JELD-WEN Holding, Inc. 10-K

Item 9A - Controls and Procedures Disclosure Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, including this Report, are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Company under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer (“CEO”) and principal financial officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. The Company’s management, including the Company’s CEO and CFO, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Report and, based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s CEO and CFO, of the effectiveness of the Company’s internal control over financial reporting. The Company’s management used the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) to perform this evaluation. Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2022. The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing under Item 8- Financial Statements and Supplementary Data . Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s most recently completed quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 58 Back to top Item 9B - Other Information None. Item 9C - Disclosures Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 59 Back to top PART III Item 10 - Directors, Executive Officers and Corporate Governance The information required by this item with respect to our executive officers appears in Part I of this Form 10-K under the heading, “Executive Officers of the Registrant”. The other information required by this item is incorporated by reference to the Company’s definitive Proxy Statement for its 2023 Annual Meeting of Stockholders to be held on May 3, 2023, which will be filed with the SEC within 120 days of the Company’s fiscal year end covered by this Form 10-K (“Proxy Statement”). Item 11 - Executive Compensation The information required by this item is incorporated by reference to the Proxy Statement, except as to information required pursuant to Item 402(v) of SEC Regulation S-K relating to pay versus performance. Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Equity Compensation Plan Information The following table sets forth information with respect to shares of our Common Stock that may be issued under our existing equity compensation plans, as of December 31, 2022: (a) (b) (c) Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (1) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity compensation plans approved by security holders 3,994,272 (2) $21.48 4,535,951 (3) Equity compensation plans not approved by security holders — — — Total 3,994,272 $21.48 4,535,951 (1) Excludes RSUs and PSUs, which have no exercise price. (2) Consists of shares underlying 1,716,944 stock options, 1,997,512 RSUs, and 279,816 PSUs outstanding under the 2011 Stock Incentive Plan and 2017 Omnibus Equity Plan. (3) Number of securities remaining for future issuances includes only shares available under the 2017 Omnibus Equity Plan. The other information required by this item is incorporated by reference to the Proxy Statement. Item 13 - Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the Proxy Statement. Item 14 - Principal Accounting Fees and Services The information required by this item is incorporated by reference to the Proxy Statement. 60 Back to top PART IV Item 15 - Exhibits and Financial Statement Schedules 1. Financial Statements The financial statements are set forth under Item 8- Financial Statements and Supplementary Data of this Form 10-K. 2. Financial Statement Schedules All financial statements and schedules are omitted because they are not applicable, not required, or the information is included in the financial statements or the notes thereto. 3. Exhibits The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this 10-K and such Exhibit Index is incorporated herein by reference. Exhibit No. Exhibit Description Form File No. Exhibit Filing Date 3.1 Second Amended and Restated Certificate of Incorporation of JELD-WEN Holding, Inc. 8-K 001-38000 3.1 May 4, 2022 3.2 Third Amended and Restated Bylaws of JELD-WEN Holding, Inc. 8-K 001-38000 3.2 May 4, 2022 4.1* Description of Securities . 4.2 Indenture, dated as of December 14, 2017, among JELD-WEN, Inc., the guarantors party thereto and Wilmington Trust, National Association, as Trustee (including for of Note). 8-K 001-38000 4.1 December 14, 2017 4.3 First Supplemental Indenture, dated as of December 21, 2018, among American Building Supply, Inc., J B L Hawaii, Limited and Wilmington Trust, National Association, as Trustee. 8-K 001-38000 4.1 December 27, 2018 4.4 Second Supplemental Indenture, dated as of September 24, 2020, among Milliken Millwork, Inc., VPI Quality Windows, Inc., subsidiaries of JELD-WEN, Inc. and Wilmington Trust, National Association, as Trustee. 10-Q 001-38000 4.2 November 3, 2020 4.5 Third Supplemental Indenture, dated as of December 31, 2020, among JELD-WEN, Inc., the guarantors party thereto and Wilmington Trust, National Association, as Trustee. 10-K 001-38000 4.9 February 23, 2021 4.6 Indenture, dated as of May 4, 2020, among JELD-WEN, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee and notes collateral agent (including form of Notes). 8-K 001-38000 4.1 May 5, 2020 4.7 First Supplemental Indenture, dated September 24, 2020, to the Senior Secured Notes Indenture, dated May 4, 2020, to the Senior Secured Notes Indenture, dated May 4, 2020, among Milliken Millwork, Inc., subsidiaries of JELD-WEN, Inc., and Wilmington Trust, National Association, as Trustee. 10-Q 001-38000 4.1 November 3, 2020 4.8 Second Supplemental Indenture, dated as of December 31, 2020, among JELD-WEN, Inc., the guarantors party thereto and WilmingtonTrust, National Association, as Trustee and Notes Collateral Agent. 10-K 001-38000 4.12 February 23, 2021 4.9 Pledge and Security Agreement, dated as of May 4, 2020, among JELD-WEN, Inc., JELD-WEN Holding, Inc., the other grantors party thereto and Wilmington Trust, National Association, as notes collateral agent. 8-K 001-38000 4.2 May 5, 2020 4.10 Guarantor Joinder Agreement, dated as of September 24, 2020, to the Term Loan Credit Agreement, dated as of October 15, 2014 (as amended on July 1, 2015, November 1, 2016, March 7, 2017, December 14, 2017, September 20, 2019) among Milliken Millwork, Inc., VPI Quality Windows, Inc., and Bank of America, N.A., as Administrative Agent. 10-Q 001-38000 4.3 November 3, 2020 4.11 Borrower Joinder Agreement, dated as of September 24, 2020, to the Revolving Credit Agreement, dated as of October 15, 2014 (as amended on July 1, 2015, November 1, 2016, December 14, 2017, December 21, 2018 and December 31, 2019) among Milliken Millwork, Inc., VPI Quality Windows, Inc., and Wells Fargo Bank, National Association, as Administrative Agent. 10-Q 001-38000 4.4 November 3, 2020 61 Back to top Exhibit No. Exhibit Description Form File No. Exhibit Filing Date 10.1 Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., the other guarantors party thereto, Wells Fargo Bank, National Association, and the lenders party thereto, dated October 15, 2014. S-1 333-211761 10.1 June 1, 2016 10.2 Amendment No. 1 to Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., the subsidiary guarantors party thereto, Wells Fargo Bank, National Association, and the lenders party thereto, dated July 1, 2015. S-1 333-211761 10.1.1 June 1, 2016 10.3 Amendment No. 2 to Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., Karona, Inc., the subsidiary guarantors party thereto, Wells Fargo Bank, National Association, and the lenders party thereto, dated November 1, 2016. S-1/A 333-211761 10.1.2 November 17, 2016 10.4 Amendment No. 3 to Credit Agreement, among JELD-WEN, Inc., JELD-WEN Holding, Inc., JELD-WEN of Canada, Ltd., the other borrowers party thereto, the subsidiary guarantors party thereto, the lenders party thereto, Wells Fargo Bank, National Association, as administrative agent, issuing bank and swingline lender and the other parties thereto, dated as of December 14, 2017. 8-K 001-38000 10.1 December 15, 2017 10.5 Amendment No. 4, dated as of December 21, 2018, among JELD-WEN, Inc., American Building Supply, Inc., J B L Hawaii, Limited, the other borrowers party thereto, the subsidiary guarantors party thereto, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent. 8-K 001-38000 10.1 December 27, 2018 10.6 Amendment No. 5, dated as of December 31, 2019, among JELD-WEN Holding, Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., the other borrowers and subsidiary guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto . 8-K 001-38000 10.1 January 6, 2020 10.7 Amendment No. 6, dated as of July 28, 2021, among JELD-WEN Holding, Inc., JELD_WEN, Inc., the subsidiary guarantors party thereto, and Bank of America, N.A., as administrative agent. 10-Q 001-38000 10.2 August 2, 2021 10.8 Term Loan Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc., Onex BP Finance LP, the other guarantors party thereto, Bank of America, N.A. and the lenders party thereto, dated October 15, 2014. S-1 333-211761 10.2 June 1, 2016 10.9 Amendment No. 1 to Term Loan Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc., Onex BP Finance LP, the subsidiary guarantors party thereto, Bank of America, N.A., and the lenders party thereto, dated July 1, 2015. S-1 333-211761 10.2.1 June 1, 2016 10.10 Amendment No. 2 to Term Loan Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc. the subsidiary guarantors party thereto, Onex BP Finance LP, Bank of America, N.A., and the lenders party thereto, dated November 1, 2016. S-1/A 333-211761 10.2.2 November 17, 2016 10.11 Amendment No. 3 to Term Loan Credit Agreement, among JELD-WEN Holding, Inc., JELD-WEN, Inc. the subsidiary guarantors party thereto, Onex BP Finance LP, Bank of America, N.A., and the lenders party thereto, dated March 7, 2017. 8-K 001-38000 10.1 March 8, 2017 10.12 Amendment No. 4, by and among JELD-WEN, Inc., JELD-WEN Holding, Inc., the subsidiary guarantors party thereto, the lenders party thereto, Bank of America, N.A., as administrative agent and the other parties thereto, dated as of December 14, 2017. 8-K 001-38000 10.2 December 15, 2017 10.13 Amendment No. 5, dated as of September 20, 2019, among JELD-WEN Holding, Inc., JELD-WEN, Inc., the subsidiary guarantors party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent. 8-K 001-38000 10.1 September 20, 2019 10.14 Amendment No. 6, dated as of July 28, 2021, among JELD-WEN Holding, Inc., JELD-WEN, Inc., JELD-WEN of Canada, Ltd., the other borrowers and subsidiary guarantors party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto. 10-Q 001-38000 10.3 August 2, 2021 10.15+ JELD-WEN Holding, Inc. Amended and Restated Stock Incentive Plan, dated January 30, 2017. 10-Q 001-38000 10.14 May 12, 2017 10.16+ Form of Nonstatutory Common Stock Option Agreement under JELD-WEN Holding, Inc. Amended and Restated Stock Incentive Plan. S-1/A 333-211761 10.7 December 16, 2016 10.17+ Form of Nonstatutory Class B-1 Common Stock Option Agreement under JELD-WEN Holding, Inc. Amended and Restated Stock Incentive Plan. S-1/A 333-211761 10.8 December 16, 2016 62 Back to top Exhibit No. Exhibit Description Form File No. Exhibit Filing Date 10.18*+ JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan. 10.19+ Amendment to Form of Nonqualified Stock Option Agreement under JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan. 10-Q 001-38000 10.2 April 30, 2021 10.20+ Form of Restricted Stock Unit Award Agreement under JELD-WEN Holding, Inc. 2017 Omnibus Plan. 10-K 001-38000 10.20 February 22, 2022 10.21+ Form of Performance Share Unit Award Agreement under JELD-WEN Holding, Inc. 2017 Omnibus Plan. 10-K 001-38000 10.21 February 22, 2022 10.22+ JELD-WEN Holding, Inc. 2022 Management Incentive Plan. 10-K 001-38000 10.22 February 22, 2022 10.23+ Form of Indemnification Agreement. S-1 333-211761 10.25 June 1, 2016 10.24+ Form of Separation Agreement between JELD-WEN Holding, Inc. and executive officers. 10-Q 001-38000 10.1 September 24, 2022 10.25+ Amendment to Executive Employment Agreement between JELD-WEN, Holding, Inc. and Kevin C. Lilly, effective August 3, 2022. 10-Q 001-38000 10.2 September 24, 2022 10.26+ Form of Executive Employment Agreement between JELD-WEN Holding, Inc. and executive officers. 10-Q 001-38000 10.1 August 5, 2020 10.27 The JELD-WEN Deferred Compensation Plan, effective April 1, 2022 8-K 001-38000 10.1 February 18, 2022 21.1* List of subsidiaries of JELD-WEN Holding, Inc. 22.1 Subsidiary Guarantors and Issuers of Guaranteed Securities. 10-K 001-38000 22.1 February 22, 2022 23.1* Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm. 24.1* Power of Attorney (included on the signature page of this Annual Report on Form 10-K). 31.1* Certification of Periodic Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 . 31.2* Certification of Periodic Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* Inline XBRL Instance 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 in Inline XBRL and contained in Exhibit 101). * Filed herewith. + Indicates management contract or compensatory plan. Item 16 - Form 10-K Summary None. 63 Back to top SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. JELD-WEN HOLDING, INC. (Registrant) By: /s/ Julie Albrecht Julie Albrecht Executive Vice President and Chief Financial Officer Date: February 21, 2023 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Julie Albrecht and Roya Behnia, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities and Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ William Christensen Chief Executive Officer and Director (Principal Executive Officer) February 21, 2023 William J. Christensen /s/ Julie Albrecht Chief Financial Officer (Principal Financial Officer) February 21, 2023 Julie Albrecht /s/ Scott Vining Chief Accounting Officer (Principal Accounting Officer) February 21, 2023 Scott Vining /s/ Roderick C. Wendt Vice Chair and Director February 21, 2023 Roderick C. Wendt /s/ Catherine A. Halligan Director February 21, 2023 Catherine Halligan /s/ Tracey I. Joubert Director February 21, 2023 Tracey I. Joubert /s/ Cynthia Marshall Director February 21, 2023 Cynthia Marshall /s/ David Nord Chair February 21, 2023 David Nord /s/ Suzanne Stefany Director February 21, 2023 Suzanne Stefany 64 Back to top Signature Title Date /s/ Bruce Taten Director February 21, 2023 Bruce Taten /s/ Steven E. Wynne Director February 21, 2023 Steven E. Wynne 65 Back to top Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238 ) F- 2 Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021, and 2020 F- 4 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021, and 2020 F- 5 Consolidated Balance Sheets as of December 31, 2022 and 2021 F- 6 Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021, and 2020 F- 7 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020 F- 8 Notes to Consolidated Financial Statements F- 9 F-1 Back to top Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of JELD-WEN Holding, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of JELD-WEN Holding, Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters F-2 Back to top The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Interim and Annual Goodwill Impairment Assessments – North America and Europe Reporting Units As described in Notes 1 and 5 to the consolidated financial statements, the Company’s goodwill balance was $460.5 million as of December 31, 2022, and the goodwill associated with the North America and Europe reporting units was $182.3 million and $199.7 million, respectively. Management tests goodwill for impairment on an annual basis during the fourth quarter and between annual tests if indicators of potential impairment exist. During the quarter ended September 24, 2022, management identified various qualitative and quantitative factors which collectively indicated a triggering event had occurred within the North America and Europe reporting units. Based on the results of the interim impairment assessment, management concluded that the carrying value of the Europe reporting unit exceeded its fair value and recorded a goodwill impairment charge of $54.9 million, representing a partial impairment of goodwill assigned to the Europe reporting unit. In addition, management determined that the North America reporting unit was not impaired. Management performed its annual goodwill impairment assessment as of the beginning of the December fiscal month of 2022 and determined that the fair value of the North America and Europe reporting units exceeded their net carrying value and no additional goodwill impairment was recorded. Management estimates the fair value of reporting units using the income approach. Under the income approach, the fair value of a reporting unit is based on discounted cash flow analysis that contains significant assumptions including revenue growth rates, expected EBITDA margins, discount rates, capital expenditures, and terminal growth rates. The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments for the North America and Europe reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates the reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, expected EBITDA margins, discount rates, capital expenditures, and terminal growth rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s interim and annual goodwill impairment assessments, including controls over the valuation of the North America and Europe reporting units. These procedures included, among others (i) testing management’s process for developing the fair value estimates; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to revenue growth rates, expected EBITDA margins, discount rates, capital expenditures, and terminal growth rates. Evaluating management’s assumptions related to revenue growth rates, expected EBITDA margins, and capital expenditures involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit; (ii) the consistency with external and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and assumptions related to terminal growth rates and discount rates. /s/ PricewaterhouseCoopers LLP Charlotte, North Carolina February 21, 2023 We have served as the Company’s auditor since 2000. F-3 Back to top Item 1 - Financial Statements JELD-WEN HOLDING, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, (amounts in thousands, except share and per share data) 2022 2021 2020 Net revenues $ 5,129,179 $ 4,771,719 $ 4,235,677 Cost of sales 4,183,753 3,796,452 3,333,770 Gross margin 945,426 975,267 901,907 Selling, general and administrative 766,092 704,892 702,715 Goodwill impairment 54,885 — — Restructuring and asset related charges, net 18,233 2,950 10,469 Operating income 106,216 267,425 188,723 Interest expense, net 82,060 77,566 74,800 Other income, net ( 54,881 ) ( 14,503 ) ( 2,752 ) Income before taxes 79,037 204,362 116,675 Income tax expense 33,310 35,540 25,089 Net income $ 45,727 $ 168,822 $ 91,586 Weighted average common shares outstanding: Basic 86,374,499 96,563,155 100,633,392 Diluted 87,075,176 98,371,142 101,681,981 Net income per share Basic $ 0.53 $ 1.75 $ 0.91 Diluted $ 0.53 $ 1.72 $ 0.90 The accompanying notes are an integral part of these Consolidated Financial Statements. F-4 Back to top JELD-WEN HOLDING, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, (amounts in thousands) 2022 2021 2020 Net income $ 45,727 $ 168,822 $ 91,586 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments, net of tax expense (benefit) of $ 1,502 , $( 4,096 ), and $ 0 , respectively ( 71,811 ) ( 77,904 ) 105,442 Interest rate hedge adjustments, net of tax expense (benefit) of $ 3,268 , $ 1,302 , and $( 468 ), respectively 9,668 3,850 ( 1,384 ) Defined benefit pension plans, net of tax expense (benefit) of $ 4,104 , $ 13,226 , and $( 3,800 ), respectively 13,255 39,001 ( 11,476 ) Total other comprehensive (loss) income, net of tax ( 48,888 ) ( 35,053 ) 92,582 Comprehensive (loss) income $ ( 3,161 ) $ 133,769 $ 184,168 The accompanying notes are an integral part of these Consolidated Financial Statements. F-5 Back to top JELD-WEN HOLDING, INC. CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share and per share data) December 31, 2022 December 31, 2021 ASSETS Current assets Cash and cash equivalents $ 219,405 $ 395,596 Restricted cash 1,463 1,294 Accounts receivable, net 603,748 552,041 Inventories 666,455 615,971 Other current assets 78,787 55,531 Assets held for sale 125,748 119,424 Total current assets 1,695,606 1,739,857 Property and equipment, net 762,486 798,804 Deferred tax assets 195,180 204,232 Goodwill 460,505 545,213 Intangible assets, net 192,105 222,181 Operating lease assets, net 167,880 201,781 Other assets 27,599 26,603 Total assets $ 3,501,361 $ 3,738,671 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 320,682 $ 418,774 Accrued payroll and benefits 133,637 135,989 Accrued expenses and other current liabilities 291,876 289,676 Current maturities of long-term debt 34,391 38,561 Liabilities held for sale 6,040 5,868 Total current liabilities 786,626 888,868 Long-term debt 1,713,238 1,667,696 Unfunded pension liability 35,505 61,438 Operating lease liability 135,822 166,318 Deferred credits and other liabilities 97,898 102,879 Deferred tax liabilities 8,724 9,254 Total liabilities 2,777,813 2,896,453 Commitments and contingencies (Note 24) 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, 84,347,712 and 90,193,550 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively. 843 902 Additional paid-in capital 734,853 719,451 Retained earnings 130,486 215,611 Accumulated other comprehensive loss ( 142,634 ) ( 93,746 ) Total shareholders’ equity 723,548 842,218 Total liabilities and shareholders’ equity $ 3,501,361 $ 3,738,671 The accompanying notes are an integral part of these Consolidated Financial Statements. F-6 Back to top JELD-WEN HOLDING, INC. CONSOLIDATED STATEMENTS OF EQUITY December 31, 2022 December 31, 2021 December 31, 2020 (amounts in thousands, except share and per share amounts) Shares Amount 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 90,193,550 $ 902 100,806,068 $ 1,008 100,668,003 $ 1,007 Shares issued for exercise/vesting of share-based compensation awards 1,128,181 11 1,011,439 10 427,950 5 Shares repurchased ( 6,848,356 ) ( 69 ) ( 11,564,009 ) ( 115 ) ( 265,589 ) ( 3 ) Shares surrendered for tax obligations for employee share-based transactions ( 125,663 ) ( 1 ) ( 59,948 ) ( 1 ) ( 24,296 ) ( 1 ) Balance at period end 84,347,712 $ 843 90,193,550 $ 902 100,806,068 $ 1,008 Additional paid-in capital Balance at beginning of period $ 720,124 $ 691,360 $ 672,445 Shares issued for exercise/vesting of share-based compensation awards 1,998 10,174 2,979 Shares surrendered for tax obligations for employee share-based transactions ( 2,764 ) ( 1,619 ) ( 463 ) Amortization of share-based compensation 16,168 20,209 16,399 Balance at period end 735,526 720,124 691,360 Employee stock notes Balance at beginning of period ( 673 ) ( 673 ) ( 673 ) Net issuances, payments and accrued interest on notes — — — Balance at period end ( 673 ) ( 673 ) ( 673 ) Balance at period end $ 734,853 $ 719,451 $ 690,687 Retained earnings Balance at beginning of period $ 215,611 $ 371,462 $ 290,583 Shares repurchased ( 130,852 ) ( 324,673 ) ( 4,997 ) Adoption of new accounting standard ASU No. 2016-13 — — ( 5,710 ) Net income 45,727 168,822 91,586 Balance at period end $ 130,486 $ 215,611 $ 371,462 Accumulated other comprehensive income (loss) Balance at beginning of period $ ( 93,746 ) $ ( 58,693 ) $ ( 151,275 ) Foreign currency adjustments ( 71,811 ) ( 77,904 ) 105,442 Unrealized gain (loss) on interest rate hedges 9,668 3,850 ( 1,384 ) Net actuarial pension gain (loss) 13,255 39,001 ( 11,476 ) Balance at period end $ ( 142,634 ) $ ( 93,746 ) $ ( 58,693 ) Total shareholders’ equity at period end $ 723,548 $ 842,218 $ 1,004,464 The accompanying notes are an integral part of these Consolidated Financial Statements F-7 Back to top JELD-WEN HOLDING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, (amounts in thousands) 2022 2021 2020 OPERATING ACTIVITIES Net income $ 45,727 $ 168,822 $ 91,586 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 131,754 137,247 134,623 Deferred income taxes ( 4,394 ) ( 14,973 ) ( 9,063 ) Net (gain) loss on disposition of assets ( 7,969 ) 1,979 ( 4,122 ) Goodwill impairment 54,885 — — Adjustment to carrying value of assets 2,375 2,076 5,537 Amortization of deferred financing costs 3,150 3,175 2,679 Loss on extinguishment of debt — 1,001 — Stock-based compensation 16,168 20,209 16,399 Contributions to U.S. pension plan — — ( 12,619 ) Amortization of U.S. pension expense 1,798 9,092 6,852 Recovery of cost from interest received on impaired notes ( 13,953 ) — — Other items, net 24,597 3,804 21,125 Net change in operating assets and liabilities, net of effect of acquisitions: Accounts receivable ( 79,692 ) ( 91,920 ) 10,819 Inventories ( 73,575 ) ( 134,482 ) 9,849 Other assets ( 4,875 ) ( 14,575 ) 5,520 Accounts payable and accrued expenses ( 58,615 ) 70,184 62,880 Change in short term and long-term tax liabilities ( 7,044 ) 14,027 13,590 Net cash provided by operating activities 30,337 175,666 355,655 INVESTING ACTIVITIES Purchases of property and equipment ( 83,217 ) ( 83,603 ) ( 77,692 ) Proceeds from sale of property and equipment 11,871 3,166 14,308 Purchase of intangible assets ( 9,003 ) ( 16,090 ) ( 19,204 ) Recovery of cost from interest received on impaired notes 13,953 — — Cash received for notes receivable 94 4,166 585 Change in securities for deferred compensation plan ( 728 ) — — Net cash used in investing activities ( 67,030 ) ( 92,361 ) ( 82,003 ) FINANCING ACTIVITIES Change in long-term debt 12,729 ( 86,051 ) 210,858 Common stock issued for exercise of options 2,009 10,184 2,984 Common stock repurchased ( 131,987 ) ( 323,722 ) ( 5,000 ) Payments to tax authorities for employee share-based compensation ( 2,765 ) ( 1,620 ) ( 933 ) Net cash (used in) provided by financing activities ( 120,014 ) ( 401,209 ) 207,909 Effect of foreign currency exchange rates on cash ( 19,315 ) ( 21,800 ) 25,157 Net (decrease) increase in cash and cash equivalents ( 176,022 ) ( 339,704 ) 506,718 Cash, cash equivalents and restricted cash, beginning 396,890 736,594 229,876 Cash, cash equivalents and restricted cash, ending $ 220,868 $ 396,890 $ 736,594 For further information see Note 26 - Supplemental Cash Flow. The accompanying notes are an integral part of these Consolidated Financial Statements. F-8 Back to top JELD-WEN HOLDING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Company and Summary of Significant Accounting Policies Nature of Business – JELD-WEN Holding, Inc., along with its subsidiaries, is a vertically integrated global manufacturer and distributor of windows, doors, and other building products that derives substantially all its revenues from the sale of its door and window products. Unless otherwise specified or the context otherwise requires, all references in these notes to “JELD-WEN,” “we,” “us,” “our,” or the “Company” are to JELD-WEN Holding, Inc. and its subsidiaries. We have facilities located in the U.S., Canada, Europe, Australia, Asia, and Mexico. Our products are marketed primarily under the JELD-WEN brand name in the U.S. and Canada and under JELD-WEN and a variety of acquired brand names in Europe, Australia, and Asia. Our revenues are affected by the level of new housing starts and remodeling activity in each of our markets. Our sales typically follow seasonal new construction and repair and remodeling industry patterns. The peak season for home construction and remodeling in many of our markets generally corresponds with the second and third calendar quarters, and therefore, sales volume is typically higher during those quarters. Our first and fourth quarter sales volumes are generally lower due to reduced repair and remodeling activity and reduced activity in the building and construction industry as a result of colder and more inclement weather in certain areas of our geographic end markets. Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC. All intercompany balances and transactions have been eliminated in consolidation. All U.S. dollar and other currency amounts, except per share amounts, are presented in thousands unless otherwise noted. Ownership – As of December 31, 2020, Onex owned approximately 33 % of the outstanding shares of our Common Stock. On March 1, 2021, May 10, 2021, and August 16, 2021, Onex exercised its rights under its Registration Rights Agreement and requested the registration for resale of 8,000,000 , 10,000,000 , 14,883,094 shares of our Common Stock, respectively, in underwritten public offerings (the “Secondary Offerings”), and as provided under the terms of the Registration Rights Agreement, we were responsible for all related fees and expenses except for the underwriters’ discounts and commissions, which were paid by Onex. The Secondary Offerings were completed on March 3, 2021, May 13, 2021, and August 18, 2021, and the Company purchased from the underwriter 800,000 , 1,000,000 , and 7,017,543 of the aggregate shares of our Common Stock that were the subject of the Secondary Offerings at a price per share of $ 28.61 , $ 28.80 , and $ 28.50 , respectively, which is the price at which the underwriter purchased the shares from Onex in the Secondary Offerings. After the Secondary Offerings, Onex held approximately 25 %, 15 %, and 0 % of our outstanding shares of Common Stock, respectively. Share Repurchases – On July 27, 2021, the Board of Directors increased the authorization under our existing share repurchase program to a total of $ 400.0 million with no expiration date. On July 28, 2022, our Board of Directors authorized a new share repurchase program, replacing our previous share repurchase authorization, with an aggregate value of $ 200.0 million and no expiration date. As of December 31, 2022, there have been no share repurchases under this program. During the years ended December 31, 2022, December 31, 2021, and December 31, 2020, we paid $ 132.0 million, $ 323.7 million and $ 5.0 million, respectively, to repurchase 6,848,356 , 11,564,009 , and 265,589 shares of our Common Stock, respectively. Fiscal Year – We operate on a fiscal calendar year, and each interim quarter is comprised of two 4-week periods and one 5-week period, with each week ending on a Saturday. Our fiscal year always begins on January 1 and ends on December 31. As a result, our first and fourth quarters may have more or fewer days included than a traditional 91-day fiscal quarter. Use of Estimates – The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions, and allocations that affect amounts reported in the consolidated financial statements and related notes. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets including goodwill and other intangible assets, employee benefit obligations, income tax uncertainties, contingent assets and liabilities, provisions for bad debt, inventory, warranty liabilities, legal claims, valuation of derivatives, environmental remediation, and claims relating to self-insurance. Actual results could differ due to the uncertainty inherent in the nature of these estimates. COVID-19 – The CARES Act in the U.S. and similar legislation in other jurisdictions includes measures that assisted companies in responding to the COVID-19 pandemic. These measures consisted primarily of cash assistance to support employment levels and deferment of remittance of certain non-income tax expense payments. The most significant impact was from the CARES Act in the U.S., which included a provision that allows employers to defer the remittance of the F-9 Back to top employer portion of the social security tax relating to 2020. The deferred employment payment was required to be paid over two years. Original payment due dates were in 2021 and 2022, however updated guidance provided by the Internal Revenue Service in December 2021 allowed for these payments to be made during 2022 and 2023. The Company deferred $ 20.9 million of the employer portion of social security tax in 2020, of which of which $ 9.9 million was paid in the first quarter of 2022 and the remaining $ 11.0 million was paid in the fourth quarter of 2022. As of December 31, 2021, the deferral of $ 20.9 million was equally recorded between accrued payroll and benefits and deferred credits and other liabilities in the consolidated balance sheet. Segment Reporting – Our reportable segments are organized and managed principally by geographic region: North America, Europe, and Australasia. We report all other business activities in Corporate and unallocated costs. In addition to similar economic characteristics, we also consider the following factors in determining the reportable segments: the nature of business activities, the management structure directly accountable to our CODM for operating and administrative activities, the discrete financial information regularly reviewed by the CODM, and information presented to the Board of Directors and investors. No segments have been aggregated for our presentation. Cash and Cash Equivalents – We consider all highly-liquid investments purchased with an original or remaining maturity at the date of purchase of three months or less to be cash equivalents. Our cash management system is designed to maintain zero bank balances at certain banks. Checks written and not presented to these banks for payment are reflected as book overdrafts and are a component of accounts payable. Restricted Cash – Restricted cash consists primarily of cash required to meet certain bank guarantees. Accounts Receivable – Accounts receivable are recorded at their net realizable value. Our customers are primarily retailers, distributors, and contractors. As of December 31, 2022, two customers accounted for 26.9 % of the consolidated accounts receivable balance. As of December 31, 2021, two customers accounted for 30.5 % of the consolidated accounts receivable balance. We maintain allowances for credit losses resulting from the inability of our customers to make required payments. We estimate the allowance for doubtful accounts based on quantitative and qualitative factors associated with the credit risk of our accounts receivable, including historical credit collections within each region where we have operations. If the financial condition of a customer deteriorates or other circumstances occur that result in an impairment of a customer’s ability to make payments, we record additional allowances as needed. We write off uncollectible trade accounts receivable against the allowance for credit losses when collection efforts have been exhausted and/or any legal action taken by us has concluded. Inventories – Inventories in the accompanying consolidated balance sheets are valued at the lower of cost or net realizable value and are determined by the first-in, first-out (“FIFO”) or average cost methods. We record provisions to write-down obsolete and excess inventory to its estimated net realizable value. The process for evaluating obsolete and excess inventory requires us to evaluate historical inventory usage and expected future production needs. Accelerating the disposal process or incorrect estimates may cause actual results to differ from the estimates at the time such inventory is disposed or sold. We classify certain inventories that are available for sale directly to external customers or used in the manufacturing of a finished good within raw materials. Notes Receivable – Notes receivable are recorded at their net realizable value. The balance consists primarily of installment notes and affiliate notes. The allowance for credit losses is based upon credit risks, historical loss trends, and specific reviews of delinquent notes. We write off uncollectible note receivables against the allowance for doubtful accounts when collection efforts have been exhausted and/or any legal action taken by us has been concluded. Current maturities and interest, net of short-term allowance are reported as other current assets. Customer Displays – Customer displays include all costs to manufacture, ship, and install the displays of our products in retail store locations. Capitalized display costs are included in other assets and are amortized over the life of the product lines, typically 1 to 3 years, and are included in SG&A expense in the accompanying consolidated statements of operations and was $ 1.4 million in 2022, $ 3.0 million in 2021, and $ 7.9 million in 2020. Cloud Computing Arrangements –We capitalize qualified cloud computing implementation costs associated with the application development stage and subsequently amortize these costs over the term of the hosting agreement and stated renewal period, if it is reasonably certain we will renew, typically 3 to 5 years. Capitalized costs are included in other assets on the consolidated balance sheet and amortization is included in SG&A expense in the accompanying consolidated statement of operations. Property and Equipment – Property and equipment are recorded at cost. The cost of major additions and betterments are capitalized and depreciated using the straight-line method over their estimated useful lives. Replacements, maintenance, and repairs that do not improve or extend the useful lives of the related assets or adapt the property to a new or different use are expensed as incurred. Interest over the construction period is capitalized as a component of cost of constructed assets. F-10 Back to top Upon sale or retirement of property or equipment, cost and related accumulated depreciation are removed from the accounts and any gain or loss is charged to income and included in other income, net in the accompanying statements of operations. Leasehold improvements are amortized over the shorter of the useful life of the improvement, the lease term, or the life of the building. Depreciation is generally provided over the following estimated useful service lives: Land improvements 10 - 20 years Buildings and improvements 10 - 45 years Machinery and equipment 3 - 20 years Intangible Assets – Definite lived intangible assets are amortized based on the pattern of economic benefit over the following estimated useful lives: Trademarks and trade names 10 - 40 years Software 3 - 10 years Patents, licenses and rights 5 - 25 years Customer relationships 5 - 20 years The lives of definite lived intangible assets are reviewed and reduced if necessary, whenever changes in their planned use occur. Legal and registration costs related to internally-developed patents and trademarks are capitalized and amortized over the lesser of their expected useful life or the legal patent life. Cost and accumulated amortization are removed from the accounts in the period that an intangible asset becomes fully amortized. The carrying value of intangible assets is reviewed by management to assess the recoverability of the assets when facts and circumstances indicate that the carrying value may not be recoverable. The recoverability test requires us to first compare undiscounted cash flows expected to be generated by that definite lived intangible asset or asset group to its carrying amount. If the carrying amounts of the definite lived intangible assets are not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques. Our valuation of identifiable intangible assets acquired is based on information and assumptions available to us at the time of acquisition, using income and market approaches to determine fair value. We do not amortize indefinite-lived intangible assets, but test for impairment annually, or when indications of potential impairment exist. For intangible assets other than goodwill, if the carrying value exceeds the fair value, we recognize an impairment loss in an amount equal to the excess. No material impairments were identified during the years ended December 31, 2022, December 31, 2021 and December 31, 2020. We capitalize certain qualified internal use software costs during the application development stage and subsequently amortize these costs over the estimated useful life of the asset. Costs incurred during the preliminary project stage and post-implementation operation stage are expensed as incurred. Long-Lived Assets – Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such assets or asset groups may not be recoverable. If a triggering event is identified, we perform an impairment test by reviewing the expected undiscounted cash flows generated from the anticipated use and eventual disposition of the asset group compared to the carrying value of the asset group. If the expected undiscounted cash flows are less than the carrying value of the asset group, then an impairment charge is required to reduce the carrying value of the asset group to fair value. Long-lived assets currently available for sale and expected to be sold within one year are classified as assets held for sale. Leases – We lease certain warehouses, distribution centers, office spaces, land, vehicles, and equipment. We determine if an arrangement is a lease at inception. A contract contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Amounts associated with operating leases are included in operating lease assets (“ROU assets”), net, accrued expense and other current liabilities and operating lease liability in our consolidated balance sheet. Amounts associated with finance leases are included in property and equipment, net, current maturities of long-term debt, and long-term debt in our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. F-11 Back to top If the lease does not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The incremental borrowing rate for operating leases that commenced in the period is determined by using the prior quarter end’s incremental borrowing rates. We have elected not to recognize an ROU asset and lease liability for leases with an initial term of twelve months or less as well as any lease covering immaterial assets. We recognize lease expense for these leases on a straight-line basis over the lease term. Variable lease payments that are dependent on usage, output, or may vary for other reasons, are excluded from lease payments in the measurement of the ROU asset and lease liability, and accordingly are recognized as lease expense in the period the obligation for those payments is incurred. For lease agreements entered into or reassessed after the adoption of Topic 842, we combine lease and non-lease components. Certain leases include renewal and/or termination options, with renewal terms that can extend the lease term from 1 to 20 years or more, and the exercise of lease renewal options under these leases is at our sole discretion. These options are included in the lease term used to determine ROU assets and corresponding liabilities when we are reasonably certain we will exercise the option. The depreciable life of assets and leasehold improvements are limited by the expected lease term. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Goodwill – Goodwill is tested for impairment on an annual basis during the fourth quarter and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Current accounting guidance provides an entity the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is impaired. If we do not perform a qualitative assessment, or if we determine that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount, we perform a quantitative goodwill impairment test using the income approach (implied fair value measured on a non-recurring basis using level 3 inputs). Under the income approach, the fair value of a reporting unit is based on discounted cash flow analysis of management's short-term and long-term forecast of operating performance. This analysis contains significant assumptions including revenue growth rates, expected EBITDA margins, discount rates, capital expenditures, and terminal growth rates. Changes in assumptions or estimates used in our goodwill impairment testing could materially affect the determination of the fair value of a reporting unit, and therefore, could eliminate any excess of fair value over carrying value of a reporting unit and, in some cases, could result in impairment. Such changes in assumptions could be caused by items such as a loss of one or more significant customers, decline in the demand for our products due to changing economic conditions, or failure to control cost increases above what can be recouped in sale price increases. These types of changes would negatively affect our profits, revenues, and growth over the long term and such a decline could significantly affect the fair value assessment of our reporting units and cause our goodwill to become impaired. We identified three reporting units for the purpose of conducting our goodwill impairment review: North America, Europe and Australasia, and applied a quantitative approach to our North America and Europe reporting units while applying a qualitative approach to our Australasia reporting unit. In determining our reporting units, we considered (i) whether an operating segment or a component of an operating segment was a business, (ii) whether discrete financial information was available, and (iii) whether the financial information is regularly reviewed by management of the operating segment. Deferred Revenue – We record deferred revenue when we collect pre-payments from customers for performance obligations we expect to fulfill through future performance of a service or delivery of a product. We classify our deferred revenue based on our estimate as to when we expect to satisfy the related performance obligations. Deferred revenues are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. Warranty Accrual – Warranty terms range primarily from one year to lifetime on certain window and door components. Warranties are normally limited to replacement or service of defective components for the original customer. Some warranties are transferable to subsequent owners and are generally limited to ten years from the date of manufacture or require pro-rata payments from the customer. A provision for estimated warranty costs is recorded at the time of sale based on historical experience and we periodically adjust these provisions to reflect actual experience. Restructuring – Costs to exit or restructure certain activities of an acquired company or our internal operations are accounted for as one-time termination and exit costs as required by the provisions of FASB ASC 420, Exit or Disposal Cost Obligations , and are accounted for separately from any business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in our consolidated statements of operations in the period in which the liability is incurred. When estimating the fair value of restructuring activities, assumptions are applied, which can differ materially from actual results. This may require us to revise our initial estimates, which may materially affect our results of operations and financial position in the period the revision is made. Derivative Financial Instruments – Derivative financial instruments are used to manage interest rate risk associated with our borrowings and foreign currency exposures related to transactions denominated in currencies other than the U.S. dollar, or in the case of our non-U.S. companies, transactions denominated in a currency other than their functional currency. All F-12 Back to top derivatives are recorded as assets or liabilities in the consolidated balance sheets at their respective fair values. As of December 31, 2022, December 31, 2021 and December 31, 2020, we had netting provisions in certain agreements with our counterparties. We have elected to not offset the fair values of derivative assets and liabilities executed with the same counterparty that are generally subject to enforceable netting agreements. Changes in a derivative’s fair value are recognized in earnings unless specific hedge criteria are met, and we elect hedge accounting prior to entering into the hedge. If a derivative is designated as a fair value hedge, the changes in fair value of both the derivative and the hedged item attributable to the hedged risks are recognized in the same line item in the results of operations. If the derivative is designated as a cash flow hedge, changes in the fair value related to the derivatives considered highly effective are initially recorded in accumulated other comprehensive income (loss) and subsequently classified to the consolidated statements of operations when the hedged item impacts earnings, and in the same line item on the consolidated statements of operations as the impact of the hedge transaction. At the inception of a fair value or cash flow hedge, we formally document the hedge relationship and the risk management objective for undertaking the hedge. In addition, for derivatives that qualify for hedge accounting, we assess, both at inception of the hedge and on an ongoing basis, whether the derivative financial instrument is and will continue to be highly effective in offsetting cash flows or fair value of the hedged item and whether it is probable that the hedged forecasted transaction will occur. Changes in the fair value of derivatives that do not qualify for hedge accounting, or fail to meet the criteria, thereafter, are also recognized in the consolidated statements of operations. See Note 23 - Fair Value of Financial Instruments for additional information on the fair value of our derivative assets and liabilities. Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. Generally, this occurs with the transfer of control of our products or services. The transfer of control to the customer occurs at a point in time, usually upon satisfaction of the shipping terms within the contract. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The taxes we collect concurrent with revenue-producing activities (e.g., sales tax, value-added tax, and other taxes) are excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are not considered a separate performance obligation. Shipping and handling costs charged to customers and the related expenses are reported in revenues and cost of sales for all customers. The expected costs associated with our base warranties and field service actions continue to be recognized as expense when the products are sold (see Note 10 - Warranty Liability ). Since payment is due at or shortly after the point of sale, the contract asset is classified as a receivable. We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less. We do not typically include extended payment terms in our contracts with customers. Incidental items that are immaterial in the context of the contract are recognized as expense. We disaggregate revenues based on geographical location. See Note 14 - Segment Information for further information on disaggregated revenue. Advertising Costs – All costs of advertising our products and services are charged to expense as incurred. Advertising and promotion expenses included in SG&A expenses were $ 32.5 million in 2022, $ 31.4 million in 2021, and $ 31.7 million in 2020. Net Interest Expense and Extinguishment of Debt Costs – We record debt extinguishment costs separately from interest expense, net within other income, net in the consolidated statements of operations. Foreign Currency Translation and Adjustments – Typically, our foreign subsidiaries maintain their accounting records in their local currency. All of the assets and liabilities of these subsidiaries (including long-term assets, such as goodwill) are converted to U.S. dollars at the exchange rate in effect at the balance sheet date, income and expense accounts are translated at average rates for the period, and shareholder’s equity accounts are translated at historical rates. The effects of translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation adjustment in consolidated other comprehensive income (loss). This balance is net of tax, where applicable. The effects of translating financial statements of foreign operations in which the U.S. dollar is their functional currency are included in the consolidated statements of operations. The effects of translating intercompany debt are recorded in the consolidated statements of operations unless the debt is of a long-term investment nature in which case gains and losses are recorded in consolidated other comprehensive income (loss). Foreign currency transaction gains or losses are credited or charged to income as incurred. F-13 Back to top Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We evaluate both the positive and negative evidence that is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. The tax effects from an uncertain tax position can be recognized in the consolidated financial statements, only if the position is more likely than not to be sustained, based on the technical merits of the position and the jurisdiction taxes of the Company. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit and the tax related to the position would be due to the entity and not the owners. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. We apply this accounting standard to all tax positions for which the statute of limitations remains open. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We file a consolidated federal income tax return in the U.S. and various states. For financial statement purposes, we calculate the provision for federal income taxes using the separate return method. Certain subsidiaries file separate tax returns in certain countries and states. Any U.S. federal, state, and foreign income taxes refundable and payable are reported in other current assets and accrued expenses and other current liabilities in our consolidated balance sheet. We do not have any non-current taxes receivable or payable at December 31, 2022 or December 31, 2021. We record interest and penalties on amounts due to tax authorities as a component of income tax expense in the consolidated statements of operations. We have elected to account for the impact of GILTI in the period in which it is incurred. Contingent Liabilities – Contingent liabilities arising from claims, assessments, litigation, fines, penalties, and other sources require significant judgment in determining the probability of loss and the amount of the potential loss. Each quarter, we review significant new claims and litigation for the probability of an adverse outcome. Estimates are recorded as liabilities when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. Disclosure is required when there is a reasonable possibility that the ultimate loss will materially exceed the recorded provision. Contingent liabilities are often resolved over long time periods. Estimating probable losses requires analysis of multiple forecasts that often depend on judgments about potential actions by third parties, such as regulators, and the estimated loss can change materially as individual claims develop. Legal costs incurred in connection with loss contingencies are expensed as incurred. Employee Retirement and Pension Benefits – We have a defined benefit plan available to certain U.S. hourly employees and several other defined benefit plans located outside of the U.S. that are country specific. The most significant of these plans is in the U.S., which is no longer open to new employees. Amounts relating to these plans are recorded based on actuarial calculations, which use various assumptions, such as discount rates and expected return on assets. See Note 25 - Employee Retirement and Pension Benefits . Recently Adopted Accounting Standards – 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. We adopted this standard in the first quarter of 2021 and the adoption did not have an impact on our consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of LIBOR or by another reference rate expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope , to clarify the scope of ASU No. 2020-04. In December 2022, the FASB issued ASU No. 2022-06, Deferral of the Sunset Date of Topic 848, which extended the relief provisions under Topic 848 through December 31, 2024. In May 2020, we elected the expedient within ASC 848 which allows us to assume that our hedged interest payments are probable of occurring regardless of any expected modifications in their terms related to reference rate reform. In addition, ASC 848 allows for the option to change the method of assessing effectiveness upon a change in critical terms of the derivative or the hedged transactions and upon the end of relief under ASC 848. At this time, we have elected to continue the method of assessing effectiveness as documented in the original hedge documentation and apply the practical expedients related to probability to assume that the reference rate on the hypothetical derivative matches the reference rate F-14 Back to top on the hedging instrument. We plan to evaluate the remaining expedients for adoption, as applicable, when contracts are modified. We currently do not expect this guidance to have a significant impact on our consolidated financial statements. Refer to Note 22 - Derivative Financial Instruments for additional disclosure information relating to our hedging activity. 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 credit losses 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 credit losses and a $ 1.9 million net impact to deferred tax assets. We have considered the applicability and impact of all ASUs. We have assessed ASUs not listed above and have determined that they were either not applicable or were not expected to have a material impact on our financial statements. Note 2. Accounts Receivable We sell our manufactured products to a large number of customers, primarily in the residential housing construction and remodel sectors, broadly dispersed across many domestic and foreign geographic regions. We assess the credit risk relating to our accounts receivable based on quantitative and qualitative factors, including historical credit collections within each region where we have operations. We perform ongoing credit evaluations of our customers to minimize credit risk. We do not usually require collateral for accounts receivable, but will require advance payment, guarantees, a security interest in the products sold to a customer, and/or letters of credit in certain situations. Customer accounts receivable converted to notes receivable are collateralized by inventory or other collateral. One window and door customer from our North America segment represents 13.9 %, 15.0 %, and 15.4 % of net revenues in 2022, 2021, 2020, respectively. As of January 1, 2020, we adopted ASC 326 - Measurement of Credit Losses on Financial Instruments on a modified retrospective basis, which increased the allowance for credit losses by $ 7.6 million on the date of adoption. The following is a roll forward of our allowance for credit losses as of December 31: (amounts in thousands) 2022 2021 2020 Balance as of January 1, $ ( 10,177 ) $ ( 12,934 ) $ ( 5,967 ) Charges to income (expense) ( 7,697 ) 765 ( 649 ) Write-offs 1,089 1,694 1,898 Additions related to adoption of 2016-09 — — ( 7,635 ) Currency translation 455 298 ( 581 ) Balance at period end $ ( 16,330 ) $ ( 10,177 ) $ ( 12,934 ) Note 3. Inventories Inventories are stated at the lower of cost or net realizable value. Finished goods and work-in-process inventories include material, labor, and manufacturing overhead costs. (amounts in thousands) 2022 2021 Raw materials $ 511,681 $ 478,566 Work in process 31,310 36,065 Finished goods 123,464 101,340 Total inventories $ 666,455 $ 615,971 F-15 Back to top Note 4. Property and Equipment, Net (amounts in thousands) 2022 2021 Land improvements $ 31,853 $ 31,808 Buildings 516,495 519,008 Machinery and equipment 1,472,469 1,461,884 Total depreciable assets 2,020,817 2,012,700 Accumulated depreciation ( 1,373,362 ) ( 1,339,057 ) 647,455 673,643 Land 62,537 65,641 Construction in progress 52,494 59,520 Total property and equipment, net $ 762,486 $ 798,804 In the fourth quarter of 2021, we reclassified $ 35.9 million of property, plant and equipment, net, to assets held for sale. Refer to Note 18 - Held for Sale for additional information. We recorded accelerated depreciation of our property, plant and equipment of $ 0.7 million, $ 2.0 million, and $ 2.0 million during the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively, within restructuring and asset related charges, net in the accompanying consolidated statements of operations. The effect on our carrying value of property and equipment due to currency translations for foreign property and equipment, net, was a decrease of $ 23.0 million and $ 21.9 million for the years ended December 31, 2022 and December 31, 2021, respectively. Depreciation expense was recorded as follows: (amounts in thousands) 2022 2021 2020 Cost of sales $ 90,950 $ 93,244 $ 88,551 Selling, general and administrative 6,675 7,872 9,594 Total depreciation expense $ 97,625 $ 101,116 $ 98,145 Note 5. Goodwill The following table summarizes the changes in goodwill by reportable segment: (amounts in thousands) North America Europe Australasia Total Reportable Segments Balance as of December 31, 2020 $ 247,650 $ 303,397 $ 88,820 $ 639,867 Transfers to assets held for sale (Note 18) ( 65,000 ) — — ( 65,000 ) Currency translation ( 5 ) ( 24,729 ) ( 4,920 ) ( 29,654 ) Balance as of December 31, 2021 $ 182,645 $ 278,668 $ 83,900 $ 545,213 Impairment — ( 54,885 ) — ( 54,885 ) Currency translation ( 376 ) ( 24,099 ) ( 5,348 ) ( 29,823 ) Balance as of December 31, 2022 $ 182,269 $ 199,684 $ 78,552 $ 460,505 We have identified three reporting units for the purpose of conducting our goodwill impairment review. In determining our reportable units, we considered (i) whether an operating segment or a component of an operating segment was a business, (ii) whether discrete financial information was available, and (iii) whether the financial information is regularly reviewed by management of the operating segment. During the quarter ended September 24, 2022, management identified various qualitative and quantitative factors which collectively indicated a triggering event had occurred within our North America and Europe reporting units. These factors included the macroeconomic environment in each region including increasing interest rates, persistent inflation, and operational inefficiencies attributable to ongoing global supply chain disruptions, the continuing geopolitical environment in Europe associated with the war in Ukraine, and foreign exchange fluctuations. These factors have negatively impacted our business performance. Based upon the results of our interim impairment analysis, we concluded that the carrying value F-16 Back to top of our Europe reporting unit exceeded its fair value, and we recorded a goodwill impairment charge of $ 54.9 million, representing a partial impairment of goodwill assigned to the Europe reporting unit. In addition, we determined our North America reporting unit was not impaired. We performed our annual impairment assessment as of the beginning of our December fiscal month of 2022. At the assessment date, our qualitative analysis of Australasia supported a conclusion that there is more than a 50% likelihood that its fair value exceeded its carrying value. Quantitatively, we determined that the fair value of our North America and Europe reporting units exceeded their net carrying value and no additional goodwill impairment was recorded. For the years ended 2021 and 2020, each reporting unit’s fair value was in excess of its carrying value, and therefore, no goodwill impairment charge was recorded. Note 6. Intangible Assets, Net The cost and accumulated amortization values of our intangible assets were as follows: December 31, 2022 (amounts in thousands) Cost Accumulated Amortization Net Book Value Customer relationships and agreements $ 137,914 $ ( 79,761 ) $ 58,153 Software 119,239 ( 43,208 ) 76,031 Trademarks and trade names 53,481 ( 12,563 ) 40,918 Patents, licenses and rights 42,821 ( 25,818 ) 17,003 Total amortizable intangibles $ 353,455 $ ( 161,350 ) $ 192,105 December 31, 2021 (amounts in thousands) Cost Accumulated Amortization Net Book Value Customer relationships and agreements $ 145,940 $ ( 73,635 ) $ 72,305 Software 118,114 ( 35,816 ) 82,298 Trademarks and trade names 55,806 ( 10,771 ) 45,035 Patents, licenses and rights 46,353 ( 23,810 ) 22,543 Total amortizable intangibles $ 366,213 $ ( 144,032 ) $ 222,181 Through December 31, 2022, we have capitalized software costs of $ 91.5 million related to the application development stage of our global ERP system and global finance implementations, including $ 1.4 million during the year ended December 31, 2022. In March 2020, due to delays in implementation of certain ERP modules and the uncertainty of their future use, we recorded $ 3.4 million of accelerated amortization of our capitalized software within restructuring and asset related charges, net in the accompanying consolidated statements of operations. In the third quarter of 2020, we reduced the estimated useful life of our ERP instance from 15 years to 10 years to align with our current plans for our future global ERP and global finance systems. In the fourth quarter of 2020, we placed in service and began amortizing our global finance instance over its estimated useful life of 10 years. As of December 31, 2022, we have placed $ 87.9 million in service and are amortizing the cost of our global systems over their estimated useful lives. The effect on our carrying value of intangible assets due to currency translations for foreign intangible assets was a decrease of $ 5.4 million and $ 6.3 million for the years ended December 31, 2022 and December 31, 2021, respectively. Intangible assets that become fully amortized are removed from the accounts in the period that they become fully amortized. Amortization expense was recorded as follows: (amounts in thousands) 2022 2021 2020 Amortization expense $ 32,749 $ 33,130 $ 28,541 Estimated future amortization expense: F-17 Back to top (amounts in thousands) 2023 $ 30,274 2024 29,635 2025 27,790 2026 25,291 2027 22,481 Thereafter 56,634 $ 192,105 Note 7. Leases We lease certain warehouses, distribution centers, office spaces, land, vehicles, and equipment. Lease ROU assets and liabilities at December 31 were as follows: (amounts in thousands) Balance Sheet Location 2022 2021 Assets: Operating Operating lease assets, net $ 167,880 $ 201,781 Finance Property and equipment, net (1) 4,361 5,327 Total lease assets $ 172,241 $ 207,108 Liabilities: Current: Operating Accrued expense and other current liabilities $ 42,494 $ 43,880 Finance Current maturities of long-term debt 1,784 1,702 Noncurrent: Operating Operating lease liability 135,822 166,318 Finance Long-term debt 2,615 3,671 Total lease liability $ 182,715 $ 215,571 (1) Finance lease assets are recorded net of accumulated depreciation of $ 4.5 million and $ 3.4 million as of December 31, 2022 and December 31, 2021, respectively. During the years ended December 31, 2022 and December 31, 2021, we obtained $ 19.7 million and $ 41.9 million in right-of-use assets, respectively, in exchange for operating lease liabilities, primarily relating to manufacturing equipment. During the years ended December 31, 2022 and December 31, 2021, we obtained $ 0.9 million and $ 1.7 million in right-of-use assets, respectively, in exchange for finance lease liabilities. The components of lease expense for the years ended December 31 were as follows: (amounts in thousands) 2022 2021 2020 Operating $ 56,685 $ 57,455 $ 56,066 Short term 15,162 15,070 12,803 Variable 7,132 6,396 4,989 Low value 1,845 1,810 1,714 Finance 161 205 193 Total lease costs $ 80,985 $ 80,936 $ 75,765 F-18 Back to top 2022 2021 Weighted average remaining lease terms (years): Operating 5.7 6.2 Finance 3.0 3.4 Weighted average discount rate: Operating 4.6 % 4.2 % Finance 3.5 % 3.1 % Future minimum lease payment obligations under operating and finance leases are as follows: December 31, 2022 (amounts in thousands) Operating Leases (1) Finance Leases Total 2023 $ 51,462 $ 1,934 $ 53,396 2024 42,036 1,609 43,645 2025 33,280 559 33,839 2026 21,717 298 22,015 2027 14,895 205 15,100 Thereafter 44,104 80 44,184 Total lease payments 207,494 4,685 212,179 Less: Interest 29,178 286 29,464 Present value of lease liability $ 178,316 $ 4,399 $ 182,715 (1) Operating lease payments include $ 1.4 million related to options to extend lease terms that are reasonably certain of being exercised. Note 8. Accrued Payroll and Benefits (amounts in thousands) 2022 2021 Accrued vacation $ 52,026 $ 52,776 Accrued payroll 30,656 31,544 Accrued bonuses and commissions 20,628 9,416 Other accrued benefits 13,900 11,720 Accrued payroll taxes 13,213 27,127 Non-U.S. defined contributions and other accrued benefits 3,214 3,406 Total accrued payroll and benefits $ 133,637 $ 135,989 Accrued payroll taxes for the year ended December 31, 2021 consisted of the deferral of payroll taxes pursuant to provisions included within the CARES Act. Additional information is disclosed within Note 1 - Summary of Significant Accounting Policies within COVID-19. Prior period balances in the table above have been reclassified to conform to current period presentation. F-19 Back to top Note 9. Accrued Expenses and Other Current Liabilities (amounts in thousands) 2022 2021 Accrued sales and advertising rebates $ 93,337 $ 90,623 Current portion of operating lease liability 42,494 43,880 Non-income related taxes 25,700 25,030 Deferred revenue and customer deposits 24,753 25,568 Current portion of warranty liability (Note 10) 23,079 23,523 Accrued expenses 18,423 18,636 Current portion of accrued claim costs relating to self-insurance programs 17,932 14,352 Accrued freight 17,398 19,020 Accrued income taxes payable 12,848 16,237 Current portion of restructuring accrual ( Note 19 ) 5,038 171 Accrued interest payable 4,038 3,633 Legal claims provision 3,490 3,476 Current portion of derivative liability (Note 22) 3,346 5,527 Total accrued expenses and other current liabilities $ 291,876 $ 289,676 The legal claims provision relates primarily to contingencies associated with the ongoing legal matters disclosed in Note 24 - Commitments and Contingencies . The accrued sales and advertising rebates, accrued interest payable, accrued freight, and non-income related taxes can fluctuate significantly period-over-period due to timing of payments. Prior period balances in the table above have been reclassified to conform to current period presentation. Note 10. Warranty Liability Warranty terms vary from one year to lifetime on certain window and door components. Warranties are normally limited to servicing or replacing defective components for the original customer. Product defects arising within six months of sale are classified as manufacturing defects and are not included in the current period expense below. Some warranties are transferable to subsequent owners and are either limited to 10 years from the date of manufacture or require pro-rata payments from the customer. A provision for estimated warranty costs is recorded at the time of sale based on historical experience and is periodically adjusted to reflect actual experience. An analysis of our warranty liability is as follows: (amounts in thousands) 2022 2021 2020 Balance as of January 1 $ 54,860 $ 52,296 $ 49,716 Current period charges 29,656 27,928 23,906 Experience adjustments 772 4,105 3,213 Payments ( 29,977 ) ( 28,558 ) ( 25,113 ) Transfers to liabilities held for sale (Note 18) — ( 518 ) — Currency translation ( 974 ) ( 393 ) 574 Balance at period end 54,337 54,860 52,296 Current portion ( 23,079 ) ( 23,523 ) ( 21,766 ) Long-term portion $ 31,258 $ 31,337 $ 30,530 The most significant component of our warranty liability is in the North America segment, which totaled $ 46.1 million at December 31, 2022, after discounting future estimated cash flows at rates between 0.53 % and 2.78 %. Without discounting, the liability would have been higher by approximately $ 2.9 million. F-20 Back to top Note 11. Long-Term Debt Our long-term debt, net of original issue discount and unamortized debt issuance costs, consisted of the following: December 31, 2022 December 31, 2022 December 31, 2021 (amounts in thousands) Interest Rate Senior Secured Notes and Senior Notes 4.63 % - 6.25 % $ 1,050,000 $ 1,050,000 Term loans 1.30 % - 6.63 % 541,970 547,598 Revolving credit facilities 5.54 % - 5.63 % 55,000 — Finance leases and other financing arrangements 1.25 % - 7.16 % 89,784 97,874 Mortgage notes 2.22 % - 2.72 % 22,472 25,411 Total Debt 1,759,226 1,720,883 Unamortized debt issuance costs and original issue discounts ( 11,597 ) ( 14,626 ) Current maturities of long-term debt ( 34,391 ) ( 38,561 ) Long-term debt $ 1,713,238 $ 1,667,696 Maturities by year, excluding unamortized debt issuance costs and original issue discounts: 2023 $ 34,391 2024 25,817 2025 674,246 2026 76,009 2027 415,902 Summaries of our significant changes to outstanding debt agreements as of December 31, 2022 are as follows: Senior Secured Notes and Senior Notes In May 2020, we issued $ 250.0 million of Senior Secured Notes bearing interest at 6.25 % and maturing in May 2025 in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The proceeds were net of fees and expenses associated with debt issuance, including an underwriting fee of 1.25 %. Interest is payable semiannually, in arrears, each May and November. In December 2017, we issued $ 800.0 million of unsecured Senior Notes in two tranches: $ 400.0 million bearing interest at 4.63 % and maturing in December 2025, and $ 400.0 million bearing interest at 4.88 % and maturing in December 2027 in a private placement for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Term Loans U.S. Facility - Initially executed in October 2014, we amended the Term Loan Facility in July 2021 to, among other things, extend the maturity date from December 2024 to July 2028 and provide additional covenant flexibility. Pursuant to the amendment, certain existing and new lenders advanced $ 550.0 million of replacement term loans, the proceeds of which were used to prepay in full the amount outstanding under the previously existing term loans. The replacement term loans bear interest at LIBOR (subject to a floor of 0.00 %) plus a margin of 2.00 % to 2.25 % depending on JWI’s corporate credit ratings. In addition, the amendment also modifies certain other terms and provisions of the Term Loan Facility. Voluntary prepayments of the replacement term loans are permitted at any time, in certain minimum principal amounts, but were subject to a 1.00 % premium during the first six months. The amendment requires 0.25 % of the initial principal to be repaid quarterly until maturity. As a result of this amendment, we recognized debt extinguishment costs of $ 1.3 million, which included $ 1.0 million of unamortized debt issuance costs and original discount fees. As of the date of the amendment, the outstanding principal balance, net of original issue discount, was $ 548.6 million. As of December 31, 2022, the outstanding principal balance, net of original issue discount, was $ 540.6 million . In February 2019, we purchased interest rate caps in order to effectively fix a 3.0 % per annum ceiling on the LIBOR component of an aggregate $ 150.0 million of our term loans. The caps became effective March 2019 and expired in December 2021. In May 2020, we entered into interest rate swap agreements with a weighted average fixed rate of 0.395 % paid against one-month LIBOR floored at 0.00 % with outstanding notional amounts aggregating to $ 370.0 million corresponding to that F-21 Back to top amount of the debt outstanding under our Term Loan Facility. The interest rate swap agreements are designated as cash flow hedges of a portion of the interest obligations on our Term Loan Facility borrowings and mature in December 2023. See Note 22 - Derivative Financial Instruments for additional information on our derivative assets and liabilities. Australia Facility - In June 2019, we reallocated AUD $ 5.0 million from the term loan commitment to the interchangeable commitment of the Australia Senior Secured Credit Facility. The amended AUD 50.0 million floating rate term loan facility bore interest at a base rate of BBSY plus a margin ranging from 1.00 % to 1.10 %, included a line fee of 1.25 % on the commitment amount, and was set to mature on February 2023. During the second quarter of 2021, we repaid the outstanding principal balance of AUD 50.0 million ($ 38.4 million) and terminated the term loan commitment. Both the term loan and non-term loan portions of the Australia Senior Secured Credit Facility are or were secured by guarantees of JWA and its subsidiaries, fixed and floating charges on the assets of JWA group, and mortgages on certain real properties owned by the JWA group. The combined agreement requires that JWA maintain certain financial ratios, including a minimum consolidated interest coverage ratio and a maximum consolidated debt to EBITDA ratio. The agreement limits dividends and repayments of intercompany loans where the JWA group is the borrower and limits loans or other financial accommodations to non-obligor entities. Revolving Credit Facilities ABL Facility - Initially executed in 2014, extensions of credit under our ABL Facility are limited by a borrowing base calculated based on specified percentages of the value of eligible accounts receivable and inventory, subject to certain reserves and other adjustments. We pay a fee of 0.25 % on the unused portion of the commitments. The ABL Facility has a minimum fixed charge coverage ratio that we are obligated to comply with under certain circumstances. The ABL Facility has various non-financial covenants, including restrictions on liens, indebtedness, dividends, customary representations and warranties, and customary events of defaults and remedies. In March 2020, we drew $ 100.0 million under our ABL Facility as a precautionary measure to ensure funding of our seasonal working capital cash requirements given the significant impact of the COVID-19 pandemic on global financial markets and economies. In May 2020, we utilized a portion of the proceeds received from our issuance of the $ 250.0 million of Senior Secured Notes to repay the outstanding balance on our ABL Facility. In the fourth quarter of 2020, we began to include the accounts receivable and inventory balances of certain recently acquired U.S. businesses in determining our availability, which expanded our borrowing base. In July 2021, we amended the ABL Facility to, among other things, extend the maturity date from December 2022 to July 2026, increase the aggregate commitment to $ 500.0 million, amend the interest rate grid applicable to the loans thereunder, provide additional covenant flexibility, and conform certain terms and provisions to the Term Loan Facility. Pursuant to the amendment, the amount allocated to U.S. borrowers was increased to $ 465.0 million. The amount allocated to Canadian borrowers was maintained at $ 35.0 million. Borrowings under the ABL Facility bear, at the borrower’s option, interest at either a base rate plus a margin of 0.25 % to 0.50 % depending on excess availability or LIBOR (subject to a floor of 0.00 %) plus a margin of 1.25 % to 1.50 % depending on excess availability. As of December 31, 2022, we had $ 55.0 million of outstanding borrowings, $ 31.1 million in letters of credit and $ 410.7 million available under the ABL Facility. Australia Senior Secured Credit Facility - In June 2019, we amended the Australia Senior Secured Credit Facility, reallocating availability from the Australia Term Loan Facility and collapsing the floating rate revolving loan facility into an AUD 35.0 million interchangeable facility to be used for guarantees, asset financing, and loans of twelve months or less. The interchangeable facility does not have a set maturity date but is instead subject to an annual review each June. In May 2020, we amended the Australia Senior Secured Credit Facility to relax certain financial covenants. The amended non-term loan portion of the facility bore line fees of 0.70 %, compared to line fees of 0.50 % under the previous amendment. The amendment also provided for a supplemental AUD 30.0 million floating rate revolving loan facility. In December 2021, we amended the Australia Senior Secured Credit Facility to reinstate maintenance financial covenant ratios to pre-pandemic thresholds and renewed the facility through its next annual review. The amended facility includes line fees of 0.50 %, compared to line fees of 0.70 % under the previous amendment. As of December 31, 2022, we had AUD 22.8 million ($ 15.4 million) available under this facility. At December 31, 2022, we had combined borrowing availability of $ 426.1 million under our revolving credit facilities. Mortgage Notes – In December 2007, we entered into thirty-year mortgage notes secured by land and buildings in Denmark with principal payments which began in 2018. As of December 31, 2022, we had DKK 156.7 million ($ 22.5 million) outstanding under these notes. Finance leases and other financing arrangements – In addition to finance leases, we include insurance premium financing arrangements and loans secured by equipment in this category. As of December 31, 2022, we had $ 89.8 million outstanding in this category, with maturities ranging from 2023 to 2029. F-22 Back to top As of December 31, 2022, we were in compliance with the terms of all of our credit facilities and the indentures governing the Senior Notes and Senior Secured Notes. Note 12. Deferred Credits and Other Liabilities Included in deferred credits and other liabilities is the long-term portion of the following liabilities as of December 31: (amounts in thousands) 2022 2021 Uncertain tax positions (Note 13) $ 31,828 $ 27,951 Warranty liability (Note 10) $ 31,258 $ 31,337 Workers' compensation claims accrual 20,331 19,165 Environmental contingencies (Note 24) 11,800 11,800 Other liabilities 2,604 1,921 Deferred income 77 278 Accrued payroll taxes — 10,427 Total deferred credits and other liabilities $ 97,898 $ 102,879 Accrued payroll taxes for the year ended December 31, 2021 represents the deferral of payroll taxes pursuant to provisions included within the CARES Act. Additional information is disclosed within Note 1 - Summary of Significant Accounting Policies within COVID-19. Note 13. Income Taxes Income before taxes, is comprised of the following for the years ended December 31: (amounts in thousands) 2022 2021 2020 Domestic income (loss) $ 61,780 $ 55,579 $ ( 8,791 ) Foreign income 17,257 148,783 125,466 Total income before taxes $ 79,037 $ 204,362 $ 116,675 Our foreign income is historically driven by our subsidiaries in Australia, Canada, Germany, and the U.K. Significant components of the provision for income taxes are as follows for the years ended December 31: (amounts in thousands) 2022 2021 2020 Federal $ 465 $ 663 $ 3,053 State 1,103 480 756 Foreign 36,136 49,370 30,343 Current taxes 37,704 50,513 34,152 Federal 14,068 3,688 ( 8,134 ) State ( 4,854 ) ( 5,927 ) 68 Foreign ( 13,608 ) ( 12,734 ) ( 997 ) Deferred taxes ( 4,394 ) ( 14,973 ) ( 9,063 ) Total provision for income taxes $ 33,310 $ 35,540 $ 25,089 The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income , states that we are permitted to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to such income in the year the tax is incurred. We have elected to account for the impact of GILTI in the period in which it is incurred. During 2020, the US Treasury issued final regulations governing the treatment of GILTI under IRC§ 951A. Included in these final regulations was a provision to allow taxpayers to make an annual election to exclude certain foreign income which is subject to a threshold level of tax in their respective foreign jurisdiction from US tax as GILTI (the High Tax Exclusion or “HTE election”). While this HTE election had been outlined in the proposed regulations issued in 2019, the final regulations allowed the election to be applied retroactively. By making this election as well as finalizing other related planning steps in 2021, we were able to F-23 Back to top effectively restore certain tax attributes recorded as deferred tax assets consisting primarily of U.S. NOLs originally impacted by GILTI resulting in net tax benefit of $ 10.8 million. The CARES Act, among other things, increased the limitation on the deductibility of business interest to 50% of "adjusted taxable income" for taxable years beginning after December 31, 2018 and before January 1, 2021 and allows taxpayers to elect to compute the limitation on business interest expense for 2020 by using its "adjusted taxable income" from 2019. The significant components of the deferred income tax benefit for the year ended December 31, 2022 were related to the IRC §174 capitalized costs offset by increase in depreciation and amortization expenses in the current period. The significant components of the deferred income tax benefit for the year ended December 31, 2021 were the favorable effects of tax planning optimizing the HTE election completed during the year allowing us to further reduce the impact of GILTI. The significant components of the deferred income tax benefit attributed to income from continuing operations for the year ended December 31, 2020, were the net increases in deferred tax assets related to the retroactive HTE election. Reconciliation of the U.S. federal statutory income tax rate to our effective tax rate is as follows for the years ended December 31: 2022 2021 2020 (amounts in thousands) Amount % Amount % Amount % Statutory rate $ 16,598 21.0 $ 42,916 21.0 $ 24,502 21.0 State income tax, net of federal benefit 2,239 2.8 2,425 1.2 ( 444 ) ( 0.4 ) Foreign source dividends and deemed inclusions ( 237 ) ( 0.3 ) ( 9,822 ) ( 4.8 ) 11,170 9.6 Valuation allowance ( 10,195 ) ( 12.9 ) ( 6,922 ) ( 3.4 ) ( 17,489 ) ( 15.0 ) Nondeductible expenses 2,209 2.8 3,172 1.6 1,653 1.4 Equity based compensation 2,486 3.1 ( 787 ) ( 0.4 ) 2,185 1.9 Goodwill Impairment 12,735 16.3 — — — — Foreign tax rate differential 974 1.2 1,176 0.5 1,613 1.4 Tax rate differences and credits 2,949 3.7 ( 10,796 ) ( 5.3 ) 26,001 22.3 Uncertain tax positions 2,963 3.7 8,711 4.3 ( 2,685 ) ( 2.3 ) Change in indefinite reversal assertion — — 5,016 2.5 — — U.S. Tax Reform — — — — ( 21,797 ) ( 18.7 ) Other 589 0.7 451 0.2 380 0.3 Effective tax rate $ 33,310 42.1 % $ 35,540 17.4 % $ 25,089 21.5 % During the year ended December 31, 2022, we recognized a benefit of $ 9.9 million from the reduction to state NOL and state credits valuation allowance, and $ 1.9 million of tax benefit attributable to research and development tax credits, partially offset by $ 12.7 million tax expense attributable to goodwill impairment. During the year ended December 31, 2021, we recognized $ 12.2 million of U.S. tax benefits attributed to the effect of tax planning, primarily related to the impact of GILTI, a benefit of $ 6.7 million from the reduction to state NOL and state credits valuation allowance, and $ 3.6 million of tax benefit attributable to research and development tax credits, partially offset by $ 5.0 million tax expense attributable to removing our assertion on certain undistributed foreign earnings. During the year ended December 31, 2020, we recognized a tax benefit of $ 10.8 million related the HTE election and related planning. The tax benefit consisted of a benefit of $ 21.8 million directly related to the HTE election, a benefit of $ 20.1 million from the reduction of the U.S. valuation allowance, partially offset by tax expense of $ 28.0 million related to a reduction in U.S. foreign tax credit carryforwards, and $ 3.1 million of additional state tax expense related to the adjustments above. F-24 Back to top Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of our assets, liabilities, and operating loss carryforwards. Significant deferred tax assets and liabilities are as follows as of December 31: (amounts in thousands) 2022 2021 Net operating loss and tax credit carryforwards $ 208,053 $ 217,634 Operating lease liabilities 47,113 55,663 Employee benefits and compensation 39,300 44,660 Accrued liabilities and other 36,323 34,532 Inventory 8,035 6,798 Allowance for credit losses and notes receivable 5,130 3,856 R&D IRC Sec. 174 18,327 — Gross deferred tax assets 362,281 363,143 Valuation allowance ( 34,833 ) ( 45,476 ) Deferred tax assets 327,448 317,667 Depreciation and amortization ( 88,974 ) ( 63,348 ) Operating lease assets ( 44,399 ) ( 53,410 ) Investments and marketable securities ( 3,401 ) ( 1,713 ) Investment in subsidiaries ( 4,218 ) ( 4,218 ) Deferred tax liabilities ( 140,992 ) ( 122,689 ) Net deferred tax assets $ 186,456 $ 194,978 Balance sheet presentation: Long-term assets $ 195,180 $ 204,232 Long-term liabilities ( 8,724 ) ( 9,254 ) Net deferred tax assets $ 186,456 $ 194,978 Valuation Allowance – The realization of deferred tax assets is based on historical tax positions and estimates of future taxable income. We evaluate both the positive and negative evidence that we believe is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), and projected taxable income in making this assessment. To fully utilize the NOLs and tax credits carryforwards, we will need to generate sufficient future taxable income in each respective jurisdiction before the expiration of the deferred tax assets governed by the applicable tax code. We had a valuation allowance of $ 34.8 million and $ 45.5 million as of December 31, 2022 and December 31, 2021, respectively. The decrease was primarily driven by a decrease of $ 9.9 million for state NOL and state credits due to the impact of forecasted taxable income in the carry-forward period. We had a valuation allowance of $ 45.5 million and $ 51.8 million as of December 31, 2021 and December 31, 2020, respectively. The decrease was primarily driven by a decrease of $ 6.7 million for state NOL and state credits due to the impact of forecasted taxable income in the carry-forward period. The following is the activity in our valuation allowance: (amounts in thousands) 2022 2021 2020 Balance as of January 1, $ ( 45,476 ) $ ( 51,847 ) $ ( 67,664 ) Valuation allowances established ( 34 ) — — Changes to existing valuation allowances ( 1,061 ) ( 2,486 ) ( 2,622 ) Release of valuation allowances 9,918 7,510 20,111 Currency translation 1,820 1,347 ( 1,672 ) Balance at period end $ ( 34,833 ) $ ( 45,476 ) $ ( 51,847 ) F-25 Back to top Loss Carryforwards – We reduced our income tax payments by utilizing NOL carryforwards of $ 196.8 million, $ 10.6 million, and $ 97.7 million during the years ended December 31, 2022, 2021, and 2020, respectively. We generated net NOL carryforwards of $ 93.7 million worldwide due to taxable losses incurred during the year ended December 31, 2022. At December 31, 2022, our federal, state and foreign NOL carryforwards totaled $ 1,449.6 million, of which $ 331.1 million does not expire; the remainder expires as follows: (amounts in thousands) 2023 $ 15,012 2024 42,347 2025 39,402 2026 40,838 Thereafter 980,865 Total loss carryforwards $ 1,118,464 As of December 31, 2022, our capital loss carryforwards totaled $ 21.6 million, which are all foreign and do not expire. Section 382 Net Operating Loss Limitation – On November 20, 2017 and October 3, 2011, we had a change in ownership pursuant to Section 382 of the Code. Under this provision of the Code, the utilization of any of our NOL or tax credit carryforwards, incurred prior to the date of ownership change, may be limited. Analyses of the respective limits for each ownership change indicated no reason to believe the annual limitation would impair our ability to utilize our NOL carryforward or net tax credit carryforwards as provided. We have concluded the limitation under Section 382 should not prevent us from fully utilizing these historical NOLs. Tax Credit Carryforwards – Our tax credit carryforwards expire as follows: (amounts in thousands) EZ Credit R & D credit Foreign Tax Credit Work Opportunity & Welfare to Work Credit State Investment Tax Credits Tip Credit TOTAL 2023 $ — $ — $ 5,735 $ — $ 1,512 $ — $ 7,247 2024 — — 3,514 — 36 — 3,550 2025 — 103 4,863 — 30 — 4,996 2026 — 57 3,108 — 18 — 3,183 2027 — 38 — — 1 — 39 Thereafter 68 19,521 — 8,167 60 102 27,918 $ 68 $ 19,719 $ 17,220 $ 8,167 $ 1,657 $ 102 $ 46,933 Earnings of Foreign Subsidiaries – The Company continually evaluates its global cash needs. During the third quarter of 2021, the Company removed its indefinite reinvestment assertion on a majority of unremitted earnings and certain other aspects of outside basis differences in its foreign subsidiaries. Deferred tax expense of $ 5.0 million was recorded for withholding and income taxes which would be owed if earnings were remitted to the U.S. parent. The Company continued to make an indefinite reinvestment assertion on other aspects of the outside basis difference in foreign subsidiaries that would attract a tax cost in excess of the Company’s cost of capital. In 2022, the Company repatriated $ 132.8 million from certain foreign subsidiaries and does not anticipate any additional remittances to the U.S. parent in the foreseeable future, given the current operating challenges disclosed within Note 5 - Goodwill and the need for cash in foreign jurisdictions to support local operations. As a result, the Company is asserting that its future earnings, in excess of previously taxed earnings, are permanently reinvested as of the third quarter of 2022. No additional deferred tax expense is recorded on prospective earnings. The Company continues to make an indefinite reinvestment assertion on other aspects of the outside basis differences in foreign subsidiaries that would attract a significant cost of capital. We hold a combined book-over-tax outside basis difference of $ 311.7 million and $ 261.9 million as of December 31, 2022 and December 31, 2021 in our investment in foreign subsidiaries and may incur up to $ 21.9 million of local country income and withholding taxes in case of distribution of unremitted earnings. Dual-Rate Jurisdiction – Estonia and Latvia tax the corporate profits of resident corporations at different rates depending upon whether the profits are distributed. The undistributed profits of resident corporations are exempt from taxation while any distributed profits are subject to a 20% corporate income tax rate. The liability for the tax on distributed profits is recorded as an income tax expense in the period in which a dividend is declared. The balance of retained earnings of our Estonian subsidiary which, if distributed, would be subject to this this tax was $ 82.0 million and $ 78.7 million as of December 31, 2022 and December 31, 2021, respectively. The balance of retained earnings of our Latvian subsidiary F-26 Back to top which, if distributed, would be subject to this tax was $ 29.8 million and $ 27.0 million as of December 31, 2022 and December 31, 2021, respectively. Tax Payments and Balances – We made tax payments of $ 46.8 million, $ 38.6 million, $ 26.8 million during the years ended December 31, 2022, 2021, and 2020, respectively, primarily for foreign liabilities. We received tax refunds of $ 1.9 million, $ 2.1 million, and $ 6.4 million during the years ended in December 31, 2022, 2021, and 2020, respectively. The primary jurisdictions for which refunds were received in the current year are Indonesia and the U.S. Total receivables for tax refunds are recorded in other current assets in the accompanying balance sheets and totaled $ 13.7 million and $ 4.0 million at December 31, 2022 and December 31, 2021, respectively. Foreign payables for taxes are recorded in accrued income taxes payable in the accompanying balance sheets and totaled $ 12.8 million and $ 16.2 million at December 31, 2022 and December 31, 2021, respectively. We do not have any non-current taxes receivable or payable as of December 31, 2022 and December 31, 2021. Accounting for Uncertain Tax Positions – A reconciliation of the beginning and ending amounts of unrecognized tax benefits excluding interest and penalties is as follows: (amounts in thousands) 2022 2021 2020 Balance as of January 1, $ 26,825 $ 16,995 $ 16,205 Increase for tax positions taken during the prior period 5,274 10,367 1,105 Decrease for settlements with taxing authorities ( 1,527 ) — ( 34 ) Increase for tax positions taken during the current period — 869 — Decrease due to statute expiration ( 76 ) ( 163 ) ( 1,569 ) Currency translation ( 1,196 ) ( 1,243 ) 1,288 Balance at period end - unrecognized tax benefit 29,300 26,825 16,995 Accrued interest and penalties 2,528 7,486 5,567 $ 31,828 $ 34,311 $ 22,562 Unrecognized tax benefits were $ 29.3 million, $ 26.8 million, and $ 17.0 million at December 31, 2022, 2021, and 2020, respectively. The increase is primarily related to management’s assessment of a potential liability as a result of ongoing tax audit discussions in Europe as well as uncertainty on prior years’ research and development tax credits in the U.S. The unrecognized tax benefit recorded in the current year for Europe is partially offset by an increase in deferred tax assets expected to be recovered should these liabilities be assessed. Interest and penalties related to uncertain tax positions are reported as a component of tax expense and included in the total uncertain tax position balance within deferred credits and other liabilities in the accompanying consolidated balance sheets. A significant portion of our uncertain tax positions relates to the implementation of the Capacity Management Agreements within the European business (“CMA”) which took place in January 1, 2015. The CMA changed the manner in which we manage our manufacturing capacity and the distribution and sale of our products in Europe. The reorganization of our Europe segment was part of our review of our operations structure and management that began in 2014 and resulted in changes in taxable income for certain of our subsidiaries within that reportable segment. Effective January 1, 2015, our subsidiary JELD-WEN U.K. Limited (the “Managing Subsidiary”) entered into an agreement (the “Managing Agreement”) with several of our other subsidiaries in Europe (collectively, the “Operating Subsidiaries”). The Managing Agreement provides that the Managing Subsidiary will receive a fee from the Operating Subsidiaries in exchange for performing various management and decision-making services for the Operating Subsidiaries. As a result, the Managing Agreement shifts certain risks (and correlated benefits) from the Operating Subsidiaries to the Managing Subsidiary. In exchange, the Managing Subsidiary guarantees a specific return to each Operating Subsidiary on a before interest and taxes basis, commensurate with such Operating Subsidiary’s functions and risk profile. While there is no impact on the consolidated reporting of the Europe segment due to the Managing Agreement, there may be changes in taxable income of the Operating Subsidiaries. Therefore, we have reserved for a potential loss resulting from such uncertainty. There were benefits of $ 20.5 million, $ 19.3 million, and $ 14.5 million included in the balance of unrecognized tax benefits as of December 31, 2022, 2021, and 2020, respectively, that would affect the effective tax rate if recognized. We cannot reasonably estimate the conclusion of certain non-US income tax examinations and its outcome at this time. We operate in multiple foreign tax jurisdictions and are generally open to examination for tax years 2015 and forward. In the U.S., we are open to examination at the federal level for tax years 2013 and forward and at state and local jurisdictions for tax years 2015 and forward. The Company is under examination in Austria, Denmark, Germany, Indonesia, Latvia, Malaysia, Switzerland, and the United Kingdom for tax years 2011 through 2019, and generally remain open to examination for other non-US jurisdictions for tax years 2015 forward. F-27 Back to top Note 14. Segment Information We report our segment information in the same way management internally organizes the business to assess performance and make decisions regarding allocation of resources in accordance with ASC 280-10- Segment Reporting . We have three reportable segments, organized and managed principally in geographic regions. 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: (income) loss from discontinued operations, net of tax; income tax (benefit) expense; depreciation and amortization; interest expense, net; restructuring and asset related charges, net; net (gain) loss on sale of property and equipment; share-based compensation expense; non-cash foreign exchange transaction/translation (income) loss; and other items. The following tables set forth certain information relating to our segments’ operations: (amounts in thousands) North America Europe Australasia Total Operating Segments Corporate and Unallocated Costs Total Consolidated Year Ended December 31, 2022 Total net revenues $ 3,260,166 $ 1,284,796 $ 611,047 $ 5,156,009 $ — $ 5,156,009 Intersegment net revenues ( 813 ) ( 341 ) ( 25,676 ) ( 26,830 ) — ( 26,830 ) Net revenues from external customers $ 3,259,353 $ 1,284,455 $ 585,371 $ 5,129,179 $ — $ 5,129,179 Depreciation and amortization $ 69,427 $ 31,139 $ 18,622 $ 119,188 $ 12,566 $ 131,754 Goodwill impairment — 54,885 — 54,885 — 54,885 Restructuring and asset related charges, net 7,338 6,042 611 13,991 4,242 18,233 Adjusted EBITDA 352,885 74,325 65,574 492,784 ( 70,628 ) 422,156 Capital expenditures 59,023 19,095 7,746 85,864 6,356 92,220 Segment assets $ 1,718,379 $ 947,974 $ 502,290 $ 3,168,643 $ 332,718 $ 3,501,361 Year Ended December 31, 2021 Total net revenues $ 2,829,918 $ 1,355,111 $ 610,737 $ 4,795,766 $ — $ 4,795,766 Intersegment net revenues ( 678 ) ( 2,661 ) ( 20,708 ) ( 24,047 ) — ( 24,047 ) Net revenues from external customers $ 2,829,240 $ 1,352,450 $ 590,029 $ 4,771,719 $ — $ 4,771,719 Depreciation and amortization $ 72,095 $ 32,855 $ 20,892 $ 125,842 $ 11,405 $ 137,247 Restructuring and asset related charges, net 1,200 1,453 394 3,047 ( 97 ) 2,950 Adjusted EBITDA 352,881 127,292 71,448 551,621 ( 86,542 ) 465,079 Capital expenditures 49,805 29,611 5,492 84,908 14,785 99,693 Segment assets $ 1,634,937 $ 1,188,024 0 $ 542,793 $ 3,365,754 $ 372,917 $ 3,738,671 Year Ended December 31, 2020 Total net revenues $ 2,529,960 $ 1,189,974 $ 529,882 $ 4,249,816 $ — $ 4,249,816 Intersegment net revenues ( 967 ) ( 2,197 ) ( 10,975 ) ( 14,139 ) — ( 14,139 ) Net revenues from external customers $ 2,528,993 $ 1,187,777 $ 518,907 $ 4,235,677 $ — $ 4,235,677 Depreciation and amortization $ 77,361 $ 29,712 $ 19,341 $ 126,414 $ 8,209 $ 134,623 Restructuring and asset related charges, net 3,164 3,682 320 7,166 3,303 10,469 Adjusted EBITDA 315,952 136,363 62,449 514,764 ( 68,350 ) 446,414 Capital expenditures 34,815 32,353 10,207 77,375 19,521 96,896 Segment assets $ 1,498,778 $ 1,152,251 $ 598,411 $ 3,249,440 $ 715,245 $ 3,964,685 F-28 Back to top Reconciliations of net income to Adjusted EBITDA are as follows: Year Ended (amounts in thousands) 2022 2021 2020 Net income $ 45,727 $ 168,822 $ 91,586 Income tax expense 33,310 35,540 25,089 Depreciation and amortization 131,754 137,247 134,623 Interest expense, net 82,060 77,566 74,800 Goodwill impairment 54,885 — — Restructuring and asset related charges, net 18,233 2,950 10,469 Net (gain) loss on sale of property and equipment ( 8,057 ) 2,049 ( 4,153 ) Share-based compensation expense 16,168 20,209 16,399 Non-cash foreign exchange transaction/translation loss (income) 14,548 ( 13,769 ) 12,904 Other items (1) 33,528 34,465 84,697 Adjusted EBITDA $ 422,156 $ 465,079 $ 446,414 . (1) Other non-recurring items not core to ongoing business activity include: (i) in the year ended December 31, 2022 (1) $ 20,001 in facility closure, consolidation, and other related costs and adjustments, (2) $ 10,842 in net legal and professional expenses and settlements, primarily relating to litigation, M&A evaluations, and strategic transformation initiatives, including $( 10,500 ) of income resulting from a legal settlement, (3) $ 3,318 relating primarily to exit costs for executives, and (4) ($ 1,975 ) relating to a credit received for overpayments of utility expenses; (ii) in the year ended December 31, 2021 (1) $ 19,795 in legal and professional expenses relating primarily to litigation, (2) $ 4,232 in compensation and non-income taxes associated with exercises of legacy equity awards, (3) $ 3,753 in expenses related to environmental matters, (4) $ 3,617 in facility closure, consolidation, startup, and other related costs, (5) $ 1,342 in costs relating to debt refinancing and debt restructuring, and (6) $ 1,267 in expenses related to fire damage and downtime at one of our facilities; (iii) in the year ended December 31, 2020 (1) $ 67,130 in legal and professional expenses, relating primarily to litigation, (2) $ 7,467 in expenses related to environmental matters, (3) $ 6,987 facility closure, consolidation, startup and other related costs, (4) $ 1,235 in one-time lease termination charges, and (5) $ 1,142 of realized losses on hedges of intercompany notes. Prior period information in the table above has been reclassified to conform to current period presentation. Net revenues by locality are as follows for the years ended December 31,: (amounts in thousands) 2022 2021 2020 Net revenues by location of external customer Canada $ 258,629 $ 220,962 $ 188,041 U.S. 2,980,770 2,589,900 2,322,079 South America (including Mexico) 22,656 21,371 22,323 Europe 1,303,298 1,378,645 1,212,810 Australia 557,174 556,460 485,852 Africa and other 6,652 4,381 4,572 Total $ 5,129,179 $ 4,771,719 $ 4,235,677 F-29 Back to top Geographic information regarding property, plant, and equipment which exceed 10% of consolidated property, plant, and equipment is as follows for the years ended December 31,: (amounts in thousands) 2022 2021 2020 North America: U.S. $ 422,508 $ 425,761 $ 469,092 Other 29,587 29,901 27,722 452,095 455,662 496,814 Europe 170,346 188,100 203,424 Australasia: Australia 96,139 106,037 118,778 Other 25,060 29,928 32,944 121,199 135,965 151,722 Corporate: U.S. 18,846 19,077 20,625 Total property and equipment, net $ 762,486 $ 798,804 $ 872,585 Note 15. Capital Stock Preferred Stock - Our Board of Directors is authorized to issue Preferred Stock from time to time in one or more series and with such rights, privileges, and preferences as the Board of Directors shall from time to time determine. We have not issued any shares of Preferred Stock. Common Stock - Common Stock includes the basis of shares outstanding plus amounts recorded as additional paid-in capital. Shares outstanding exclude the shares issued to the Employee Benefit Trust that are considered similar to treasury shares and total 193,941 shares at both December 31, 2022 and December 31, 2021 with a total original issuance value of $ 12.4 million. We record share repurchases on their trade date and reduce shareholders’ equity and increase accounts payable. Repurchased shares are retired, and the excess of the repurchase price over the par value of the shares is charged to retained earnings. On July 27, 2021, our Board of Directors increased our previous repurchase authorization to a total of $ 400.0 million with no expiration date. On July 28, 2022, our Board of Directors authorized a new share repurchase program, replacing our previous share repurchase authorization, with an aggregate value of $ 200.0 million and no expiration date. As of December 31, 2022, there have been no share repurchases under this program. During the years ended December 31, 2022, December 31, 2021, and December 31, 2020, we repurchased 6,848,356 , 11,564,009 , and 265,589 shares of our Common Stock, respectively, at an average price of $ 19.12 , $ 28.09 , and $ 18.83 , respectively. F-30 Back to top Note 16. Earnings Per Share The basic and diluted income per share calculations were determined based on the following share data : 2022 2021 2020 Weighted average outstanding shares of Common Stock basic 86,374,499 96,563,155 100,633,392 Restricted stock units, performance share units, and options to purchase Common Stock 700,677 1,807,987 1,048,589 Weighted average outstanding shares of Common Stock diluted 87,075,176 98,371,142 101,681,981 The following table provides the securities that could potentially dilute basic earnings per share in the future but were not included in the computation of diluted income per share as their inclusion would be anti-dilutive: 2022 2021 2020 Common Stock options 1,652,320 1,226,906 1,721,921 Restricted stock units 738,528 12,590 367,461 Performance share units 133,467 751 249,084 Note 17. Stock Compensation In connection with our IPO, the Board adopted, and our shareholders approved, the JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan, (the “Omnibus Equity Plan”). Under the Omnibus Equity Plan, equity awards may be made in respect of 9,900,000 shares of our Common Stock and may be granted in the form of options, restricted stock, RSUs, stock appreciation rights, dividend equivalent rights, share awards, and performance-based awards (including performance share units and performance-based restricted stock). Share-based compensation expense included in SG&A expenses totaled $ 16.2 million, $ 20.2 million, and $ 16.4 million in 2022, 2021, and 2020, respectively. There were no material related tax benefits for the years ended December 31, 2022, December 31, 2021, and December 31, 2020. As of December 31, 2022, there was $ 15.5 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the remaining weighted-average vesting period of 1.5 years. Stock Options – Generally, stock option awards vest ratably each year on the anniversary date over a three-year period, have an exercise term of 10 years, and any vested options must be exercised within 90 days of the employee leaving the Company. The compensation cost of option awards is charged to expense based upon the graded-vesting method over the vesting periods applicable to the option awards. The graded-vesting method provides for vesting of portions of the overall awards at interim dates and results in greater expense in earlier years than the straight-line method. When options are granted, we calculate the fair value of common and Class B-1 Common Stock options using multiple Black-Scholes option valuation models. Expected volatilities are based upon a selection of public guideline companies. The risk-free rate was based upon U.S. Treasury rates. Key assumptions used in the valuation models were as follows for the years ended December 31: 2022 2021 2020 Expected volatility 51.33 % - 60.06 % 52.42 % - 53.62 % 37.52 % - 37.66 % Expected dividend yield rate 0.00 % 0.00 % 0.00 % Weighted average term (in years) 5.5 - 6.5 5.5 - 6.5 5.5 - 6.5 Weighted average grant date fair value $ 5.69 - $ 11.96 $ 14.39 $ 9.45 Risk free rate 1.91 % - 3.51 % 0.71 % - 0.91 % 1.39 % - 1.44 % F-31 Back to top The following table represents stock option activity: Shares Weighted Average Exercise Price Per Share Aggregate Intrinsic Value (millions) Weighted Average Remaining Contract Term in Years Outstanding as of January 1, 2020 2,832,799 $ 19.55 Granted 407,607 24.30 Exercised ( 335,553 ) 12.27 Forfeited ( 273,022 ) 27.53 Balance as of December 31, 2020 2,631,831 $ 20.41 Granted 309,902 29.01 Exercised ( 699,756 ) 14.48 Forfeited ( 79,955 ) 27.22 Balance as of December 31, 2021 2,162,022 $ 23.31 Granted 534,631 18.18 Exercised ( 157,167 ) 11.89 Forfeited ( 822,542 ) 25.99 Balance as of December 31, 2022 1,716,944 $ 21.48 $ 0.3 5.7 Exercisable as of December 31, 2022 1,339,630 $ 22.96 $ 0.3 5.5 RSUs – RSUs are subject to the continued service of the recipient through the vesting date, which is generally from issuance. Beginning 2021, RSUs granted vest ratably each year on the anniversary date generally over a three-year period rather than at the end of the three-year period. Once vested, the recipient will receive one share of Common Stock for each restricted stock unit. The grant-date fair value per share used for RSUs was determined using the closing price of our Common Stock on the NYSE on the date of the grant. We apply this grant-date fair value per share to the total number of shares that we anticipate will fully vest and amortize the fair value to compensation expense over the vesting period using the straight-line method. The following table represents RSU activity: Shares Weighted Average Grant-Date Fair Value Per Share Outstanding as of January 1, 2019 1,239,505 $ 22.13 Granted 865,091 19.62 Vested ( 138,245 ) 26.22 Forfeited ( 179,554 ) 23.63 Balance as of December 31, 2020 1,786,797 $ 21.43 Granted 652,579 29.09 Vested ( 311,683 ) 22.65 Forfeited ( 301,301 ) 24.99 Balance as of December 31, 2021 1,826,392 $ 23.37 Granted 1,540,246 20.32 Vested ( 768,341 ) 22.31 Forfeited ( 600,785 ) 23.14 Balance as of December 31, 2022 1,997,512 $ 21.50 PSUs – PSUs are subject to continued employment of the recipient through the vesting date, which is on the third anniversary of the grant. Once vested, the recipient will receive one share of Common Stock for each vested PSU. For PSUs issued prior to 2021, the number of PSUs that vest is determined by a payout factor consisting of equally weighted performance measures of Adjusted EBITDA and free cash flow, each as reported over the applicable three-year F-32 Back to top performance period and is adjusted based upon a market condition measured by our relative total shareholder return (“TSR”) over the applicable three-year performance period as compared to the TSR of the Russell 3000 index. For PSUs issued in 2021 and thereafter, the number of PSUs that vest is determined by a payout factor consisting of equally weighted pre-set three year performance targets on return on invested capital (“ROIC”) and TSR. The fair value of the award is estimated using a Monte Carlo simulation approach in a risk-neutral framework to model future stock price movements based on historical volatility, risk free rates of return, and correlation matrix. The following table represents PSU activity for the awarded shares at target performance measures: Shares Weighted Average Grant-Date Fair Value Per Share Outstanding as of January 1, 2019 510,773 $ 24.97 Granted 311,275 25.50 Forfeited ( 77,585 ) 25.96 Balance as of December 31, 2020 744,463 $ 25.09 Granted 165,749 30.70 Forfeited ( 205,949 ) 28.58 Balance as of December 31, 2021 704,263 $ 25.39 Granted 158,587 29.24 Vested ( 202,673 ) 22.20 Forfeited ( 380,361 ) 27.79 Balance as of December 31, 2022 279,816 $ 26.61 F-33 Back to top Note 18. Held for Sale During 2021, the Company ceased the appeal process for its litigation with Steves & Sons, Inc. (“Steves”) further described in Note 24 - Commitments and Contingencies. As a result, we are required to divest the Company’s Towanda, PA operations (“Towanda”). As of December 31, 2022 and December 31, 2021, the assets and liabilities associated with the sale of Towanda qualify as held for sale. Since the Company will continue manufacturing door skins for its internal needs, the divestiture decision did not represent a strategic shift thereby precluding the divestiture as qualifying as a discontinued operation. In addition to Towanda, which we have immaterial assets held for sale at points in time, primarily relating to property, plant and equipment from restructuring efforts, which have been classified as held for sale in the accompanying consolidated balance sheet as of December 31, 2021. The assets and liabilities included within the summary below are expected to be disposed of within the next twelve months and are included in assets held for sale and liabilities held for sale in the accompanying balance sheet. As of December 31, 2022, the assets and liabilities classified as held for sale are those of Towanda. The results of Towanda will continue to be reported within our North America operations until the divestiture is finalized. (amounts in thousands) 2022 2021 Assets Inventory $ 16,592 $ 15,520 Other current assets 110 105 Property and equipment 41,600 35,870 Intangible assets 1,471 1,471 Goodwill 65,000 65,000 Operating lease assets 975 1,458 Assets held for sale $ 125,748 $ 119,424 Liabilities Accrued payroll and benefits $ 852 $ 907 Accrued expenses and other current liabilities 4,707 3,945 Current maturities of long term debt 1 10 Long-term debt — 2 Operating lease liability 480 1,004 Liabilities held for sale $ 6,040 $ 5,868 Note 19. Restructuring and Asset Related Charges, Net We engage in restructuring activities focused on improving productivity and operating margins. Restructuring costs primarily relate to costs associated with workforce reductions, plant consolidations and closure, and changes to the management structure to align with our operations. Asset related charges, consisting of accelerated depreciation and amortization, were recorded in addition to our restructuring costs. For the years ended December 31, 2022 and December 31, 2021 there were no material asset related charges. For the year ended December 31, 2020, asset related charges primarily consisted of accelerated amortization of capitalized costs of certain ERP modules due to delays in implementation and uncertainty of their future use. Other exit costs for the year ended December 31, 2022 primarily consisted of lease termination charges. F-34 Back to top The following table summarizes the restructuring and asset related charges, net for the periods indicated: (amounts in thousands) North America Europe Australasia Corporate and Unallocated Costs Total Consolidated Year Ended December 31, 2022 Severance costs $ 6,842 $ 3,773 $ 576 $ 3,223 $ 14,414 Other exit costs — 1,253 35 156 1,444 Total restructuring charges, net 6,842 5,026 611 3,379 15,858 Asset related charges 496 1,016 — 863 2,375 Total restructuring and asset related charges, net $ 7,338 $ 6,042 $ 611 $ 4,242 $ 18,233 Year Ended December 31, 2021 Severance costs $ ( 4 ) $ 701 $ 123 $ — $ 820 Other exit costs ( 28 ) — 179 ( 97 ) 54 Total restructuring charges, net ( 32 ) 701 302 ( 97 ) 874 Asset related charges 1,232 752 92 — 2,076 Total restructuring and asset related charges, net $ 1,200 $ 1,453 $ 394 $ ( 97 ) $ 2,950 Year Ended December 31, 2020 Severance costs $ 2,057 $ 2,503 $ 564 $ ( 10 ) $ 5,114 Other exit costs ( 1 ) 235 ( 370 ) ( 46 ) ( 182 ) Total restructuring charges, net 2,056 2,738 194 ( 56 ) 4,932 Asset related charges 1,108 944 126 3,359 5,537 Total impairment and asset related charges, net $ 3,164 $ 3,682 $ 320 $ 3,303 $ 10,469 The following is a summary of the restructuring accruals recorded and charges incurred: (amounts in thousands) 2022 2021 2020 Balance as of January 1 $ 171 $ 1,377 $ 7,043 Current period charges 15,858 874 4,932 Payments ( 10,885 ) ( 2,020 ) ( 10,801 ) Currency translation ( 106 ) ( 60 ) 203 Balance at period end $ 5,038 $ 171 $ 1,377 Restructuring accruals are expected to be paid within the next 12 months and are included within accrued expenses and other current liabilities in the consolidated balance sheet. Note 20. Interest Expense, Net Interest expense, net is net of capitalized interest and interest income. Capitalized interest incurred during the construction phase of significant property and equipment additions totaled $ 0.9 million, $ 0.4 million, and $ 1.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. During the year ended December 31, 2022, we recognized interest income of $ 6.3 million primarily from gains on our interest rate swap agreements reclassified to interest income, refer to Note 22 - Derivative Financial Instruments for further information . Interest income recorded during the years ended December 31, 2021 and December 31, 2020 was not significant. For the years ended December 31, 2022, 2021 and 2020, interest payments totaled $ 80.6 million, $ 75.0 million, and $ 71.7 million, respectively. Interest expense, net also includes amortization of debt issuance costs that are amortized using the effective interest method and amortization of original issue discounts. F-35 Back to top Note 21. Other Income, Net The table below summarizes the amounts included in other income, net in the accompanying consolidated statements of operations: (amounts in thousands) 2022 2021 2020 Foreign currency (gains) losses, net $ ( 2,285 ) $ ( 9,886 ) $ 11,858 Insurance reimbursement ( 6,343 ) ( 1,619 ) ( 1,388 ) Pension (income) expense ( 4,473 ) ( 464 ) 1,646 Recovery of cost from interest received on impaired notes ( 13,953 ) — — Net (gain) loss on sale or disposal of property and equipment ( 8,057 ) 1,979 ( 4,122 ) Governmental assistance ( 1,699 ) ( 1,732 ) ( 8,281 ) Loss on extinguishment of debt — 1,342 — Legal settlement income ( 10,500 ) — — Credit for overpayments of utility expenses ( 1,975 ) — — Other items ( 5,596 ) ( 4,123 ) ( 2,465 ) Total other income, net $ ( 54,881 ) $ ( 14,503 ) $ ( 2,752 ) Governmental assistance for the year ended December 31, 2022, December 31, 2021, and December 31, 2020 primarily consisted of cash received from government pandemic assistance programs in Europe and North America as a result of COVID-19. During the year ended December 31, 2022, government pandemic assistance of $ 0.6 million was recognized within our Europe segment. During the years ended December 31, 2021 and December 31, 2020, we recognized $ 1.6 million and $ 7.4 million, respectively, of government pandemic assistance within our Europe and North America segments. The prior period information has been reclassified to conform to current period presentation. Note 22. Derivative Financial Instruments Foreign currency derivatives – As a multinational corporation, we are exposed to the impact of foreign currency fluctuations. To the extent borrowings, sales, purchases, or other transactions are not executed in the local currency of the operating unit, we are exposed to foreign currency risk. In most of the countries in which we operate, the exposure to foreign currency movements is limited because the operating revenues and expenses of our business units are substantially denominated in the local currency. To mitigate the exposure, we may enter into a variety of foreign currency derivative contracts. To manage the effect of exchange fluctuations on forecasted sales, purchases, acquisitions, capital expenditures, and certain intercompany transactions that are denominated in foreign currencies, we have foreign currency derivative contracts with a total notional amount of $ 80.0 million as of December 31, 2022. We also are subject to currency translation risk associated with converting our foreign operations’ financial statements into U.S. dollars. To mitigate the impact to the consolidated earnings of the Company from the effect of the translation of certain subsidiaries’ local currency results into U.S. dollars, we have foreign currency derivative contracts with a total notional amount of $ 85.1 million as of December 31, 2022. We do not use derivative financial instruments for trading or speculative purposes. We have not elected hedge accounting for any foreign currency derivative contracts. We record mark-to-market changes in the values of these derivatives in other income, net. We recorded nominal mark-to-market gains relating to foreign currency derivatives in the year ended December 31, 2022, gains of $ 9.0 million in the year ended December 31, 2021, and losses of $ 5.4 million in the year ended December 31, 2020. Interest rate derivatives – We are exposed to interest rate risk in connection with our variable rate long-term debt and we partially mitigate this risk through interest rate derivatives such as swaps and caps. In May 2020, we entered into interest rate swap agreements to manage this risk. The interest rate swap agreements have outstanding notional amounts aggregating to $ 370.0 million and mature in December 2023 with a weighted average fixed rate of 0.395 % swapped against one-month USD LIBOR floored at 0.00 %. The interest rate swap agreements are designated as cash flow hedges and effectively fix the interest rate on a corresponding portion of the aggregate debt outstanding under our Term Loan Facility. No portion of these interest rate contracts were deemed ineffective during the year ended December 31, 2022. We recorded pre-tax mark-to-market gains of $ 17.9 million and $ 4.1 million during the years ended December 31, 2022 and December 31, 2021, respectively, and losses of $ 2.3 million during the year ended December 31, 2020 in other comprehensive income. We reclassified gains previously recorded in other comprehensive income to interest income of $ 5.0 million during F-36 Back to top the year ended December 31, 2022, and losses to interest expense of $ 1.1 million and $ 0.5 million during the years ended December 31, 2021 and December 31, 2020, respectively. As of December 31, 2022, approximately $ 16.2 million is expected to be reclassified to interest income over the next twelve months. The derivative agreements each contain a provision whereby we could be declared in default on our derivative obligations if we either default or, in certain cases, are capable of being declared in default of any of our indebtedness greater than specified thresholds. These agreements also contain a provision where we could be declared in default subsequent to a merger or restructuring type event if the creditworthiness of the resulting entity is materially weaker. During the first quarter of 2019, we entered into two interest rate cap contracts against three-month USD LIBOR, each with a cap rate of 3 %. These caps had a combined notional amount of $ 150.0 million, became effective in March 2019, and expired in December 31, 2021. We did not elect hedge accounting and recorded insignificant mark-to-market adjustments in the years ended December 31, 2021 and December 31, 2020. Other derivative instruments – From time to time, we may enter into other types of derivative instruments immaterial to the business. Unless otherwise disclosed, these instruments are not designated as hedging instruments and mark-to-market adjustments are recorded in the statement of operations each period. The fair values of derivative instruments held are as follows: Derivative assets (amounts in thousands) Balance Sheet Location 2022 2021 Derivatives designated as hedging instruments: Interest rate contracts Other current assets $ 16,235 $ 263 Interest rate contracts Other assets — 3,036 Derivatives not designated as hedging instruments: Foreign currency forward contracts Other current assets $ 3,809 $ 6,297 Other derivative instruments Other current assets 73 — Derivatives liabilities (amounts in thousands) Balance Sheet Location 2022 2021 Derivatives not designated as hedging instruments: Foreign currency forward contracts Accrued expenses and other current liabilities $ 3,058 $ 5,527 Other derivative instruments Accrued expenses and other current liabilities 288 — Note 23. 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. F-37 Back to top The recorded carrying amounts and fair values of these instruments were as follows: December 31, 2022 (amounts in thousands) Carrying Amount Total Fair Value Level 1 Level 2 Level 3 Assets measured at NAV (1) Assets: Cash equivalents $ 6,078 $ 6,078 $ — $ 6,078 $ — $ — Derivative assets, recorded in other current assets 20,117 20,117 — 20,117 — — Deferred compensation plan assets, recorded in other assets 725 725 — 725 — — Pension plan assets: Cash and short-term investments 10,314 10,314 — 10,314 — — U.S. Government and agency obligations 35,657 35,657 35,657 — — — Corporate and foreign bonds 127,618 127,618 — 127,618 — — Equity securities 18,971 18,971 18,971 — — — Mutual funds 70,801 70,801 — 70,801 — — Common and collective funds 60,297 60,297 — — — 60,297 Liabilities: Debt, recorded in long-term debt and current maturities of long-term debt $ 1,759,226 $ 1,555,367 $ — $ 1,555,367 $ — $ — Derivative liabilities, recorded in accrued expenses and other current liabilities 3,346 3,346 — 3,346 — — December 31, 2021 (amounts in thousands) Carrying Amount Total Fair Value Level 1 Level 2 Level 3 Assets measured at NAV (1) Assets: Cash equivalents $ 33,143 $ 33,143 $ — $ 33,143 $ — $ — Derivative assets, recorded in other current assets 6,560 6,560 — 6,560 — — Derivative assets, recorded in other assets 3,036 3,036 — 3,036 — — Pension plan assets: Cash and short-term investments 18,053 18,053 — 18,053 — — U.S. Government and agency obligations 41,617 41,617 41,617 — — — Corporate and foreign bonds 134,214 134,214 — 134,214 — — Equity securities 37,384 37,384 37,384 — — — Mutual funds 71,183 71,183 — 71,183 — — Common and collective funds 127,840 127,840 — — — 127,840 Liabilities: Debt, recorded in long-term debt and current maturities of long-term debt $ 1,720,883 $ 1,751,353 $ — $ 1,751,353 $ — $ — Derivative liabilities, recorded in accrued expenses and other current assets 5,527 5,527 — 5,527 — — (1) Certain pension assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. These include investments in large cap equity and commingled real estate funds, which are valued using the NAV provided by the administrator of the funds. Redemption of these funds is not subject to restriction. Derivative assets and liabilities reported in level 2 primarily include foreign currency derivative contracts and interest rate swap agreements. See Note 22- Derivative Financial Instruments for additional information about our derivative assets and liabilities. Deferred compensation plan assets reported in level 2 consist of mutual funds. There are no material non-financial assets or liabilities as of December 31, 2022 or December 31, 2021. F-38 Back to top Note 24. Commitments and Contingencies Litigation – We are involved in various legal proceedings, claims, and government audits arising in the ordinary course of business. We record our best estimate of a loss when the loss is considered probable and the amount of such loss can be reasonably estimated. When a loss is probable and there is a range of estimated loss with no best estimate within the range, we record the minimum estimated liability related to the lawsuit or claim. As additional information becomes available, we reassess the potential liability and revise our accruals, if necessary. Because of uncertainties related to the resolution of lawsuits and claims, the ultimate outcome may differ materially from our estimates. Other than the matters described below, there were no proceedings or litigation matters involving the Company or its property as of December 31, 2022 that we believe would have a material adverse effect on our consolidated financial position or cash flows, although they could have a material adverse effect on our operating results for a particular reporting period. Steves & Sons, Inc. vs JELD-WEN, Inc. – We sell molded door skins to certain customers pursuant to long-term contracts, and these customers in turn use the molded door skins to manufacture interior doors and compete directly against us in the marketplace. We gave notice of termination of one of these contracts and, on June 29, 2016, the counterparty to the agreement, Steves and Sons, Inc. (“Steves”) filed a claim against JWI in the U.S. District Court for the Eastern District of Virginia, Richmond Division (the “Eastern District of Virginia”). The complaint alleged that our acquisition of CMI, a competitor in the molded door skins market, together with subsequent price increases and other alleged acts and omissions, violated antitrust laws, and constituted a breach of contract and breach of warranty. Specifically, the complaint alleged that our acquisition of CMI substantially lessened competition in the molded door skins market. The complaint sought declaratory relief, ordinary and treble damages, and injunctive relief, including divestiture of certain assets acquired in the CMI acquisition. In February 2018, a jury in the Eastern District of Virginia returned a verdict that was unfavorable to JWI with respect to Steves’ claims that our acquisition of CMI violated Section 7 of the Clayton Act, and found that JWI breached the supply agreement between the parties (the “Original Action”). The verdict awarded Steves $ 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. 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 (the “Steves Texas Trade Secret Theft Action”). On September 11, 2019, JELD-WEN filed a notice of appeal of the Eastern District of Virginia’s injunction to the Fourth Circuit Court of Appeals (the “Fourth Circuit”). On March 13, 2019, the presiding judge entered an Amended Final Judgment Order in the Original Action, awarding $ 36.5 million in past damages under the Clayton Act (representing a trebling of the jury’s verdict) and granting divestiture of certain assets acquired in the CMI acquisition, subject to appeal. The judgment also conditionally awarded damages in the event the judgment was overturned on appeal. Specifically, the court awarded $ 139.4 million as future antitrust damages in the event the divestiture order was overturned on appeal and $ 9.9 million as past contract damages in the event both the divestiture and antitrust claims were overturned on appeal. On April 12, 2019, Steves filed a petition requesting an award of its fees and a bill of costs, seeking $ 28.4 million in attorneys’ fees and $ 1.7 million in costs in connection with the Original Action. On November 19, 2019, the presiding judge entered an order for further relief awarding Steves an additional $ 7.1 million in damages for pricing differences from the date of the underlying jury verdict through May 31, 2019 (the “Pricing Action”). We also appealed that ruling. On April 14, 2020, Steves filed a motion for further supplemental relief for pricing differences from the date of the prior order and going forward through the end of the parties’ current supply agreement (the “Future Pricing Action”). We opposed that request for further relief. JELD-WEN filed a supersedeas bond and notice of appeal of the judgment, which was heard by the Fourth Circuit on May 29, 2020. On February 18, 2021, the Fourth Circuit issued its decision on appeal in the Original Action, affirming the Amended Final Judgment Order in part and vacating and remanding in part. The Fourth Circuit vacated the Eastern District of Virginia’s alternative $ 139.4 million lost-profits award, holding that award was premature because Steves has not suffered the purported injury on which its claim for future lost profits rests. The Fourth Circuit also vacated the Eastern District of Virginia’s judgment for Sam Steves, Edward Steves, and John Pierce on JELD-WEN’s trade secrets claims. The Fourth Circuit affirmed the Eastern District of Virginia’s finding of antitrust injury and its award of $ 36.5 million in past antitrust damages. It also affirmed the Eastern District of Virginia’s divestiture order, while clarifying that JELD-WEN F-39 Back to top retains the right to challenge the terms of any divestiture, including whether a sale to any particular buyer will serve the public interest, and made clear that the Eastern District of Virginia may need to revisit its divestiture order if the special master who has been appointed by the presiding judge cannot locate a satisfactory buyer. JELD-WEN then filed a motion for rehearing en banc with the Fourth Circuit that was denied on March 22, 2021. Following a thorough review, and consistent with our practice, we concluded that it is in the best interest of the Company and its stakeholders to move forward with the divestiture of Towanda and certain related assets. Although the Company did not seek Supreme Court review of the Fourth Circuit’s February 18, 2021 decision, the Company retains the legal right to challenge the divestiture process and the final divestiture order. We made estimates related to the divestiture in the preparation of our financial statements; however, there can be no guarantee that the divestiture will be consummated. The divestiture process is ongoing, and the special master is overseeing this process. Although the Company has decided to divest, we continue to believe that Steves’ claims lacked merit and that it was not entitled to the extraordinary remedy of divestiture. We continue to believe that the judgment in accordance with the verdict was improper under applicable law. During the pendency of the Original Action, on February 14, 2020, Steves filed a complaint and motion for preliminary injunction in the Eastern District of Virginia alleging that we breached the long-term supply agreement between the parties, including, among other claims, by incorrectly calculating the allocation of door skins owed to Steves (the “Allocation Action”). Steves sought an additional allotment of door skins and damages for violation of antitrust laws, tortious interference, and breach of contract. On April 10, 2020, the presiding judge granted Steves’ motion for preliminary injunction, and the parties settled the issues underlying the preliminary injunction on April 30, 2020 and the Company reserved the right to appeal the ruling in the Fourth Circuit. The Company believed all the claims lacked merit and moved to dismiss the antitrust and tortious interference claims. On June 2, 2020, we entered into a settlement agreement with Steves to resolve the Pricing Action, the Future Pricing Action, and the Allocation Action. As a result of the settlement, Steves filed a notice of satisfaction of judgment in the Pricing Action, withdrew its Future Pricing Action with prejudice, and filed a stipulated dismissal with prejudice in the Allocation Action. The Company also withdrew its appeal of the Pricing Action. The parties agreed to bear their own respective attorneys’ fees and costs in these actions. In partial consideration of the settlement, JWI and Steves entered into an amended supply agreement satisfactory to both parties that, by its terms, ended on September 10, 2021. This settlement had no effect on the Original Action between the parties except to agree that certain specific terms of the Amended Final Judgment Order in the Original Action would apply to the amended supply agreement during the pendency of the appeal of the Original Action. On April 2, 2021, JWI and Steves filed a stipulation regarding the amended supply agreement in the Original Action, stating that regardless of whether the case remains on appeal as of September 10, 2021, and absent further order of the court, the amended supply agreement would be extended until the divestiture of Towanda and certain related assets is complete and Steves’ new supply agreement with the company that acquires Towanda is in effect. We continue to believe the claims in the settled actions lacked merit and made no admission of liability in these matters. On October 7, 2021, we entered into a settlement agreement with Steves to resolve the following: (i) Steves’ past and any future claims for attorneys’ fees, expenses, and costs in connection with the Original Action, except that Steves and JWI each reserved the right to seek attorneys’ fees arising out of any challenge of the divestiture process or the final divestiture order; (ii) the Steves Texas Trade Secret Theft Action and the related Fourth Circuit appeal of the Eastern District of Virginia’s injunction in the Original Action; (iii) the past damages award in the Original Action; and (iv) any and all claims and counterclaims, known or unknown, that were asserted or could have been asserted against each other from the beginning of time through the date of the settlement agreement. As a result of the settlement, the parties filed a stipulated notice of satisfaction of the past antitrust damages judgment and a stipulated notice of settlement of Steves’ claim for attorneys’ fees, expenses, and costs against JWI in the Original Action, and Steves filed a notice of withdrawal of its motion for attorneys’ fees and expenses and bill of costs in the Original Action. The Company also filed a notice of dismissal with prejudice and agreed to take no judgment in the Steves Texas Trade Secret Theft Action, and the parties filed a joint agreement for dismissal of the injunction appeal in the Fourth Circuit. On November 3, 2021, we paid $ 66.4 million to Steves under the settlement agreement. 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 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 (“Cambridge”). The lawsuit sought compensatory damages, equitable relief, and an award of attorneys’ fees and costs. On May 8, 2020, the Public Employees Retirement System of Mississippi and the Plumbers and Pipefitters National Pension Fund were named as co-lead plaintiffs and filed an amended complaint on June 22, 2020. On April 20, 2021, the parties reached an agreement in principle to resolve this securities class action. The agreement contemplated a full release of claims through the date of preliminary court approval of the settlement in exchange for a payment of $ 39.5 million, primarily funded by the Company’s D&O insurance carriers, except $ 5.0 million which was F-40 Back to top provisionally funded by the Company and remains subject to dispute with insurance carriers. On November 22, 2021, the Court granted final approval of the settlement agreement. The deadline to appeal the entry of the final approval order and judgment was December 22, 2021, and no party or class member filed an appeal. The Company continues to believe that the plaintiffs’ claims lacked merit and has denied any liability or wrongdoing for the claims made against the Company. In re JELD-WEN Holding, Inc. Derivative Litigation – On February 2, 2021, Jason Aldridge, on behalf of the Company, filed a derivative action in the U.S. District Court for the District of Delaware against certain current and former executives and directors of the Company, alleging that the individual defendants breached their fiduciary duties by allowing the wrongful acts alleged in the Steves and Cambridge actions, as well as violations of Section 14(a) and 20(a) of the Exchange Act, unjust enrichment, and waste of corporate assets among other allegations (the “Aldridge Action”). The lawsuit sought compensatory damages, equitable relief, and an award of attorneys’ fees and costs. The plaintiff filed an amended complaint on May 10, 2021. On June 21, 2021, prior to a response from the Company in the Aldridge Action, Shieta Black and the Board of Trustees of the City of Miami General Employees’ & Sanitation Employees’ Retirement Trust, on behalf of the Company, filed a derivative action in the U.S. District Court for the District of Delaware against certain current and former executives and directors of the Company and Onex Corporation (“Onex”), alleging that the defendants breached their fiduciary duties by allowing the wrongful acts alleged in the Steves and Cambridge actions, as well as insider trading, and unjust enrichment among other allegations (the “Black Action”). The lawsuit sought compensatory damages, corporate governance reforms, restitution, equitable relief, and an award of attorneys’ fees and costs. The court granted the Black and Aldridge plaintiffs in motion to consolidate the lawsuits on July 16, 2021. On June 20, 2022, the parties entered into a settlement agreement of the consolidated matters, which was approved by the Court on approval of the December 20, 2022, and the cases were dismissed with prejudice. As part of the settlement, the Company, as putative plaintiff, received approximately $ 10.5 million after attorneys’ fees and costs were deducted in January 2023. 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 were consolidated into two separate actions, a Direct Purchaser Action and an Indirect Purchaser Action. The suits alleged that Masonite and JELD-WEN 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 sought ordinary and treble damages, declaratory relief, interest, costs, and attorneys’ fees. On August 31, 2020, JELD-WEN and Masonite entered into a settlement agreement with the putative Direct Purchaser class to resolve the Direct Purchaser Action. Each defendant agreed to pay a total of $ 30.8 million to the named plaintiffs and the settlement class in exchange for a full release of claims through the date of preliminary approval of the revised settlement, which the court granted on February 5, 2021. In addition, on September 4, 2020, JELD-WEN and Masonite entered into a separate settlement agreement with the putative Indirect Purchaser class to resolve the Indirect Purchaser Action. Each defendant agreed to pay $ 9.75 million to the named plaintiffs and the settlement class in exchange for a full release of claims through the execution date of the settlement agreement. The final fairness hearing in the Direct Purchaser Action was held on June 2, 2021, and the court entered a final approval order and judgment on June 3, 2021. On June 17, 2021, the Company made the settlement payment to the named plaintiffs and the settlement class in the Direct Purchaser Action. The deadline to appeal the entry of the final approval order and judgment was July 7, 2021, and no party or class member filed an appeal. The final fairness hearing in the Indirect Purchaser Action was held on July 26, 2021 and the court issued a final approval order and judgment on July 27, 2021. On August 10, 2021, the Company made the settlement payment to the named plaintiffs and the settlement class in the Indirect Purchaser Action. The deadline to appeal the entry of the final approval order and judgment was August 26, 2021, and no party or class member filed an appeal. The Company continues to believe that the plaintiffs’ claims lacked merit and has denied any liability or wrongdoing for the claims made against the Company. Canadian Antitrust Litigation – On May 15, 2020, Développement Émeraude Inc., on behalf of itself and others similarly situated, filed a putative class action lawsuit against the Company and Masonite in the Superior Court of the Province of Quebec, Canada, which was served on us on September 18, 2020 (“the Quebec Action”). The putative class consists of any person in Canada who, since October 2012, purchased one or more interior molded doors from the Company or Masonite. The suit alleges an illegal conspiracy between the Company and Masonite to agree on prices, the distribution of market shares and/or the production levels of interior molded doors and that the plaintiffs suffered damages in that they were charged and paid higher prices for interior molded doors than they would have had to pay but for the alleged anti-competitive conduct. The plaintiffs are seeking compensatory and punitive damages, attorneys’ fees and costs. On September 9, 2020, Kate O’Leary Swinkels, on behalf of herself and others similarly situated, filed a putative class action against the Company and Masonite in the Federal Court of Canada, which was served on us on September 29, 2020 (the F-41 Back to top “Federal Court Action”). The Federal Court Action makes substantially similar allegations to the Quebec Action and the putative class is represented by the same counsel. In February 2021, the plaintiff in the Federal Court Action issued a proposed Amended Statement of Claim that replaced the named plaintiff, Kate O’Leary Swinkels, with David Regan. The plaintiff has sought a stay of the Quebec Action while the Federal Court Action proceeds. We anticipate a hearing on the certification of the Federal Court Action in 2023. The Company believes both the Quebec Action and the Federal Court Action lack merit and intends to vigorously defend against them. We have evaluated the claims against us and recorded provisions based on management’s judgment about the probable outcome of the litigation and have included our estimates in accrued expenses in the accompanying balance sheets. See Note 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 $ 5.0 million and $ 200.0 million for domestic product liability risk and exposures between $ 3.0 million and $ 200.0 million for auto, general liability, personal injury, and workers’ compensation. We have no stop loss insurance covering our self-insured employee medical plan and are responsible for all claims thereunder. We estimate our provision for self-insured losses based upon an evaluation of current claim exposure and historical loss experience. Actual self-insurance losses may vary significantly from these estimates. At December 31, 2022 and December 31, 2021, our accrued liability for self-insured risks was $ 92.6 million and $ 88.4 million, respectively. Indemnifications – At December 31, 2022, we had commitments related to certain representations made in contracts for the purchase or sale of businesses or property. These representations primarily relate to past actions such as responsibility for transfer taxes if they should be claimed, and the adequacy of recorded liabilities, warranty matters, employment benefit plans, income tax matters, or environmental exposures. These guarantees or indemnification responsibilities typically expire within one to three years . We are not aware of any material amounts claimed or expected to be claimed under these indemnities. From time to time and in limited geographic areas, we have entered into agreements for the sale of our products to certain customers that provide additional indemnifications for liabilities arising from construction or product defects. We cannot estimate the potential magnitude of such exposures, but to the extent specific liabilities have been identified related to product sales, liabilities have been provided in the warranty accrual in the accompanying consolidated balance sheets. Other Financing Arrangements – At times we are required to provide letters of credit, surety bonds, or guarantees to meet various performance, legal, warranty, environmental, workers compensation, licensing, utility, and governmental requirements. Stand-by letters of credit are provided to certain customers and counterparties in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers, and future funding commitments. The stated values of these letters of credit agreements, surety bonds, and guarantees were $ 67.6 million and $ 116.9 million at December 31, 2022 and December 31, 2021, respectively. The decrease is primarily due to the cancellation of bonds related to the Steves’ legal matter. Environmental Contingencies – We periodically incur environmental liabilities associated with remediating our current and former manufacturing sites as well as penalties for not complying with environmental rules and regulations. We record a liability for remediation costs when it is probable that we will be responsible for such costs and the costs can be reasonably estimated. These environmental liabilities are estimated based on current available facts and current laws and regulations. Accordingly, it is likely that adjustments to the estimated liabilities will be necessary as additional information becomes available. Short-term environmental liabilities and settlements are recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets and totaled $ 0.5 million at December 31, 2022 and $0.5 million at December 31, 2021. Long-term environmental liabilities are recorded in deferred credits and other liabilities in the accompanying consolidated balance sheets and totaled $ 11.8 million at December 31, 2022 and December 31, 2021, respectively. Everett, Washington WADOE Action – In 2007, we were identified by the WADOE as a PLP with respect to our former manufacturing site in Everett, Washington. In 2008, we entered into an Agreed Order with the WADOE to assess historic environmental contamination and remediation feasibility at the site. As part of the order, we agreed to develop a CAP, arising from the feasibility assessment. In December 2020, we submitted to the WADOE a draft feasibility assessment with an array of remedial alternatives, which we considered substantially complete. During 2021, several comment rounds were completed as well as the identification of the Port of Everett and W&W Everett Investment LLC as additional PLPs, with respect to this matter with each PLP being jointly and severally liable for the cleanup costs. The WADOE received the final feasibility assessment on December 31, 2021, containing various remedial alternatives with its preferred remedial alternatives totaling $ 23.4 million. Based on this study, we have determined our range of possible outcomes to be F-42 Back to top $ 11.8 million to $ 33.4 million. On March 1, 2022, we delivered a draft CAP to the WADOE consistent with its preferred alternatives, and on May 16, 2022, we received the WADOE’s initial comments on the draft CAP. On June 13, 2022, we responded to the WADOE’s comments, and on October 19, 2022, the WADOE identified Wick Family Properties as another PLP. On December 19, 2022, the WADOE provided the draft CAP to the Company and other PLPs. After further negotiation, the final CAP will ultimately be formalized in an Agreed Order or Consent Decree with the WADOE, the Company, and the other PLPs. We have made provisions within our financial statements within the range of possible outcomes; however, the contents and cost of the final CAP and allocation of the responsibility between the identified PLPs could vary materially from our estimates. Towanda, Pennsylvania Consent Order – In December 2020, we entered into a COA with the PaDEP to remove a pile of wood fiber waste from our site in Towanda, Pennsylvania, which we acquired in connection with our acquisition of CMI in 2012, by using it as fuel for a boiler at that site. The COA replaced a 2018 Consent Decree between PaDEP and us. Under the COA, we are required to achieve certain periodic removal objectives and ultimately remove the entire pile by August 31, 2025. There are currently $ 2.3 million in bonds posted in connection with these obligations. If we are unable to remove this pile by August 31, 2025, then the bonds will be forfeited, and we may be subject to penalties by PaDEP. We currently anticipate meeting all applicable removal deadlines; however, if our operations should change, additional alternatives would be evaluated to meet the prescribed removal timeline. Employee Stock Ownership Plan – We have historically provided cash to our U.S. ESOP in order to fund required distributions to participants through the repurchase of shares of our Common Stock. Following our February 2017 IPO, the value of a share of Common Stock held through the ESOP is now based on our public share price. We do not anticipate that we will fund future distributions. Purchase Obligations - As of December 31, 2022, we have purchase obligations of $ 29.2 million due in 2023 and $ 14.4 million due in 2024 and thereafter. These purchase obligations are primarily relating to software hosting services and in-bound freight. Purchase obligations are defined as purchase agreements that are enforceable and legally binding and that specify all significant terms, including quantity, price, and the approximate timing of the transaction. Note 25. 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. In 2020, we elected to utilize the alternative method when calculating the Pension Benefit Guarantee Corporation premiums for 2020 and the succeeding four years. We use a spot rate yield curve to estimate the pension benefit obligation and net periodic benefits costs. The components of net periodic benefit cost are summarized as follows for the years ended December 31: (amounts in thousands) Components of pension benefit expense - U.S. benefit plan 2022 2021 2020 Service cost $ 3,470 $ 2,690 $ 3,090 Interest cost 10,556 8,870 12,236 Expected return on plan assets ( 21,424 ) ( 22,234 ) ( 21,860 ) Amortization of net actuarial pension loss 1,798 9,092 6,852 Pension benefit (income) expense $ ( 5,600 ) $ ( 1,582 ) $ 318 Discount rate used to determine benefit costs 2.88 % 2.55 % 3.31 % Expected long-term rate of return on assets 5.25 % 5.75 % 6.25 % Compensation increase rate N/A N/A N/A In October 2019, the Society of Actuaries released the PRI-2012 Mortality Tables (update to RP-2014 mortality tables), which were adopted in 2019 and represent our best estimate of future experience for the base mortality table. The Society of Actuaries has released annual updates to the mortality improvement projection scale that was first released in 2014, with the most recent annual update being Scale MP-2020. We adopted the use of Scale MP-2020 as of December 31, 2020 as it represents our best estimate of future mortality improvement projection experience as of the measurement dates. We developed the discount rate based on the plan’s expected benefit payments using the Willis Towers Watson RATE:Link 10:90 Yield Curve. Based on this analysis, we selected a 5.39 % discount rate for our projected benefit F-43 Back to top obligation. As the discount rate is reduced or increased, the pension obligation would increase or decrease, respectively, and future pension expense would increase or decrease, respectively. We maintain policies for investment of pension plan assets. The policies set forth stated objectives and a structure for managing assets, which includes various asset classes and investment management styles that, in the aggregate, are expected to produce a sufficient level of diversification and investment return over time and provide for the availability of funds for benefits as they become due. The policies also provide guidelines for each investment portfolio that control the level of risk assumed in the portfolio and ensure that assets are managed in accordance with stated objectives. The plan invests primarily in publicly traded equity and debt securities as directed by the plan’s investment committee. The target asset allocation is determined by reference to the plan’s funded status percentage. The target allocation of plan assets was 52.2 % fixed income securities, 39.8 % equity securities and 8.0 % other investments, as of December 31, 2022 and December 31, 2021, respectively. The pension plan’s expected return assumption is based on the weighted average aggregate long-term expected returns of various actively managed asset classes corresponding to the plan’s asset allocation. We have selected an expected return on plan assets based on a historical analysis of rates of return, our investment mix, market conditions and other factors. The fair value of plan assets decreased in 2022 due primarily to investment returns and benefit payments. The fair value of plan assets increased in 2021 due primarily to investment returns, partially offset by benefit payments. (amounts in thousands) Change in fair value of plan assets - U.S. benefit plan 2022 2021 Balance as of January 1, $ 418,947 $ 396,853 Actual return on plan assets ( 80,997 ) 43,242 Benefits paid ( 20,060 ) ( 18,312 ) Administrative expenses paid ( 3,413 ) ( 2,836 ) Balance at period end $ 314,477 $ 418,947 The plan’s projected benefit obligation is determined by using weighted-average assumptions made on December 31, of each year as summarized below: (amounts in thousands) Change in projected benefit obligation - U.S. benefit plan 2022 2021 Balance as of January 1, $ 445,268 $ 474,085 Service cost 3,470 2,690 Interest cost 10,556 8,870 Actuarial gain ( 110,342 ) ( 19,229 ) Benefits paid ( 20,060 ) ( 18,312 ) Administrative expenses paid ( 3,413 ) ( 2,836 ) Balance at period end $ 325,479 $ 445,268 Discount rate 5.39 % 2.88 % Compensation increase rate N/A N/A As of December 31, 2022, the plan’s estimated benefit payments for the next ten years are as follows (amounts in thousands): 2023 $ 19,065 2024 20,417 2025 21,099 2026 21,672 2027 22,193 2028-2032 114,943 The company made no cash contributions to the plan for the years ended December 31, 2022 and December 31, 2021. During fiscal year 2023, no cash contributions are required to be made to the plan. F-44 Back to top The plan’s accumulated benefit obligation of $ 325.5 million is determined by taking the projected benefit obligation and removing the impact of the assumed compensation increases. The plan’s funded status as of December 31 is as follows: (amounts in thousands) Unfunded pension liability - U.S. benefit plan 2022 2021 Projected benefit obligation at end of period $ 325,479 $ 445,268 Fair value of plan assets at end of period ( 314,477 ) ( 418,947 ) Unfunded pension liability $ 11,002 $ 26,321 Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December 31 are as follows: (amounts in thousands) Accumulated other comprehensive loss - U.S. benefit plan 2022 2021 2020 Net actuarial pension loss beginning of period $ 52,832 $ 102,161 $ 87,459 Amortization of net actuarial loss ( 1,798 ) ( 9,092 ) ( 6,852 ) Net (gain) loss occurring during year ( 7,921 ) ( 40,237 ) 21,554 Net actuarial pension loss at end of period 43,113 52,832 102,161 Tax expense (benefit) 8,059 5,603 ( 6,860 ) Net actuarial pension loss at end of period, net of tax $ 51,172 $ 58,435 $ 95,301 Non-U.S. Defined Benefit Plans – We have several other defined benefit plans located outside the U.S. that are country specific. Some of these plans remain open to participants and others are closed. We maintain policies for investment of the assets of our funded pension plans. The target allocation of plan assets was approximately 36 % fixed income securities, 32 % equity securities and 32 % other investments, as of December 31, 2022 and December 31, 2021, respectively. The expenses related to these plans are recorded in the consolidated statements of operations and are determined by using weighted-average assumptions made on January 1 of each year as summarized below for the years ended December 31. (amounts in thousands) Components of pension benefit expense - Non-U.S. benefit plans 2022 2021 2020 Service cost $ 2,402 $ 2,728 $ 2,548 Interest cost 880 714 908 Curtailment gain ( 1,742 ) — — Expected return on plan assets ( 306 ) ( 453 ) ( 435 ) Amortization of net actuarial pension loss 532 857 849 Pension benefit expense $ 1,766 $ 3,846 $ 3,870 Discount rate 1.9 % - 7.6 % 0.8 % - 7.6 % 0.2 % - 7.8 % Expected long-term rate of return on assets 0.0 % - 5.5 % 0.0 % - 5.5 % 0.0 % - 4.6 % Compensation increase rate 0.0 % - 7.0 % 0.5 % - 7.0 % 0.5 % - 7.0 % (amounts in thousands) Change in fair value of plan assets - Non-U.S. benefit plans 2022 2021 Balance as of January 1, $ 11,344 $ 11,471 Actual (loss) gain return on plan assets ( 553 ) 837 Company contribution 143 197 Benefits paid ( 849 ) ( 542 ) Administrative expenses paid ( 843 ) ( 41 ) Cumulative translation adjustment ( 61 ) ( 578 ) Balance at period end $ 9,181 $ 11,344 F-45 Back to top The projected benefit obligation for the non-US plans is determined by using weighted-average assumptions made on December 31, 2022 of each year as summarized below: (amounts in thousands) Change in projected benefit obligation - Non-U.S. benefit plans 2022 2021 Balance as of January 1, $ 49,903 $ 53,871 Service cost 2,402 2,728 Interest cost 880 714 Actuarial gain ( 7,029 ) ( 769 ) Curtailment gain ( 1,958 ) — Benefits paid ( 3,155 ) ( 2,753 ) Administrative expenses paid ( 61 ) ( 41 ) Cumulative translation adjustment ( 4,499 ) ( 3,847 ) Balance at period end $ 36,483 $ 49,903 Discount rate 3.3 % - 7.3 % 0.5 % - 7.6 % Compensation increase rate 0.0 % - 7.0 % 0.5 % - 7.0 % As of December 31, 2022, the estimated benefit payments for the non-U.S. plans over the next ten years are as follows (amounts in thousands): 2023 $ 2,475 2024 2,656 2025 2,780 2026 2,934 2027 2,975 2028-2032 15,121 The accumulated benefit obligations of $ 31.0 million for the non-U.S. plans are determined by taking the projected benefit obligation and removing the impact of the assumed compensation increases. We expect to contribute $ 1.5 million to the non-U.S. plans in 2023. The funded status of these plans as of December 31 are as follows: (amounts in thousands) Unfunded pension liability - Non-U.S. benefit plans 2022 2021 Projected benefit obligation at end of period $ 36,483 $ 49,903 Fair value of plan assets at end of period ( 9,181 ) ( 11,344 ) Net pension liability $ 27,302 $ 38,559 Long-term unfunded pension liability $ 24,503 $ 35,117 Current portion 4,592 5,545 Total unfunded pension liability $ 29,095 $ 40,662 Total overfunded pension liability $ 1,793 $ 2,103 The current portion of the unfunded pension liability is recorded in accrued payroll and benefits in the accompanying consolidated balance sheets. The overfunded pension liability is recorded in long-term other assets in the accompanying consolidated balance sheets. F-46 Back to top Net actuarial pension losses are recorded in consolidated other comprehensive income (loss) for the years ended December 31 are as follows: (amounts in thousands) Accumulated other comprehensive loss - Non-U.S. benefit plans 2022 2021 2020 Net actuarial pension loss beginning of period $ 9,913 $ 12,811 $ 12,237 Amortization of net actuarial loss ( 532 ) ( 857 ) ( 849 ) Net (gain) loss occurring during year ( 6,457 ) ( 931 ) 1,339 Effect of curtailment ( 167 ) — — Cumulative translation adjustment ( 484 ) ( 1,110 ) 84 Net actuarial pension loss at end of period 2,273 9,913 12,811 Tax benefit ( 632 ) ( 2,280 ) ( 3,043 ) Net actuarial pension loss at end of period, net of tax $ 1,641 $ 7,633 $ 9,768 Other Non-U.S. Defined Contribution Plans –We have several other defined contribution plans located outside the U.S. that are country specific. Other plans that are characteristically defined contribution plans have accrued liabilities of $ 2.4 million and $ 2.4 million, respectively, at December 31, 2022 and December 31, 2021. The total compensation expense for non-U.S. defined contribution plans was $ 29.9 million in 2022, $ 29.5 million in 2021, and $ 21.1 million in 2020. F-47 Back to top Note 26. Supplemental Cash Flow Information Year Ended (amounts in thousands) December 31, 2022 December 31, 2021 December 31, 2020 Cash Operating Activities: Operating leases $ 58,575 $ 59,190 $ 58,235 Interest payments on financing lease obligations 161 205 193 Cash paid for amounts included in the measurement of lease liabilities $ 58,736 $ 59,395 $ 58,428 Cash Investing Activities: Purchases of securities for deferred compensation plan $ ( 834 ) $ — $ — Sale of securities for deferred compensation plan 106 — — Change in securities for deferred compensation plan $ ( 728 ) $ — $ — Issuances of notes receivable $ ( 55 ) $ ( 52 ) $ ( 57 ) Cash received on notes receivable 149 4,218 642 Change in notes receivable $ 94 $ 4,166 $ 585 Non-cash Investing Activities: Property, equipment, and intangibles purchased in accounts payable $ 4,987 $ 6,753 $ 5,862 Property, equipment, and intangibles purchased with debt 9,779 8,839 18,813 Customer accounts receivable converted to notes receivable 49 141 843 Cash Financing Activities: Proceeds from issuance of new debt $ — $ 548,625 $ 250,000 Borrowings on long-term debt 779,977 37,306 100,941 Payments of long-term debt ( 767,248 ) ( 666,534 ) ( 135,250 ) Payments of debt issuance and extinguishment costs, including underwriting fees — ( 5,448 ) ( 4,833 ) Change in long-term debt $ 12,729 $ ( 86,051 ) $ 210,858 Cash paid for amounts included in the measurement of finance lease liabilities $ 1,792 $ 2,090 $ 1,721 Non-cash Financing Activities: Prepaid insurance funded through short-term debt borrowings $ 16,486 $ 13,048 $ 10,785 Shares repurchased in accounts payable — 1,066 — Accounts payable converted to installment notes 1,279 69 914 Other Supplemental Cash Flow Information: Cash taxes paid, net of refunds $ 44,723 $ 36,513 $ 20,443 Cash interest paid 80,613 74,953 71,659 Prior period information in the table above have been reclassified to conform to current period presentation. 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