00%
2.57 - 7.06
0.94% - 1.63%
Stock Options – Generally, stock option awards vest ratably each year on the anniversary date over a 3 to 5-year period,
have an exercise term of 10 years and any vested options must be exercised within 90 days of the employee leaving the
Company. The compensation cost of option awards is charged to expense based upon the graded-vesting method over the
vesting periods applicable to the option awards. The graded-vesting method provides for vesting of portions of the overall
awards at interim dates and results in greater expense in earlier years than the straight-line method.
When options are granted, we calculate the fair value of common and Class B-1 Common Stock options using multiple
Black-Scholes option valuation models. Expected volatilities are based upon a selection of public guideline companies. The
risk-free rate was based upon U.S. Treasury rates.
Key assumptions used in the valuation models were as follows for the years ended December 31:
Expected volatility
Expected dividend yield rate
Weighted average term (in years)
Weighted average grant date fair value
Risk free rate
2018
2017
2016
34.81% - 39.68% 37.36% - 42.83% 43.57% - 52.72%
0.00%
5.50 - 6.50
$12.98
0.00%
5.50 - 6.50
$11.51
0.00%
5.50 - 7.50
$17.84
2.04% - 2.96%
1.83% - 2.19%
1.47% - 1.77%
F-44
The following table represents stock option activity:
Weighted
Average
Exercise Price
Per Share
Aggregate
Intrinsic
Value
(millions)
Shares
Weighted
Average
Remaining
Contract
Term in Years
Outstanding as of January 1, 2016
5,288,096
$
Granted
Exercised
Forfeited
Balance as of December 31, 2016
Issued upon conversion of class B-1 common stock
Granted
Exercised
Forfeited
367,400
(245,014)
(253,506)
5,156,976
2,494,553
505,122
(2,781,055)
(448,928)
$
Balance as of December 31, 2017
4,926,668
$
Granted
Exercised
Forfeited
Balance as of December 31, 2018
Exercisable as of December 31, 2018
838,912
(1,548,484)
(884,391)
3,332,705
1,898,585
$
$
19.06
37.12
19.91
16.82
20.40
11.13
27.78
11.67
15.01
14.56
32.16
13.79
18.80
18.22
13.37
$
$
7.2
5.8
6.3
5.0
RSUs – RSUs are subject to the continued service of the recipient through the vesting date, which is generally 12 to 60
months from issuance. Once vested, the recipient will receive one share of common stock for each restricted stock unit.
Prior to the IPO, the grant-date fair value per share used for RSUs was determined using the aggregate value of our
common equity, as determined by a third-party valuation firm, as of the most recent calendar quarter-end and applying a
10% discount based upon reflecting the differential economic rights and preferences of the Preferred or the ESOP common
shares relative to the common shares, with that amount rounded down to the nearest whole percent. After the IPO, the
grant-date fair value per share used for RSUs was determined using the closing price of our common stock on the NYSE
on the date of the grant. We apply this grant-date fair value per share to the total number of shares that we anticipate will
fully vest and amortize the fair value to compensation expense over the vesting period using the straight-line method. In
February 2018, we granted 314,267 RSUs to our Chairman of the Board and interim CEO which vested daily through the
first anniversary of the date of grant, subject to continuous employment. On June 30, 2018, 208,364 RSUs were forfeited at
the end of his interim service.
The following table represents RSU activity:
Outstanding January 1, 2017
Granted - non-employee directors
Granted - employee
Vested
Forfeited
Balance as of December 31, 2017
Granted - non-employee directors
Granted - employee
Vested
Forfeited
$
$
Shares
385,220
23,245
342,727
(175,110)
(13,714)
562,368
341,983
424,944
(124,560)
(530,867)
Balance as of December 31, 2018
673,868
$
F-45
Weighted
Average
Grant-Date
Fair Value
Per Share
22.00
31.22
28.73
18.40
26.02
27.51
31.62
27.15
25.21
29.69
28.07
PSUs – In the first quarter of 2018, we issued PSUs pursuant to the Omnibus Equity Plan. The PSUs are subject to
continued employment of the recipient through the vesting date, which is on the third anniversary of the grant. Once
vested, the recipient will receive one share of common stock for each vested PSU.
The number of PSUs that vest is determined by a payout factor consisting of equally weighted performance measures of
Adjusted EBITDA and free cash flow and is adjusted based upon a market condition measured by our relative total
shareholder return (“TSR”) as compared to the TSR of the Russell 3000 index. The fair value of the award is estimated
using a Monte Carlo simulation approach in a risk-neutral framework to model future stock price movements based on
historical volatility, risk free rates of return and correlation matrix.
The following table represents PSU activity for the awarded shares at target performance measures.
Outstanding as of December 31, 2017
Granted - employee
Forfeited
Balance as of December 31, 2018
Note 24. Impairment and Restructuring Charges
Weighted
Average
Grant-Date
Fair Value
Per Share
—
31.60
33.31
31.41
Shares
—
193,763
(19,093)
174,670
$
$
Closure costs and impairment charges for operations not qualifying as discontinued operations are classified as impairment
and restructuring charges in our consolidated statements of operations.
In 2018, we recorded $7.2 million of charges in Australia related to plant consolidations and personnel restructuring. In
Europe, we recorded $6.1 million of charges primarily related to personnel restructuring. In North America, we recorded
$6.1 million of charges related to plant consolidations and personnel restructuring as well as exiting two leased corporate
buildings offset by $2.1 million of reduction in expense due to a favorable tax ruling related to a prior divestiture.
In 2017, we recorded $6.8 million of restructuring charges in the U.S. mostly related to a reduction in work force in the
fourth quarter. In Europe we recorded charges of $3.6 million related to two building impairments and various personnel
restructuring. In Canada we recorded charges of $2.7 million mostly related to consolidation of operations.
In 2016, we recorded $6.8 million of impairment and restructuring charges in Europe, including $3.8 million related to
restructuring and plant closures of a recent acquisition and $3.0 million related to various personnel restructuring across
Europe. In Australasia, we recorded charges of $2.4 million mostly related to a site closure and restructuring of a recent
acquisition. In North America, we recorded $4.6 million of charges including $2.5 million of various termination benefits
and $2.1 million of other impairment and restructuring charges.
The table below summarizes the amounts included in impairment and restructuring charges in the accompanying
consolidated statements of operations:
(amounts in thousands)
Closed operations
Continuing operations
Impairments
Restructuring charges, net of fair value adjustment gains
Total impairment and restructuring charges
2018
2017
2016
$
$
$
360
870
1,230
16,098
17,328
$
$
$
1,479
—
1,479
11,577
13,056
$
$
$
1,778
1,203
2,981
10,866
13,847
Short-term restructuring accruals are recorded in accrued expenses and totaled $6.6 million and $7.2 million as of
December 31, 2018 and December 31, 2017, respectively. Long-term restructuring accruals are recorded in deferred credits
and other liabilities and totaled $2.0 million and $3.9 million as of December 31, 2018 and December 31, 2017,
respectively.
F-46
The following is a summary of the restructuring accruals recorded and charges incurred:
(amounts in thousands)
December 31, 2018
Severance and sales restructuring costs
Disposal of property and equipment
Lease obligations and other
Total
December 31, 2017
Severance and sales restructuring costs
Disposal of property and equipment
Lease obligations and other
Total
December 31, 2016
Severance and sales restructuring costs
Disposal of property and equipment
Lease obligations and other
Total
Note 25. Interest Expense
Beginning
Accrual
Balance
Additions
Charged to
Expense
Payments
or
Utilization
Ending
Accrual
Balance
$
$
$
$
$
$
7,232
$
11,767
$
—
3,807
11,039
836
—
4,183
5,019
5,424
—
3,083
$
$
$
$
289
4,043
16,099
9,492
190
1,895
11,577
7,448
(71)
3,489
$
$
$
$
8,507
$
10,866
$
(13,646) $
(289)
(4,563)
(18,498) $
(3,096) $
(190)
(2,271)
(5,557) $
(12,036) $
71
(2,389)
(14,354) $
5,353
—
3,287
8,640
7,232
—
3,807
11,039
836
—
4,183
5,019
Interest expense is net of capitalized interest. Capitalized interest incurred during the construction phase of significant
property and equipment additions totaled $1.8 million in 2018, $0.9 million in 2017 and $1.7 million in 2016. We made
interest payments of $68.9 million in 2018, $66.1 million in 2017 and $73.9 million in 2016. Interest expense also includes
debt issuance costs that are amortized using the effective interest method. We allocated interest expense to discontinued
operations of $0.6 million in 2016.
Note 26. Other (Income) Expense
The table below summarizes the amounts included in other (income) expense in the accompanying consolidated statements
of operations:
(amounts in thousands)
Foreign currency (gains) losses
Legal settlement income
Pension benefit expense
Other items
Settlement of contract escrow
Total other (income) expense
2018
2017
2016
$
$
(10,196) $
(7,541)
6,975
(2,208)
—
(12,970) $
10,426
(2,456)
12,616
(2,482)
(2,247)
15,857
$
$
3,580
(9,671)
12,738
(5,237)
—
1,410
In accordance with our adoption of ASU 2017-07, prior year balances have been revised with the activity being adjusted
through the “Pension benefit expense” line above. See detail in Note 1 - Description of Company and Summary of
Significant Accounting Policies.
In July 2016, we entered into a confidential settlement agreement on a commercial matter in our North America segment
that originated in 2011, pursuant to which we received $8.4 million. We recorded the gain associated with this settlement in
other income in the accompanying consolidated statements of operations.
Prior period balances in the table above have been reclassified to conform to current-period presentation.
F-47
Note 27. Derivative Financial Instruments
All derivatives are recorded as assets or liabilities in the consolidated balance sheets at their respective fair values. For
derivatives that qualify for hedge accounting, changes in the fair value related to the effective portion of the hedge are
recognized in earnings at the same time as either the change in fair value of the underlying hedged item or the effect of the
hedged item’s exposure to the variability of cash flows. Changes in fair value related to the ineffective portion of the hedge
are recognized immediately in earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting,
or fail to meet the criteria thereafter, are also recognized in the consolidated statements of operations. See Note 28 - Fair
Value Measurements for additional information on the fair value of our derivative assets and liabilities.
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. To mitigate the exposure, we enter into a variety of foreign currency derivative contracts, such as forward
contracts, option collars, and cross-currency hedges. We use foreign currency derivative contracts, with a total notional
amount of $127.3 million, to manage the effect of exchange fluctuations on forecasted sales, purchases, acquisitions,
inventory and capital expenditures and certain intercompany transactions that are denominated in foreign currencies. We
use foreign currency derivative contracts, with a total notional amount of $72.1 million, to hedge the effects of translation
gains and losses on intercompany loans and interest. We also use foreign currency derivative contracts, with a total notional
amount of $185.3 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 do not use derivative financial instruments
for trading or speculative purposes. Hedge accounting has not been elected for any foreign currency derivative contracts.
We record mark-to-market changes in the values of these derivatives in other (income) expense. We recorded mark-to-
market gains of $7.8 million at December 31, 2018 and losses of $6.3 million, and $0.9 million at December 31, 2017, and
2016, respectively.
Interest rate derivatives – We are exposed to interest rate risk in connection with our variable rate long-term debt. During
the fourth quarter of 2014, we entered into interest rate swap agreements to manage this risk. These interest rate swaps
were set to mature in September 2019 with half of the $488.3 million amortized aggregate notional amount having become
effective in September 2015, and the other half having become effective in September 2016. On July 1, 2015, we amended
our Term Loan Facility, and we received an additional $480.0 million in long-term borrowings. In conjunction with the
issuance of the incremental term loan debt, we entered into additional interest rate swap agreements to manage our
increased exposure to the interest rate risk associated with variable rate long-term debt. The additional interest rate swaps
were set to mature in September 2019 with half of the $426.0 million aggregate notional amount having become effective
in June 2016 and the other half having become effective in December 2016. In conjunction with the December 2017
refinancing of the Term Loan Facility (see Note 15 - Long-Term Debt), we terminated all of the interest rate swaps which
had outstanding notional amounts aggregating to $914.3 million and recorded a loss on termination of $3.6 million in
consolidated other comprehensive income (loss), which will be amortized as interest expense over the life of the original
interest rate swaps. The unamortized, pre-tax balance of this loss recorded in consolidated other comprehensive income
(loss) was $1.3 million and $3.4 million at December 31, 2018 and 2017, respectively.
The interest rate swap agreements were designated as cash flow hedges and, prior to their termination in December 2017,
effectively changed the LIBOR-based portion of the interest rate (or “base rate”) on a portion of the debt outstanding under
our Term Loan Facility to the weighted average fixed rates per the time frames below:
(amounts in thousands)
December 2015 - June 2016
June 2016 - September 2016
September 2016 - December 2016
December 2016 - December 2017
(1) Aggregate notional amounts in effect during the period shown.
Notional (1)
$273,000
$486,000
$759,000
$914,250
Weighted
Average Rate
1.997%
2.054%
2.161%
2.188%
We recorded $2.1 million, $8.9 million and $5.0 million of interest expense deriving from the interest rate swaps during the
years ended December 31, 2018, 2017, and 2016 respectively.
F-48
The agreements with our counterparties contained a provision where 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 on any of our indebtedness
greater than specified thresholds. These agreements also contained 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:
(amounts in thousands)
Derivatives not designated as hedging instruments:
Balance Sheet Location
2018
2017
Derivative assets
Foreign currency forward contracts
Other current assets
$
8,234
$
2,235
(amounts in thousands)
Derivatives not designated as hedging instruments:
Derivatives liabilities
Balance Sheet Location
2018
2017
Foreign currency forward contracts
Accrued expenses and other current liabilities
$
1,161
$
2,905
Note 28. 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. There are three levels of inputs that 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)
Assets:
Cash equivalents
Derivative assets, recorded in other current
assets
Pension plan assets:
Cash and short-term investments
U.S. Government and agency obligations
Corporate and foreign bonds
Asset-backed securities
Equity securities
Mutual funds
Carrying
Amount
Total
Fair Value
Level 1
Level 2
Level 3
Assets
measured
at NAV(a)
2018
$
30
$
30
$
— $
30
$
— $
8,234
8,234
7,254
24,622
90,490
—
22,378
60,099
7,254
24,622
90,490
—
22,378
60,099
—
—
24,622
—
—
22,378
—
—
8,234
7,254
—
90,490
—
—
60,099
—
—
—
—
—
—
—
—
—
Common and collective funds
110,596
110,596
Liabilities:
Senior notes
Term loans
Derivative liabilities, recorded in accrued
expenses and deferred credits
$ 800,000
$ 692,000
$
— $ 692,000
$
— $
474,058
455,545
1,161
1,161
—
—
455,545
1,161
—
—
F-49
—
—
—
—
—
—
—
—
110,596
—
—
—
—
—
—
—
—
—
—
—
100,697
—
—
—
(amounts in thousands)
Assets:
Cash equivalents
Derivative assets, recorded in other current
assets
Pension plan assets:
Cash and short-term investments
U.S. Government and agency obligations
Corporate and foreign bonds
Asset-backed securities
Equity securities
Mutual funds
Carrying
Amount
Total
Fair Value
Level 1
Level 2
Level 3
Assets
measured
at NAV(a)
2017
$
44,091
$
44,091
$
— $
44,091
$
— $
2,235
2,235
17,859
25,122
98,432
839
32,444
80,352
17,859
25,122
98,432
839
32,444
80,352
—
—
25,122
—
—
32,444
—
—
2,235
17,859
—
98,432
839
—
80,352
—
—
—
—
—
—
—
—
—
Common and collective funds
100,697
100,697
Liabilities:
Senior notes
Term loans
Derivative liabilities, recorded in accrued
expenses and deferred credits
$ 800,000
$ 807,000
$
— $ 807,000
$
— $
440,568
442,218
2,905
2,905
—
—
442,218
2,905
—
—
(a)
Certain pension assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not
been classified in the fair value hierarchy. These include investments in large cap equity and commingled real estate funds.
Redemption of these funds is not subject to restriction.
Derivative assets and liabilities reported in level 2 include foreign currency contracts. See Note 27- Derivative Financial
Instruments for additional information about our derivative assets and liabilities.
The non-financial assets that are measured at fair value on a non-recurring basis are presented below:
(amounts in thousands)
Continuing operations
Total
(amounts in thousands)
Closed operations
Total
Note 29. Commitments and Contingencies
Carrying
Value
$
$
48
48
Total
Fair Value
48
$
$
48
$
2018
Level 1
Level 2
Level 3
Total
Losses
— $
— $
48
48
$
$
175
175
—
— $
2017
Carrying
Value
$
$
914
914
Total
Fair Value
914
$
$
914
$
$
Level 1
Level 2
Level 3
Total
Losses
— $
— $
— $
— $
914
914
$
$
1,473
1,473
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. Legal judgments and estimated settlements have been included in accrued expenses in the
accompanying consolidated balance sheets. 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 assess the potential liability related to pending litigation and claims 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.
In the opinion of management and based on the liability accruals provided, other than as described below, as of
December 31, 2018, there are no current proceedings or litigation matters involving the Company or its property that
F-50
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 – 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 have given 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 (“Eastern District of Virginia”). The complaint alleges 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 alleges that our acquisition of CMI substantially lessened competition in the molded door skins market. The
complaint seeks 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 verdict awarded Steves $12.2 million for past damages under both the
Clayton Act and breach of contract claims and $46.5 million in future lost profits under the Clayton Act claim.
In October 2018, the presiding judge vacated a portion of the jury verdict, reducing the contract damages award by $2.2
million. We expect that Steves will be required to elect to recover its past damages either under the Clayton Act claims
or the contract claims, but not both. If a judgment is entered under the Clayton Act, any damages awarded will be
trebled. In addition, if a judgment is entered under either theory in accordance with the verdict, Steves will be entitled
to an award of attorney’s fees, which amounts have not yet been quantified. We asserted a position that, because future
lost profits were awarded, Steves is not permitted to pursue its claim for divestiture of certain assets acquired in the
CMI acquisition. An evidentiary hearing on equitable remedies, including divestiture, was held in April 2018. On
October 5, 2018, the presiding judge issued an opinion finding that a remedy of divestiture is an appropriate remedy. On
December 7, 2018, the presiding judge granted in part and denied in part Steves’ request for declaratory relief. On
December 20, 2018, the presiding judge entered a Final Judgment Order, granting divestiture and conditionally
awarding monetary damages in the event the divestiture order is overturned. Steves moved to amend on January 11,
2019.
JELD-WEN has filed a renewed motion for judgment as a matter of law and a motion for a new trial, and we intend to
vigorously oppose entry of an adverse judgment, and to appeal any adverse judgment that may be entered. We continue
to believe that Steves’ claims lack merit, Steves’ damages calculations are speculative and excessive, and Steves is not
entitled in any event to the extraordinary remedy of divestiture. We believe that multiple pretrial and trial rulings were
erroneous and improperly limited the Company’s defenses, and that judgment in accordance with the verdict would be
improper for several reasons under applicable law. However, based upon the recent rulings described above, in the third
quarter of 2018 the Company recorded a charge of $76.5 million associated with this loss contingency included in
SG&A in the accompanying consolidated statement of operations. The charge reflects the judgment anticipated to be
entered against the Company, including the trebling of $12.2 million of past damages under the Clayton Act, and
estimated legal fees. The charge does not include any amount for lost profits or divestiture. Steves has indicated its
intention to elect divestiture, rather than lost profits. Any judgment entered that awards lost profits, if ultimately upheld
after exhaustion of our appellate remedies, could have a material adverse effect on our financial position, operating
results, or cash flows, particularly for the reporting period in which a loss is recorded. Because the operations acquired
from CMI have been fully integrated into the Company’s other operations, divestiture of those operations would be
difficult if not impossible and, therefore, it is not possible to estimate the cost of any final divestiture order or the extent
to which such an order would have a material adverse effect on our financial position, operating results or cash flows.
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 $1.2 million. The presiding judge has entered a judgment in our favor for those
amounts. On November 30, 2018, the presiding judge denied our request for a permanent injunction. Our other claims
remain pending in Bexar County, Texas.
F-51
In Re: Interior Molded Doors Antitrust Litigation - On October 19, 2018, Grubb Lumber Company, on behalf of itself
and others similarly situated, filed a putative class action lawsuit against us and one of our competitors in the doors
market, Masonite Corporation (“Masonite”) in the Eastern District of Virginia. We subsequently received additional
complaints from and on behalf of direct and indirect purchasers of interior molded doors. The suits have been
consolidated into two separate actions, a Direct Purchaser Action and an Indirect Purchaser Action. The suits allege that
Masonite and we violated Section 1 of the Sherman Act, and in the Indirect Purchaser Action, related state law antitrust
and consumer protection laws, by engaging in a scheme to artificially raise, fix, maintain, or stabilize the prices of
interior molded doors in the United States. The complaints seek unquantified ordinary and treble damages, declaratory
relief, interest, costs and attorneys’ fees. The Company believes the claims lack merit and intends to vigorously defend
against the actions. At this early stage of the proceedings, we are unable to conclude that a loss is probable or to
estimate the potential magnitude of any loss in the matters, although a loss 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 $3.0 million and $250.0
million for domestic product liability risk and exposures between $0.5 million and $250.0 million for auto, general
liability, personal injury and workers’ compensation. We have no stop-gap coverage on claims covered by our self-
insured domestic 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 December 31, 2018 and December 31, 2017, our
accrued liability for self-insured risks was $73.8 million and $73.3 million respectively.
Indemnifications – At December 31, 2018, 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 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.
Performance Bonds and Letters of Credit – At times, we are required to provide letters of credit, surety bonds or
guarantees to customers, vendors and others. 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 outstanding performance bonds and stand-by
letters of credit were as follows:
(amounts in thousands)
Self-insurance workers’ compensation
Environmental
Liability and other insurance
Other
Total outstanding performance bonds and stand-by letters of credit
December 31,
2018
December 31,
2017
$
$
22,312
$
14,552
18,988
10,870
66,722
$
21,072
14,452
12,900
6,650
55,074
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 in
the accompanying consolidated balance sheets and totaled $0.5 million at both December 31, 2018 and December 31,
2017. Long-term environmental liabilities are recorded in deferred credits and other liabilities in the accompanying
consolidated balance sheets. No long-term environmental liabilities were recorded at December 31, 2018 and $0.1
million were recorded at December 31, 2017.
F-52
Everett, Washington WADOE Action - In 2008, we entered into an Agreed Order with the WADOE to assess historic
environmental contamination and remediation feasibility at our former manufacturing site in Everett, Washington. As
part of this agreement, we also agreed to develop a CAP, arising from the feasibility assessment. We are currently
working with WADOE to finalize our RI/FS (Remedial Investigation and Feasibility Study), and, once final, we will
develop the CAP. We estimate the remaining cost to complete our RI/FS and develop the CAP at $0.5 million, which
we have fully accrued. However, because we cannot at this time we cannot reasonably estimate the cost associated with
any remedial actions we would be required to undertake and have not provided accruals for any remedial action in our
accompanying consolidated financial statements.
Towanda, Pennsylvania Consent Order - In 2015, 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
2013, by using it as fuel for a boiler at that site. The COA replaced a 1995 Consent Decree between CMI’s predecessor
Masonite, Inc. and PaDEP. Under the COA, we are required to achieve certain periodic removal objectives and
ultimately remove the entire pile by August 31, 2022. There are currently $11.0 million in bonds posted in connection
with these obligations. If we are unable to remove this pile by August 31, 2022, 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 at this site decrease and we burn less fuel than currently anticipated, we may not be able to meet such
deadlines.
Service Agreements – In February 2015, we entered into a strategic servicing agreement with a third-party vendor to
identify and execute cost reduction opportunities. The agreement provided for a tiered fee structure directly tied to cost
savings realized. This contract terminated pursuant to its own terms on December 31, 2015, and we made a final
payment of $6.3 million on January 2, 2018. We expect no further costs related to this issue.
Employee Stock Ownership Plan – We have historically provided cash to our U.S. ESOP in order to fund required
distributions to participants through the repurchase of shares of our common stock. Following our February 2017 IPO,
the value of a share of Common Stock held through the ESOP is now based on our public share price. We do not
anticipate that we will fund future distributions.
Purchase Obligations - As of December 31, 2018, we have purchase obligations of $6.5 million due in 2019 and $2.5
million due in 2020-2021. These purchase obligations are primarily relating to raw materials purchase agreements and
software hosting services. Purchase obligations are defined as purchase agreements that are enforceable and legally
binding and that specify all significant terms, including quantity, price, and the approximate timing of the transaction.
Lease Commitments – We have various operating lease agreements primarily for facilities, manufacturing equipment,
airplanes and vehicles. These obligations generally have remaining non-cancelable terms. Minimum annual lease
payments are as follows (amounts in thousands):
2019
2020
2021
2022
2023
Thereafter
$
Continuing
Operations
49,128
43,794
30,885
24,020
19,352
33,943
$
201,122
Rent expense from continuing operations was $63.7 million in 2018, $50.0 million in 2017 and $45.8 million in 2016.
Rent expense from discontinued operations was $0.1 million in 2016. There was no rent expense from discontinued
operations in 2018 or 2017.
F-53
Note 30. Employee Retirement and Pension Benefits
U.S. Defined Benefit Pension Plan
Certain U.S. hourly employees participate in our defined benefit pension plan. The plan is not open to new employees.
Beginning in 2017, we moved from utilizing a weighted average discount rate, which was derived from the yield curve
used to measure the pension benefit obligation at the beginning of the period, to a spot rate yield curve to estimate the
pension benefit obligation and net periodic benefits costs. The change in estimate provides a more accurate measurement of
service and interest cost by applying the spot rate that could be used to settle each projected cash flow individually. This
change in estimate did not have a material effect on net periodic benefit costs for the years ended December 31, 2018 or
2017.
The components of net periodic benefit cost are summarized as follows for the years ended December 31:
(amounts in thousands)
Components of pension benefit expense - U.S. benefit plan
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial pension loss
Pension benefit expense
Discount rate
Expected long-term rate of return on assets
Compensation increase rate
2018
2017
2016
$
$
4,170
$
3,870
$
13,180
(20,769)
9,314
13,371
(17,940)
12,680
5,895
$
11,981
$
3,320
16,387
(19,990)
12,264
11,981
3.47%
6.25%
N/A
3.94%
6.25%
N/A
4.25%
7.00%
N/A
The new mortality tables published by the Society of Actuaries in 2014 were adopted in 2014 and represent our best
estimate of future experience for the base mortality table. The Society of Actuaries has released annual updates to the
mortality improvement projection scale that was first released in 2014, with the most recent annual update being Scale
MP-2018. We adopted the use of Scale MP-2018 as of December 31, 2018 as it represents our best estimate of future
mortality improvement projection experience as of the measurement date.
We developed the discount rate based on the plan’s expected benefit payments using the Willis Towers Watson RATE:Link
10:90 Yield Curve. Based on this analysis, we selected a 4.27% discount rate for our projected benefit obligation. As the
discount rate is reduced or increased, the pension obligation would increase or decrease, respectively, and future pension
expense would increase or decrease, respectively.
In the fourth quarter of 2016, we corrected through other comprehensive income a $3.7 million increase to our pension
liability for a change in the retirement age assumption for vested terminated participants based upon a 2015 experience
study. The change in retirement age should have been reflected in our 2015 actuarial estimate and was immaterial to the
current and prior periods.
Pension benefit expense from amortization of net actuarial pension loss is estimated to be $8.9 million in 2019.
We maintain policies for investment of pension plan assets. The policies set forth stated objectives and a structure for
managing assets, which includes various asset classes and investment management styles that, in the aggregate, are
expected to produce a sufficient level of diversification and investment return over time and provide for the availability of
funds for benefits as they become due. The policies also provide guidelines for each investment portfolio that control the
level of risk assumed in the portfolio and ensure that assets are managed in accordance with stated objectives. The plan
invests primarily in publicly-traded equity and debt securities as directed by the plan’s investment committee. The pension
plan’s expected return assumption is based on the weighted average aggregate long-term expected returns of various
actively managed asset classes corresponding to the plan’s asset allocation. We have selected an expected return on plan
assets based on a historical analysis of rates of return, our investment mix, market conditions and other factors. The fair
value of plan assets decreased in 2018 due primarily to investment losses and benefit payments in excess of our
discretionary contribution and increased in 2017 due primarily to investment returns in excess of benefit payments and our
discretionary contribution.
F-54
(amounts in thousands)
Change in fair value of plan assets - U.S. benefit plan
Balance as of January 1,
Actual return on plan assets
Company contribution
Benefits paid
Administrative expenses paid
Balance at period end
The plan’s investments as of December 31 are summarized below:
Summary of plan investments - U.S. benefit plan
Equity securities
Debt securities
Other
2018
2017
$
$
339,751
(20,466)
4,125
(15,965)
(4,682)
302,763
$
295,995
52,559
10,000
(14,948)
(3,855)
$
339,751
% of Plan Assets
2018
7.4
38.0
54.6
100.0
2017
7.3
35.3
57.4
100.0
The plan’s projected benefit obligation is determined by using weighted-average assumptions made on December 31, of
each year as summarized below:
(amounts in thousands)
Change in projected benefit obligation - U.S. benefit plan
Balance as of January 1,
Service cost
Interest cost
Actuarial loss
Benefits paid
Administrative expenses paid
Balance at period end
Discount rate
Compensation increase rate
2018
2017
$
435,696
$
405,310
4,170
13,180
(48,463)
(15,965)
(4,682)
383,936
$
3,870
13,371
31,948
(14,948)
(3,855)
$
435,696
4.27%
N/A
3.47%
N/A
As of December 31, 2018, the plan’s estimated benefit payments for the next ten years are as follows (amounts in
thousands):
2019
2020
2021
2022
2023
2024-2028
$
17,623
18,376
19,232
20,002
20,667
111,159
The company made cash contributions to the plan of $4.1 million and $10.0 million for the year ended December 31, 2018
and 2017, respectively. During fiscal year 2019, we expect to make cash contributions to the plan of approximately $7.7
million.
F-55
The plan’s accumulated benefit obligation of $383.9 million is determined by taking the projected benefit obligation and
removing the impact of the assumed compensation increases. The plan’s funded status as of December 31 is as follows:
(amounts in thousands)
Unfunded pension liability - U.S. benefit plan
Projected benefit obligation at end of period
Fair value of plan assets at end of period
Unfunded pension liability
Current portion
Long-term unfunded pension liability
2018
2017
383,936
(302,763)
81,173
—
$
435,696
(339,751)
95,945
—
81,173
$
95,945
$
$
The current portion of the unfunded pension liability is recorded in accrued payroll and benefits and is equal to the
expected employer contributions in the following year.
Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December
31 are as follows:
(amounts in thousands)
Accumulated other comprehensive income (loss) - U.S. benefit plan
Net actuarial pension loss beginning of period
Amortization of net actuarial loss
Net (gain) loss occurring during year
Net actuarial pension loss at end of period
Tax benefit
Net actuarial pension loss at end of period, net of tax
2018
2017
2016
112,632
(9,314)
(7,228)
96,090
(5,344)
90,746
$
$
127,982
(12,680)
(2,670)
112,632
(9,583)
103,049
$
$
130,052
(12,264)
10,194
127,982
(15,041)
112,941
$
$
Non-U.S. Defined Benefit Plans – We have several other defined benefit plans located outside the U.S. that are country
specific. Some of these plans remain open to participants and others are closed. The expenses related to these plans are
recorded in the consolidated statements of operations and are determined by using weighted-average assumptions made on
January 1 of each year as summarized below for the years ended December 31.
During 2018, we discovered that certain expenses and benefit obligations related to defined benefit plans in Europe had
been omitted from the certain prior year disclosures. The disclosures below have been revised to include these plans for the
years ended December 31, 2017 and 2016. The revision had no impact on the consolidated balance sheets, statements of
operations or cash flows as there was no change in the amounts recorded.
(amounts in thousands)
Components of pension benefit expense - Non-U.S. benefit plans
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial pension loss
Pension benefit expense
Discount rate
Expected long-term rate of return on assets
Compensation increase rate
2018
2017
2016
$
$
2,070
$
1,668
$
1,417
(833)
189
1,272
(700)
145
2,843
$
2,385
$
1,341
1,218
(714)
351
2,196
0.2% - 9.0%
0.8% - 7.2%
0.7% - 8.3%
0.0% - 5.3%
0.0% - 5.7%
0.0% - 5.3%
0.5% - 7.0%
0.5% - 7.0%
0.5% - 7.0%
F-56
Non-U.S. pension benefit expenses from amortization of net actuarial pension losses are estimated to be $0.7 million in
2019.
(amounts in thousands)
Change in fair value of plan assets - Non-U.S. benefit plans
Balance as of January 1,
Actual return on plan assets
Company contribution
Benefits paid
Administrative expenses paid
Cumulative translation adjustment
Balance at period end
The investments of the non-U.S. plans as of December 31 are summarized below:
Summary of plan investments - Non-U.S. benefit plans
Equity securities
Debt securities
Other
2018
2017
15,994
(33)
250
(2,046)
(25)
(1,464)
12,676
$
$
13,596
1,232
277
(198)
(49)
1,136
15,994
$
$
% of Plan Assets
2018
48.4
20.8
30.8
100.0
2017
48.3
22.0
29.7
100.0
The projected benefit obligation for the non-U.S. plans is determined by using weighted-average assumptions made on
December 31, of each year as summarized below:
(amounts in thousands)
Change in projected benefit obligation - Non-U.S. benefit plans
Balance as of January 1,
Pension obligation acquired
Service cost
Interest cost
Actuarial loss
Benefits paid
Administrative expenses paid
Cumulative translation adjustment
Balance at period end
Discount rate
Compensation increase rate
2018
2017
$
41,406
$
35,113
4,891
2,242
956
776
(4,481)
(25)
(2,962)
42,803
$
—
1,683
1,251
1,250
(1,143)
(49)
3,301
41,406
$
0.2% - 3.1%
0.8% - 5.1%
0.5% - 2.5%
0.5% - 2.8%
As of December 31, 2018, the estimated benefit payments for the non-U.S. plans over the next ten years are as follows
(amounts in thousands):
2019
2020
2021
2022
2023
2024-2028
$
2,600
2,386
2,849
2,476
2,788
68,462
The accumulated benefit obligations of $32.5 million for the non-U.S. plans are determined by taking the projected benefit
obligation and removing the impact of the assumed compensation increases. We expect to contribute $10.6 million to the
non-U.S. plans in 2019.
F-57
The funded status of these plans as of December 31 are as follows:
(amounts in thousands)
Unfunded pension liability - Non-U.S. benefit plans
Projected benefit obligation at end of period
Fair value of plan assets at end of period
Net pension liability
Long-term unfunded pension liability
Current portion
Total unfunded pension liability
Total overfunded pension liability
2018
2017
42,803
(12,676)
30,127
26,349
5,295
31,644
1,517
$
$
$
$
$
41,406
(15,994)
25,412
20,641
6,674
27,315
1,903
$
$
$
$
$
The current portion of the unfunded pension liability is recorded in accrued payroll and benefits in the accompanying
consolidated balance sheets and is equal to the expected employer contributions in the following year. The overfunded
pension liability is recorded in long-term other assets in the accompanying consolidated balance sheets.
Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December
31 are as follows:
(amounts in thousands)
Accumulated other comprehensive income (loss) - Non-U.S. benefit plans
Net actuarial pension loss beginning of period
Amortization of net actuarial loss
Net gain occurring during year
Cumulative translation adjustment
Net actuarial pension loss at end of period
Tax benefit
Net actuarial pension loss at end of period, net of tax
2018
2017
2016
7,359
(1,442)
1,462
71
7,450
(1,911)
5,539
$
$
6,781
(149)
742
(15)
7,359
(1,886)
5,473
$
$
5,160
(10)
1,621
10
6,781
(1,785)
4,996
$
$
Other Defined Contribution Plans –We have several other defined contribution plans located outside the U.S. that are
country specific. Other plans that are characteristically defined contribution plans have accrued liabilities of $2.6 million
and $2.1 million, respectively, at December 31, 2018 and December 31, 2017. The total compensation expense for non-
U.S. defined contribution plans was $27.0 million in 2018, $23.8 million in 2017 and $23.3 million in 2016.
F-58
Note 31. Supplemental Cash Flow Information
(amounts in thousands)
Cash Investing Activities:
Change in notes receivable
Issuances of notes receivable
Cash received on notes receivable
Non-cash Investing Activities:
Property, equipment and intangibles purchased in accounts payable
Property and equipment purchased for debt
Notes receivable and accrued interest from employees and directors
settled with return of JWH stock
Customer accounts receivable converted to notes receivable
2018
2017
2016
$
$
$
(77) $
351
274
$
(61) $
2,052
1,991
$
6,961
$
15,099
$
32,262
—
110
791
183
393
(68)
1,035
967
1,340
1,438
—
1,276
Cash Financing Activities:
Proceeds from issuance of new debt, net of discount
$
38,823
$
1,240,000
$
374,063
Borrowings on long-term debt
Payments of long-term debt
Payments of debt issuance and extinguishment costs, including
underwriting fees
Change in long-term debt
Change in notes payable
Payments on notes payable
Non-cash Financing Activities:
Prepaid insurance funded through short-term debt borrowings
Shares surrendered for tax obligations for employee share-based
transactions in accrued liabilities
Accounts payable converted to installment notes
Other Supplemental Cash Flow Information:
Cash taxes paid, net of refunds
Cash interest paid
104,419
(72,422)
5,334
(1,618,641)
(352)
(16,358)
763
(16,844)
(8,146)
70,468
$
(389,665) $
349,836
—
—
(205)
(205)
(180)
(180)
2,757
$
2,662
2,954
7
12,886
569
—
—
—
$
$
$
$
46,295
$
22,532
$
68,892
66,060
26,797
73,920
F-59
Note 32. Quarterly Financial Data (unaudited)
Summarized quarterly financial data for the years ended December 31, 2018 and 2017 are as follows:
Statements of Operations Data:
Net revenues
Gross margin
Operating income
Income before taxes and equity earnings
Net income
Net income attributable to common shareholders
Mar. 31,
2018
Three Months Ended
Sep. 29,
Jun. 30,
2018
2018
(dollars in thousands)
Dec. 31,
2018
$
946,179
$
1,172,497
$
1,136,949
$
1,091,078
205,853
248,807
241,789
227,285
38,165
35,508
40,271
40,265
71,098
58,641
35,452
35,511
7,613
(2,721)
28,885
28,879
55,782
44,149
39,665
39,705
0.39
0.38
Net income per share basic
Net income per share diluted
$
$
0.38
0.37
$
$
0.34
0.33
$
$
0.28
0.27
$
$
Statements of Operations Data:
Net revenues(a)
Gross margin(b)
Operating income(c)
Income before taxes and equity earnings
Net income (loss)
Net (loss) income attributable to common shareholders
Apr. 1,
2017
Three Months Ended
Sep. 30,
Jul. 1,
2017
2017
(dollars in thousands)
Dec. 31,
2017
$
847,853
$
948,788
$
991,325
$
181,687
231,295
227,894
40,821
8,199
6,428
(4,034)
86,823
63,408
46,778
46,778
86,446
63,242
51,275
51,275
975,783
208,546
49,818
10,906
(93,690)
(93,690)
Net (loss) income per share basic
Net (loss) income per share diluted
$
$
(0.05) $
(0.05) $
0.45
0.43
$
$
0.49
0.47
$
$
(0.89)
(0.89)
(a)
(b)
(c)
As a result of our retrospective application of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost and to conform with current-period presentation of revenues, we reclassified certain
amounts in our statement of operations that were previously reported in our quarterly periods. These revisions were $66 for April
1, 2017, $52 for July 1, 2017, $(83) for September 30, 2017, $(220) for December 31, 2017.
As a result of our retrospective application of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost and to conform with current-period presentation of revenues, we reclassified certain
amounts in our statement of operations that were previously reported in our quarterly periods. These revisions were $322 for
April 1, 2017, $294 for July 1, 2017, $303 for September 30, 2017, $305 for December 31, 2017.
As a result of our retrospective application of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost and to conform with current-period presentation of revenues, we reclassified certain
amounts in our statement of operations that were previously reported in our quarterly periods. These revisions were $3,131 for
April 1, 2017, $3,103 for July 1, 2017, $3,111 for September 30, 2017, $4,495 for December 31, 2017.
During the fourth quarter of 2017, the Tax Act lowered our U.S. federal tax rate which reduced the valuation of our net
deferred tax assets, resulting in an additional tax expense of approximately $21.1 million. In addition, the Tax Act resulted
in an additional estimated foreign repatriation tax charge of $11.3 million. See Note 17 - Income Taxes for further detail.
F-60
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF JELD-WEN HOLDING, INC.
Parent Company Information
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except share and per share data)
Selling, general and administrative
Equity in earnings of subsidiaries
Other (income) expense
Interest income
Interest expense
Other
Income before taxes
Income tax (benefit) expense
Net income
Comprehensive income (loss):
Net income
Other comprehensive (loss) income, net of tax
Equity in comprehensive (loss) income of subsidiaries
Total other comprehensive (loss) income, net of tax
Total comprehensive income
For the Years Ended December 31,
2018
2017
2016
$
15,924
$
23,457
$
159,882
33,860
(36)
45
(411)
144,360
—
(35)
73
(426)
10,791
—
48,195
424,946
(57)
65
(438)
377,181
—
$
$
$
144,360
$
10,791
$
377,181
144,360
$
10,791
$
377,181
(49,476)
(49,476)
94,884
101,835
101,835
(34,194)
(34,194)
$
112,626
$
342,987
See Notes to Condensed Financial Information
F-61
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF JELD-WEN HOLDING, INC.
Parent Company Information
CONDENSED BALANCE SHEETS
(amounts in thousands, except share and per share data)
ASSETS
Current assets
Cash and cash equivalents
Receivable from subsidiaries
Other current assets
Total current assets
Property and equipment, net
Investment in subsidiaries
Long-term notes receivable
Total assets
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
Current payable to subsidiaries
Accrued expenses and other current liabilities
Notes payable and current maturities of long-term debt
Total current liabilities
Long-term debt
Total liabilities
Commitments and contingencies (Note 5)
Shareholders’ equity
December 31,
2018
December 31,
2017
$
2,289
$
3,830
$
$
1,000
20
3,309
3,202
909,712
147
—
15
3,845
3,363
885,070
147
916,370
$
892,425
37
$
2,649
75
757
3,518
205
3,723
744
2,126
227
981
4,078
963
5,041
Common Stock: 900,000,000 shares authorized, par value $0.01 per share, 101,310,862
shares outstanding as of December 31, 2018; 900,000,000 shares authorized, par value
$0.01 per share, 105,990,483 shares outstanding as of December 31, 2017
1,013
1,060
Additional paid-in capital
Retained earnings
Total shareholders’ equity
658,593
253,041
912,647
Total liabilities, convertible preferred shares, and shareholders’ equity
$
916,370
$
652,666
233,658
887,384
892,425
See Notes to Condensed Financial Information
F-62
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF JELD-WEN HOLDING, INC.
Parent Company Information
CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash used in operating activities:
Depreciation
Litigation settlement funded by subsidiaries
Income from subsidiaries investment
Other items, net
Payment to option holders funded by subsidiaries
Stock-based compensation
Net change in operating assets and liabilities, net of effect of acquisitions:
Receivables and payables from subsidiaries
Other assets
Accounts payable and accrued expenses
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES
Additional Investment in subsidiaries
Cash received on notes receivable
Proceeds from sales of subsidiaries' shares
Distribution received from subsidiaries
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Distributions paid
Payments of long-term debt
Employee note repayments
Common stock issued for exercise of options
Common stock repurchased
Proceeds from sale of common stock, net of underwriting fees and commissions
Payments associated with initial public offering
Net cash (used in) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash, cash equivalents and restricted cash, beginning
Cash, cash equivalents and restricted cash, ending
For the Years Ended December 31,
2018
2017
2016
$
144,360
$
10,791
$
377,181
161
—
139
—
139
—
(159,882)
(33,860)
(424,946)
538
—
191
—
15,052
19,785
123,366
(24,020)
(5)
(859)
(15)
(882)
122,731
(27,871)
—
—
—
1,500
1,500
—
(982)
39
201
(125,030)
—
—
(125,772)
(1,541)
3,830
(480,306)
17
30,181
1,000
(449,108)
—
(861)
26
1,029
—
480,306
(2,066)
478,434
1,455
2,375
$
2,289
$
3,830
$
(205)
20,739
22,464
(1,296)
(5,253)
1,092
(10,085)
—
16
32,605
382,400
415,021
(404,198)
(728)
223
1,187
—
—
—
(403,516)
1,420
955
2,375
See Notes to Condensed Financial Information
F-63
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF JELD-WEN HOLDING, INC.
Parent Company Information
NOTES TO CONDENSED FINANCIAL INFORMATION
Note 1. Description of Company and Summary of Significant Accounting Policies
Accounting policies adopted in the preparation of this condensed parent company only financial information are the
same as those adopted in the consolidated financial statements and described in Note 1 - Description of Company and
Summary of Significant Accounting Policies, of the consolidated financial statements included in this Form 10-K.
Nature of Business – JELD-WEN Holding, Inc., (the “Parent Company”) (a Delaware corporation) was formed by
Onex Partners III LP to effect the acquisition of JELD-WEN, Inc. and had no activities prior to the acquisition of JELD-
WEN, Inc. on October 3, 2011. The Parent Company is a holding company with no material operations of its own that
conducts substantially all of its activities through its direct subsidiary, JELD-WEN Inc. and its subsidiaries.
The accompanying condensed parent-only financial information includes the accounts of the Parent Company and, on
an equity basis, its direct and indirect subsidiaries and affiliates. Accordingly, these condensed financial statements have
been presented on a “parent-only” basis. Under a parent-only presentation, the Parent Company’s investments in
subsidiaries are presented under the equity method of accounting. These parent-only financial statements should be read
in conjunction with the JELD-WEN Holding, Inc. and subsidiaries consolidated financial statements included elsewhere
herein.
The condensed parent-only financial statements have been prepared in accordance with Rule 12-04, Schedule I of
Regulation S-X as the restricted net assets of the subsidiaries of the Company exceed 25% of the consolidated net assets
of the Company. The ability of the Company’s operating subsidiaries to pay dividends may be restricted due to the
terms of the subsidiaries’ financing arrangements (see Note 15 - Long-Term Debt to the consolidated financial
statements).
Property and Equipment – Property and equipment is recorded at cost. The cost of major additions and betterments
are capitalized and depreciated using the straight-line method over their estimated useful lives while replacements,
maintenance and repairs that do not improve or extend the useful lives of the related assets or adapt the property to a
new or different use are expensed as incurred.
Depreciation is generally provided over the following estimated useful service lives:
Buildings
Note 2. Property and Equipment, Net
(amounts in thousands)
Buildings
Total depreciable assets
Accumulated depreciation
Total property and equipment, net
15 - 45 years
2018
2017
3,632
$
3,632
(430)
3,202
$
3,636
3,636
(273)
3,363
$
$
Depreciation expense was $0.2 million in the years ended December 31, 2018, and $0.1 million in the years ended 2017 and 2016,
respectively.
F-64
Note 3. Long-Term Debt
(amounts in thousands)
Installment notes for stock
Current maturities of long-term debt
Maturities by year:
2019
2020
2021
2022
2023
Thereafter
2018 Year-end
Effective Interest Rate
3.50% - 5.50%
2018
2017
$
$
962
(757)
205
$
$
$
$
1,944
(981)
963
757
205
—
—
—
—
962
Installment Notes for Stock - We entered into installment notes for stock representing amounts due to former or retired employees
for repurchases of our stock that are payable over 5 or 10 years depending on the amount with payments through 2020. As of
December 31, 2018, we had $1.0 million outstanding under these notes.
Note 4. Stock Compensation
For discussion of stock compensation expense of the Parent Company and its subsidiaries, see Note 23 - Stock
Compensation, to the consolidated financial statements.
Note 5. Commitments and Contingencies
For discussion of the commitments and contingencies of the subsidiaries of the Parent Company see Note 29 -
Commitments and Contingencies, to the consolidated financial statements.
Note 6. Supplemental Cash Flow
(amounts in thousands)
Non-cash Investing Activities:
Notes receivable and accrued interest from employees and directors
settled with return of JWH stock
Dividend from subsidiary settled with payable to subsidiary
Non-cash Financing Activities:
Shares surrendered for tax obligations for employee share-based
transactions in accrued liabilities
Costs associated with initial public offering formerly capitalized in
prepaid expenses
Subsidiary non-cash director notes and accrued interest activity
2018
2017
2016
$
$
— $
183
$
132,295
—
7
$
569
$
—
—
5,857
—
—
—
—
—
2,068
F-65
[THIS PAGE INTENTIONALLY LEFT BLANK]
EXECUTIVE LEADERSHIP TEAM
BOTTOM ROW, LEFT TO RIGHT:
JIM GARCIA
Senior Vice President,
Global JEM (JELD-WEN
Excellence Model) Leader
LAURA DOERRE
Executive Vice President,
General Counsel and
Chief Compliance Officer
TOP ROW, LEFT TO RIGHT:
GARY S. MICHEL
President and CEO
TIMOTHY CRAVEN
Executive Vice President,
Human Resources
PETER FARMAKIS
Executive Vice President
and President, Australasia
DANIEL CASTILLO
Senior Vice President,
North America Doors
PETER MAXWELL
Executive Vice President
and President, Europe
JOHN LINKER
Executive Vice President
and CFO
MARK DIXON
Senior Vice President,
Global Procurement
PETER SMITH
Senior Vice President,
North America Windows
BOARD OF DIRECTORS
KIRK HACHIGIAN
Chairman of the Board
WILLIAM F. BANHOLZER
Director
ANTHONY MUNK
Director
RODERICK WENDT
Director and Vice Chairman
MARTHA BYORUM
Director
MATTHEW ROSS
Director
BRUCE TATEN
Director
STEVEN WYNNE
Director
GARY S. MICHEL
Director, President and CEO
GREG G. MAXWELL
Director
SUZANNE STEFANY
Director
EXECUTIVE OFFICE
2645 Silver Crescent Drive
Charlotte, NC 28273
USA
WEBSITE
jeld-wen.com
EMAIL
investors@jeldwen.com
©2019 JELD-WEN, Inc. This publication and its contents are owned by or licensed to JELD-WEN,
Inc. or its affiliates, and are protected by copyright, trademark, and other laws. Unauthorized use
or duplication is prohibited. JELD-WEN reserves the right to change product specifications without
notice. Please visit our website at jeld-wen.com for current information. All rights reserved.