QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer | o | Smaller reporting company | ||||
Emerging growth company |
Page No. | ||
Part I - Financial Information | ||
Item 1. | Unaudited Financial Statements | |
Consolidated Statements of Operations | ||
Consolidated Statements of Comprehensive Income (Loss) | ||
Consolidated Balance Sheets | ||
Consolidated Statements of Equity | ||
Consolidated Statements of Cash Flows | ||
Notes to Unaudited Consolidated Financial Statements | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |
Item 4. | Controls and Procedures | |
Part II - Other Information | ||
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 5. | Other Information | |
Item 6. | Exhibits | |
Signature |
ABL Facility | 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 |
ABS | American Building Supply, Inc. |
Adjusted EBITDA | 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 |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
AUD | Australian Dollar |
Australia Senior Secured Credit Facility | 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 |
BBSY | Bank Bill Swap Bid Rate |
Bylaws | Amended and Restated Bylaws of JELD-WEN Holding, Inc. |
CAP | Cleanup Action Plan |
Charter | Restated Certificate of Incorporation of JELD-WEN Holding, Inc. |
Class B-1 Common Stock | 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 |
CMI | CraftMaster Manufacturing, Inc. |
COA | Consent Order and Agreement |
CODM | Chief Operating Decision Maker |
Common Stock | The 900,000,000 shares of common stock, par value $0.01 per share, authorized under our Charter |
Corporate Credit Facilities | Collectively, our ABL Facility and our Term Loan Facility |
COVID-19 | A novel strain of the 2019-nCov coronavirus |
Credit Facilities | Collectively, our Corporate Credit Facilities and our Australia Senior Secured Credit Facility as well as other acquired term loans and revolving credit facilities |
DKK | Danish Krone |
ERP | Enterprise Resource Planning |
ESOP | JELD-WEN, Inc. Employee Stock Ownership and Retirement Plan |
Exchange Act | Securities Exchange Act of 1934, as amended |
FASB | Financial Accounting Standards Board |
10-K | Annual Report on Form 10-K for the fiscal year ended December 31, 2019 |
GAAP | Generally Accepted Accounting Principles in the United States |
GHGs | Greenhouse Gases |
GILTI | Global Intangible Low-Taxed Income |
JELD-WEN | JELD-WEN Holding, Inc., together with its consolidated subsidiaries where the context requires |
JEM | JELD-WEN Excellence Model |
JWH | JELD-WEN Holding, Inc., a Delaware corporation |
JWI | JELD-WEN, Inc., a Delaware corporation |
LIBOR | London Interbank Offered Rate |
MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Onex | Onex Partners III LP and certain affiliates |
PaDEP | Pennsylvania Department of Environmental Protection |
Preferred Stock | 90,000,000 shares of Preferred Stock, par value $0.01 per share, authorized under our Charter |
PSU | Performance stock unit |
R&R | Repair and remodel |
RSU | Restricted stock unit |
SEC | Securities and Exchange Commission |
Securities Act | Securities Act of 1933, as amended |
Senior Notes | $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 | Selling, general, and administrative expenses |
Tax Act | Tax Cuts and Jobs Act |
Term Loan Facility | Our term loan facility, dated as of October 15, 2014, and 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 |
U.S. | United States of America |
VPI | VPI Quality Windows, Inc. |
WADOE | Washington State Department of Ecology |
Three Months Ended | |||||||
(amounts in thousands, except share and per share data) | March 28, 2020 | March 30, 2019 | |||||
Net revenues | $ | $ | |||||
Cost of sales | |||||||
Gross margin | |||||||
Selling, general and administrative | |||||||
Impairment and restructuring charges | |||||||
Operating income | |||||||
Interest expense, net | |||||||
Other income | ( | ) | ( | ) | |||
Income before taxes | |||||||
Income tax expense | |||||||
Net income (loss) | $ | ( | ) | $ | |||
Weighted average common shares outstanding: | |||||||
Basic | |||||||
Diluted | |||||||
Net income (loss) per share | |||||||
Basic | $ | $ | |||||
Diluted | $ | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Net income (loss) | $ | ( | ) | $ | |||
Other comprehensive income (loss), net of tax: | |||||||
Foreign currency translation adjustments, net tax of $0 | ( | ) | ( | ) | |||
Interest rate hedge adjustments, net of tax (benefit) expense of $0 and ($112), respectively | |||||||
Defined benefit pension plans, net of tax expense of $1,060 and $771, respectively | |||||||
( | ) | ( | ) | ||||
Comprehensive income (loss) | $ | ( | ) | $ |
(amounts in thousands, except share and per share data) | March 28, 2020 | December 31, 2019 | |||||
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 | |||||||
Operating lease assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | $ | |||||
Accrued payroll and benefits | |||||||
Accrued expenses and other current liabilities | |||||||
Current maturities of long-term debt | |||||||
Total current liabilities | |||||||
Long-term debt | |||||||
Unfunded pension liability | |||||||
Operating lease liability | |||||||
Deferred credits and other liabilities | |||||||
Deferred tax liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies (Note 21) | |||||||
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, 100,487,485 shares outstanding as of March 28, 2020; 900,000,000 shares authorized, par value $0.01 per share, 100,668,003 shares outstanding as of December 31, 2019 | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total shareholders’ equity | |||||||
Total liabilities and shareholders’ equity | $ | $ |
March 28, 2020 | March 30, 2019 | ||||||||||||
(amounts in thousands, except share and per share amounts) | Shares | Amount | Shares | Amount | |||||||||
Preferred stock, $0.01 par value per share | $ | $ | |||||||||||
Common stock, $0.01 par value per share | |||||||||||||
Balance at beginning of period | $ | $ | |||||||||||
Shares issued for exercise/vesting of share-based compensation awards | |||||||||||||
Shares repurchased | ( | ( | ) | ( | ( | ) | |||||||
Shares surrendered for tax obligations for employee share-based transactions | ( | ( | |||||||||||
Balance at period end | $ | $ | |||||||||||
Additional paid-in capital | |||||||||||||
Balance at beginning of period | $ | $ | |||||||||||
Shares issued for exercise/vesting of share-based compensation awards | |||||||||||||
Shares surrendered for tax obligations for employee share-based transactions | ( | ) | ( | ) | |||||||||
Amortization of share-based compensation | |||||||||||||
Balance at period end | |||||||||||||
Employee stock notes | |||||||||||||
Balance at beginning of period | ( | ) | ( | ) | |||||||||
Net issuances, payments and accrued interest on notes | ( | ) | |||||||||||
Balance at period end | ( | ) | ( | ) | |||||||||
Balance at period end | $ | $ | |||||||||||
Retained earnings | |||||||||||||
Balance at beginning of period | $ | $ | |||||||||||
Share repurchased | ( | ) | ( | ) | |||||||||
Adoption of new accounting standard ASU No. 2016-02 | — | ||||||||||||
Adoption of new accounting standard ASU No. 2016-13 | $ | ( | ) | — | |||||||||
Net (loss) income | ( | ) | |||||||||||
Balance at period end | $ | $ | |||||||||||
Accumulated other comprehensive income (loss) | |||||||||||||
Balance at beginning of period | $ | ( | ) | $ | ( | ) | |||||||
Foreign currency adjustments | ( | ) | ( | ) | |||||||||
Unrealized gain on interest rate hedges | — | ||||||||||||
Net actuarial pension gain | |||||||||||||
Balance at period end | $ | ( | ) | $ | ( | ) | |||||||
Total shareholders’ equity at period end | $ | $ |
Three Months Ended | ||||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | ||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | ( | ) | $ | ||||
Adjustments to reconcile net income (loss) 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 | ||||||||
Amortization of deferred financing costs | ||||||||
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 used in 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 | ||||||||
Change in long-term debt | ||||||||
Common stock issued for exercise of options | ||||||||
Common stock repurchased | ( | ) | ( | ) | ||||
Payments to tax authorities for employee share-based compensation | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Effect of foreign currency exchange rates on cash | ( | ) | ||||||
Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
Cash, cash equivalents and restricted cash, beginning | ||||||||
Cash, cash equivalents and restricted cash, ending | $ | $ | ||||||
For further information see Note 23 - Supplemental Cash Flow. |
(amounts in thousands) | Preliminary Allocation | Measurement Period Adjustment | Final Allocation | ||||||||
Fair value of identifiable assets and liabilities: | |||||||||||
Accounts receivable | $ | $ | ( | ) | $ | ||||||
Inventories | ( | ) | |||||||||
Other current assets | |||||||||||
Property and equipment | |||||||||||
Identifiable intangible assets | |||||||||||
Operating lease assets | — | ||||||||||
Goodwill | ( | ) | |||||||||
Other assets | — | ||||||||||
Total assets | $ | $ | $ | ||||||||
Accounts payable | — | ||||||||||
Other current liabilities | |||||||||||
Operating lease liability | — | ||||||||||
Other liabilities | |||||||||||
Total liabilities | $ | $ | $ | ||||||||
Purchase price: | |||||||||||
Cash consideration, net of cash acquired | $ | $ | $ |
(amounts in thousands) | March 28, 2020 | December 31, 2019 | |||||
Raw materials | $ | $ | |||||
Work in process | |||||||
Finished goods | |||||||
Total inventories | $ | $ |
(amounts in thousands) | March 28, 2020 | December 31, 2019 | |||||
Property and equipment | $ | $ | |||||
Accumulated depreciation | ( | ) | ( | ) | |||
Total property and equipment, net | $ | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Cost of sales | $ | $ | |||||
Selling, general and administrative | |||||||
Total depreciation expense | $ | $ |
(amounts in thousands) | North America | Europe | Australasia | Total Reportable Segments | |||||||||||
Balance as of January 1 | $ | $ | $ | $ | |||||||||||
Currency translation | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Balance at end of period | $ | $ | $ | $ |
March 28, 2020 | |||||||||||
(amounts in thousands) | Cost | Accumulated Amortization | Net Book Value | ||||||||
Customer relationships and agreements | $ | $ | ( | ) | $ | ||||||
Software | ( | ) | |||||||||
Trademarks and trade names | ( | ) | |||||||||
Patents, licenses and rights | ( | ) | |||||||||
Total amortizable intangibles | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||
(amounts in thousands) | Cost | Accumulated Amortization | Net Book Value | ||||||||
Customer relationships and agreements | $ | $ | ( | ) | $ | ||||||
Software | ( | ) | |||||||||
Trademarks and trade names | ( | ) | |||||||||
Patents, licenses and rights | ( | ) | |||||||||
Total amortizable intangibles | $ | $ | ( | ) | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Amortization expense | $ | $ |
(amounts in thousands) | March 28, 2020 | December 31, 2019 | |||||
Cloud computing arrangements | $ | $ | |||||
Customer displays | |||||||
Deposits | |||||||
Long-term notes receivable | |||||||
Overfunded pension benefit obligation | |||||||
Other prepaid expenses | |||||||
Debt issuance costs on unused portion of revolver facility | |||||||
Other long-term accounts receivable | |||||||
Other long-term assets | |||||||
Total other assets | $ | $ |
(amounts in thousands) | March 28, 2020 | December 31, 2019 | |||||
Current portion of legal claims provision | $ | $ | |||||
Accrued sales and advertising rebates | |||||||
Current portion of operating lease liability | |||||||
Non-income related taxes | |||||||
Accrued expenses | |||||||
Current portion of warranty liability (Note 10) | |||||||
Accrued interest payable | |||||||
Current portion of accrued claim costs relating to self-insurance programs | |||||||
Current portion of deferred revenue | |||||||
Current portion of restructuring accrual (Note 17) | |||||||
Current portion of derivative liability (Note 19) | |||||||
Current portion of accrued income taxes payable | |||||||
Total accrued expenses and other current liabilities | $ | $ |
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
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 | $ | $ |
March 28, 2020 | March 28, 2020 | December 31, 2019 | |||||||
(amounts in thousands) | Interest Rate | ||||||||
Senior notes | 4.63% - 4.88% | $ | $ | ||||||
Term loans | 1.30% - 3.94% | ||||||||
Finance leases and other financing arrangements | 1.90% - 6.00% | ||||||||
Mortgage notes | |||||||||
Revolving credit facilities | 2.25% -2.55% | ||||||||
Installment notes for stock | |||||||||
Unamortized debt issuance costs and original issue discount | ( | ) | ( | ) | |||||
Current maturities of long-term debt | ( | ) | ( | ) | |||||
Long-term debt | $ | $ |
(amounts in thousands) | North America | Europe | Australasia | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated | |||||||||||||||||
Three Months Ended March 28, 2020 | |||||||||||||||||||||||
Total net revenues | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||
Intersegment net revenues | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | ||||||||||||
Net revenues from external customers | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||
Impairment and restructuring charges | |||||||||||||||||||||||
Adjusted EBITDA | ( | ) | |||||||||||||||||||||
Three Months Ended March 30, 2019 | |||||||||||||||||||||||
Total net revenues | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||
Intersegment net revenues | ( | ) | ( | ) | ( | ) | ( | ) | — | ( | ) | ||||||||||||
Net revenues from external customers | $ | $ | $ | $ | $ | — | $ | ||||||||||||||||
Impairment and restructuring charges | ( | ) | |||||||||||||||||||||
Adjusted EBITDA | ( | ) |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Net income (loss) | $ | ( | ) | $ | |||
Income tax expense | |||||||
Depreciation and amortization | |||||||
Interest expense, net | |||||||
Impairment and restructuring charges(1) | |||||||
(Gain) loss on sale of property and equipment | ( | ) | |||||
Share-based compensation expense | |||||||
Non-cash foreign exchange transaction/translation (income) loss | ( | ) | ( | ) | |||
Other items (2) | |||||||
Other non-cash items | |||||||
Adjusted EBITDA | $ | $ |
(1) | Impairment and restructuring charges consist of (i) impairment and restructuring charges that are included in our consolidated unaudited 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 unaudited consolidated statements of operations in the amount of $ |
(2) | Other non-recurring items not core to ongoing business activity include: (i) in the three months ended March 28, 2020 (1) $ |
Three Months Ended | |||||
March 28, 2020 | March 30, 2019 | ||||
Weighted average outstanding shares of Common Stock basic | |||||
Restricted stock units, performance share units and options to purchase Common Stock | |||||
Weighted average outstanding shares of Common Stock diluted |
Three Months Ended | |||
March 28, 2020 | March 30, 2019 | ||
Common Stock options | |||
Restricted stock units | |||
Performance share units |
Three Months Ended | |||||||||||||
March 28, 2020 | March 30, 2019 | ||||||||||||
Shares | Weighted Average Exercise Price Per Share | Shares | Weighted Average Exercise Price Per Share | ||||||||||
Options granted | $ | $ | |||||||||||
Options canceled | $ | $ | |||||||||||
Options exercised | $ | $ | |||||||||||
Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | ||||||||||
RSUs granted | $ | $ | |||||||||||
PSUs granted | $ | $ |
(amounts in thousands) | North America | Europe | Australasia | Corporate and Unallocated Costs | Total Consolidated | ||||||||||||||
Three Months Ended March 28, 2020 | |||||||||||||||||||
Severance costs | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
Other exit costs | ( | ) | ( | ) | |||||||||||||||
Total restructuring costs | ( | ) | |||||||||||||||||
Impairments | |||||||||||||||||||
Total impairment and restructuring charges | $ | $ | $ | $ | $ | ||||||||||||||
Three Months Ended March 30, 2019 | |||||||||||||||||||
Severance costs | $ | $ | $ | $ | $ | ||||||||||||||
Other exit costs | ( | ) | ( | ) | |||||||||||||||
Total restructuring costs | ( | ) | |||||||||||||||||
Impairments | |||||||||||||||||||
Total impairment and restructuring charges | $ | $ | $ | $ | ( | ) | $ |
(amounts in thousands) | Beginning Accrual Balance | Additions Charged to Expense | Payments or Utilization | Ending Accrual Balance | |||||||||||
March 28, 2020 | |||||||||||||||
Severance costs | $ | $ | $ | ( | ) | $ | |||||||||
Other exit costs | ( | ) | |||||||||||||
Total | $ | $ | $ | ( | ) | $ | |||||||||
March 30, 2019 | |||||||||||||||
Severance costs | $ | $ | $ | ( | ) | $ | |||||||||
Other exit costs | ( | ) | |||||||||||||
Total | $ | $ | $ | ( | ) | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Pension benefit expense | $ | $ | |||||
Foreign currency gain | ( | ) | ( | ) | |||
(Gain) loss on sale of business units, property, and equipment | ( | ) | |||||
Other income items | ( | ) | ( | ) | |||
Legal settlement income | ( | ) | |||||
Total other income | $ | ( | ) | $ | ( | ) |
Derivative assets | |||||||||
(amounts in thousands) | Balance Sheet Location | March 28, 2020 | December 31, 2019 | ||||||
Derivatives not designated as hedging instruments: | |||||||||
Foreign currency forward contracts | Other current assets | $ | $ | ||||||
Interest rate cap contracts | Other assets |
Derivatives liabilities | |||||||||
(amounts in thousands) | Balance Sheet Location | March 28, 2020 | December 31, 2019 | ||||||
Derivatives not designated as hedging instruments: | |||||||||
Foreign currency forward contracts | Accrued expenses and other current liabilities | $ | $ |
March 28, 2020 | |||||||||||||||||||
(amounts in thousands) | Carrying Amount | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||||
Cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Derivative assets, recorded in other current assets | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
Senior notes | $ | $ | $ | $ | $ | ||||||||||||||
Term loans | |||||||||||||||||||
Derivative liabilities, recorded in accrued expenses and deferred credits |
December 31, 2019 | |||||||||||||||||||
(amounts in thousands) | Carrying Amount | Total Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||||
Derivative assets, recorded in other current assets | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
Senior notes, recorded in long-term debt | $ | $ | $ | $ | $ | ||||||||||||||
Term loans, recorded in long-term debt and current maturities of long-term debt | |||||||||||||||||||
Derivative liabilities, recorded in accrued expenses and deferred credits |
March 28, 2020 | |||||||||||||||||||||||
(amounts in thousands) | Carrying Value | Total Fair Value | Level 1 | Level 2 | Level 3 | Total Losses | |||||||||||||||||
Continuing operations | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Total | $ | $ | $ | $ | $ | $ |
December 31, 2019 | |||||||||||||||||||||||
(amounts in thousands) | Carrying Value | Total Fair Value | Level 1 | Level 2 | Level 3 | Total Losses | |||||||||||||||||
Closed operations | $ | $ | $ | $ | $ | ||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ |
(amounts in thousands) | March 28, 2020 | December 31, 2019 | |||||
Self-insurance workers’ compensation | $ | $ | |||||
Legal | |||||||
Liability and other insurance | |||||||
Environmental | |||||||
Other | |||||||
Total outstanding performance bonds and stand-by letters of credit | $ | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Components of pension benefit expense - U.S. benefit plan: | |||||||
Administrative cost | $ | $ | |||||
Interest cost | |||||||
Expected return on plan assets | ( | ) | ( | ) | |||
Amortization of net actuarial pension loss | |||||||
Pension benefit expense | $ | $ |
Three Months Ended | |||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||
Cash Operating Activities: | |||||||
Operating leases | $ | $ | |||||
Finance leases | |||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | $ | |||||
Non-cash Investing Activities: | |||||||
Property, equipment and intangibles purchased in accounts payable | $ | $ | |||||
Property, equipment and intangibles purchased for debt | |||||||
Customer accounts receivable converted to notes receivable | |||||||
Cash Financing Activities: | |||||||
Borrowings on long-term debt | |||||||
Payments of long-term debt | ( | ) | ( | ) | |||
Change in long-term debt | $ | $ | |||||
Cash paid for amounts included in the measurement of finance lease liabilities | $ | $ | |||||
Non-cash Financing Activities: | |||||||
Prepaid insurance funded through short-term debt borrowings | $ | $ | |||||
Prepaid ERP costs 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 | |||||||
Leased assets obtained in exchange for new finance lease liabilities | |||||||
Leased assets obtained in exchange for new operating lease liabilities |
Three Months Ended | |||||||||||
March 30, 2019 | |||||||||||
(amounts in thousands, except per share data) | As Reported | Correction | As Revised | ||||||||
Consolidated Statement of Operations: | |||||||||||
Net revenues | $ | $ | ( | ) | $ | ||||||
Cost of sales | $ | $ | ( | ) | $ | ||||||
Gross margin | $ | $ | ( | ) | $ | ||||||
Selling, general and administrative | $ | $ | $ | ||||||||
Operating income (loss) | $ | $ | ( | ) | $ | ||||||
Other (income) expense(1) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Income before taxes and equity earnings | $ | $ | ( | ) | $ | ||||||
Income tax expense (benefit) | $ | $ | $ | ||||||||
Income from continuing operations, net of tax | $ | $ | ( | ) | $ | ||||||
Net income (loss) | $ | $ | ( | ) | $ | ||||||
Net income (loss) attributable to common shareholders | $ | $ | ( | ) | $ |
(1) | Non-controlling interest of $ |
Three months ended | |||||||||||
March 30, 2019 | |||||||||||
(amounts in thousands) | As Reported | Correction | As Revised | ||||||||
Net income (loss) | $ | $ | ( | ) | $ | ||||||
Income tax expense | $ | $ | $ | ||||||||
Non-cash foreign exchange transaction/translation (income) loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||
Other items | $ | $ | ( | ) | $ | ||||||
Adjusted EBITDA | $ | $ | ( | ) | $ |
Three months ended | |||||||||||||||||||||||
March 30, 2019 | |||||||||||||||||||||||
(amounts in thousands) | North America | Europe | Australasia | Total Operating Segments | Corporate and Unallocated Costs | Total Consolidated | |||||||||||||||||
As Reported | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Correction | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
As Revised | $ | $ | $ | $ | $ | ( | ) | $ |
• | negative trends in overall business, financial market and economic conditions, and/or activity levels in our end markets; |
• | increases in interest rates and reduced availability of financing for the purchase of new homes and home construction and improvements; |
• | political, economic, including pandemics, such as COVID-19, and other risks, that arise from operating a multinational business; |
• | changes in building codes that could increase the cost of our products or lower the demand for our windows and doors; |
• | lack of transparency, threat of fraud, public sector corruption, and other forms of criminal activity involving government officials; |
• | other risks and uncertainties, including those listed under Item 1A- Risk Factors in our 10-K and Item 1A- Risk Factors in this 10-Q. |
• | 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. |
Three Months Ended | |||||||||||||
March 28, 2020 | March 30, 2019 | ||||||||||||
(amounts in thousands) | % of Net Revenues | % of Net Revenues | |||||||||||
Net revenues | $ | 979,187 | 100.0 | % | $ | 1,010,260 | 100.0 | % | |||||
Cost of sales | 784,818 | 80.1 | % | 802,131 | 79.4 | % | |||||||
Gross margin | 194,369 | 19.9 | % | 208,129 | 20.6 | % | |||||||
Selling, general and administrative | 172,584 | 17.6 | % | 164,100 | 16.2 | % | |||||||
Impairment and restructuring charges | 6,545 | 0.7 | % | 3,719 | 0.4 | % | |||||||
Operating income | 15,240 | 1.6 | % | 40,310 | 4.0 | % | |||||||
Interest expense, net | 16,604 | 1.7 | % | 17,656 | 1.7 | % | |||||||
Other income | (2,331 | ) | (0.2 | )% | (3,472 | ) | (0.3 | )% | |||||
Income before taxes | 967 | 0.1 | % | 26,126 | 2.6 | % | |||||||
Income tax expense | 1,197 | 0.1 | % | 10,349 | 1.0 | % | |||||||
Net income (loss) | $ | (230 | ) | — | % | $ | 15,777 | 1.6 | % |
Three Months Ended | |||||||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | |||||||||
Net revenues from external customers | % Variance | ||||||||||
North America | $ | 586,736 | $ | 565,105 | 3.8 | % | |||||
Europe | 281,493 | 299,966 | (6.2) | % | |||||||
Australasia | 110,958 | 145,189 | (23.6) | % | |||||||
Total Consolidated | $ | 979,187 | $ | 1,010,260 | (3.1) | % | |||||
Percentage of total consolidated net revenues | |||||||||||
North America | 59.9 | % | 55.9 | % | |||||||
Europe | 28.8 | % | 29.7 | % | |||||||
Australasia | 11.3 | % | 14.4 | % | |||||||
Total Consolidated | 100.0 | % | 100.0 | % | |||||||
Adjusted EBITDA(1) | |||||||||||
North America | $ | 48,990 | $ | 52,796 | (7.2) | % | |||||
Europe | 23,326 | 27,638 | (15.6) | % | |||||||
Australasia | 8,725 | 16,380 | (46.7) | % | |||||||
Corporate and unallocated costs | (6,533 | ) | (7,536 | ) | (13.3) | % | |||||
Total Consolidated | $ | 74,508 | $ | 89,278 | (16.5) | % | |||||
Adjusted EBITDA as a percentage of segment net revenues | |||||||||||
North America | 8.3 | % | 9.3 | % | |||||||
Europe | 8.3 | % | 9.2 | % | |||||||
Australasia | 7.9 | % | 11.3 | % | |||||||
Total Consolidated | 7.6 | % | 8.8 | % |
(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 13 - Segment Information in our consolidated financial statements. |
Three Months Ended | ||||||||
(amounts in thousands) | March 28, 2020 | March 30, 2019 | ||||||
Cash provided by (used in): | ||||||||
Operating activities | $ | (76,575 | ) | $ | (27,958 | ) | ||
Investing activities | (22,366 | ) | (88,936 | ) | ||||
Financing activities | 89,290 | 93,471 | ||||||
Effect of changes in exchange rates on cash and cash equivalents | (5,616 | ) | 63 | |||||
Net change in cash and cash equivalents | $ | (15,267 | ) | $ | (23,360 | ) |
• | 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; |
• | 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; and |
• | Institute additional training programs that occur on a regular basis related to internal control over financial reporting for our world-wide finance and accounting personnel. |
• | The onboarding of additional personnel, including an experienced finance executive, in Europe with knowledge and experience in internal control over financial reporting; |
• | conducting quarterly web-based training sessions on internal controls over financial reporting, monitoring controls, complex accounting topics, account reconciliations and journal entry controls in Europe; and |
• | implementing enhancements to closing processes that included the continuation of the centralization of certain tasks, development of manuals and standardized templates to enhance the evidence supporting the local teams’ execution of internal control over financial reporting. |
• | decreased demand for our products as a result of a slowdown in the U.S. and global economies and resulting decreases in construction and R&R; |
• | increased storage costs as a result of larger volume of inventory that remains unsold; and |
• | uncertain expense management in light of continued efforts to protect our employees and operational issues resulting from absenteeism and closures experienced by our facilities globally. |
• | complete or partial closures of, or other operational issues at, one or more of our manufacturing or distribution facilities resulting from government action; |
• | difficulty sourcing materials necessary to fulfill production requirements or higher prices to fulfill our requirements as a result of suppliers experiencing closures or reductions in their capacity utilization levels; |
• | reduced economic activity severely impacting our customers’ financial condition and liquidity, reducing the likelihood they will be purchasing additional products from us and increasing the likelihood they may require additional time to pay us or will fail to pay us at all, which could significantly increase the amount of accounts receivable and require us to record additional allowances for doubtful accounts; |
• | reduced economic activity resulting in a prolonged recession, which could negatively impact consumer discretionary spending; |
• | a decrease in the principal that may be drawn under our ABL Facility as a result of a decrease in our accounts receivable and inventory; |
• | difficulty accessing debt and equity capital on attractive terms, or at all, an impact on our credit ratings, and a severe disruption and instability in the global financial markets or deterioration in credit and financing conditions that affect our access to capital necessary to fund business operations or to address maturing liabilities on a timely basis; |
• | negative impact on our future compliance with financial covenants under our Corporate Credit Facilities and other debt agreements, which could result in a default and potentially an acceleration of indebtedness; and |
• | the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, decreasing our ability to ensure business continuity during this disruption. |
• | the duration, scope, and severity of the COVID-19 pandemic; |
• | the disruption or delay of production and delivery of materials and products in our supply chain; |
• | the impact of travel bans, work-from-home policies, or shelter-in-place orders; |
• | the temporary or prolonged shutdown of manufacturing facilities and decreased retail traffic; |
• | staffing shortages; |
• | general economic, financial, and industry conditions, particularly conditions relating to liquidity, financial performance, and related credit issues in our industry, which may be amplified by the effects of COVID-19; and |
• | the long-term effects of COVID-19 on the national and global economy, including on consumer confidence and spending, financial markets and the availability of credit for us, our suppliers and our customers. |
(a) | (b) | (c) | (d) | |||||
Period | Total Number of Shares (or Units) Purchased 1 | Average Price Paid Per Share (or Unit) 2 | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Programs | ||||
January 1, 2020 - January 25, 2020 | — | $— | — | $175,000 | ||||
January 26, 2020 - February 22, 2020 | 32,179 | $21.76 | 32,179 | $174,300 | ||||
February 23, 2020 - March 28, 2020 | 233,410 | $18.42 | 233,410 | $170,000 | ||||
Total | 265,589 | $18.83 | 265,589 |
Exhibit No. | Exhibit Description | Form | File No. | Exhibit | Filing Date | ||
4.1 | 8-K | 001-38000 | 4.1 | May 5, 2020 | |||
4.2 | 8-K | 001-38000 | 4.2 | May 5, 2020 | |||
31.1* | |||||||
31.2* | |||||||
32.1* | |||||||
101.INS* | XBRL Instance Document-the instance document does not appear in this Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | ||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||
104* | Cover page Interactive Data file (formatted as Inline XBRL and contained in Exhibit 101) | ||||||
* | Filed herewith |
JELD-WEN HOLDING, INC. | |
(Registrant) | |
By: | /s/ John Linker |
John Linker | |
Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal period ended March 28, 2020 of JELD-WEN Holding, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | I have reviewed this Quarterly Report on Form 10-Q for the fiscal period ended March 28, 2020 of JELD-WEN Holding, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; and |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Earnings Per Share - Potentially Dilutive Securities (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 28, 2020 |
Mar. 30, 2019 |
|
Stock options | Common stock | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect | ||
Antidilutive securities excluded from computation of diluted earnings per share | 2,170,131 | 1,685,101 |
RSUs | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect | ||
Antidilutive securities excluded from computation of diluted earnings per share | 670,493 | 449,547 |
Performance share units | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect | ||
Antidilutive securities excluded from computation of diluted earnings per share | 206,263 | 147,552 |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 28, 2020 |
Mar. 30, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Effective rate for continuing operations (percent) | 123.80% | 39.60% | ||
Income tax expense | $ 1,197 | $ 10,349 | $ (10,058) | |
Discrete adjustments | 800 | 1,300 | ||
Interest on income taxes expense | 800 | 400 | ||
Tax benefit from stock option exercise | 1,100 | |||
Other adjustments | $ 200 | |||
Unrecognized tax benefits | $ 19,800 | $ 20,200 |
Impairment and Restructuring Charges - Narrative (Details) - USD ($) $ in Thousands |
Mar. 28, 2020 |
Dec. 31, 2019 |
---|---|---|
Restructuring and Related Activities [Abstract] | ||
Restructuring reserve, current | $ 4,946 | $ 6,051 |
Restructuring accrual | $ 800 | $ 1,000 |
Supplemental Cash Flow Information (Tables) |
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Schedule of Cash Flow, Supplemental Disclosures |
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Derivative Financial Instruments (Tables) |
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair values of derivative instruments held are as follows:
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Supplemental Cash Flow Information |
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Supplemental Cash Flow Information | Supplemental Cash Flow Information
|
Description of Company and Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
---|---|
Mar. 28, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation – The accompanying unaudited consolidated financial statements as of March 28, 2020 and for the three months ended March 28, 2020 and March 30, 2019, respectively, have been prepared in accordance with GAAP for interim financial information and pursuant to the rules and regulations of the SEC. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company’s financial position for the periods presented. The results for the three months ended March 28, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or any other period. The accompanying consolidated balance sheet as of December 31, 2019 was derived from audited financial statements included in the Company’s Form 10-K. The accompanying consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. Certain prior year amounts have been reclassified to conform to current year presentation. The consolidated statements of operations and statements of cash flows have been revised to reflect the correction of certain errors and other accumulated misstatements as described in Note 25 - Revision of Prior Period Financial Statements. We do not believe the errors corrected were material to our previously issued financial statements.
|
Fiscal Year | 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.
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Use of Estimates | 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.
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Factoring Arrangements | These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk of non-collection to the factor. Thus, cash proceeds from these arrangements are reflected as operating activities, including the change of accounts receivable on our statement of cash flows each period. We do not service any factored accounts after the factoring has occurred and do not have any servicing assets or liabilities. We utilize factoring arrangements as part of our financing to manage working capital. |
Recently Adopted Accounting Standards and Recent Accounting Standards Not Yet Adopted | Recently Adopted Accounting Standards – 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. We adopted this standard in the first quarter of 2020 and the adoption did not have an impact on our unaudited consolidated financial statements as of the date of adoption. 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. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to (Topic 326), Financial Instruments-Credit Losses, (Topic 815), Derivatives and Hedging, and (Topic 825), Financial Instruments, to clarify and address certain items related to the amendments of ASU No. 2016-13. We adopted this standard in the first quarter of 2020 using the modified retrospective approach, which primarily impacted our allowance for doubtful accounts as a result of our analysis of customer historical credit and collections data. Additionally, we recognized a $5.7 million cumulative effect adjustment, net of tax, to retained earnings, which includes a $7.6 million increase to the allowance for doubtful accounts and a $1.9 million net impact to deferred tax assets. Recent Accounting Standards Not Yet Adopted – In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently assessing the impact of this ASU on our consolidated financial statements and disclosures. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles of ASC 740, including, but not limited to, accounting relating to intraperiod tax allocations, deferred tax liabilities related to outside basis differences, and year to date losses in interim periods. This guidance is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. We are currently assessing the impact of this ASU on our consolidated financial statements and disclosures. 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.
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Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table summarizes the changes in goodwill by reportable segment:
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Other Assets |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs.
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Label | Element | Value |
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Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 761,000 |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments We record financial assets and liabilities at fair value based on FASB guidance related to fair value measurements. The guidance requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Three levels of inputs may be used to measure fair value: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Quoted market-based inputs or unobservable inputs that are corroborated by market data. Level 3 – Unobservable inputs that are not corroborated by market data. The recorded carrying amounts and fair values of these instruments were as follows:
Derivative assets and liabilities reported in level 2 include foreign currency and interest rate cap contracts. See Note 19- 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:
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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 28, 2020 |
Mar. 30, 2019 |
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Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ (230) | $ 15,777 |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustments, net tax of $0 | (53,639) | (12,046) |
Interest rate hedge adjustments, net of tax (benefit) expense of $0 and ($112), respectively | 0 | 550 |
Defined benefit pension plans, net of tax expense of $1,060 and $771, respectively | 2,763 | 1,454 |
Total other comprehensive income (loss), net of tax | (50,876) | (10,042) |
Comprehensive income (loss) | $ (51,106) | $ 5,735 |
Stock Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation | Stock Compensation The activity under our incentive plans for the periods presented are reflected in the following tables:
Stock-based compensation expense was $3.7 million and $2.6 million for the three months ended March 28, 2020 and March 30, 2019, respectively. As of March 28, 2020, we had $42.2 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 2.32 years.
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Income Taxes |
3 Months Ended |
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Mar. 28, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company has completed its accounting for the income tax effects of the Tax Act. Although the measurement period has effectively ended, additional guidance and regulations continue to be released or finalized. We have considered these ongoing developments and determined that they have no impact on our tax accounts for the three months ended March 28, 2020. Final guidance, once issued, may materially affect our conclusions regarding the net related effects of the Tax Act on our unaudited consolidated financial statements. Until then, management will continue to monitor and work with its tax advisors to interpret any guidance issued. The effective income tax rate for continuing operations 123.8% for the three months ended March 28, 2020 compared to 39.6% for the three months ended March 30, 2019. In accordance with ASC 740-270, we recorded tax expense of $1.2 million and $10.3 million from continuing operations for the three months ended March 28, 2020 and March 30, 2019, respectively, by applying an estimated annual effective tax rate to our year-to-date income for includable entities during the respective periods. Our estimated annual effective tax rate for both years includes the impact of the tax on GILTI. The application of the estimated annual effective tax rate in interim periods may result in a significant variation in the customary relationship between income tax expense and pretax accounting income due to the seasonality of our global business. Entities that are currently generating losses and for which there is a full valuation allowance are excluded from the worldwide effective tax rate calculation and are calculated separately. The estimated annual effective tax rate for the current year is materially impacted by changes in management’s judgment regarding the realizability of deferred tax assets. Due to the ongoing financial and operational impacts on our business arising from COVID-19 focused in the current year, our ability to realize certain tax benefits related primarily to US foreign tax credits has been impacted. As such, management believes that our existing valuation allowance against these credits as well as our net operating losses at the state level will likely increase through the year as events occur. In accordance with guidance, we have factored the predicted increases as of the balance sheet date into our estimated annual effective tax rate for the current year. To the extent that actual results and/or events differ from our predicted results, we may continue to see effects on our estimated annual effective tax rate. The impact of significant discrete items is separately recognized in the quarter in which they occur. The tax expense related to discrete items included in the tax provision for continuing operations for the three months ended March 28, 2020 and March 30, 2019 was $0.8 million and $1.3 million, respectively. The discrete tax expense of $0.8 million for the three months ended March 28, 2020 was attributable to current period interest expense on uncertain tax positions. The discrete tax expense for the three months ended March 30, 2019 was comprised primarily of $1.1 million of tax expense related to the shortfall recognized from exercises and forfeitures from share-based compensation awards and $0.4 million attributable to current period interest expense on uncertain tax positions, offset by $0.2 million for other matters. Under ASC 740-10, we provide for uncertain tax positions and the related interest expense by adjusting unrecognized tax benefits and accrued interest accordingly. We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. We had unrecognized tax benefits of $19.8 million and $20.2 million as of March 28, 2020 and December 31, 2019, respectively. The prior period information has been revised. Please refer to Note 25 - Revision of Prior Period Financial Statements.
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Commitment and Contingencies - Indemnifications (Details) |
3 Months Ended |
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Mar. 28, 2020 | |
Minimum | |
Loss Contingencies | |
Indemnification, term | 1 year |
Maximum | |
Loss Contingencies | |
Indemnification, term | 3 years |
Intangible Assets, Net - Cost and Accumulated Amortization (Details) - USD ($) $ in Thousands |
Mar. 28, 2020 |
Dec. 31, 2019 |
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Finite-Lived Intangible Assets | ||
Cost | $ 337,592 | $ 347,841 |
Accumulated amortization | (100,359) | (97,514) |
Total intangibles, net | 237,233 | 250,327 |
Customer relationships and agreements | ||
Finite-Lived Intangible Assets | ||
Cost | 148,025 | 151,540 |
Accumulated amortization | (59,049) | (57,326) |
Total intangibles, net | 88,976 | 94,214 |
Software | ||
Finite-Lived Intangible Assets | ||
Cost | 94,244 | 92,821 |
Accumulated amortization | (19,645) | (18,222) |
Total intangibles, net | 74,599 | 74,599 |
Trademarks and trade names | ||
Finite-Lived Intangible Assets | ||
Cost | 54,613 | 58,088 |
Accumulated amortization | (7,729) | (7,512) |
Total intangibles, net | 46,884 | 50,576 |
Patents, licenses and rights | ||
Finite-Lived Intangible Assets | ||
Cost | 40,710 | 45,392 |
Accumulated amortization | (13,936) | (14,454) |
Total intangibles, net | $ 26,774 | $ 30,938 |
Property and Equipment, Net (Details) - USD ($) $ in Thousands |
Mar. 28, 2020 |
Dec. 31, 2019 |
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Property, Plant and Equipment, Net | ||
Property and equipment | $ 1,999,308 | $ 2,052,584 |
Accumulated depreciation | (1,169,578) | (1,188,209) |
Total property and equipment, net | $ 829,730 | $ 864,375 |
Other Assets (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Assets |
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reportable Segments, by Segment | The following tables set forth certain information relating to our segments’ operations:
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Reconciliation of Net Income to Adjusted EBITDA | Reconciliations of net income (loss) to Adjusted EBITDA are as follows:
The prior period information has been revised and reclassified to conform with current period presentation. Please refer to Note 25 - Revision of Prior Period Financial Statements.
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Other (Income) Expense (Tables) |
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Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Income | The table below summarizes the amounts included in other (income) expense in the accompanying unaudited consolidated statements of operations:
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Impairment and Restructuring Charges |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment and Restructuring Charges | Impairment and Restructuring Charges During 2020 and 2019, we engaged in restructuring activities intended to improve productivity, operating margins, and working capital levels. Restructuring costs primarily relate to workforce reductions, repositioning of management structure and costs associated with plant consolidations and closures. Asset impairment charges were recorded in addition to our restructuring costs. In the three months ended March 28, 2020, impairment charges primarily related to capitalized costs of certain ERP modules due to delays in implementation and uncertainty of their future use. In the three months ended March 30, 2019, impairment charges were primarily related to ROU assets and property and equipment held by operations impacted by restructuring. The following table summarizes the restructuring charges for the periods indicated:
Short-term restructuring accruals are recorded in accrued expenses and totaled $4.9 million and $6.1 million as of March 28, 2020 and December 31, 2019, respectively. Long-term restructuring accruals are recorded in deferred credits and other liabilities and totaled $0.8 million and $1.0 million as of March 28, 2020 and December 31, 2019, respectively. The following is a summary of the restructuring accruals recorded and charges incurred:
The prior period information has been reclassified to conform to current period presentation.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | 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-cash foreign exchange transaction/translation (income) loss; other non-cash items; other items; and costs related to debt restructuring and debt refinancing. The following tables set forth certain information relating to our segments’ operations:
Reconciliations of net income (loss) to Adjusted EBITDA are as follows:
The prior period information has been revised and reclassified to conform with current period presentation. Please refer to Note 25 - Revision of Prior Period Financial Statements.
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Consolidated Balance Sheets (Parentheticals) - $ / shares |
Mar. 28, 2020 |
Dec. 31, 2019 |
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Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 90,000,000 | 90,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, shares authorized (shares) | 900,000,000 | 900,000,000 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares outstanding (shares) | 100,487,485 | 100,668,003 |
Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Litigation – We are involved in various legal proceedings, claims, and government audits arising in the ordinary course of business. We record our best estimate of a loss when the loss is considered probable and the amount of such loss can be reasonably estimated. When a loss is probable and there is a range of estimated loss with no best estimate within the range, we record the minimum estimated liability related to the lawsuit or claim. As additional information becomes available, we reassess the potential liability and revise our accruals, if necessary. Because of uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ materially from our estimates. Other than the matters described below, as of March 28, 2020, 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. 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 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 alleged that our acquisition of CMI, a competitor in the molded door skins market, together with subsequent price increases and other alleged acts and omissions, violated antitrust laws, and constituted a breach of contract and breach of warranty. Specifically, the complaint alleged that our acquisition of CMI substantially lessened competition in the molded door skins market. The complaint sought declaratory relief, ordinary and treble damages, and injunctive relief, including divestiture of certain assets acquired in the CMI acquisition. In February 2018, a jury in the Eastern District of Virginia returned a verdict that was unfavorable to JWI with respect to Steves’ claims that our acquisition of CMI violated Section 7 of the Clayton Act and found that JWI breached the supply agreement between the parties. The 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. On March 13, 2019, the presiding judge entered an Amended Final Judgment Order awarding $36.5 million in past damages under the Clayton Act (representing a trebling of the jury’s verdict) and granting divestiture of CMI, subject to appeal. The judgment also conditionally awarded damages in the event the judgment is overturned on appeal. Specifically, the court awarded $139.4 million as future antitrust damages in the event the divestiture order is overturned on appeal and $9.9 million as past contract damages in the event both the divestiture and antitrust claims are overturned on appeal. JELD-WEN filed a supersedeas bond and notice of appeal of the judgment, which is scheduled for hearing by the Fourth Circuit Court of Appeals in May 2020, but could be rescheduled to a later date due to the COVID-19 pandemic. On April 12, 2019, the plaintiffs filed a petition requesting an award of their fees and a bill of costs seeking $28.4 million in attorneys’ fees and $1.7 million in costs. That petition remains pending and subject to further appeal. On November 19, 2019, the presiding judge entered an order for further relief awarding Steves an additional $7.1 million in damages for pricing differences from the date of the underlying jury verdict through May 31, 2019. We have also appealed that ruling. On April 14, 2020, Steves filed a motion for further supplemental relief for pricing differences from the date of the prior order through the present. We are in the process of reviewing that new motion and are in the process of filing a responsive pleading. No hearing date on the new motion has been set. 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 of CMI. We believe that multiple pretrial and trial rulings were erroneous and improperly limited the Company’s defenses, and that the judgment in accordance with the verdict was improper for several reasons under applicable law. The judgment, 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 or a payment is required. Because the operations acquired from CMI have been fully integrated into the Company’s 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 entered a judgment in our favor for those damages and the entire amount has been paid by Steves. On August 16, 2019, the presiding judge granted Steves’ request for an injunction, prohibiting us from pursuing certain claims against individual defendants pending in Bexar County, Texas. These claims have been stayed pending appeal. Separately, on February 14, 2020, Steves filed a complaint and motion for preliminary injunction in the U.S. District Court for the Eastern District of Virginia, Richmond Division, alleging that we breached the long-term supply agreement between the parties, among other claims, including by incorrectly calculating the allocation of door skins owed to Steves. Steves is seeking an additional allotment of door skins and damages for violation of antitrust laws, tortious interference, and breach of contract. On April 10, 2020, the presiding judge granted Steves’ motion for preliminary injunction and the parties settled the issues underlying the preliminary injunction on April 30, but reserved the right to appeal the ruling in the Fourth Circuit Court of Appeals. The Company believes all the claims lack merit and has moved to dismiss the antitrust and tortious interference claims. A trial on this matter is currently expected in July 2020. Cambridge Retirement System v. JELD-WEN Holding, Inc., et al. – On February 19, 2020, Cambridge Retirement System filed a putative class action lawsuit in the U.S. District Court for the Eastern District of Virginia against the Company, current and former Company executives and various Onex-related entities alleging violations of Section 10(b) and Rule 10b-5 of the Exchange Act, as well as violations of Section 20(a) of the Exchange Act against the individual defendants and Onex-related entities. The lawsuit seeks compensatory damages, equitable relief and an award of attorneys’ fees and costs. The Company believes the claims lack merit and intends to vigorously defend against the action. 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. On September 18, 2019, the court denied the defendants’ motions to dismiss the lawsuits in their entirety and granted the defendants’ motions to dismiss various state law claims and to limit all claims to a four-year statute of limitations. As a result, the plaintiffs’ damages period is limited to the four-year period between 2014 and 2018. Trial in the two matters has been set for January 2021. We have evaluated the claims against us and recorded provisions based on management’s judgment about the probable outcome of the litigation and have included our estimates in accrued expenses in the accompanying balance sheets. See Note 9 - Accrued Expenses and Other Current Liabilities. While we expect a favorable resolution to these matters, the dispute resolution process could be lengthy, and if the plaintiffs were to prevail completely or substantially in the respective matters described above, such an outcome could have a material adverse effect on our operating results, consolidated financial position, or cash flows. Self-Insured Risk – We self-insure substantially all of our domestic business liability risks including general liability, product liability, warranty, personal injury, auto liability, workers’ compensation and employee medical benefits. Excess insurance policies from independent insurance companies generally cover exposures between $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 loss insurance covering our self-insured employee medical plan and are responsible for all claims thereunder. We estimate our provision for self-insured losses based upon an evaluation of current claim exposure and historical loss experience. Actual self-insurance losses may vary significantly from these estimates. At March 28, 2020 and December 31, 2019, our accrued liability for self-insured risks was $74.9 million and $76.6 million, respectively. Indemnifications – At March 28, 2020, 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. During 2019, we filed bonds in the amount of $47.7 million related to the Steves’ and Sons legal proceeding. The outstanding performance bonds and stand-by letters of credit were as follows:
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 $0.7 million at both March 28, 2020 and December 31, 2019. 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 either March 28, 2020 or December 31, 2019. 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 Corrective Action Plan (“CAP”), arising from the feasibility assessment. We are currently working with WADOE to finalize our Remedial Investigation and Feasibility Study (“RI/FS”), and, on April 30, 2020, we provided the WADOE with our revised draft RI/FS. The WADOE will review our RI/FS and provide a public comment period, potentially in the second quarter of 2020, before we can develop the CAP. However, at this time, we cannot reasonably estimate the cost associated with any remedial actions we will be required to undertake under the CAP; therefore, we 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 $2.3 million in bonds posted in connection with these obligations. If we are unable to remove this pile by August 31, 2022, then the bonds will be forfeited, and we may be subject to penalties by PaDEP. We currently anticipate meeting all applicable removal deadlines; however, if our operations at this site decrease and we burn less fuel than currently anticipated, we may not be able to meet such deadlines.
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Consolidated Statement of Operations - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 28, 2020 |
Mar. 30, 2019 |
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Income Statement [Abstract] | ||
Net revenues | $ 979,187 | $ 1,010,260 |
Cost of sales | 784,818 | 802,131 |
Gross margin | 194,369 | 208,129 |
Selling, general and administrative | 172,584 | 164,100 |
Impairment and restructuring charges | 6,545 | 3,719 |
Operating income | 15,240 | 40,310 |
Interest expense, net | 16,604 | 17,656 |
Other income | (2,331) | (3,472) |
Income before taxes | 967 | 26,126 |
Income tax expense | 1,197 | 10,349 |
Net income (loss) | $ (230) | $ 15,777 |
Weighted average common shares outstanding: | ||
Basic (shares) | 100,646,850 | 100,643,509 |
Diluted (shares) | 100,646,850 | 101,461,293 |
Net income (loss) per share | ||
Basic (usd per share) | $ 0 | $ 0.16 |
Diluted (usd per share) | $ 0 | $ 0.16 |
Commitment and Contingencies - Performance Bonds and Letters of Credit (Details) - USD ($) $ in Thousands |
Mar. 28, 2020 |
Dec. 31, 2019 |
---|---|---|
Loss Contingencies | ||
Self-insurance workers’ compensation | $ 23,638 | $ 23,638 |
Legal | 48,561 | 48,561 |
Liability and other insurance | 16,678 | 16,678 |
Environmental | 8,286 | 8,186 |
Other | 6,504 | 5,864 |
Total outstanding performance bonds and stand-by letters of credit | $ 103,667 | 102,927 |
Steve and Sons | ||
Loss Contingencies | ||
Total outstanding performance bonds and stand-by letters of credit | $ 47,700 |
Intangible Assets, Net - Narrative (Details) $ in Millions |
3 Months Ended |
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Mar. 28, 2020
USD ($)
| |
Finite-Lived Intangible Assets | |
Capitalized implementation costs | $ 62.3 |
Software | |
Finite-Lived Intangible Assets | |
Increase in intangible assets | 5.4 |
Finite-lived intangible assets put in service during period | $ 52.0 |
Finite-lived intangible assets, term (years) | 15 years |
Finite lived intangible assets written off | $ 3.4 |
Property and Equipment, Net - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 28, 2020 |
Mar. 30, 2019 |
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Property, Plant and Equipment | ||
Property, Plant and Equipment | ||
Impairment of assets | $ 0.9 | $ 0.9 |
Fair Value of Financial Instruments - Non-Financial Assets and Liabilities (Details) - Nonrecurring - USD ($) $ in Thousands |
Mar. 28, 2020 |
Dec. 31, 2019 |
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Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | $ 341 | |
Closed operations | $ 988 | |
Total | 341 | 988 |
Changes Measurement | ||
Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | 895 | |
Closed operations | 1,586 | |
Total | 895 | 1,586 |
Carrying Amount | ||
Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | 341 | |
Closed operations | 988 | |
Total | 341 | 988 |
Level 1 | ||
Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | 0 | |
Closed operations | 0 | |
Total | 0 | 0 |
Level 2 | ||
Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | 0 | |
Closed operations | 0 | |
Total | 0 | 0 |
Level 3 | ||
Fair Value, Assets Measured on Nonrecurring Basis | ||
Continuing operations | 341 | |
Closed operations | 988 | |
Total | $ 341 | $ 988 |
Impairment and Restructuring Charges (Tables) |
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Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment and Restructuring Costs | The following table summarizes the restructuring charges for the periods indicated:
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Schedule of Restructuring Reserve by Type of Cost | The following is a summary of the restructuring accruals recorded and charges incurred:
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Intangible Assets, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The cost and accumulated amortization values of our intangible assets were as follows:
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Finite-lived Intangible Assets Amortization Expense | 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:
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Long-Term Debt (Tables) |
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Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | Our long-term debt, net of original issue discount and unamortized debt issuance costs, consisted of the following:
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Earnings Per Share - Diluted Loss Per Share Calculation (Details) - shares |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 28, 2020 |
Mar. 30, 2019 |
Dec. 31, 2018 |
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Earnings Per Share [Abstract] | |||
Weighted average outstanding shares of common stock basic (shares) | 100,646,850 | 100,643,509 | 104,530,572 |
Restricted stock units and options to purchase common stock (shares) | 0 | 817,784 | |
Weighted average outstanding shares of common stock diluted (shares) | 100,646,850 | 101,461,293 | 106,360,657 |
Warranty Liability - Rollforward (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 28, 2020 |
Mar. 30, 2019 |
Dec. 31, 2019 |
|
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) | |||
Balance as of January 1 | $ 49,716 | $ 46,468 | |
Current period expense | 4,668 | 4,344 | |
Liabilities assumed due to acquisition | 0 | 79 | |
Experience adjustments | 1,902 | 904 | |
Payments | (6,476) | (5,602) | |
Currency translation | (756) | 106 | |
Balance at period end | 49,054 | 46,299 | |
Current portion | (20,397) | (20,272) | $ (21,054) |
Long-term portion | $ 28,657 | $ 26,027 |
Related Party Transactions - Narrative (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2019
USD ($)
|
May 31, 2019
USD ($)
|
Mar. 28, 2020
USD ($)
lease
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Mar. 30, 2019
USD ($)
|
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Related Party Transaction | ||||
Gain on sale of business | $ 2,073 | $ (582) | ||
VPI | ||||
Related Party Transaction | ||||
Operating lease assets | 3,739 | 3,739 | ||
Affiliated Entity | ||||
Related Party Transaction | ||||
Unrecorded unconditional purchase obligation | $ 7,000 | |||
Unrecorded unconditional purchase obligation, amount remaining | 3,500 | |||
Sale of Subsidiary | Affiliated Entity | Board of Directors Member | ||||
Related Party Transaction | ||||
Proceeds from the divestiture of business | $ 6,500 | |||
Gain on sale of business | $ 2,800 | |||
Acquired Lease | Affiliated Entity | VPI | ||||
Related Party Transaction | ||||
Number of operating leases | lease | 2 | |||
Operating lease assets | $ 3,800 | $ 3,600 | ||
Increase in operating lease assets | $ 600 |
Revision of Prior Period Financial Statements (Tables) |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections and Prior Period Adjustments |
Consolidated Statement of Cash Flow The errors did not impact the subtotals for cash flows from operating activities, investing activities, or financing activities. Reconciliation of pre-tax net income (loss) to Note 13 - Segment Information, Adjusted EBITDA
Segment Information: Adjusted EBITDA
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The recorded carrying amounts and fair values of these instruments were as follows:
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Fair Value Measurements, Nonrecurring | The non-financial assets that are measured at fair value on a non-recurring basis are presented below:
|
Acquisitions - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 28, 2020 |
Mar. 30, 2019 |
Dec. 31, 2019 |
|
Business Acquisition | |||
Goodwill | $ 587,043 | $ 602,500 | |
Acquisition-related costs | $ 200 | ||
VPI | |||
Business Acquisition | |||
Goodwill | $ 23,500 | $ 26,553 | |
Intangible assets useful life (years) | 8 years |
Property and Equipment, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | Depreciation expense was recorded as follows:
|
Employee Retirement and Pension Benefits |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 28, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Retirement and Pension Benefits | 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. Pension expense, as recorded in the accompanying unaudited consolidated statements of operations, is determined by using spot rate assumptions made on January 1 of each year as summarized below:
During the three months ended March 28, 2020, we made required contributions to our U.S. defined benefit pension plan or (“the Plan”) of $1.6 million. During the three months ended March 30, 2019, we made required contributions to the Plan of $1.4 million. We did not make any voluntary contributions during any of the periods described above. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act ( the“Act”) was enacted. In conjunction with the CARES Act, companies were provided relief for defined benefit pension plans, which allows for the deferral of the remaining $6.5 million of minimum contributions for 2020.
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