JELD-WEN Holding, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Jeldwyn Holding Inc. First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Karina Padilla, SEP, Corporate Planning and Analysis, and Investor Relations. Please go ahead.

Thank you. Good morning, everyone. We issued our earnings press release this morning and posted a slide presentation to the Investor Relations portion of our website, which we will be referencing during this call. I'm joined today by Gary Mischel, our CEO, and John Langer, our CFO. Before we begin, I would like to remind everyone that during this call, we will make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties, including those set forth in our earnings release and provided in our forms 10-K and 10-Q filed with the SEC. Jocelyn does not undertake any duty to update forward-looking statements, including the guidance we are providing with respect to certain expectations for future results or statements regarding the expected outcome of pending litigation. Additionally, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to their most directly comparable financial measure calculated in a GAAP can be found in our earnings release and in the appendix to this presentation. I would now like to turn the call over to Gary.

Thanks, Karina. Good morning, everyone, and thank you for joining us. First, I'd like to share that our thoughts are with everyone who has been impacted by the COVID-19 pandemic, and especially those frontline workers in essential roles in our communities. Our focus at Jelwin is the health and safety of our associates, our customers, and partners during this uncharted and challenging time. Equally important is meeting our customers' needs and ensuring business continuity. When the pandemic first appeared, we implemented a comprehensive response plan focused on safety and business continuity. We took swift and decisive action to protect our workforce and assure business continuity in line with government mandates so that we could continue to meet customer demand. I'm incredibly proud of our leadership team and all of our associates for rallying together as we manage through this crisis. Fortunately, only a small number of GELWIN associates have been diagnosed with the virus and all have or are recovering. We wish them the very best as they return to health. Please turn to page four for a brief summary of our first quarter results. Despite the pandemic, we continued to carry the momentum from 2019 into 2020. The COVID-19 impact on first quarter results was limited. And I'm pleased to note that we delivered first quarter EBITDA margins of 7.6%, slightly ahead of our previous outlook, even though revenue was slightly below expectations. As a company, we achieved the sixth consecutive quarter of favorable price versus cost inflation. Also of note, our North America segment delivered core revenue growth for the second consecutive quarter, and Europe delivered core margin expansion for the third consecutive quarter. Net revenue decreased 3.1% to $979 million due primarily to a 3% reduction in core revenue. First quarter cash flow performance was in line with normal seasonality. Although we are well positioned to navigate through the uncertainty of the current market environment, Given the fluidity of the pandemic and its unknown longer-term economic and social impacts, we are withdrawing guidance for the full year. We have a strong liquidity position with no near-term debt maturities or standing maintenance financial covenants. We recently issued an opportunistic new debt offering in the form of senior secured notes that provides us with additional financial liquidity should we need it and positions us to grow in the future. We will get more detail later in the call on the offering and other steps we've taken to enhance our cash position and improve our financial flexibility. In the first quarter, orders and demand activity were largely in line with expectations, despite some temporary production shutdowns due to localized COVID-19 actions. Our focus was and is on meeting the demands of our customers, even as we enhance safety measures. Fortunately, we experienced minimal supply chain disruption that had no impact on our Q1 results. We are proactively evaluating alternate supply sources and qualifying new suppliers and new products from our suppliers to assure continuity and minimize risk of supply chain disruption. Page 5 highlights the actions we've taken in response to the pandemic. First and foremost is our priority to protect and ensure the safety and health of our associates and business partners. We've implemented enhanced safety measures based on guidelines from the World Health Organization and the Centers for Disease Control and Prevention and those mandated by local jurisdictions. Our response included adjusting manufacturing operations to allow for social distancing, enhancing cleaning protocols and sanitation frequency, and establishing daily health self-assessment for employees and visitors reporting to our work sites. Our GELWIN Excellence Model, or GEM, is being utilized to help us implement new standard work at our operating locations. We've established and are sharing enterprise standard work incorporating COVID-19 best practices to minimize exposure risk, hosting regular webinars and other communications with our operational leaders to share updates, and learning. Let me share with you some examples of standard work now in place. We have enhanced visual management within our facilities. Sites are using visual cues throughout our facilities to remind associates of the need to maintain social distancing. They've reconfigured work streams, placed posters in common areas, and taped floors to assure safe physical separation. Increased hygiene and sanitation measures have been adopted by every location. Associates are provided with cleaning products to wipe down their workstations, computer screens, shared tools, and equipment prior to starting their shifts each day and after returning from breaks and lunch. Increased use of engineering controls, that is, installing barriers and dividers, plexiglass screens, plastic guards, and the like within and between workstations. We're also providing face shields and creating separate sound booth type platforms with plastic guarding for employees who need to communicate closer than within six feet. Common areas are cleaned with increased frequency and additional sanitizer is readily available. To enforce social distancing, breaks are staggered. Some chairs have been removed from break rooms and break room floors are taped to visually demonstrate six foot distances. In addition to associates assessing their own wellness before the start of each shift, we also conduct temperature screening. Sites are establishing either drive-up or single-line flow screening processes so that associates are evaluated for healthy temperature before they are permitted to enter the facility. In the United States, the CDC has recommended use of face coverings while out in public, and some locales have mandated it. Where mandated, we are also requiring use in our facilities. In all other locations, consistent with CDC guidelines, we are encouraging all associates to wear face coverings. From a business perspective, servicing our customers has been and continues to be a priority. We have weekly global leadership team meetings to regularly evaluate pandemic status and operational impact, and we formed regional response teams that meet daily to respond real time as the pandemic evolves across countries. We're in constant contact with our customers to understand their outlooks and serve their demand, and we are proactively working with our supply chain partners to mitigate any potential disruptions. Operationally, in most markets, we've been deemed an essential business as we directly support residential and commercial construction and service other businesses that do as well. Therefore, we continue to operate in all regions. In some locations, we temporarily suspended production based on government mandate. In Europe, while operations in the UK and France were suspended for a period of time, our France operations are back up and running, and we expect our UK facilities to come online in the coming weeks. Our Malaysia operations were idled in mid-March and reopened May 5th. Just a few locations in the US have been idled and we were able to continue to meet customer demand. In line with our values and consistent with our desire to support the communities in which we operate, all GELWIN operating locations around the world are supporting COVID-19 crisis response efforts, centrally funded and executed in a manner best decided at local levels. Through our locations around the world, Our associates have donated to food banks and homeless shelters and provided needed personal protective equipment to hospitals. In our hometown of Charlotte, we're dispatching food trucks to serve prepared meals at 14 hospitals and police and fire stations as a gesture of thanks and appreciation for those on the front lines and to support these local businesses as well. Page 5 also highlights some of the proactive and comprehensive measures we're taking in the second quarter to reduce expenses and preserve cash to enhance liquidity. These actions include compensation reductions for senior management and the board of directors, furloughs for management and staff, and other mandatory time off, halting discretionary expenses, and delaying nonessential capital investments in project work. In March, we also took the prudent step of enhancing our financial flexibility by drawing down $100 million on our existing credit facility, which has since been repaid through funding from a very successful senior secured notes offering. John will walk you through more detail on our liquidity and these austerity measures in a few minutes. We ended the first quarter with a healthy view of our customer orders for April, a solid backlog. but the longer-term demand forecast remains unclear. The Q2 demand drivers and pandemic impacts are different in each of our geographic segments, which I'll discuss on page six. Each of our three operating segments are facing different stages of year-term COVID-19-related challenges, some due to reduced demand and some due to facilities that are closed due to government mandates. We are expecting to see further demand deceleration of our products in waves from the lag effect of stay-at-home orders in many of our markets, impacting demand for future R&R and new construction in the future. In the meantime, pockets of our business continue to see strong demand into April, and we are working to meet that demand while prioritizing the safety of our associates. We have analyzed a variety of hypothetical demand and stress test scenarios prepare for this uncertain time. Our teams have already reduced costs and cash deployment in advance of this uncertain environment. And we've identified other levers for our cost structure so that we can execute in response to tier changes in demand. We will also position our business from a cost and service perspective to capture additional growth and market share as demand begins to recover. As we manage through this uncertainty, We are urgently attacking our cost structure while also maintaining the ability to accelerate share gains and drive profitable growth. These efforts, combined with a strong liquidity position and balance sheet flexibility, should position us for long-term success. We intend to come out of this pandemic a stronger gel wind than before. In North America, first quarter price increases took effect in March as planned in our holdings. residential new construction demand largely continues, though home builder orders and new starts are slowing. We expect reduced demand and other delays as the second quarter progresses, though the impact may not be fully felt until later in the year due to lag. While retail stores remain open and even with an uptick in online demand and in-store stock POS, we expect the North America repair and remodel market to weaken for doors and windows, and continue to trend toward more stock skews and lower volume on special orders. Combining the weakening demand outlook with a handful of North America sites that are either closed or operating at reduced capacity, we expect second quarter volumes to be down in the mid to high teens percentage versus last year. In Europe, order demand remains healthy in Germany and the Scandinavian markets. However, Government mandated shutdowns of our manufacturing facilities in the UK and France impacted operations there. April results will be impacted by these facility closures and we expect activity to improve as the second quarter progresses and these plants restart operations. Overall, we expect volumes in Europe to be down in the low to mid-teens percentage for the quarter compared to prior year. To date, COVID-19 impacts in Australasia have been limited. Construction markets remain open, although activity there was already below prior year due to the ongoing housing contraction. Direct to builder revenue is showing signs of slowing further and showroom traffic in our design centers is also declining. Showings are now available by appointment only in response to COVID-19. We expect volume for second quarter to be down in the high teens as a percent versus prior year. Operationally, both plants in Malaysia were closed in mid-March due to government mandates and reopened May 5th. We continue to assess pandemic related and general market conditions in each region, and we will adjust business operations as needed to operate safely and to meet the eventual market demand upswing post COVID-19. As always, we remain in close contact with our customers and are working together to be opportunistic in finding new ways to add value to their businesses and our relationships as we move to an expected market recovery stage. As we adapt our business to address the pandemic and associated market dynamics, our foundational strategy remains the same. We continue to deploy the Gelwyn Excellence Model across our operations and functions and to execute on the footprint rationalization and modernization program to improve our operations, delivering productivity gain, and right-sizing our cost structure, particularly for the uncertain future demand environment. With that, I'll pass it over to John Linker to provide a more detailed review of our financial results for the first quarter of 2020.