UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________
(Mark One) | | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 20221, 2023
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission file number 001-40456
________________________
JANUS INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
________________________
| | | | | |
| Delaware | 86-1476200 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
135 Janus International Blvd. Temple, GA | 30179 |
| (Address of Principal Executive Offices) | (Zip Code) |
(866) 562-2580
(Registrant's telephone number, including area code)
________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of Each Class: | Trading Symbol(s) | Name of Each Exchange
on Which RegisteredRegistered: |
| Common Stock, par value $0.0001 per share | JBI
| New York Stock Exchange
|
Securities registered pursuant to section 12(g) of the Act: None
________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports);, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☐ | Accelerated filer | ☐☒ |
| Non-accelerated filer | ☒☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 13, 2022, 146,561,7175, 2023, 146,744,164 shares of Class A Common Stock, par value $0.0001, were issued and outstanding.
JANUS INTERNATIONAL GROUP, INC.
Quarterly Report on Form 10-Q
TABLE OF CONTENTSTable of Contents
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SAFE HARBOR, FORWARD-LOOKING STATEMENTS | |
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| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | P3ART I — FINANCIAL INFORMATION | |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) that reflect our current views with respect to future events and financial performance, business strategies, expectations for our business and any other statements of a future or forward-looking nature, constitute “forward-looking statements” for the purposes of federal securities laws.
These forward-looking statements include, but are not limited to, statements about our financial condition, results of operations, earnings outlook and prospects or regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those contemplated in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Form 10-Q and in our other filings with the Securities and Exchange Commission (the “SEC”). We do not assume any obligation to update any forward-looking statements after the date of this Report, except as required by law.
In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would”, and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:
•changes adversely affecting the business in which we are engaged;
•geopolitical risk and changes in applicable laws or regulations;
•the possibility that Janus may be adversely affected by other economic, business, and/or competitive factors;
•operational risk;
•any failure to effectively manage, and receive anticipated returns from, acquisitions, divestitures, investments, joint ventures and other portfolio actions;
•fluctuations in the demand for our products and services;
•the impact of supply chain disruptions and inflation and our ability to recoup rising costs in the rates we charge to our customers;
•the possibility that we may impair our long-lived assets and other assets, including inventory, property and equipment and investments in unconsolidated affiliates;
•the possibility that the COVID-19 pandemic, or another major disease, disrupts Janus’sJanus’ business;
•our ability to maintain the listing of our securities on a national securities exchange;
•the possibility of significant changes in foreign exchange rates and controls;
•litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Janus’sJanus’ resources;
•general economic conditions, including the capital and credit markets;
•the possibility of political instability, war or acts of terrorism in any of the countries where we operate; and
•other risks detailed from time to time in our filings with the SEC, press releases, and other communications, including those set forth under “Risk Factors” included in our 20212022 Annual Report on Form 10-K for the year ended January 1,December 31, 2022, and in the documents incorporated by reference herein and therein.
All subsequent written and oral forward-looking statements concerning the matters addressed in this Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Form 10-Q. Except to the extent required by applicable law or regulation we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.
PART I — FINANCIALI--FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTSFinancial Statements.
| | |
| Janus International Group, Inc. |
|
| Condensed Consolidated Balance Sheets |
(dollar amounts in thousands, except share and per share data)data - Unaudited) |
| | | April 2, | | January 1, | | | | | | | | | | |
| | 2022 | | 2022 | | April 1, | | December 31, |
| | (Unaudited) | | | | 2023 | | 2022 |
| ASSETS | ASSETS | | ASSETS | |
| Current Assets | Current Assets | | Current Assets | |
| Cash and cash equivalents | $ | 26,626 | | | $ | 13,192 | | |
| Accounts receivable, less allowance for credit losses; $5,733 and $5,449, at April 2, 2022 and January 1, 2022, respectively | 118,758 | | | 107,372 | | |
| Costs and estimated earnings in excess of billing on uncompleted contracts | 30,286 | | | 23,121 | | |
| Cash | | Cash | $ | 69,639 | | | $ | 78,373 | |
| Accounts receivable, less allowance for credit losses; $4,652 and $4,549, at April 1, 2023 and December 31, 2022, respectively | | Accounts receivable, less allowance for credit losses; $4,652 and $4,549, at April 1, 2023 and December 31, 2022, respectively | 149,758 | | | 155,397 | |
| Costs in excess of billing on uncompleted contracts | | Costs in excess of billing on uncompleted contracts | 40,992 | | | 39,251 | |
| Inventory, net | Inventory, net | 64,226 | | | 56,596 | | Inventory, net | 64,769 | | | 67,677 | |
| Prepaid expenses | Prepaid expenses | 12,255 | | | 9,843 | | Prepaid expenses | 8,354 | | | 9,098 | |
| Other current assets | Other current assets | 2,922 | | | 4,057 | | Other current assets | 4,450 | | | 13,381 | |
| Total current assets | Total current assets | $ | 255,073 | | | $ | 214,181 | | Total current assets | $ | 337,962 | | | $ | 363,177 | |
| Right-of-use assets, net | Right-of-use assets, net | 41,518 | | | — | | Right-of-use assets, net | 43,961 | | | 44,305 | |
| Property and equipment, net | Property and equipment, net | 42,584 | | | 41,607 | | Property and equipment, net | 46,005 | | | 42,083 | |
| Customer relationships, net | 305,080 | | | 312,199 | | |
| Tradename and trademarks | 107,826 | | | 107,980 | | |
| Other intangibles, net | 15,495 | | | 15,861 | | |
| Intangible assets, net | | Intangible assets, net | 397,276 | | | 404,385 | |
| Goodwill | Goodwill | 369,279 | | | 369,286 | | Goodwill | 368,363 | | | 368,204 | |
| Deferred tax asset, net | Deferred tax asset, net | 59,998 | | | 58,915 | | Deferred tax asset, net | 46,601 | | | 46,601 | |
| Other assets | Other assets | 1,855 | | | 1,973 | | Other assets | 1,740 | | | 1,863 | |
| Total assets | Total assets | $ | 1,198,708 | | | $ | 1,122,002 | | Total assets | $ | 1,241,908 | | | $ | 1,270,618 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current Liabilities | Current Liabilities | | Current Liabilities | |
| Accounts payable | Accounts payable | $ | 65,336 | | | $ | 54,961 | | Accounts payable | $ | 58,545 | | | $ | 52,268 | |
| Billing in excess of costs and estimated earnings on uncompleted contracts | 28,053 | | | 23,207 | | |
| Billing in excess of costs on uncompleted contracts | | Billing in excess of costs on uncompleted contracts | 18,311 | | | 21,445 | |
| Current maturities of long-term debt | Current maturities of long-term debt | 8,215 | | | 8,067 | | Current maturities of long-term debt | 8,649 | | | 8,347 | |
| Other accrued expenses | 65,867 | | | 54,111 | | |
| Accrued expenses and other current liabilities | | Accrued expenses and other current liabilities | 61,366 | | | 70,551 | |
| Total current liabilities | Total current liabilities | $ | 167,471 | | | $ | 140,346 | | Total current liabilities | $ | 146,871 | | | $ | 152,611 | |
| Line of credit | — | | | 6,369 | | |
| Long-term debt, net | Long-term debt, net | 703,022 | | | 703,718 | | Long-term debt, net | 649,818 | | | 699,850 | |
| Deferred tax liability, net | Deferred tax liability, net | 1,804 | | | 749 | | Deferred tax liability, net | 1,909 | | | 1,927 | |
| Other long-term liabilities | Other long-term liabilities | 39,260 | | | 2,533 | | Other long-term liabilities | 39,704 | | | 40,944 | |
| Total liabilities | Total liabilities | $ | 911,557 | | | $ | 853,715 | | Total liabilities | $ | 838,302 | | | $ | 895,332 | |
| STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY | | | | STOCKHOLDERS’ EQUITY | | | |
| Common Stock, 825,000,000 shares authorized, $.0001 par value, 146,561,717 and 146,561,717 shares issued and outstanding at April 2, 2022 and January 1, 2022, respectively | 15 | | | 15 | | |
| Common Stock, 825,000,000 shares authorized, $0.0001 par value, 146,744,164 and 146,703,894 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | | Common Stock, 825,000,000 shares authorized, $0.0001 par value, 146,744,164 and 146,703,894 shares issued and outstanding at April 1, 2023 and December 31, 2022, respectively | 15 | | | 15 | |
| Treasury stock, at cost, 18,520 and zero shares as of April 1, 2023 and December 31, 2022, respectively | | Treasury stock, at cost, 18,520 and zero shares as of April 1, 2023 and December 31, 2022, respectively | (183) | | | — | |
| Additional paid-in capital | Additional paid-in capital | 278,399 | | | 277,799 | | Additional paid-in capital | 283,744 | | | 281,914 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (1,465) | | | (949) | | Accumulated other comprehensive loss | (4,105) | | | (4,796) | |
| Accumulated surplus (deficit) | 10,202 | | | (8,578) | | |
| Retained earnings | | Retained earnings | 124,135 | | | 98,153 | |
| Total stockholders’ equity | Total stockholders’ equity | $ | 287,151 | | | $ | 268,287 | | Total stockholders’ equity | $ | 403,606 | | | $ | 375,286 | |
| Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 1,198,708 | | | $ | 1,122,002 | | Total liabilities and stockholders’ equity | $ | 1,241,908 | | | $ | 1,270,618 | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| | |
| Janus International Group, Inc. |
|
| Condensed Consolidated Statements of Operations and Comprehensive Income |
(dollar amounts in thousands, except share and per share data)data - Unaudited) |
| | | Three Months Ended | | Three Months Ended |
| | April 2, 2022 | | March 27, 2021 | | April 1, 2023 | | April 2, 2022 |
| | (Unaudited) | | (Unaudited) | | | | |
| REVENUE | | |
| Sales of product | $ | 197,306 | | | $ | 121,696 | | |
| Sales of services | 32,214 | | | 31,128 | | |
| Total revenue | $ | 229,520 | | | $ | 152,824 | | |
| Cost of Sales | 152,950 | | | 99,531 | | |
| REVENUES | | REVENUES | | | |
| Product revenues | | Product revenues | $ | 209,664 | | | $ | 197,306 | |
| Service revenues | | Service revenues | 42,240 | | | 32,214 | |
| Total revenues | | Total revenues | 251,904 | | | 229,520 | |
| Product cost of revenues | | Product cost of revenues | 120,068 | | | 128,560 | |
| Service cost of revenues | | Service cost of revenues | 31,903 | | | 24,390 | |
| Cost of Revenues | | Cost of Revenues | 151,971 | | | 152,950 | |
| GROSS PROFIT | GROSS PROFIT | $ | 76,570 | | | $ | 53,293 | | GROSS PROFIT | 99,933 | | | 76,570 | |
| OPERATING EXPENSE | OPERATING EXPENSE | | OPERATING EXPENSE | |
| Selling and marketing | Selling and marketing | 13,349 | | | 9,458 | | Selling and marketing | 14,821 | | | 13,349 | |
| General and administrative | General and administrative | 28,106 | | | 19,586 | | General and administrative | 34,100 | | | 28,106 | |
| Operating Expenses | Operating Expenses | $ | 41,455 | | | $ | 29,044 | | Operating Expenses | 48,921 | | | 41,455 | |
| INCOME FROM OPERATIONS | INCOME FROM OPERATIONS | $ | 35,115 | | | $ | 24,249 | | INCOME FROM OPERATIONS | 51,012 | | | 35,115 | |
| Interest expense | Interest expense | (8,775) | | | (8,126) | | Interest expense | (15,998) | | | (8,775) | |
| Other expense | Other expense | (28) | | | (1,559) | | Other expense | (15) | | | (29) | |
| Other Expense, Net | $ | (8,804) | | | $ | (9,685) | | |
| INCOME BEFORE TAXES | INCOME BEFORE TAXES | $ | 26,311 | | | $ | 14,564 | | INCOME BEFORE TAXES | 34,999 | | | 26,311 | |
| Provision (benefit) for Income Taxes | 6,607 | | | (155) | | |
| Provision for Income Taxes | | Provision for Income Taxes | 9,017 | | | 6,607 | |
| NET INCOME | NET INCOME | $ | 19,704 | | | $ | 14,719 | | NET INCOME | $ | 25,982 | | | $ | 19,704 | |
| Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) | (516) | | | 311 | | Other Comprehensive Income (Loss) | 691 | | | (516) | |
| COMPREHENSIVE INCOME | COMPREHENSIVE INCOME | $ | 19,188 | | | $ | 15,030 | | COMPREHENSIVE INCOME | 26,673 | | | 19,188 | |
| Net income attributable to common stockholders | Net income attributable to common stockholders | $ | 19,704 | | | $ | 14,719 | | Net income attributable to common stockholders | $ | 25,982 | | | $ | 19,704 | |
| Weighted-average shares outstanding, basic and diluted (Note 16) | | | | |
| Weighted-average shares outstanding, basic and diluted (Note 12) | | Weighted-average shares outstanding, basic and diluted (Note 12) | | | |
| Basic | Basic | 146,561,717 | | | 66,145,633 | | Basic | 146,703,894 | | | 146,561,717 | |
| Diluted | Diluted | 146,832,889 | | | 66,145,633 | | Diluted | 146,751,901 | | | 146,832,889 | |
| Net income per share, basic and diluted (Note 16) | | |
| Net income per share, basic and diluted (Note 12) | | Net income per share, basic and diluted (Note 12) | |
| Basic | Basic | $ | 0.13 | | | $ | 0.22 | | Basic | $ | 0.18 | | | $ | 0.13 | |
| Diluted | Diluted | $ | 0.13 | | | $ | 0.22 | | Diluted | $ | 0.18 | | | $ | 0.13 | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.Statements
| | |
| Janus International Group, Inc. |
|
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) |
(dollar amounts in thousands, except share data)data - Unaudited) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B
Common Units | | Class A
Preferred Units | | Common Stock | | Additional paid-in capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated
Surplus (Deficit) | | Total |
| Unit | | Amount | | Unit | | Amount | | Shares | | Amount | | | | | | | | |
| Balance as of December 26, 2020 | 4,478 | | | $ | 261 | | | 189,044 | | | $ | 189,044 | | | — | | | $ | — | | | $ | — | | | $ | (227) | | | $ | (48,205) | | | $ | 140,874 | |
| Retroactive application of the recapitalization | (4,478) | | | (261) | | | (189,044) | | | (189,044) | | | 66,145,633 | | | 7 | | | 189,299 | | | — | | | — | | | — | |
| Balance as of December 26, 2020, as adjusted | — | | | $ | — | | | — | | | $ | — | | | 66,145,633 | | | $ | 7 | | | $ | 189,299 | | | $ | (227) | | | $ | (48,205) | | | $ | 140,874 | |
| Vesting of Midco LLC class B units | — | | | — | | | — | | | — | | | 111,895 | | | $ | — | | | $ | 52 | | | $ | — | | | $ | — | | | $ | 52 | |
| Distributions to Janus Midco LLC Class A unitholders | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (96) | | | (96) | |
| Cumulative translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 311 | | | — | | | 311 | |
| Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,719 | | | 14,719 | |
| Balance as of March 27, 2021 | — | | | $ | — | | | — | | | $ | — | | | 66,257,528 | | | $ | 7 | | | $ | 189,351 | | | $ | 84 | | | $ | (33,582) | | | $ | 155,860 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B
Common Units | | Class A
Preferred Units | | Common Stock | | Additional paid-in capital | | Accumulated Other Comprehensive Loss | | Accumulated
Surplus (Deficit) | | Total |
| Unit | | Amount | | Unit | | Amount | | Shares | | Amount | | | | | | | | |
| Balance as of January 1, 2022 | — | | | $ | — | | | — | | | $ | — | | | 146,561,717 | | | $ | 15 | | | $ | 277,799 | | | $ | (949) | | | $ | (8,578) | | | $ | 268,287 | |
| Share based compensation | — | | | — | | | — | | | — | | | — | | | — | | | 600 | | | — | | | — | | | 600 | |
Cumulative effect of change in accounting principle(a) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (924) | | | (924) | |
| Cumulative translation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (516) | | | — | | | (516) | |
| Net income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 19,704 | | | 19,704 | |
| Balance as of April 2, 2022 | — | | | $ | — | | | — | | | $ | — | | | 146,561,717 | | | $ | 15 | | | $ | 278,399 | | | $ | (1,465) | | | $ | 10,202 | | | $ | 287,151 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Preferred Units
(1,000,000 shares authorized
par value of .0001) | Common Stock | | Additional paid-in capital | | Accumulated Other Comprehensive Loss | | Retained Earnings
(Accumulated Deficit) | | Total |
| Shares | | Amount | Shares | | Amount | | | | | | | | |
| Balance as of January 1, 2022 | — | | | — | | 146,561,717 | | | $ | 15 | | | $ | 277,799 | | | $ | (949) | | | $ | (8,578) | | | $ | 268,287 | |
| Share based compensation | — | | | — | | — | | | — | | | 600 | | | — | | | — | | | 600 | |
Cumulative effect of change in accounting principle(a) | — | | | — | | — | | | — | | | — | | | — | | | (924) | | | (924) | |
| Cumulative translation adjustment | — | | | — | | — | | | — | | | — | | | (516) | | | — | | | (516) | |
| Net income | — | | | — | | — | | | — | | | — | | | — | | | 19,704 | | | 19,704 | |
| Balance as of April 2, 2022 | — | | | $ | — | | 146,561,717 | | | $ | 15 | | | $ | 278,399 | | | $ | (1,465) | | | $ | 10,202 | | | $ | 287,151 | |
(a) EffectiveEffective January 2, 2022, the Company adopted the provisions of ASUAccounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) and ASU 2016-02, Leases (Topic 842). We have elected to adopt each of the two standards using the modified retrospective approach through a cumulative-effect adjustment to the opening balance of accumulated deficit for both. See Note 2 in the Annual Report on Form 10-K, for the year ended December 31, 2022, for further details of the impact of each standard.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Preferred Units
(1,000,000 shares authorized
par value of .0001) | Common Stock | | Treasury Stock | Additional paid-in capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | Total |
| Shares | | Amount | Shares | | Amount | | Shares | | Amount | | | | | | | |
Balance as of December 31, 2022 | — | | | — | | 146,703,894 | | | $ | 15 | | | — | | | $ | — | | $ | 281,914 | | | $ | (4,796) | | | $ | 98,153 | | | $ | 375,286 | |
| Issuance of restricted units | — | | | — | | 58,790 | | | — | | | — | | | — | | — | | | — | | | — | | | — | |
| Shares withheld for taxes upon vesting of restricted units | — | | | — | | (18,520) | | | — | | | 18,520 | | | (183) | | — | | | — | | | — | | | (183) | |
| Share based compensation | — | | | — | | — | | | — | | | — | | | — | | 1,830 | | | — | | | — | | | 1,830 | |
| Cumulative translation adjustment | — | | | — | | — | | | — | | | — | | | — | | — | | | 691 | | | — | | | 691 | |
| Net income | — | | | — | | — | | | — | | | — | | | — | | — | | | — | | | 25,982 | | | 25,982 | |
Balance as of April 1, 2023 | — | | | $ | — | | 146,744,164 | | | $ | 15 | | | 18,520 | | | $ | (183) | | $ | 283,744 | | | $ | (4,105) | | | $ | 124,135 | | | $ | 403,606 | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| | |
| Janus International Group, Inc. |
|
| Condensed Consolidated Statements of Cash Flows |
(dollar amounts in thousands)thousands - Unaudited) |
| | | | | | | | | | | |
| Three Months Ended |
| April 2, 2022 | | March 27, 2021 |
| (Unaudited) | | (Unaudited) |
| Cash Flows Provided By Operating Activities | | | |
| Net income | $ | 19,704 | | | $ | 14,719 | |
| Adjustments to reconcile net income to net cash provided by operating activities | | | |
| Depreciation of property and equipment | 1,857 | | | 1,473 | |
| Reduction in carrying amount of right-of-use assets | 1,319 | | | — | |
| Intangible amortization | 7,225 | | | 6,832 | |
| Deferred finance fee amortization | 912 | | | 754 | |
| Share based compensation | 600 | | | 52 | |
| Loss on extinguishment of debt | — | | | 1,421 | |
| Loss on sale of assets | — | | | 61 | |
| Loss on abandonment of PP&E | 103 | | | — | |
| Undistributed earnings of affiliate | (22) | | | (40) | |
| Deferred income taxes | — | | | (768) | |
| Changes in operating assets and liabilities | | | |
| Accounts receivable | (11,752) | | | 837 | |
| Costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings on uncompleted contracts | (7,165) | | | (920) | |
| Prepaid expenses and other current assets | (1,285) | | | 20 | |
| Inventory | (7,630) | | | (4,942) | |
| Accounts payable | 10,375 | | | 5,641 | |
| Other accrued expenses | 9,875 | | | 1,869 | |
| Other assets and long-term liabilities | 661 | | | (1,449) | |
| Net Cash Provided By Operating Activities | $ | 24,777 | | | $ | 25,560 | |
| Cash Flows Used In Investing Activities | | | |
| Proceeds from sale of equipment | — | | | 55 | |
| Purchases of property and equipment | (2,880) | | | (2,363) | |
| Cash paid for acquisitions, net of cash acquired | — | | | (1,565) | |
| Net Cash Used In Investing Activities | $ | (2,880) | | | $ | (3,873) | |
| Cash Flows Used In Financing Activities | | | |
| Net repayments on line of credit | (6,369) | | | — | |
| Distributions to Janus Midco LLC unitholders | — | | | (96) | |
| Principal payments on long-term debt | (2,017) | | | (1,631) | |
| Principal payments under financing lease obligations | (19) | | | — | |
| Payments for deferred financing fees | — | | | (765) | |
| Cash Used In Financing Activities | $ | (8,405) | | | $ | (2,492) | |
| Effect of exchange rate changes on cash and cash equivalents | (58) | | | 54 | |
| Net Increase in Cash and Cash Equivalents | $ | 13,434 | | | $ | 19,249 | |
| Cash and Cash Equivalents, Beginning of Period | 13,192 | | | 45,255 | |
| Cash and Cash Equivalents, End of Period | $ | 26,626 | | | $ | 64,504 | |
| Supplemental Cash Flow Information | | | |
| Interest paid | $ | 6,096 | | | $ | 11,292 | |
| Income taxes paid | $ | 370 | | | $ | 321 | |
| Cash paid for operating leases | $ | 1,900 | | | $ | — | |
| Non-cash investing and financing activities: | | | |
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 42,202 | | | $ | — | |
| Right-of-use assets obtained in exchange for finance lease obligations | $ | 633 | | | $ | — | |
| Deferred transaction costs related to Juniper merger | $ | — | | | $ | 8,032 | |
| | | |
| | | | | | | | | | | |
| Three Months Ended |
| April 1, 2023 | | April 2, 2022 |
| (Unaudited) | | (Unaudited) |
| Cash Flows Provided By Operating Activities | | | |
| Net income | $ | 25,982 | | | $ | 19,704 | |
| Adjustments to reconcile net income to net cash provided by operating activities | | | |
| Depreciation of property and equipment | 2,180 | | | 1,857 | |
| Reduction in carrying amount of right-of-use assets | 1,485 | | | 1,319 | |
| Change in inventory obsolescence reserve | (304) | | | — | |
| Amortization of intangibles | 7,416 | | | 7,225 | |
| Deferred finance fee amortization | 1,346 | | | 912 | |
| Provision for losses on accounts receivable | 102 | | | 975 | |
| Share based compensation | 1,830 | | | 600 | |
| Loss on extinguishment of debt | — | | | 103 | |
| Loss on sale of equipment | 6 | | | — | |
| Undistributed losses (earnings) of affiliate | 58 | | | (22) | |
| Changes in operating assets and liabilities | | | |
| Accounts receivable | 5,826 | | | (12,727) | |
| Costs in excess of billings on uncompleted contracts | (1,644) | | | (7,165) | |
| Prepaid expenses and other current assets | 9,652 | | | (1,285) | |
| Inventory | 3,310 | | | (7,630) | |
| Accounts payable | 6,168 | | | 10,375 | |
| Billing in excess of costs on uncompleted contracts | (3,294) | | | 4,847 | |
| Accrued expenses and other current liabilities | (8,471) | | | 4,647 | |
| Other assets and long-term liabilities | (1,402) | | | 1,042 | |
| Net Cash Provided By Operating Activities | $ | 50,246 | | | $ | 24,777 | |
| Cash Flows Used In Investing Activities | | | |
| Proceeds from sale of equipment | $ | 17 | | | $ | — | |
| Purchases of property and equipment | (6,070) | | | (2,880) | |
| Cash paid for acquisitions, net of cash acquired | (1,002) | | | — | |
| Net Cash Used In Investing Activities | $ | (7,055) | | | $ | (2,880) | |
| Cash Flows Used In Financing Activities | | | |
| Payments on line of credit | $ | — | | | $ | (6,369) | |
| Principal payments on long-term debt | (52,017) | | | (2,017) | |
| Principal payments under finance lease obligations | (141) | | | (19) | |
| Cash Used In Financing Activities | $ | (52,158) | | | $ | (8,405) | |
| Effect of exchange rate changes on cash | $ | 233 | | | $ | (58) | |
| Net Increase (Decrease) in Cash | $ | (8,734) | | | $ | 13,434 | |
| Cash, Beginning of Period | $ | 78,373 | | | $ | 13,192 | |
| Cash, End of Period | $ | 69,639 | | | $ | 26,626 | |
| Supplemental Cash Flows Information | | | |
| Interest paid | $ | 14,513 | | | $ | 6,096 | |
| Income taxes paid | $ | 185 | | | $ | 370 | |
| Cash paid for operating leases | $ | 1,987 | | | $ | 1,900 | |
| Non-cash investing and financing activities: | | | |
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 33 | | | $ | 42,202 | |
| Right-of-use assets obtained in exchange for finance lease obligations | $ | 1,113 | | | $ | 633 | |
| RSU Shares withheld related to employee taxes | $ | 183 | | | $ | — | |
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
Janus International Group, Inc.
Notes to Unaudited Consolidated Financial Statements
(dollar amounts in thousands, except share and per share data)
1. 1.Nature of Operations
Janus International Group, Inc. (f/k/a Janus Parent, Inc.) (“Group” or “Janus” or “Company”) is a holding company.company incorporated in Delaware. References to “Janus,” “Group,” “Company,” “we,” “our” or “us” refer to Janus International Group, LLC (“Janus Core”) is a wholly-owned subsidiary of Janus Intermediate, LLC (“Intermediate”). Intermediate is a wholly-owned subsidiary of Janus Midco, LLC (“Midco”)Inc. and Midco is a wholly-owned subsidiary of Group. These entities are all incorporated in the state of Delaware.its consolidated subsidiaries. The GroupCompany is a global manufacturer, supplier, and supplierprovider of turn-key self-storage, commercial, and industrial building solutions including:solutions. The Company provides facility and door automation and access control technologies, roll up and swing doors, hallway systems, and relocatable storage “MASS” (Moveable Additional Storage Structures) units, among other solutions, and works with its customers throughout every phase of a project by providing solutions spanning from facility planning and door automation technologies with manufacturingdesign, construction, technology, and the restoration, rebuilding, and replacement (“R3”) of damaged or end-of-life products.
The Company is headquartered in Temple, Georgia, and has domestic operations in Georgia, Texas, Arizona, Indiana, North Carolina, with international operations in United Kingdom, Australia, and Singapore.
The Group’s wholly owned subsidiary, Janus International Europe Holdings Ltd. (UK) (“JIEH”), owns 100% of the equity of Janus International Europe Ltd. (UK) (“JIE”), a company incorporated in EnglandCompany provides products and Wales, and its subsidiary Steel Storage France (s.a.r.l), a company incorporated in France. JIEH owns 100% of the equity for Active Supply & Design (CDM) Ltd. (UK) (“AS&D”), a company incorporated in England and Wales and 100% of the equity of Steel Storage Australia & Steel Storage Asia (“Steel Storage”), companies incorporated in Australia and Singapore. Steel Storage Asia changed its legal entity name to Janus International (Storage Solutions) Asia Pte, Ltd. AS&D merged with JIE in 2021.
The Group’s wholly owned subsidiary, Janus Cobb Holdings, LLC (“Cobb”), owns 100% of the equity of Asta Industries, Inc. (“ASTA”), a company incorporated in Georgia, and its subsidiary Atlanta Door Corporation, a company incorporated in Georgia. Cobb also owns 100% of the equity of Nokē, Inc. (“NOKE”), a company incorporated in Delaware, and Betco, Inc. (“BETCO”), a company also incorporated in Delaware.
On January 2, 2020, JIEH purchased 100% of the outstanding shares of Steel Storage.
On January 18, 2021, the Group,services through its wholly owned subsidiary Steel Storage acquired 100%two operating and reportable segments which are based on the geographic region of the net assets of G & M Stor-More Pty Ltd (“G&M”).
On August 18, 2021, the Group, through its wholly owned subsidiary Janus Core, acquired 100% of the equity interests of DBCI, LLC f/k/a Dingo NewCo, LLC (“DBCI”), a company incorporated in Delaware.
On August 31, 2021, the Group, through its wholly owned subsidiary Janus Core, acquired 100% of the equity of Access Control Technologies, LLC (“ACT”), a company incorporated in North Carolina. Through this acquisition, the Group also acquired all assets and certain liabilities of Phoenix Iron Worx, LLC (“Phoenix”), a company incorporated in North Carolina.
The Group’s business is operated through two geographic regions that comprise our 2 reportable segments:operations: (i) Janus North America and (ii) Janus International. The Janus International segment is comprised of JIEH,Janus International Europe Holdings Ltd. (UK) (“JIE”), whose production and sales are largely in Europe and Australia. The Janus North America segment is comprised of all the other entities including Janus Core together with each of its operating subsidiaries, BETCO, NOKE, ASTA, DBCI, ACT,Betco, Inc. (“BETCO”), Nokē, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Access Control Technologies, LLC (“ACT”), Janus Door, LLC (“Janus Door”) and Steel Door Depot.com, LLC (“Steel Door Depot”).
As of June 7, 2021, the Company consummated the business combination (the “Business Combination”) contemplated by the Business Combination Agreement, dated as of December 21, 2020 (as amended from time to time, the “Business Combination Agreement”), by and among the Company, Juniper Industrial Holdings, Inc. (“Juniper” or “JIH”), a blank check company, JIH Merger Sub, Inc., a wholly-owned subsidiary of the Company (“JIH Merger Sub”), Jade Blocker Merger Sub 1, Inc., Jade Blocker Merger Sub 2, Inc., Jade Blocker Merger Sub 3, Inc., Jade Blocker Merger Sub 4, Inc., Jade Blocker Merger Sub 5, Inc. (collectively referred to as the “Blocker Merger Subs”), Clearlake Capital Partners IV (AIV-Jupiter) Blocker, Inc., Clearlake Capital Partners IV (Offshore) (AIV-Jupiter) Blocker, Inc., Clearlake Capital Partners V (AIV-Jupiter) Blocker, Inc., Clearlake Capital Partners V (USTE) (AIV-Jupiter) Blocker, Inc., Clearlake Capital Partners V (Offshore) (AIV-Jupiter) Blocker, Inc. (collectively referred to as the “Blockers”), Midco, Jupiter Management Holdings, LLC, Jupiter Intermediate Holdco, LLC, J.B.I., LLC and Cascade GP, LLC, solely in its capacity as equityholder representative. Pursuant to the Business Combination Agreement, (i) JIH Merger Sub merged with and into Juniper with Juniper being the surviving corporation in the merger and a wholly-owned subsidiary of the Company, (ii) each of the Blocker Merger Subs merged with and into the corresponding Blockers with such Blocker being the surviving corporation in each such merger and a wholly-owned subsidiary of the Company, (iii) each other equityholder of Midco contributed or sold, as applicable, all of its equity interests in Midco to the Company or Juniper, as applicable, in exchange for cash, preferred units and/or shares of the common stock, as applicable, and (iv) the Company contributed all of the equity interests in Midco acquired pursuant to the foregoing transactions to Juniper, such that, as a result of the consummation of the Business Combination, Midco became an indirect wholly-owned subsidiary of Juniper.
Immediately upon the completion of the Business Combination, Juniper and Midco became wholly-owned subsidiaries of the Group.LLC. The Group’sCompany’s common stock is currently traded on the New York Stock Exchange under the symbol “JBI”.
The dollar amounts in the notes are shown in thousands of dollars, unless otherwise noted, and rounded to the nearest thousand except for share and per share amounts.Assets held at foreign locations were approximately $64,422$65,406 and $58,439$61,144 as of April 2, 20221, 2023 and January 1,December 31, 2022, respectively. Revenues earned at foreign locations totaled approximately $17,914$21,572 and $12,560$17,914 for the three months ended April 1, 2023 and April 2, 2022, and March 27, 2021, respectively.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying consolidated balance sheet as of April 2, 2022, and the consolidated statements of operations and comprehensive income, changes in stockholders’ equity and cash flows for the three months ended April 2, 2022 and March 27, 2021, are unaudited.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. However, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of April 2, 2022, and its results of operations, including its comprehensive income and stockholders’ equity for the three months ended April 2, 2022 and March 27, 2021. The results for the three months ended April 2, 2022 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2022.
Basis of Presentation
The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with U.S. GAAP and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
The Business Combination, completedSEC. In the opinion of the Company’s management, the Unaudited Condensed Consolidated Financial Statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of June 7, 2021, was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, JIH is treated as the acquired companyApril 1, 2023, and Midco is treated as the acquirer for financial statement reporting purposes (the “Combined Company”). Midco has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances:
•Midco equityholders have the majority ownership and voting rights in the Combined Company. The relative voting rights is equivalent to equity ownership (each share of common stock is one vote). JIH shareholders (IPO investors, founders, PIPE investors) hold 49.2% voting interest compared to Midco’s 50.8% voting interest.
•The board of directors of the Combined Company is composed of nine directors, with Midco equity holders having the ability to elect or appoint a majority of the board of directors in the Combined Company.
•Midco’s senior management are the senior management of the Combined Company.
•The Combined Company has assumed the Janus name.
Accordingly, for accounting purposes, the financial statements of the Combined Company represent a continuation of the financial statements of Midco with the acquisition being treated as the equivalent of Midco issuing stock for the net assets of JIH, accompanied by a recapitalization. The net assets of JIH were stated at historical cost, with no goodwill or other intangible assets recorded. Midco is deemed to be the predecessor of the Company, and the consolidated assets and liabilities andits results of operations, prior to the Closing Date,including its comprehensive income and stockholders’ equity for the three months ended March 27, 2021 are those of Midco. April 1, 2023 and April 2, 2022. The shares and corresponding capital amounts and net income per share available to common stockholders, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio establishedyear-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the Business Combination Agreement.
One-time directUnited States of America. This Quarterly Report on Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and incremental transaction costs incurred bynotes that are included in the Company were recorded basedAnnual Report on Form 10-K, for the activities to which the costs relate and the structure of the transaction. The costs relating to the issuance of equity is recorded as a reduction of the amount of equity raised, presented in additional paid-in capital, while all costs related to the warrants and contingent consideration were estimated and charged to expense.year ended December 31, 2022.
Principles of Consolidation
The consolidated financial statementsUnaudited Condensed Consolidated Financial Statements include the accounts of the GroupCompany and its wholly owned subsidiaries. The Company’s joint venture is accounted for under the equity method of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reorganization
AsOn the Condensed Consolidated Statements of June 7, 2021, Midco transferred its wholly owned direct subsidiary Janus International Group, LLCOperations and Comprehensive Income, the Company bifurcated the prior year “Cost of Sales” account between “Product cost of revenues” and “Service cost of revenues” to conform to the Group, thereby transferring the business for which historical financial information is included in these results of operations, to be indirectly held by Midco.current year presentation.
Use of Estimates in the Consolidated Financial Statements
The preparation of consolidated financial statementsUnaudited Condensed Consolidated Financial Statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant items subject to such estimates and assumptions include, but are not limited to, income taxes and the effective tax rates, the fair value of assets and liabilities related to acquisitions,reserves
for inventory obsolescence, the recognition and valuation of unit-based compensation arrangements, the useful lives of property and equipment, estimated progress toward completion for certain revenue recognition,contracts, allowances for uncollectible receivable balances, fair values and impairment of intangible assets and goodwill and assumptions used in the recognition of contract assets.
The COVID-19 outbreak may continue to have a negative impact on our operations, supply chain, transportation networks and customers. In addition, the ability of our employees and our suppliers’ and customers’ employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, which may significantly hamper our production throughout the supply chain and constrict sales channels. The extent of these factors are uncertain and cannot be predicted. Our consolidated financial statements reflect estimates and assumptions made by management as of April 2, 2022. Events and changes in circumstances arising after April 2, 2022, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods. | | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act, or JOBS Act, exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The Company qualifies as an “Emerging Growth Company” and has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows the Company to adopt the new or revised standard at the same time periods as private companies.
Shipping and Handling (Revenue & Cost of Sales)
The Company records all amounts billed to customers in sales transactions related to shipping and handling as revenue earned for the goods provided. Shipping and handling costs are included in cost of sales. Shipping and handling costs were approximately $9,934 and $7,104 for the three months ended April 2, 2022 and March 27, 2021, respectively.
Inventories
Inventories are measured using the first-in, first-out (FIFO) method. Labor and overhead costs associated with inventory produced by the Company are capitalized. Inventories are stated at the lower of cost or net realizable value as of April 2, 2022 and January 1, 2022. The Company has recorded a reserve for inventory obsolescence as of April 2, 2022 and January 1, 2022, of approximately $1,308 and $1,295, respectively.
Property and Equipment
Property and equipment acquired in business combinations are recorded at fair value as of the acquisition date and are subsequently stated less accumulated depreciation. Property and equipment otherwise acquired are stated at cost less accumulated depreciation. Depreciation is charged to expense on the straight-line basis over the estimated useful life of each asset. Leasehold improvements are amortized over the shorter of the lease term or their respective useful lives. Maintenance and repairs are charged to expense as incurred.
The estimated useful lives for each major depreciable classification of property and equipment are as follows
| | | | | |
Manufacturing machinery and equipment | 3-7 years |
Office furniture and equipment | 3-7 years |
Vehicles | 3-10 years |
Leasehold improvements | 3-20 years |
Allowance for Credit Losses
On January 2, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. Refer to Recently Adopted Accounting Pronouncements section of this note for more information on the impact to the Consolidated Financial Statements.
The Company gathered information about its current bad debt reserve and write-off practices and loss methodology, in-scope assets, historical credit losses, proposed pooling approach and expected changes to business practices under CECL. Accounts receivables are stated at estimated net realizable value from the sale of products and services to established customers. The Company determined that pooling accounts receivable by business units was the most appropriate because of the similarity of risk characteristics within each line such as customers and services offered. Historical losses and customer-specific reserve information that are used to calculate the historical loss rates are available for each business unit.
During the pooling process, the Company identified two distinct customer types: commercial and self-storage. As these customer types have different risk characteristics, the Company concludes to pool the financial assets at this level within each business unit.
Commercial customers typically are customers contracting with the Company on short-term projects with smaller credit limits and overall, smaller project sizes. Due to the short-term nature and smaller scale of these types of projects, the Company expects minimal write-offs of its receivables at the Commercial pool.
Self-storage projects typically involve general contractors and make up the largest portion of the Company’s accounts receivable balance. These projects are usually longer-term construction projects and billed over the course of construction. Credit limits are larger for these projects given the overall project size and duration. Due to the longer-term nature and larger scale of these types of projects, the Company expects a potential for more write-offs of its receivable balances within the Self-Storage pool.
The Company reviewed methods provided by the guidance and determined the loss-rate method to be used in the CECL analysis for trade receivables and contract assets. This loss-rate method was selected as there is reliable historical information available by business unit, and this historical information was determined to be representative of the Company’s current customers, products, services, and billing practices.
The summary of activity in the allowance for credit losses for the three months ended April 2, 2022 and March 27, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended April 2, 2022 |
| | Beginning Balance | | ASC 326 Impact | | Write-offs | | Provision (Reversal) | | Ending Balance |
| Allowance for credit losses | | 5,449 | | | 366 | | | (1,017) | | | 975 | | | 5,773 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 27, 2021 |
| | Beginning Balance | | Recoveries | | Write-offs | | Provision (Reversal) | | Ending Balance |
| Allowance for credit losses | | 4,485 | | | — | | | — | | | (597) | | | 3,888 | |
(1) On January 2, 2022, the Company adopted the provisions of ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326), which introduced a new model known as CECL.
Other Current Assets
Other current assets as of April 2, 2022 and January 1, 2022 of $2,922 and $4,057, respectively, consists primarily of other receivables and net VAT taxes.
Fair Value Measurement
The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. A three-tiered hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires that the Company use observable market data, when available, and minimize the use of unobservable inputs when determining fair value:
•Level 1, observable inputs such as quoted prices in active markets;
•Level 2, inputs other than the quoted prices in active markets that are observable either directly or indirectly; and
•Level 3, unobservable inputs in which there is little or no market data, which requires that the Company develop its own assumptions.
The fair value of cash, accounts receivable less allowance for credit losses, and accounts payable approximate the carrying amounts due to the short-term maturities of these instruments. The fair value of the Company’s debt approximates its carrying amount as of April 2, 20221, 2023 and January 1,December 31, 2022 due to its variable interest rate that is tied to the current London Interbank Offered Rate (“LIBOR”)LIBOR rate plus an applicable margin and consistency in our credit rating. To estimate the fair value of the Company’s long term debt, the Company utilized fair value based risk measurements that are indirectly observable, such as credit risk that fallsfall within Level 2 of the Fair Value hierarchy.
Recently AdoptedSignificant Accounting PronouncementsPolicies
In June 2016,The Company’s significant accounting policies have not changed materially from those described in its Annual Report on Form 10-K for the Financialfiscal year ended December 31, 2022.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are recorded at the invoiced amount and do not bear interest. On January 2, 2022, the Company adopted Accounting Standards BoardUpdate (“FASB”ASU”) issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amendedRefer to the Recently Adopted Accounting Pronouncements section of our 2022 Annual Report on Form 10-K for various technical issues, is effectivethe year ended December 31, 2022, for emerging growth companies following private company adoption dates for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. more information on the impact to the Consolidated Financial Statements.
The Company adoptedgathered information about its current bad debt reserve and write-off practices and loss methodology, in-scope assets, historical credit losses, proposed pooling approach and expected changes to business practices under CECL. Accounts receivables are stated at estimated net realizable value from the sale of products and services to established customers. The Company determined that pooling accounts receivable by business units was the most appropriate because of the similarity of risk characteristics within each line such as customers and services offered. Historical losses and customer-specific reserve information that are used to calculate the historical loss rates are available for each business unit.
During the pooling process, the Company identified two distinct customer types: commercial and self-storage. As these customer types have different risk characteristics, the Company pools the financial assets at this standard effective January 2, 2022 usinglevel within each business unit.
Commercial customers typically are customers contracting with the modified retrospectiveCompany on short-term projects with smaller credit limits and overall, smaller project sizes. Due to the short-term nature and smaller scale of these types of projects, the Company expects minimal write-offs of its receivables at the commercial pool.
Self-storage projects typically involve general contractors and make up the largest portion of the Company’s accounts receivable balance. These projects are usually longer-term construction projects and billed over the course of construction. Credit limits are larger for these projects given the overall project size and duration. Due to the longer-term nature and larger scale of these types of projects, the Company expects a potential for more write-offs of its receivable balances within the self-storage pool.
The Company reviewed methods provided by the guidance and determined to use the loss-rate method in the CECL analysis for trade receivables and recognized a cumulative-effect adjustment increasing accumulated deficitcontract assets. This loss-rate method was selected as there is reliable historical information available by business unit, and increasingthis historical information was determined to be representative of the Company’s current customers, products, services, and billing practices.
| | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
The activity for the allowance for credit losses by $366.during the periods ended April 1, 2023 and fiscal year ended December 31, 2022, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | January 2, 2022 |
| | Pre-ASC 326
Adoption | | Impact of ASC
326 Adoption | | As Reported
Under ASC 326 |
| Accounts Receivable, net | | 107,372 | | | (366) | | | 107,006 | |
| Cost in Excess of Billings | | 23,121 | | | — | | | 23,121 | |
| Accumulated Deficit | | (8,578) | | | (366) | | | (8,944) | |
| | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Balance at beginning of period | $ | 4,549 | | | $ | 5,449 | |
| CECL Adoption | — | | | 366 | |
| Write-offs | — | | | (2,949) | |
| Provision (reversal). net | 103 | | | 1,683 | |
| Balance at end of period | $ | 4,652 | | | $ | 4,549 | |
In
(1) On January 2017,2, 2022, the FASB issuedCompany adopted the provisions of ASU 2017-04, Intangibles2016-13, Financial Instruments - Goodwill and OtherCredit Losses: Measurement of Credit Losses on Financial Instruments (Topic 350): Simplifying326), which introduced a new model known as CECL.
Product Warranties
The Company records a liability for product warranties at the Test for Goodwill Impairment. This update removes Step 2time of the goodwill impairment test underrelated sale of goods. The liability is estimated using historical warranty experience, projected claim rates and expected costs per claim. The Company adjusts its liability for specific warranty matters when they become known and the exposure can be estimated. Product failure rates as well as material usage and labor costs incurred in correcting a product failure affect the Company's warranty liabilities. If actual costs differ from estimated costs, the Company must make a revision to the warranty liability. Generally, the Company offers warranties ranging between 1-3 years for our products with the exception of roofing at one of our business units which is up to 10 years.
The activity related to product warranty liabilities recorded in Accrued expenses and other current guidance, which requires a hypothetical purchase price allocation.liabilities, during the periods ended April 1, 2023 and fiscal year ended December 31, 2022, is as follows:
| | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Balance at beginning of period | $ | 876 | | | $ | 736 | |
| Aggregate changes in the product warranty liability | 325 | | 140 |
| Balance at end of period | $ | 1,201 | | | $ | 876 | |
Concentrations of Risk
Financial instruments that are potentially subject to concentration of credit risk consist primarily of cash and accounts receivable. The new guidance requires an impairment charge to be recognized forCompany maintains cash in bank deposit accounts that, at times, may exceed the amount by whichinsured limits of the carrying amount exceeds the reporting unit’s fair value. Upon adoption, the guidance is to be applied prospectively. ASU 2017-04 is effective for Emerging Growth Companies in fiscal years beginning after December 15, 2021, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.local country. The Company has adopted this standard effective January 2, 2022.not experienced any losses in such accounts. The standard hadCompany sells its products and services mainly in the United States and European regions. The Company performs ongoing evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. The Company generally does not require its customers to provide collateral or other security to support accounts receivable. As of April 1, 2023 and December 31, 2022, no impactcustomer accounted for more than 10% of the accounts receivable balance.
Segments
The Company manages its operations through two operating and reportable segments: Janus North America and Janus International. These segments align the Company’s products and service offerings based on the consolidatedgeographic location between North America and International locations which is consistent with how the Company’s Chief Executive Officer, its Chief Operating Decision Maker (“CODM”), reviews and evaluates the Company’s operations. The CODM allocates resources and evaluates the financial statements.performance of each operating segment. The Company’s segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. Refer to Note 14, Segments, for further detail.
In June 2020,Recently Adopted Accounting Pronouncements
On January 1, 2023, the FASB issuedCompany adopted ASU 2020-05,2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"), which amends ASC 805, Business Combinations (Topic 805), to add contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and to require that an acquiring entity recognize and measure contract assets and contract liabilities acquired in a business combination in
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
accordance with ASC 606, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) which deferred the effective date for ("ASC 842, Leases, for one year. The leasing standard606"). Janus will be effective for fiscal years beginningapplying the pronouncement prospectively to business combinations occurring on or after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted the leasing standard effective January 2, 2022 and has elected to adopt the new standard at the adoption date using the modified retrospective method and recognized a cumulative-effect adjustment to accumulated deficit in the amount of $557. Under this approach, we will continue to report comparative period financial information under ASC 840. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification. We also made an accounting policy election to exclude leases with an initial term of 12 months or less from the consolidated balance sheet. We will recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. As part of this adoption, we have implemented internal controls and key system functionality to enable the preparation of financial information.
The adoption of the standard resulted in recording right-of-use assets of $42,835 and lease liabilities of $44,776 as of January 2, 2022. The right-of-use assets are lower than the lease liabilities as existing deferred rent and lease incentive liabilities were recorded against the right-of-use assets at adoption in accordance with the standard. The standard had no impact on our debt-covenant compliance under our current agreements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The Company has adopted this standard effective January 2, 2022. The standard had no impact on the consolidated financial statements.
Recently Issued Accounting Pronouncements
In March 2020, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU is effective and may be applied beginning March 12, 2020 and will apply through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The amendments in ASU 2021-01 provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The provisions must be applied at a Topic, Subtopic, or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company is currently evaluating the impact this adoption will have on Janus’s consolidated financial statements
In August 2020,April 2022, the FASB, issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifiesproposed the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share (EPS) calculations as a result of these changes. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance asdeferral of the beginningsunset date of its annual fiscal year.this guidance to December 31, 2024. The Company does not expect that adopting the Reference Rate Reform accounting pronouncement will have a significant impact of the standard on the consolidated results of operations, financial statements.position, or cash flows of the Company.
Although there are several other new accounting pronouncements issued or proposed by the FASB, which have been adopted or will be adopted as applicable, management does not believe any of these accounting pronouncements has had or will have a material impact on the Group’sCompany’s consolidated financial position or results of operations.
3. Inventories
Inventories are stated at the lower of cost or net realizable value utilizing the first-in, first-out (FIFO) method. The major components of inventories as of April 2, 20221, 2023 and January 1,December 31, 2022 are as follows:
| | | April 2, | | January 1, | | April 1, | | December 31, |
| | 2022 | | 2022 | | 2023 | | 2022 |
| Raw materials | Raw materials | $ | 46,195 | | | $ | 41,834 | | Raw materials | $ | 48,772 | | | $ | 49,788 | |
| Work-in-process | Work-in-process | 772 | | | 671 | | Work-in-process | 534 | | | 1,566 | |
| Finished goods | Finished goods | 17,259 | | | 14,091 | | Finished goods | 15,463 | | | 16,323 | |
| $ | 64,226 | | | $ | 56,596 | | |
| Inventory, net | | Inventory, net | $ | 64,769 | | | $ | 67,677 | |
The Company has recorded a reserve for inventory obsolescence as of April 1, 2023 and December 31, 2022, of approximately $2,342 and $2,034, respectively.
4. Property and Equipment
Property, equipment, and other fixed assets as of April 2, 20221, 2023 and January 1,December 31, 2022 are as follows:
| | | | | | | | | | | |
| April 2, | | January 1, |
| 2022 | | 2022 |
| Land | $ | 4,501 | | | $ | 4,501 | |
| Manufacturing machinery and equipment | 36,099 | | | 35,688 | |
| Leasehold improvements | 4,873 | | | 4,599 | |
| Construction in progress | 4,974 | | | 3,571 | |
| | | |
| | | |
| Other | 13,939 | | | 13,287 | |
| $ | 64,386 | | | $ | 61,646 | |
| Less accumulated depreciation | (21,802) | | | (20,039) | |
| $ | 42,584 | | | $ | 41,607 | |
| | | | | | | | | | | | | | |
| | April 1, | | December 31, |
| Useful Life | 2023 | | 2022 |
| Land | Indefinite | $ | 4,501 | | | $ | 4,501 | |
| Building | 39 years | 2,459 | | | 2,459 | |
| Manufacturing machinery and equipment | 3-7 years | 40,498 | | | 38,814 | |
| Leasehold improvements | Over the shorter of the lease term or respective useful life | 8,446 | | | 8,327 | |
| Computer and software | 3 years | 9,762 | | | 9,580 | |
| Furniture and fixtures, and vehicles | 3-7 years | 3,800 | | | 3,623 | |
| Construction in progress | — | 5,727 | | | 1,852 | |
| | $ | 75,193 | | | $ | 69,156 | |
| Less: accumulated depreciation | | (29,188) | | | (27,073) | |
| | $ | 46,005 | | | $ | 42,083 | |
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
5. Acquired Intangible Assets and Goodwill
Intangible assets acquired in a business combination are recognized at fair value and amortized over their estimated useful lives. The carrying basis and accumulated amortization of recognized intangible assets at April 2, 20221, 2023 and January 1,December 31, 2022, are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 2, | | January 1, |
| 2022 | | 2022 |
| Gross Carrying Amount | | Accumulated Amortization | | Average Remaining Life in Years | | Gross Carrying Amount | | Accumulated Amortization |
| Intangible Assets | | | | | | | | | |
| Customer relationships | $ | 409,715 | | | $ | 104,635 | | | 11 | | $ | 410,094 | | | $ | 97,895 | |
| Noncompete agreements | 411 | | | 236 | | | 5 | | 412 | | | 231 | |
| Tradenames and trademarks | 107,826 | | | — | | | Indefinite | | 107,980 | | | — | |
| Other intangibles | 61,804 | | | 46,484 | | | 6 | | 61,836 | | | 46,156 | |
| $ | 579,756 | | | $ | 151,355 | | | | | $ | 580,322 | | | $ | 144,282 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | April 1, | | December 31, |
| | 2023 | | 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Amount |
| Intangible Assets | Useful Life | | | | | | | | | | | |
| Customer relationships | 10-15 years | $ | 408,536 | | | $ | 132,753 | | | $ | 275,783 | | | $ | 408,246 | | | $ | 125,613 | | | $ | 282,633 | |
| Tradenames and trademarks | Indefinite | 107,491 | | | — | | | 107,491 | | | 107,378 | | | — | | | 107,378 | |
| Software development | 10-15 years | 20,320 | | | 6,447 | | | 13,873 | | | 20,320 | | | 6,085 | | | 14,235 | |
| Noncompete agreements | 3-8 years | 395 | | | 266 | | | 129 | | | 394 | | | 255 | | | 139 | |
| Backlog | < 1 year | — | | | — | | | — | | | 41,390 | | | 41,390 | | | — | |
| | $ | 536,742 | | | $ | 139,466 | | | $ | 397,276 | | | $ | 577,728 | | | $ | 173,343 | | | $ | 404,385 | |
Changes to gross carrying amount of recognized intangible assets due to translation adjustments include an approximate $566 and $270 loss$307 for the period ended April 2, 2022 and January 1, 2022, respectively.2023. Amortization expense was approximately $7,225$7,416 and $6,832$7,225 for the three monthsmonth periods ended April 1, 2023 and April 2, 2022, and March 27, 2021, respectively.
The changes in the carrying amounts of goodwill for the period ended April 2, 20221, 2023 were as follows:
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Balance as of January 1,December 31, 2022 | $ | 369,286368,204 | |
Changes due to foreign currency fluctuationsForeign Currency Translation Adjustment | (7)159 | |
Balance as of April 2, 20221, 2023 | $ | 369,279368,363 | |
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are summarized as follows:
| | | April 2, | | January 1, | | April 1, | | December 31, |
| | 2022 | | 2022 | | 2023 | | 2022 |
| Customer deposits | | Customer deposits | $ | 28,505 | | | $ | 29,581 | |
| Employee compensation | | Employee compensation | 9,709 | | | 16,520 | |
| Current operating lease liabilities | | Current operating lease liabilities | 5,375 | | | 5,310 | |
| Sales tax payable | Sales tax payable | $ | 4,376 | | | $ | 3,606 | | Sales tax payable | 5,298 | | | 5,144 | |
| Income taxes | | Income taxes | 1,313 | | | 773 | |
| Accrued professional fees | | Accrued professional fees | 1,935 | | | 3,594 | |
| Product warranties | | Product warranties | 1,201 | | | 876 | |
| Accrued freight | | Accrued freight | 1,139 | | | 1,177 | |
| Interest payable | Interest payable | 5,189 | | | 2,741 | | Interest payable | 374 | | | 235 | |
| Other accrued liabilities | 1,082 | | | 1,766 | | |
| Employee compensation | 12,300 | | | 13,857 | | |
| Customer deposits and allowances | 25,729 | | | 24,555 | | |
| Income taxes | 6,797 | | | 810 | | |
| Short term lease liabilities | 4,762 | | | — | | |
| Other | 5,632 | | | 6,777 | | |
| Indemnity holdback liability | | Indemnity holdback liability | — | | | 1,002 | |
| Other liabilities | | Other liabilities | 6,517 | | | 6,339 | |
| Total | Total | $ | 65,867 | | | $ | 54,111 | | Total | $ | 61,366 | | | $ | 70,551 | |
Other liabilities as of April 2,1, 2023 and December 31, 2022 and January 1, 2022 consists primarily of property tax, freight accrual, legal, accountingcredit card and various other professional fee accruals.
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
7. Line of Credit
On February 12, 2018, the Company, through Intermediate and Janus Core, entered into a revolving line of credit facility with a financial institution.institution pursuant to ABL Credit And Guarantee Agreement (the “LOC Agreement”). In August 2021, the Company increased the available line of credit from $50,000 to $80,000, incurred additional fees for this amendment of $425 and extended the maturity date from February 18, 2023 to August 12, 2024. The current line of credit facility is for $80,000 with interest payments due in arrears. The interest rate on the facility is based on a base rate, unless a LIBOR Rate (as defined in the LOC Agreement) option is chosen by the Company. If the LIBOR Rate is elected, the interest computation is equal to the LIBOR Rate plus the LIBOR Rate Margin.Margin of 1.25%, as of April 1, 2023. If the Base Rate (as defined in the LOC Agreement) is elected, the interest computation is equal to the Base Rate of the greatest of (a) the federal funds rate plus .5%, (b) the LIBOR rate plus 1%, or (c) the financial institution’s Prime Rate (as defined in the LOC Agreement), plus the Base Rate Margin.Margin (as defined in the LOC Agreement) of .25% as of April 1, 2023. At the beginning of each quarter, the applicable margin is set and determined by the administrative agent based on the average net availability on the line of credit for the previous quarter. As
of April 2, 20221, 2023 and January 1,December 31, 2022, the interest rate in effect for the facility was 3.8%8.3% and 3.5%7.8%, respectively. The line of credit is collateralized by accounts receivable and inventories. The Company has incurred deferred loan costs in the amount of $1,483 which are being amortized over the term of the facility that expires on August 12, 2024, using the effective interest method, and are presented as part of other assets within our consolidated balance sheet.Unaudited Condensed Consolidated Balance Sheet. The amortization of the deferred loan costs is included in interest expense on the consolidated statementsUnaudited Condensed Consolidated Statements of operationsOperations and comprehensive income.Comprehensive Income. Amortization of approximately $62 and $62 was recognized for the three months ended April 1, 2023 and April 2, 2022, respectively. The unamortized portion of the fees as of April 2, 20221, 2023 and January 1,December 31, 2022 was approximately $586$340 and $648,$402, respectively. There was $0 and $6,369$— outstanding balance on the line of credit as of April 2, 20221, 2023 and January 1, 2022, respectively.December 31, 2022.
8. Long-Term Debt
Long-term debt consists of the following:
| | | April 2, | | January 1, | | April 1, | | December 31, |
| | 2022 | | 2022 | | 2023 | | 2022 |
Note payable - Amendment No. 4 First Lien | Note payable - Amendment No. 4 First Lien | 720,363 | | | 722,379 | | Note payable - Amendment No. 4 First Lien | $ | 662,295 | | | $ | 714,312 | |
| Financing leases | Financing leases | 617 | | | — | | Financing leases | 2,044 | | | 1,043 | |
| | $ | 720,980 | | | $ | 722,379 | | | $ | 664,339 | | | $ | 715,355 | |
| Less unamortized deferred finance fees | 9,743 | | | 10,594 | | |
| Less current maturities | 8,215 | | | 8,067 | | |
| Less: unamortized deferred finance fees | | Less: unamortized deferred finance fees | 5,872 | | | 7,158 | |
| Less: current maturities | | Less: current maturities | 8,649 | | | 8,347 | |
| Total long-term debt | Total long-term debt | $ | 703,022 | | | $ | 703,718 | | Total long-term debt | $ | 649,818 | | | $ | 699,850 | |
Notes Payable - Amendment No.4 First Lien - On August 18, 2021, the Company completed a refinancing in the form of itsthat certain Incremental Amendment No. 4 to that certain First Lien AmendmentCredit and Guarantee Agreement, dated as of February 12, 2018 (as restated,
amended and restated, supplemented or otherwise modified from time to time) (the “Amendment No. 3,4 First Lien”), in which the principal terms of the amendment were new borrowings of $155,000 which was used to fund the DBCI acquisition. The Amendment No. 4 First Lien is comprised of a syndicate of lenders originating on August 18, 2021 in the amount of $726,413 with interest payable in arrears. The outstanding loan balance is to be repaid on a quarterly basis of 0.25% of the original balance beginning the last day of September 2021 with the remaining principal due on the maturity date of February 12, 2025. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of LIBOR, plus an applicable margin percent (total(effective rate of 4.25%8.1% as of April 2, 2022)1, 2023). The debt is secured by substantially all business assets. Unamortized debt issuance costs are approximately $9,743 and $10,594 at April 2, 2022 and January 1, 2022, respectively. This refinancing amendment was accounted for as a modification and as such no gain or loss was recognized for this transaction and any bank fees, original issue discount and charges capitalized are being amortized as a component of interest expense over the remaining loan term. Third party fees paid in connection with this amendment were expensed.
As of April 2, 20221, 2023 and January 1,December 31, 2022, the Company maintained one letter of credit totaling approximately $400 on which there were no balances due.
In connection with the Company entering into the First Lien debt agreement discussed above, deferred finance fees were capitalized. These costs are being amortized over the terms of the associated debt under the effective interest rate method. Amortization of approximately $912$1,284 and $754$851 was recognized for the three months ended April 1, 2023 and April 2, 2022, and March 27, 2021, respectively, as a component of interest expense, including those amounts amortized in relation to the deferred finance fees associated with the outstanding line of credit.
Aggregate annual maturities of long-term debt at The increase during the period ended April 2, 2022, are:
| | | | | |
| 2022 | $ | 6,170 | |
| 2023 | 8,226 | |
| 2024 | 6,209 | |
| 2025 | 700,353 | |
| 2026 | 22 | |
| Thereafter | — | |
| Total | $ | 720,980 | |
9. Business Combinations
Business Combination with Juniper Industrial Holdings, Inc.
On June 7, 2021, Juniper consummated a business combination with Midco pursuant to the Business Combination Agreement. Pursuant to ASC 805, for financial accounting and reporting purposes, Midco1, 2023, was deemed the accounting acquirer and Juniper was treated as the
accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Accordingly, the Business Combination was treated as the equivalent of Midco issuing equity for the net assets of Juniper, accompanied by a recapitalization. Under this method of accounting, the consolidated financial statements of Midco are the historical financial statements of Janus International Group, Inc. The net assets of Juniper were stated at historical costs, with no goodwill or other intangible assets recorded in accordance with U.S. GAAP, and are consolidated with Midco’s financial statements on the Closing Date. The shares and net income (loss) per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated to reflect the exchange ratio established in the Business Combination Agreement.
Asprimarily a result of the Business Combination, Midco’s unitholders received aggregate consideration of approximately $1,200,000, which consisted of (i) $541,700 in cash atvoluntary prepayment as noted above.
9. Leases
At lease commencement, a right-of-use (“ROU”) asset and lease liability is recorded based on the closingpresent value of the Business Combinationfuture lease payments over the lease term. The Company has elected not to recognize a ROU asset and (ii) 70,270,400 shareslease liability for leases with terms of common stock valued at $10.00 per share, totaling $702,700.12 months or less. The Company leases facilities, vehicles, and other equipment under long-term operating and financing leases with varying terms.
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
In connectionaddition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar service, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. Furthermore, for all other types of leases, the practical expedient was also elected whereby lease and non-lease components have been combined. The Company uses the non-cancellable lease term unless it is reasonably certain that a renewal or termination option will be exercised. When available, the Company will use the rate implicit in the lease to discount lease payments to present value, however as most leases do not provide an implicit rate, the Company will estimate the incremental borrowing rate to discount the lease payments. The Company estimates the incremental borrowing rate based on the rates of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis, over a similar term, and in a similar economic environment. The ROU asset also includes any lease prepayments and initial direct costs, offset by lease incentives. The Company does not consider renewal periods or early terminations to be reasonably certain and are thus not included in the lease term for real estate or equipment assets.
The components of ROU assets and lease liabilities were as follows:
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| (in thousands) | Balance Sheet Classification | April 1, 2023 | | December 31, 2022 |
| Assets: | | | | |
| Operating lease assets | Right-of-use assets, net | $ | 41,949 | | | $ | 43,282 | |
| Finance lease assets | Right-of-use assets, net | 2,012 | | | 1,023 | |
| Total leased assets | | $ | 43,961 | | | $ | 44,305 | |
| Liabilities: | | | | |
| Current: | | | | |
| Operating | Other accrued expenses | $ | 5,375 | | | $ | 5,310 | |
| Financing | Current maturities of long-term debt | 581 | | | 280 | |
| Noncurrent: | | | | |
| Operating | Other long-term liabilities | $ | 39,668 | | | $ | 40,907 | |
| Financing | Long-term debt | 1,463 | | | 763 | |
| Total lease liabilities | | $ | 47,087 | | | $ | 47,260 | |
The components of lease expense were as follows:
| | | | | | | | | | | |
| Three Months Ended | | Three Months Ended |
| (in thousands) | April 1, 2023 | | April 2, 2022 |
| Operating lease cost | $ | 2,146 | | | $ | 1,986 | |
| Short-term lease cost | — | | | 60 | |
| Finance lease cost: | | | |
| Amortization of right-of-use assets | $ | 124 | | | $ | 17 | |
| Interest on lease liabilities | 30 | | | 3 | |
| Total lease cost | $ | 2,300 | | | $ | 2,066 | |
Other information related to leases was as follows: | | | | | | | | | | | |
| April 1, 2023 | | December 31, 2022 |
| Weighted Average Remaining Lease Term (in years) | | | |
| Operating Leases | 9.55 | | 9.66 |
| Finance Leases | 3.26 | | 3.37 |
| Weighted Average Discount Rate | | | |
| Operating Leases | 7.1% | | 7.1% |
| Finance Leases | 8.0% | | 6.6% |
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
As of April 1, 2023, future minimum lease payments under noncancellable operating leases with the closinginitial or remaining lease terms in excess of one year were as follows:
| | | | | |
| (in thousands) | |
| 2023 | $ | 6,254 | |
| 2024 | 7,513 | |
| 2025 | 6,649 | |
| 2026 | 6,074 | |
| 2027 | 5,304 | |
| Thereafter | 31,866 | |
| Total future lease payments | $ | 63,660 | |
| Less: imputed interest | $ | (18,617) | |
| Present value of future lease payments | $ | 45,043 | |
As of April 1, 2023, future minimum repayments of finance leases were as follows:
| | | | | |
| (in thousands) | |
| 2023 | $ | 539 | |
| 2024 | 718 | |
| 2025 | 718 | |
| 2026 | 246 | |
| 2027 | 92 | |
| Thereafter | 13 | |
| Total future lease payments | $ | 2,326 | |
| Less: imputed interest | $ | (282) | |
| Present value of future lease payments | $ | 2,044 | |
10. Income Taxes
The Company is taxed as a Corporation for U.S. income tax purposes and similar sections of the Business Combination, the Sponsor received 2,000,000 shares of Janus’s Common Stock (pro rata among the Sponsor sharesstate income tax laws. The Company’s effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and shares held by certain affiliates) (the “Earnout Shares”) contingent upon achieving certain market share price milestone as outlinedtax rate differences between U.S. and foreign jurisdictions. The foreign subsidiaries file income tax returns in the Business Combination Agreement. The vesting ofUnited Kingdom, France, Australia, and Singapore as necessary. For tax reporting purposes, the Earnout Shares occurred automatically as of the close of the trading on June 21, 2021 in accordancetaxable income or loss with the terms of the Earnout Agreement, entered into by and between the Company and the Sponsor at the closing of the Transaction.
Concurrently with the execution and delivery of the Business Combination Agreement, certain institutional accredited investors (the “PIPE Investors”), entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors purchased an aggregate of 25,000,000 shares of Common Stock (the “PIPE Shares”) at a purchase price per share of $10.00 (the “PIPE Investment”). One of the Company’s directors also purchased an aggregate of 1,000,000 of the PIPE Shares as part of the PIPE Investment. The PIPE Investment was closed on June 7, 2021 and the issuance of an aggregate of 25,000,000 shares of Common Stock occurred concurrently with the consummation of the Business Combination.
In connection with the Business Combination, the Group incurred direct and incremental costs of approximately $44,500 relatedrespect to the equity issuance, consisting primarily45% ownership in the joint venture operating in Mexico will be reflected in the income tax returns filed under that country’s jurisdiction. The Company’s provision for income taxes consists of investment banking, legal, accountingprovisions for federal, state, and other professional fees. In addition, the Company incurred $4,468 in transaction bonuses paid to key employeesforeign income taxes. Deferred tax liabilities and $5,210 in non-cash share-based compensation expense due to the accelerated vesting of Midco’s legacy share-based compensation plan. See Note 10 - “Equity Incentive Plan and Unit Option Plan” for additional information.
G & M Stor-More Pty Ltd Acquisition
On January 19, 2021, the Company, through its wholly owned subsidiary Steel Storage Australia Pty Ltd. acquired 100% of the net assets of G & M Stor-More Pty Ltd. for total cash consideration of approximately $1,739. In aggregate, approximately $814 was attributed to intangible assets, approximately $929 was attributable to goodwill, and approximately $(4) was attributable to net liabilities assumed. different tax jurisdictions are not offset.
The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Steel Storage. All of the goodwill was assigned to the Janus International segment of the business and is not deductibleprovision for income tax purposes.
The weighted-average amortization of acquired intangibles is 11.6 years.
During 2021, the Company incurred approximately $105 of third-party acquisition costs. These expenses are included in general and administrative expense of the Company’s consolidated statement of operations and comprehensive incometaxes for the three months ended March 27, 2021.April 1, 2023 and April 2, 2022 includes amounts related to entities within the Company taxed as corporations in the United States, United Kingdom, France, Australia, and Singapore. The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate on year to date ordinary income and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. Additionally, the income tax effects of significant unusual or infrequently occurring items are recognized entirely within the interim period in which the event occurs.
Pro forma resultsDuring the three months ended April 1, 2023 and April 2, 2022, the Company recorded a total income tax provision of operations for this acquisition have not been presented asapproximately $9,017 and $6,607 on pre-tax income of $34,999 and $26,311 resulting in an effective tax rate of 25.8% and 25.1%, respectively. For the historical results of operations for G & M Stor-More Pty Ltd. are not material tothree months ended April 1, 2023, effective tax rates were primarily impacted by the consolidated results of operations.change in statutory rate differentials, changes in estimated state income tax and apportionment rates, and permanent differences. For, the three months ended April 2, 2022, effective rates were primarily impacted by statutory rate differentials, changes in estimated tax rates, and permanent differences.
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
11. Equity Incentive Plan and Unit Option PlanCompensation
2021 Omnibus Incentive Plan
Effective June 7,The Company maintains its 2021 the Group implemented an equity incentive program designedOmnibus Incentive Plan (the “Plan”) under which it grants stock-based awards to enhance the profitability and value of its investment for the benefit of its stockholders by enabling Group to offer eligible directors, officers and employees equity-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Group’sCompany’s stockholders.
The Plan allows the Company to issue and grant 15,125,000 shares.
The Company measures compensation expense for restricted stock units (“RSUs”) issued under the 2021 Omnibus Incentive Plan (the “Plan”)stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Stock-based compensation is measured atDuring the three months ended April 1, 2023, the Company granted stock-based awards including restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and stock options under the Plan. The grant date fair value of RSUs are equal to the closing price of the Company’s common stock on either: (i) the date of grant; or (ii) the previous trading day, depending on the grant date and recognized as compensation expense over the requisite service period. The Company records compensation cost for these awards using the straight-line method.level of administration required. Forfeitures are recognized as they occur.occur, any unvested RSUs or stock options are forfeited upon a “Termination of Service”, as defined in the Plan, or as otherwise provided in the applicable award agreement or determined by the Company’s Compensation Committee of the Board of Directors.
Restricted Stock Unit Grants
RSUs are subject to a vesting period between one and four years. RSU activity for the three months ended April 1, 2023 is as follows:
(dollar amounts in thousands, except share and per share data)
The following table summarizes all restricted stock unit activity: | | | | | | | | | | | |
| Three Months Ended April 1, 2023 |
| RSUs | | Weighted-Average Grant Date Fair Value |
| Unvested, outstanding at December 31, 2022 | 465,064 | | | $ | 10.5 | |
| Granted | 495,631 | | | 10.6 | |
| Vested | (58,790) | | | 9.5 | |
| Forfeited | (9,288) | | | 10.0 | |
| Unvested, outstanding at April 1, 2023 | 892,617 | | | $ | 10.6 | |
| | | | | | | | | | | |
| Three Months Ended April 2, 2022 |
| RSUs | | Weighted-Average Grant Date Fair Value |
| Outstanding at January 1, 2022 | 275,370 | | | $ | 11.91 | |
| Granted | — | | | — | |
| Vested | — | | | — | |
| Forfeited | (4,198) | | | — | |
| Outstanding at April 2, 2022 | 271,172 | | | $ | 11.91 | |
| Unvested at April 2, 2022 | 271,172 | | | $ | 11.91 | |
Stock-based compensation expense for RSUs is recognized straight line over the respective service period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the above awards was approximately $637 and $600 for the three months ended April 2, 2022.
At1, 2023 and April 2, 2022, totalrespectively. As of April 1, 2023, there was an aggregate of $8,538 of unrecognized compensation expense for nonvested equity awardsrelated to the RSUs granted, was approximately $2.6 million. This expense is expectedwhich the Company expects to be recordedamortize over a weighted-average period of 3.293.01 years.
Performance-based Restricted Stock Unit Grants
PSU awards are based on the satisfaction of the Company’s performance metrics. The number of PSUs that become earned can range between 0% and 200% of the original target number of PSUs awarded for the 2022 awards. PSUs are subject to a three-year performance cliff-vesting period.
As of April 1, 2023, PSUs activity for the three months ended April 1, 2023 is as follows:
(dollar amounts in thousands, except share and per share data)
| | | | | | | | | | | |
| Three Months Ended April 1, 2023 |
| PSUs | | Weighted-Average Grant Date Fair Value |
| Unvested, outstanding at December 31, 2022 | 252,923 | | | $ | 9.5 | |
| Granted | 229,091 | | | 10.6 | |
| Vested | — | | | — | |
| Forfeited | — | | | — | |
Unvested, outstanding at April 1, 2023 (1) | 482,014 | | | 10.0 | |
1) This number excludes 252,923 performance stock units, which represents the incremental number of units that would be issued based on performance results from previously-granted PSU awards. The PSUs granted in 2022 are currently estimated at 200% of target.Stock-based compensation expense for PSUs is recognized straight line over the requisite service period, reduced for actual forfeitures, and included in general and administrative in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the PSUs was approximately $994 for the three months ended April 1, 2023. As of April 1, 2023, there
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
was an aggregate of $4,802 of unrecognized expense related to the PSUs granted, which the Company expects to amortize over a weighted-average period of 2.21 years.
The above table represents PSUs assuming 100% of target payout at the time of the grant. Actual payouts can range between 0% and 200%, depending on performance results for the three-year performance period. As of April 1, 2023, the Company deemed the estimate of the PSUs granted in fiscal year ended December 31, 2022 to be issued at 200% of target, and have reflected such estimates within the share-based compensation expense. The Company estimates the PSU’s granted during the period ending April 1, 2023 to be issued at 100% of target.
The Actual payout of the 2022 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 2, 2022, through December 28, 2024. The Actual payout of the 2023 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 1, 2023, through December 27, 2025.
Stock Options
Stock options are granted by applying a valuation method to determine the grant date fair value for each stock option award. Stock options are subject to a vesting period of either three or four years. Stock option awards typically vest in 33% or 25% annual installments on each annual anniversary of the vesting commencement date for the duration of the vesting period, and expire ten years from the grant date. The fair value of each option is estimated using a Black-Scholes option valuation model using the independent valuations of the Company’s stock.
The principal assumptions utilized in valuing stock options include, the expected option life, the risk-free interest rate (an estimate based on the yield of United States Treasury zero coupon with a maturity equal to the expected life of the option), the expected stock price volatility using the historical and implied price volatility, and the expected dividend yield.
A summary of the assumptions used in determining the fair value of stock options is as follows:
(dollar amounts in thousands, except share and per share data)
| | | | | |
| Three Months Ended April 1, 2023 |
| Expected life of option (years) | 6.00 - 6.25 |
| Risk-free interest rate | 2.9% - 3.7% |
| Expected volatility of the Company’s stock | 45% - 48% |
| Expected dividend yield on the Company’s stock | — | % |
Stock option activity for the three months ended April 1, 2023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended April 1, 2023 |
| Stock Options | | Weighted-Average Grant Date Fair Value | | Weighted Average Remaining Contractual Life (in years) | | Intrinsic value |
| Unvested, outstanding at December 31, 2022 | 700,729 | | | $ | 4.5 | | | 9.8 | | $ | 0.2 | |
| Granted | 18,796 | | | 5.3 | | | 10.0 | | — | |
| Exercised | — | | | — | | | — | | | — | |
| Vested | (113,252) | | | 4.5 | | | 9.0 | | — | |
| Forfeited | — | | | — | | | — | | | — | |
| Unvested, outstanding at April 1, 2023 | 606,273 | | | $ | 4.5 | | | 9.1 | | $ | — | |
| Vested not exercised at April 1, 2023 | 113,252 | | | $ | 4.5 | | | 9.0 | | $ | — | |
Stock-based compensation expense for stock options is recognized straight line over the respective vesting period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to stock options was approximately $199 and $— for the three months ended April 1, 2023 and April 2, 2022, respectively. Total unamortized stock-based compensation expense related to the unvested stock options was approximately $2,544, which the Company expects to amortize over a weighted-average period of 3.09 years.
Midco - Class B Unit Incentive Plan17
Prior to the Business Combination, commencing on March 15, 2018, the Board of Directors of Midco approved the Class B Unit Incentive Plan (the “Class B Plan”), which was a form of long-term compensation that provided for the issuance of ownership units to employees for purposes of retaining them and enabling such individuals to participate in the long-term growth and financial success of Midco. As a result of the Business Combination, the Board of Directors approved an acceleration of the awards granted in connection with the Class B Plan, to allow accelerated vesting of the units upon consummation of the Business Combination.
On June 7, 2021, the Group’s common stock began trading | | |
| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
12. Net Income Per Share
Basic net income per share is computed based on the NYSE under the symbol “JBI”. Pursuant to the terms of the Amended and Restated Certificate of Incorporation, the Company is authorized and has available 825,000,000 shares of common stock with a par value of $0.0001 per share. Immediately following the Business Combination on June 7, 2021, there were 138,384,250 shares of common stock with a par value of $0.0001 outstanding. The Company has retroactively adjusted the shares issued and outstanding prior to June 7, 2021 to give effect to the exchange ratio established in the Business Combination Agreement to determine theweighted average number of shares of common stock into which they were converted. As of April 2, 2022,outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential common shares is 146,561,717. The increase in outstanding shares is a result of warrant exercise and redemptions during the year ended January 1, 2022.
Preferred Stock
Our certificate of incorporation authorizesperiod using the issuance of 1,000,000 shares of preferredtreasury stock with a par value of $0.0001 per share. As of April 2, 2022, zero shares of preferred stock were issued and outstanding, and no designation of rights and preferences of preferred stock had been adopted. Our preferred stock is not quoted on any market or system, and there is not currently a market for our preferred stock.
Rollover Equity
At the closing date of the Business Combination, each outstanding unit of Midco’s Class A Preferred and Class B Common converted into our common stock at the then-effective conversion rate. Each unit of Midco Class A Preferred was converted into approximately 343.983 shares of our common stock, and each unit of Midco Class B Common was converted into approximately 249.585 shares of our common stock.
PIPE Investment
Concurrently with the execution and delivery of the Business Combination Agreement, certain institutional accredited investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors purchased an aggregate of 25,000,000 shares of common stock (the “PIPE Shares”) at a purchase price per share of $10.00 (the “PIPE Investment”). One of the Company’s directors purchased an aggregate of 1,000,000 of the PIPE Shares as part of the PIPE Investment.
The PIPE Investment was closed on June 7, 2021 and the issuance of an aggregate of 25,000,000 shares of common stock occurred concurrently with the consummation of the Business Combination. The sale and issuance was made to accredited investors in reliance on Rule 506 of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).
Founder Shares
In August 2019, Juniper Industrial Sponsor, LLC (the “Sponsor”) purchased 8,625,000 shares of Class B common stock (the “founder shares”) of JIH for an aggregate purchase price of $25,000 in cash, or approximately $0.003 per founder share. By virtue of the consummation of the Business Combination, the Sponsor’s Class B common stock was converted into the right to receive an equivalent number of shares of common stock, 2,000,000 of which (pro rata among the Sponsor shares and shares held by certain affiliates) (the
“Earnout Shares”) were contingent upon achieving certain market share price milestones as outlined in the Business Combination Agreement (the “Earnout Agreement”). The vesting of the Earnout Shares occurred automatically as of the close of the trading on June 21, 2021 in accordance with the terms of the Earnout Agreement. The table below represents the approximate common stock holdings of Group immediately following the Business Combination.
| | | | | | | | |
| Shares | % |
| Janus Midco, LLC unitholders | 70,270,400 | | 50.8 | % |
| Public stockholders | 43,113,850 | | 31.2 | % |
| PIPE Investors | 25,000,000 | | 18.0 | % |
| Total | 138,384,250 | | 100.0 | % |
Warrants
The Sponsor purchased 10,150,000 warrants to purchase Class A common stock of JIH (the “private placement warrants”) for a purchase price of $1.00 per whole private placement warrant, or $10,150,000 in the aggregate, in private placement transactions that occurred simultaneously with the closing of the Juniper IPO and the closing of the over-allotment option for the Juniper IPO (the “private placement”). Each private placement warrant entitled the holder to purchase one share of Class A common stock of JIH at $11.50 per share. The private placement warrants were only exercisable for a whole number of shares of Class A common stock of JIH. The Sponsor transferred 5,075,000 of its private placement warrants to Midco’s equityholders as part of the consideration for the Business Combination. Immediately after giving effect to the Business Combination, there were 10,150,000 issued and outstanding private placement warrants. The private placement warrants were liability classified. Immediately after giving effect to the Business Combination, there were 17,249,995 issued and outstanding public warrants. The public warrants were equity classified. The private placement warrants and public warrants were all exercised or redeemed on November 18, 2021.
Dividend Policy
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our common or preferred stock in the foreseeable future. It is presently intended that we will retain our earnings for use in business operations and, accordingly, it is not anticipated that the Board of Directors will declare dividends in the foreseeable future. In addition, the terms of our credit facilities include restrictions on our ability to issue and pay dividends.
12. Related Party Transactions
Prior to the Business Combination, Jupiter Intermediate Holdco, LLC, on behalf of the Janus Core, entered into a Management and Monitoring Services Agreement (“MMSA”) with the Class A Preferred Unit holders group. As a result of the Business Combination the MMSA was terminated effective June 7, 2021. Janus Core paid management fees of $2,615 to the Class A Preferred Unit holders group formethod. For the three months ended March 27, 2021. There were no Class A Preferred Unit holders group management fees accruedApril 1, 2023 and unpaid as of April 2, 2022, dilutive potential common shares include stock options and January 1, 2022, respectively.unvested restricted stock units. Dilutive EPS excludes all common shares if their effect is anti-dilutive.
Janus Core leases a manufacturing facility in Butler, Indiana, from Janus Butler, LLC, an entity wholly owned by a former memberThe following table sets forth the computation of the board of directors of the Group. Effective October 20, 2021 the member resigned from the board of directors of Janus Core. Rent payments paidbasic and diluted EPS attributable to Janus Butler, LLCcommon stockholders for the three months ended April 2, 20221, 2023 and March 27, 2021 were approximately $37 and $49, respectively. The original lease extended through October 31, 2021 and on November 1, 2021 the lease was extended to October 31, 2026, with monthly payments of approximately $13 with an annual escalation of 1.5%.
Janus Core was previously a party to a lease agreement with 134 Janus International, LLC, which is an entity majority owned by a former member of the board of directors of the Company. In December 2021, the leased premises in Temple, Georgia were sold by the former director to a third party buyer, resulting in an assignment of the lease to said third-party buyer and an extension of the lease to November 30, 2031. Rent payments paid to 134 Janus International, LLC in the three months ended April 2, 2022 (in thousands, except share and March 27, 2021 were approximately and $0 and $114, respectively.
The Group is a party to a lease agreement with ASTA Investment, LLC, for a manufacturing facility in Cartersville, Georgia an entity partially owned by a stockholder of the Company. The original lease term began on April 1, 2018 and extended through March 31, 2028 and was amended in March 2021 to extend the term until March 1, 2030, with monthly lease payments of $66 per
month with an annual escalation of 2.0%. Rent payments to ASTA Investment, LLC for the three months ended April 2, 2022 and March 27, 2021 were approximately $203 and $198, respectively.share data): | | | | | | | | | | | |
| Three Months Ended |
| April 1, 2023 | | April 2, 2022 |
| Numerator: | | | |
| Net income attributable to common stockholders | $ | 25,982 | | | $ | 19,704 | |
| Denominator: | | | |
| Weighted average number of shares: | | | |
| Basic | 146,703,894 | | | 146,561,717 | |
| Adjustment for dilutive securities | 48,007 | | | 271,172 | |
| Diluted | 146,751,901 | | | 146,832,889 | |
| Basic net income per share attributable to common stockholders | $ | 0.18 | | | $ | 0.13 | |
| Diluted net income per share attributable to common stockholders | $ | 0.18 | | | $ | 0.13 | |
13. Revenue Recognition
The Company accounts for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights and payment terms can be identified, the contract has commercial substance, and it is probable that
the Company will collect substantially all of the consideration to which it is entitled. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised good or service to a customer.
Contract Balances
Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract assets primarily result from contracts that include installation which are billed via payment requests that are submitted in the month following the period during which revenue was recognized. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing. Contract assets are disclosed as costs and estimated earnings in excess of billings on uncompleted contracts, and contract liabilities are disclosed as billings in excess of costs and estimated earnings on uncompleted contracts in the consolidated balance sheet.Unaudited Condensed Consolidated Balance Sheet. Contract balances as of April 2, 20221, 2023 were as follows:
| | | | | |
| |
| April 2, 20221, 2023 |
| Contract assets, beginning of the period | $ | 23,12139,251 | |
| Contract assets, end of the period | $ | 30,28640,992 | |
| Contract liabilities, beginning of the period | $ | 23,20721,445 | |
| Contract liabilities, end of the period | $ | 28,05318,311 | |
During the three months ended April 2, 2022,1, 2023, the Company recognized revenue of approximately $12,455$11,948 related to contract liabilities at January 1,December 31, 2022. There wereThis reduction was offset by new billings of approximately $17,301$8,814 for product and services for which there were unsatisfied performance obligations to customers and revenue had not yet been recognized as offor the three month period ended April 1, 2023.
The Company derives subscription revenue from continued software support and through the Nokē Smart Entry System, a product which provides mobile access for tenants and remote monitoring and tracking for operators. We determine standalone selling price for recurring software revenue by using the adjusted market assessment approach. The recurring revenue recognized from the Nokē Smart Entry System for the three months ended April 1, 2023 and April 2, 2022.2022 was $439 and $268 , respectively.
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| Janus International Group, Inc. |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
Disaggregation of Revenue
The principal categories we use to disaggregate revenues are by timing and sales channel of revenue recognition. The following disaggregation of revenues depict the Company’s reportable segment revenues by timing and sales channel of revenue recognition for the three months ended April 1, 2023 and April 2, 2022 and March 27, 2021:2022:
Revenue by Timing of Revenue Recognition
| | | | | | | | | | | |
| Three Months Ended |
| Reportable Segments by Timing of Revenue Recognition | April 2, 2022 | | March 27, 2021 |
| Janus North America | | | |
| Goods transferred at a point in time | $ | 200,157 | | | $ | 120,893 | |
| Services transferred over time | 25,099 | | | 25,641 | |
| $ | 225,256 | | | $ | 146,534 | |
| Janus International | | | |
| Goods transferred at a point in time | 10,798 | | | 7,073 | |
| Services transferred over time | 7,116 | | | 5,487 | |
| $ | 17,914 | | | $ | 12,560 | |
| Eliminations | (13,650) | | | (6,270) | |
| Total Revenue | $ | 229,520 | | | $ | 152,824 | |
| | | | | | | | | | | | | | |
| | Three Months Ended |
| Reportable Segments by Timing of Revenue Recognition | | April 1, 2023 | | April 2, 2022 |
| Janus North America | | | | |
| Goods transferred at a point in time | | $ | 204,439 | | | $ | 200,157 | |
| Services transferred over time | | 33,775 | | | 25,099 | |
| | $ | 238,214 | | | $ | 225,256 | |
| Janus International | | | | |
| Goods transferred at a point in time | | $ | 13,106 | | | $ | 10,798 | |
| Services transferred over time | | 8,466 | | | 7,116 | |
| | $ | 21,572 | | | $ | 17,914 | |
| Eliminations | | $ | (7,882) | | | $ | (13,650) | |
| Total Revenue | | $ | 251,904 | | | $ | 229,520 | |
Revenue by Sales Channel Revenue Recognition
| | | | | | | | | | | | |
| Three Months Ended | |
| Reportable Segments by Sales Channel Revenue Recognition | April 2, 2022 | | March 27, 2021 | |
| Janus North America | | | | |
| Self Storage-New Construction | $ | 75,709 | | | $ | 48,701 | | |
| Self Storage-R3 | 61,572 | | | 39,331 | | |
| Commercial and Others | 87,975 | | | 58,502 | | |
| $ | 225,256 | | | $ | 146,534 | | |
| Janus International | | | | |
| Self Storage-New Construction | $ | 11,897 | | | $ | 8,901 | | |
| Self Storage-R3 | 6,017 | | | 3,659 | | |
| | | | |
| $ | 17,914 | | | $ | 12,560 | | |
| Eliminations | (13,650) | | | (6,270) | | |
| Total Revenue | $ | 229,520 | | | $ | 152,824 | | |
14. Leases
On January, 2 2022, the Group adopted ASU 2016-02, Leases, using the optional transition method. Under this method, the Group has recognized the cumulative effect adjustment to the opening balance of retained earnings. The Group has elected to adopt the package of practical expedients which apply to leases that commenced before the adoption date. By electing the package of practical expedients, the Group did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, and the initial direct costs for any existing leases. At lease commencement, a right-of-use (“ROU”) asset and lease liability is recorded based on the present value of the future lease payments over the lease term. The Group has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. The Group leases facilities, vehicles, and other equipment under long-term operating and financing leases with varying terms.
In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar service, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. Furthermore, for all other types of leases the practical expedient was also elected whereby lease and non-lease components have been combined. The Group uses the non-cancellable lease term unless it is reasonably certain that a renewal or termination option will be exercised. When available, the Group will use the rate implicit in the lease to discount lease payments to present value, however as most leases do not provide an implicit rate, the Group will estimate the incremental borrowing rate to discount the lease payments. The Group estimates the incremental borrowing rate based on the rates of interest that the Group would have to pay to borrow an amount equal to the lease payments on a collateralized basis, over a similar term, and in a similar economic environment. The ROU asset also includes any lease prepayments and initial direct costs, offset by lease incentives. The Group does not consider renewal periods or early terminations to be reasonably certain and are thus not included in the lease term for real estate or equipment assets.
The components of ROU assets and lease liabilities were as follows:
| | | | | | | | |
(in thousands) | Balance Sheet Classification | April 2, 2022 |
Assets: | | |
Operating lease assets | Right-of-use assets, net | $ | 40,902 | |
Finance lease assets | Right-of-use assets, net | $ | 616 | |
Total leased assets | | $ | 41,518 | |
| | |
Liabilities: | | |
Current: | | |
Operating | Other accrued expenses | $ | 4,762 | |
Financing | Current maturities of long-term debt | $ | 147 | |
Noncurrent: | | |
Operating | Other long-term liabilities | $ | 38,241 | |
Financing | Long-term debt | $ | 470 | |
Total lease liabilities | | $ | 43,620 | |
The components of lease expense were as follows:
| | | | | |
| Three Months Ended |
(in thousands) | April 2, 2022 |
Operating lease cost | $ | 1,986 | |
Short-term lease cost | $ | 60 | |
Financial lease cost: | |
Amortization of right-of-use assets | $ | 17 | |
Interest on lease liabilities | $ | 3 | |
Total lease cost | $ | 2,066 | |
Other information related to leases was as follows:
| | | | | |
| Three Months Ended |
| April 2, 2022 |
| |
Weighted Average Remaining Lease Term | |
| |
Operating Leases | 10.0 years |
Finance Leases | 3.8 years |
| |
Weighted Average Discount Rate | |
| |
Operating Leases | 6.5 | % |
Finance Leases | 5.0 | % |
As of April 2, 2022, future minimum lease payments under noncancellable operating leases with initial or remaining lease terms in excess of one year were as follows:
| | | | | |
| (in thousands) | |
| |
| 2022 | $ | 5,577 | |
| 2023 | $ | 6,957 | |
| 2024 | $ | 6,068 | |
| 2025 | $ | 5,680 | |
| 2026 | $ | 5,265 | |
| Later years | $ | 30,961 | |
| Total future lease payments | $ | 60,508 | |
| Less imputed interest | $ | (17,505) | |
| Present value of future lease payments | $ | 43,003 | |
As of April 2, 2022, minimum repayments of long-term debt under financing leases were as follows:
| | | | | |
| (in thousands) | |
| |
| 2022 | $ | 130 | |
| 2023 | $ | 174 | |
| 2024 | $ | 174 | |
| 2025 | $ | 174 | |
| 2026 | $ | 25 | |
| Later years | $ | — | |
| Total future lease payments | $ | 677 | |
| Less imputed interest | $ | (60) | |
| Present value of future lease payments | $ | 617 | |
15. Income Taxes
Prior to June 7, 2021, the Company was a limited liability company taxed as a partnership for U.S. federal income tax purposes. The Company was generally not directly subject to income taxes under the provisions of the Internal Revenue Code and most applicable state laws. Therefore, taxable income or loss was reported to the members for inclusion in their respective tax returns.
After June 7, 2021, the Group is taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. The Group’s effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and certain tax rate differences between U.S. and foreign jurisdictions. The foreign subsidiaries file income tax returns in the United Kingdom, France, Australia, and Singapore as necessary. For tax reporting purposes, the taxable income or loss with respect to the 45% ownership in the joint venture operating in Mexico will be reflected in the income tax returns filed under that country’s jurisdiction. The Group’s provision for income taxes consists of provisions for federal, state, and foreign income taxes.
The provision for income taxes for the three months ended April 2, 2022 and March 27, 2021 includes amounts related to entities within the group taxed as corporations in the United States, United Kingdom, France, Australia, and Singapore. The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate on year to date ordinary income and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. Additionally, the income tax effects of significant unusual or infrequently occurring items are recognized entirely within the period in which the event occurs.
During the three months ended April 2, 2022 and March 27, 2021, the Company recorded a total income tax provision (benefit) of approximately $6,607 and $(155) on pre-tax income of approximately $26,311 and $14,564 resulting in an effective tax rate of 25.1% and (1.1)%, respectively. The effective tax rates for these periods were primarily impacted by the change in tax status of the Group, statutory rate differentials, changes in estimated tax rates, and permanent differences.
16. Net Income Per Share
Prior to the Business Combination, and prior to effecting the reverse recapitalization, the Company’s pre-merger LLC membership structure included two classes of units: Class A preferred units and Class B common units. The Class A preferred units were entitled to receive distributions prior and in preference on Class A preferred unit unpaid cumulative dividends (“Unpaid Preferred Yield”) followed by Class A preferred unit capital contributions that have not been paid back to the holders (the “Unreturned Capital”). Vested Class B common units participate in the remaining distribution on a pro-rata basis with Class A preferred units if they have met the respective Participation Threshold and, if applicable, the Target Value defined in the respective Unit Grant Agreement. The Class A preferred and Class B common units fully vested at the Business Combination date.
Pursuant to the Restated and Amended Certificate of Incorporation and as a result of the reverse recapitalization, the Company has retrospectively adjusted the weighted average shares outstanding prior to June 7, 2021 to give effect to the exchange ratio used to determine the number of shares of common stock into which they were converted. Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.
The following table sets forth the computation of basic and diluted EPS attributable to common stockholders for the three months ended April 2, 2022 and March 27, 2021 (in thousands except share data):
| | | | | | | | | | | |
| |
| Three Months Ended |
| April 2, 2022 | | March 27, 2021 |
| Numerator: | | | |
| Net income attributable to common stockholders | $ | 19,704 | | | $ | 14,719 | |
| Denominator: | | | |
| Weighted average number of shares: | | | |
| Basic | 146,561,717 | | | 66,145,633 | |
| Adjustment for Restricted Stock Units | 271,172 | | | $ | — | |
| Diluted | 146,832,889 | | | 66,145,633 | |
| Basic net income per share attributable to common stockholders | $ | 0.13 | | | $ | 0.22 | |
| Diluted net income per share attributable to common stockholders | $ | 0.13 | | | $ | 0.22 | |
| | | | | | | | | | | |
| Three Months Ended |
| Reportable Segments by Sales Channel Revenue Recognition | April 1, 2023 | | April 2, 2022 |
| Janus North America | | | |
| Self Storage-New Construction | $ | 68,243 | | | $ | 75,709 | |
| Self Storage-R3 | 82,253 | | | 61,572 | |
| Commercial and Others | 87,718 | | | 87,975 | |
| $ | 238,214 | | | $ | 225,256 | |
| Janus International | | | |
| Self Storage-New Construction | $ | 18,538 | | | $ | 11,897 | |
| Self Storage-R3 | 3,034 | | | 6,017 | |
| $ | 21,572 | | | $ | 17,914 | |
| Eliminations | $ | (7,882) | | | $ | (13,650) | |
| Total Revenue | $ | 251,904 | | | $ | 229,520 | |
17. | | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
14. Segments Information
The Company operates its business and reports its results through 2two reportable segments: Janus North America and Janus International, in accordance with ASC Topic 280, Segment Reporting. The Janus International segment is comprised of JIEHJIE with its production and sales located largely in Europe and Australia.Europe. The Janus North America segment is comprised of all the other entities including Janus Core, BETCO, NOKE, ASTA, DBCI, ACT, Janus Door, U.S. Door, and Steel Door Depot.
Summarized financial information for the Company’s segments is shown in the following tables:
| | | Three Months Ended | | Three Months Ended |
| | April 2, | | March 27, | | April 1, | | April 2, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Revenue | Revenue | | | | Revenue | | | |
| Janus North America | Janus North America | $ | 225,256 | | | $ | 146,534 | | Janus North America | $ | 238,214 | | | $ | 225,256 | |
| Janus International | Janus International | 17,914 | | | 12,560 | | Janus International | 21,572 | | | 17,914 | |
| Intersegment | (13,650) | | | (6,270) | | |
| Eliminations | | Eliminations | (7,882) | | | (13,650) | |
| Consolidated Revenue | Consolidated Revenue | $ | 229,520 | | | $ | 152,824 | | Consolidated Revenue | $ | 251,904 | | | $ | 229,520 | |
| Income From Operations | Income From Operations | | | | Income From Operations | | | |
| Janus North America | Janus North America | $ | 34,855 | | | $ | 23,915 | | Janus North America | $ | 48,878 | | | $ | 34,855 | |
| Janus International | Janus International | 249 | | | 307 | | Janus International | 2,279 | | | 249 | |
| Eliminations | Eliminations | 11 | | | 27 | | Eliminations | (145) | | | 11 | |
| Total Segment Operating Income | Total Segment Operating Income | $ | 35,115 | | | $ | 24,249 | | Total Segment Operating Income | $ | 51,012 | | | $ | 35,115 | |
| Depreciation of Property and Equipment Expense | | | | |
| Depreciation Expense | | Depreciation Expense | | | |
| Janus North America | Janus North America | $ | 1,673 | | | $ | 1,367 | | Janus North America | $ | 1,954 | | | $ | 1,673 | |
| Janus International | Janus International | 184 | | | 106 | | Janus International | 226 | | | 184 | |
| Consolidated Depreciation of Property and Equipment Expense | $ | 1,857 | | | $ | 1,473 | | |
| Consolidated Depreciation Expense | | Consolidated Depreciation Expense | $ | 2,180 | | | $ | 1,857 | |
| Amortization of Intangible Assets | Amortization of Intangible Assets | | | | Amortization of Intangible Assets | | | |
| Janus North America | Janus North America | $ | 6,886 | | | $ | 6,414 | | Janus North America | $ | 7,105 | | | $ | 6,886 | |
| Janus International | Janus International | 339 | | | 418 | | Janus International | 311 | | | 339 | |
| Consolidated Amortization Expense | Consolidated Amortization Expense | $ | 7,225 | | | $ | 6,832 | | Consolidated Amortization Expense | $ | 7,416 | | | $ | 7,225 | |
| Capital Expenditures | Capital Expenditures | | | | Capital Expenditures | | | |
| Janus North America | Janus North America | $ | 2,553 | | | $ | 1,419 | | Janus North America | $ | 5,144 | | | $ | 2,553 | |
| Janus International | Janus International | 327 | | | 944 | | Janus International | 926 | | | 327 | |
| Consolidated Capital Expenditures | Consolidated Capital Expenditures | $ | 2,880 | | | $ | 2,363 | | Consolidated Capital Expenditures | $ | 6,070 | | | $ | 2,880 | |
| Identifiable Assets | | | | |
| Janus North America | $ | 1,134,286 | | | $ | 843,686 | | |
| Janus International | $ | 64,422 | | | $ | 55,060 | | |
| Consolidated Assets | $ | 1,198,708 | | | $ | 898,746 | | |
| | | | | | | | | | | |
| April 1, | | December 31 |
| 2023 | | 2022 |
| Identifiable Assets | | | |
| Janus North America | $ | 1,176,877 | | | $ | 1,209,905 | |
| Janus International | 65,031 | | | 60,713 | |
| Consolidated Assets | $ | 1,241,908 | | | $ | 1,270,618 | |
| | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
15. Restructuring
During fiscal year 2022 and 2023, the Company initiated a restructuring plan to relocate one of its international facilities and align its ongoing corporate strategy. The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability and efficiency of business processes. Restructuring charges can include severance costs, relocations costs, recruiting fees affiliated with hiring new personnel, legal costs, and contract cancellation costs.
The Company records restructuring charges when they are probable and estimable. Restructuring costs are accrued when the Company announces the closure or restructuring event, and the amounts can be reasonably estimated. Restructuring costs are included in general and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income.
The Company’s restructuring expenses are comprised of the following:
| | | | | | | | | | | |
| (in thousands) | April 1, | | April 2, |
| 2023 | | 2022 |
| Severance and termination benefits | $ | 93 | | | $ | — | |
| Facility related charges | — | | | 103 | |
| Legal, consulting, and other professional fees | 497 | | | — | |
| Total Restructuring Charges | $ | 590 | | | $ | 103 | |
The following table summarizes the changes in the Company’s accrued restructuring balance, which are included in Accrued Expenses and Other Current Liabilities in the accompanying Condensed Consolidated Balance Sheets.
| | | | | |
| |
| Balance at December 31, 2022 | $ | — | |
| Restructuring charges | 590 | |
| Payments | (497) | |
| Balance at April 1, 2023 | $ | 93 | |
18. Significant Estimates16. Commitments and ConcentrationsContingencies
Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following:
General Litigation
From timeThe Company is subject to time, we are involved in various lawsuits, claims and legal proceedingslawsuits that arise primarily in the ordinary course of business. These matters involve, among other things, disputes with vendors or customers, personnel and employment matters, and personal injury. We assess these matters on a case-by-case basis as they arise and establish reserves as required. As of the date of this Quarterly Report on Form 10-Q, there were no material pending legal proceedings in which we or any of our subsidiaries are a party or to which any of our property is subject. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.
Self-Insurance
Under the Company’s workers’ compensation insurance program, coverage is obtained for catastrophic exposures under which the Company retains a portion of certain expected losses. The Company has stop loss workers’ compensation insurance for claims in excess of $200 as of April 2, 20221, 2023 and January 1,December 31, 2022, respectively. Provision for losses expected under this program is recorded based upon the Company’s estimates of the aggregate liability for claims incurred and totaled approximately $467$409 and $383$409 as of April 2, 2022,1, 2023, and January 1,December 31, 2022, respectively. The amount of actual losses incurred could differ materially from the estimates reflected in these consolidated financial statements.Unaudited Condensed Consolidated Financial Statements.
Under the Company’s health insurance program, coverage is obtained for catastrophic exposures under which the Company retains a portion of certain expected losses. The Company has stop loss insurance for claims in excess of $250$275 and $250$275 as of April 2, 20221, 2023 and January 1,December 31, 2022, respectively. Provision for losses expected under this program is recorded based upon the Company’s estimates of the aggregate liability for claims incurred and totaled approximately $1,710$2,146 and $1,539$2,099 as of April 2, 20221, 2023 and January 1,December 31, 2022, respectively. The amount of actual losses incurred could differ materially from the estimates reflected in these consolidated financial statements.Unaudited Condensed Consolidated Financial Statements.
19.17. Related Party Transactions
For the three months ended April 1, 2023 and April 2, 2022, there were no related party transactions.
| | |
| Janus International Group, Inc. |
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
18. Subsequent Events
For the interim consolidated financial statementsUnaudited Condensed Consolidated Financial Statements as of April 2, 2022,1, 2023, the Company has evaluated subsequent events through the issuance date of the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
JANUS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which Janus’s managementJanus’management believes is relevant to an assessment and understanding of consolidated results of operations and financial condition. You should read the following discussion and analysis of Janus’sJanus’ financial condition and results of operations in conjunction with the unaudited consolidatedUnaudited Condensed Consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q (this(the “Form 10-Q”).
Certain information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to plans and strategy for Janus’sJanus’ business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” Janus’sJanus’ actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Form 10-Q. We assume no obligation to update any of these forward-lookingforward- looking statements.
Unless otherwise indicated or the context otherwise requires, references in this Janus’ Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Midco” “Janus,” “we,” “us,” “our,” and other similar terms refer to Midco and its subsidiaries prior to the Business Combination and to Janus International Group Inc. (Parent) and its consolidated subsidiaries after giving effect to the Business Combination.subsidiaries.
Percentage amounts included in this Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Form 10-Q may vary from those obtained by performing the same calculations using the figures in our consolidated financial statementsUnaudited Condensed Consolidated Financial Statements included elsewhere in this Form 10-Q. Certain other amounts that appear in this Form 10-Q may not sum due to rounding.
Introduction
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is a supplement to the accompanying unaudited consolidated financial statementsUnaudited Condensed Consolidated Financial Statements, and provides additional information on our business, recent developments, financial condition, liquidity and capital resources, cash flows and results of operations. MD&A is organized as follows:
•Business Overview: This section provides a general description of our business, and a discussion of management’s general outlook regarding market demand, our competitive position and product innovation, as well as recent developments we believe are important to understanding our results of operations and financial condition or in understanding anticipated future trends.
•Basis of Presentation: This section provides a discussion of the basis on which our unaudited condensed consolidated financial statements were prepared.
•Results of Operations: This section provides an analysis of our unaudited results of operations for the three monthsmonth period ended April 1, 2023 and April 2, 2022 and March 27, 2021, respectively.2022.
•Liquidity and Capital Resources: This section provides a discussion of our financial condition and an analysis of our unaudited cash flows for the three monthsmonth period ended April 1, 2023 and April 2, 2022 and March 27, 2021, respectively.2022. This section also provides a discussion of our contractual obligations, other purchase commitments and customer credit risk that existed at April 2, 2022,1, 2023, as well as a discussion of our ability to fund our future commitments and ongoing operating activities through internal and external sources of capital.
•Critical Accounting Policies and Estimates: This section identifies and summarizes those accounting policies that significantly impact our reported results of operations and financial condition and require significant judgment or estimates on the part of management in their application.
Business Overview
Janus is a leading global manufacturer and supplier of turn-key self-storage, commercial and industrial building solutions including: roll up and swing doors, hallway systems, relocatable storage units, and facility and door automation technologies with manufacturing operations in Georgia, Texas, Arizona, Indiana, North Carolina, United Kingdom, Australia, and Singapore. The Company focuses on two primary markets, providing building solutions to the self-storage industry and the broader commercial industrial market.Australia. The self-storage industry is comprised of institutional and non-institutional facilities. Institutional facilities typically include multi-story, climate controlled facilities located in prime locations owned and/or managed by large REITsReal Estate Investment Trusts (“REITs”) or returns-driven operators of scale and are primarily located in the top 50 Metropolitan Statistical AreasU.S. metropolitan statistical areas (“MSAs”), whereas the vast majority of non-institutional facilities are single-story, non-climate controlled facilities located outside of city centers owned and/or managed by smaller private operators that are mostly located outside of the top 50 U.S. MSAs. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and restore, rebuild, replace (R3) of damaged or end-of-life products.
Our business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International. The Janus International segment is comprised of JIEH, whose production and sales are largely in Europe and Australia. The
Janus North America segment is comprised of all the other entities including Janus Core, BETCO, NOKE, ASTA, DBCI, ACT,International Group, LLC (together with each of its operating subsidiaries, “Janus Core”), Betco, Inc. (“BETCO”), Noke, Inc. (“NOKE”), Asta Industries, Inc. (“ASTA”), Access Control Technologies, LLC (“ACT”), U.S. Door & Building Components, LLC (“U.S. Door”), Janus Door, LLC (“Janus Door”), and Steel Door Depot.Depot.com, LLC (“Steel Door Depot”).
Furthermore, our business is comprised of three primary sales channels: New Construction-Self-storage, R3-Self-storage (R3), and Commercial and Other. The Commercial and Other category is primarily comprised of roll-up sheet and rolling steel door sales into the commercial marketplace.
New construction consists of engineering and project management work pertaining to the design, building, and logistics of a greenfield new self-storageself- storage facility tailored to customer specifications while being compliant with ADA regulations. Any Nokē Smart Entry System revenue associated with a new construction project also rolls up into this sales channel.
The concept of Janus R3 (Restore, Rebuild, Replace) is to replace storage unit doors, optimizing unit mix and idle land, and adding a more robust security solution to enable customers to (1) charge higher rental rates and (2) compete with modern self-storage facilities and large operators. In addition, the R3 sales channel also includes new self-storage capacity being brought online through conversions and expansions. R3 transforms facilities through door replacement, facility upgrades, Nokē Smart Entry Systems, and moveable additionalrelocatable storage structures (“MASS”)MASS (Moveable Additional Storage Structure).
Commercial light duty steel roll-up doors are designed for applications that require less frequent and less demanding operations. Janus offers heavy duty commercial grade steel doors (minimized dead-load, or constant weight of the curtain itself) perfect for warehouses, commercial buildings, and terminals, designed with a higher gauge and deeper guides, which combats the heavy scale of use with superior strength and durability. Janus also offers rolling steel doors known for minimal maintenance and easy installation with, but not limited to, the following options, commercial slat doors, heavy duty service doors, fire doors, fire rated counter shutters, insulated service doors, counter shutters and grilles.
Executive Overview
Janus’sJanus’ financials reflect the result of the execution of our operational and corporate strategy to penetrate the fast-growing self-storage, commercial and selfindustrial storage markets, expand its market share, as well as capitalizecapitalizing on the aging self-storage facilities, while continuing to diversify our products and solutions. We believe Janus is a bespoke provider of not only products, but solutions that generate a favorable financial outcome for our clients.
During 2021, we acquired G&M, DBCI, and ACT to expand market share. Our M&A activity has collectively enhanced our growth trajectory, technology and global footprint, while providing us access to highly attractive adjacent categories.
Total revenue was $229.5 million forRevenues increased in the three monthsmonth period ended April 1, 2023 as compared to the three month period ended April 2, 2022, representing ana 9.8% increase of 50.2% from $152.8 million for the three months ended March 27, 2021.
Revenues increased in the first quarter of 2022 as compared to the first quarter of 2021,revenue. This increase is largely due to continued strong performance within all threethe R3 sales channels and $22.1 million of inorganic growth as a result of the DBCI and ACT acquisitionschannel, coupled with the impact from the commercial actions taken in 2021.2022. The same trends were generally present in both the Janus North America segment as well as the Janus International segment, with the exception of the fact that the Internationalinternational segment does not sell into the Commercial sales channel.
Net income was $26.0 million for the three month period ended April 1, 2023, representing a 31.9% increase from $19.7 million for the three month period ended April 2, 2022. Net income as a percentage of revenue was 10.3% representing an increase of 1.7% from 8.6% for the three month period ended April 2, 2022.
Adjusted EBITDA was $61.2 million for the three month period ended April 1, 2023, representing a 37.0% increase from $44.7 million for the three monthsmonth period ended April 2, 2022, representing a 37.0% increase from $32.6 million for the three months ended March 27, 2021.2022.
Adjusted EBITDA as a percentage of revenue was 24.3% for the three month period ended April 1, 2023, representing an increase of 4.8% from 19.5% for the three monthsmonth period ended April 2, 2022, representing a decrease of 1.8% from 21.3% for the three months ended March 27, 2021.2022. The reductionincrease in Adjusted EBITDA margins is a direct result of increased revenue primarily due to commercial actions taking full effect in third quarter of 2022 as well as the impact of cost synergies from our acquisitions of DBCI and ACT in 2021, which was partially offset by the inflationary increases in raw material, labor and logistics costs impacting the business in advance of price increasescommercial actions taking full effect. In addition to the inflationary cost pressures, Janus also experienced incremental costs as a public company and incremental headcount costs associated with continued strategic investments in our Nokē Smart entry ground game and customer service department.
Information regarding use of Adjusted EBITDA, a non-GAAP measure, and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, is included in “Non-GAAP Financial Measures.”
The Business Combination
On June 7, 2021, Juniper Industrial Holdings, Inc. (“Juniper”) consummated a business combination with Midco pursuant to the Business Combination Agreement. Pursuant to ASC 805, for financial accounting and reporting purposes, Midco was deemed the accounting acquirer and Juniper was treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. At the closing date of the business combination, each outstanding unit of Midco’s Class A Preferred and Class B Common converted into our common stock at the then-effective conversion rate. Immediately upon the completion of the Business Combination, Juniper and Midco became wholly-owned subsidiaries of Janus International Group, Inc. The shares of common stock of the Company are currently traded on the NYSE under the symbol “JBI”.
As a result of the Business Combination, equityholders of Midco received aggregate consideration with a value equal to $1.2 billion which consisted of (i) $541.7 million in cash and (ii) $702.7 million in shares of our common stock, or 70,270,400 shares based on an assumed stock price of $10.00 per share. In connection with the closing of the Business Combination, the Sponsor received the Earnout Shares contingent upon achieving certain market share price milestones as outlined in the Business Combination Agreement. The vesting of the Earnout Shares occurred as of the close of the trading on June 21, 2021.
Part of the proceeds from the merger were used to pay a non-liquidating cash distribution to Midco unitholders’ in the amount of $541.7 million and partial payment of our Note Payable in the amount of $61.6 million. (See “Liquidity and Capital Resources” section).
Business Segment Information
Our business is operated through two geographic regions that comprise our two reportable segments: Janus North America and Janus International.
Janus North America is comprised of eight operating segments including Janus Core, Janus Door, Steel Door Depot, ASTA, NOKE, BETCO, DBCI, and ACT. Janus North America produces and provides various fabricated components such as commercial and self-storage doors, walls, hallway systems and building components used primarily by owners or builders of self-storage and commercial and industrial facilities and also offers installation
services along with the products. Janus North America represented 92.2% and 91.8%91.4% of Janus’sthe Company’s revenue for the three monthsmonth period ended April 1, 2023, and 92.2% of the Company’s revenue for the three month period ended April 2, 2022 and March 27, 2021, respectively.2022.
Janus International is comprised solely of one operating segment, JIEH.Janus International Europe Holdings Ltd (UK). The Janus International segment produces and provides similar products and services as Janus North America, butwith the exception of the fact that the international segment does not sell into the Commercial sales channel, and they’re largely in Europe as well as Australia. Janus International does not sell into the commercial end markets. Janus International represented 7.8% and 8.2%8.6% of Janus’sJanus’ revenue for the three monthsmonth period ended April 1, 2023, and 7.8% of the Company’s revenue for the three month period ended April 2, 2022 and March 27, 2021, respectively.
Acquisitions
Our highly accretive M&A strategy focuses on (i) portfolio diversification into attractive and logical adjacencies, (ii) geographic expansion, and (iii) technological innovation.
Inorganic growth, through acquisitions, serves to increase Janus’s strategic growth. Since 2021, Janus has completed three acquisitions which contributed a combined $58.7 million inorganic revenue increase from December 26, 2020 through April 2, 2022. Refer to Item 1A. Risk Factors within this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022, which contain further information on the risks associated with integration of these acquisitions. Janus acquired the following three companies to fuel the inorganic growth of its manufacturing capabilities, product offerings, and technology solutions provided to customers.
On January 18, 2021, the Company, through its wholly owned subsidiary Steel Storage Australia Pty Ltd. acquired 100% of the net assets of G & M Stor-More Pty Ltd. for approximately $1.74 million. G & M Stor-More Pty Ltd. has over 23 years’ experience in self-storage building, design, construction and consultation. As a result of the acquisition, the Company will have an opportunity to increase its customer base of the self-storage industry and expand its product offerings in the Australian market.
On August 18, 2021, the Group, through its wholly owned subsidiary Janus Core acquired 100% of the equity interests of DBCI, a company incorporated in Delaware, for approximately $169.2 million. DBCI is a manufacturer of exterior building products in North America, with over 25 years’ servicing commercial, residential and repair markets. As a result of the acquisition, the Company will have an opportunity to increase its customer base of both the commercial and self-storage industries and expand its product offerings in the North American market.
On August 31, 2021, the Group, through its wholly owned subsidiary Janus Core acquired 100% of the equity of ACT, a company incorporated in North Carolina, for $10.3 million. Through this acquisition, the Group also acquired all assets and certain liabilities of Phoenix, a company incorporated in North Carolina. ACT has specialized in protecting critical assets in the self-storage and industrial building industries for over 7 years. The ACT team is comprised of security industry experts who continually train to be at the forefront of emerging industry trends, technological advancements, and new security vulnerabilities or hazards that threaten their clients. As a result of the acquisition, the Company will have an opportunity to expand its Nokē Smart Entry ground game.
Impact of Brexit
The U.K. exit from the European Union on January 31, 2020, commonly referred to as Brexit, has caused, and may continue to cause, uncertainty in the global markets. Political and regulatory responses to the withdrawal are still developing. Any impact from Brexit on our business and operations over the long term will depend, in part, on the outcome of tariff, tax treaties, trade, regulatory, and other negotiations the U.K. conducts.
Impact of COVID-19 and the CARES Act
In early 2020, the Coronavirus (COVID-19) swiftly began to spread globally, and the World Health Organization (WHO) subsequently declared COVID-19 to be a public health emergency of international concern on March 11, 2020. The COVID-19 outbreak resulted in travel restrictions and in some cases, prohibitions of non-essential activities, disruption and shutdown of certain businesses and greater uncertainty in global financial markets. The full extent to which COVID-19 impacts Janus’s business, results of operations and financial condition are dependent on the further duration and spread of the outbreak mainly within the United States, Europe, and Australia.
To aid in combating the negative business impacts of COVID-19, the federal government enacted the “Coronavirus Aid, Relief, and Economic Security (CARES) Act” on March 27, 2020. Under the CARES Act, Janus deferred $2.6 million in payroll taxes of which half of the balance was paid on December 31, 2021 and the remaining balance, or $1.3 million is due December 31, 2022.
As a result of COVID-19 and in support of continuing its manufacturing efforts, Janus has undertaken a number of steps to protect its employees, suppliers and customers, as their safety and well-being is one of our top priorities. There was $0.1 million and $0.2 million in COVID-19 related expenses in the three months ended April 2, 2022 and March 27, 2021, respectively, primarily related to COVID-19 PPE supplies and COVID tests.
Notwithstanding our continued operations and performance, the COVID-19 pandemic may continue to have negative impacts on our operations, supply chain, transportation networks and customers, which may compress our margins as a result of preventative and precautionary measures that Janus, other businesses, and governments are taking. Any resulting economic downturn could adversely affect demand for our products and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products, services and raw materials. The progression of this matter could also negatively impact our business or results of operations through the temporary closure of our operating locations or those of our customers or suppliers, among others. In addition, the ability of our employees and our suppliers’ and customers’ employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of the control measures noted above, which may significantly hamper our production throughout the supply chain and constrict sales channels. The extent to which the COVID-19 pandemic may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the pandemic and the effectiveness of actions globally to contain or mitigate its effects.
Our unaudited consolidated financial statements and discussion and analysis of financial condition and results of operations reflect estimates and assumptions made by management as of April 2, 2022. Events and changes in circumstances arising after April 2, 2022, including those resulting from the impacts of the COVID-19 pandemic, will be reflected in management’s estimates for future periods.
Management continues to monitor the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.
Key Performance Measures
Management evaluates the performance of its reportable segments based on the revenue of services and products, gross profit, operating margins, and cash from business operations. We use Adjusted EBITDA, which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends. Please see the section “Non-GAAP Financial Measure” below for further discussion of this financial measure, including the reasons why we use such financial measures and reconciliations of such financial measures to the nearest GAAP financial measures.
Human capital is also one of the main cost drivers of the manufacturing, selling, and administrative processes of Janus. As a result, headcount is reflective of the health of Janus and indicative of an expansion or contraction of the overall business. We expect to continue to increase headcount in the future as we grow our business. Moreover, we expect that we will continue to hire additional accounting, finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being a public company.
The following table sets forth key performance measures for the three monthsperiods ended April 1, 2023 and April 2, 2022 and March 27, 2021
(dollar(dollar amounts in thousands):
| | | Three Months Ended | | Variance | | Three Months Ended | | Variance |
| | April 2, 2022 | | March 27, 2021 | | $ | | % | | April 1, 2023 | | April 2, 2022 | | $ | | % |
| Total Revenue | Total Revenue | $ | 229,520 | | $ | 152,824 | | $ | 76,696 | | | 50.2 | % | Total Revenue | $ | 251,904 | | | $ | 229,520 | | | $ | 22,384 | | | 9.8 | % |
| Adjusted EBITDA | Adjusted EBITDA | $ | 44,667 | | $ | 32,614 | | $ | 12,053 | | | 37.0 | % | Adjusted EBITDA | $ | 61,183 | | | $ | 44,667 | | | $ | 16,516 | | | 37.0 | % |
| Adjusted EBITDA (% of revenue) | Adjusted EBITDA (% of revenue) | 19.5 | % | | 21.3 | % | | (1.8) | % | Adjusted EBITDA (% of revenue) | 24.3 | % | | 19.5 | % | | 4.8 | % |
As of April 1, 2023, and April 2, 2022, and March 27, 2021, our employeethe headcount was 2,301 (including 518 temporary employees) and 2,125 (including 519 temporary employees) and 1,699 (including 380 temporary employees), respectively.
Total revenue increased by $76.7$22.4 million or 50.2%9.8% for the three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021April 2, 2022, primarily due to improved market conditions and commercial actions instituted in 2021 and increased volumes partially related
to pull through of the 2021 new construction pent up demand coupled with a $22.1 million increase in inorganic revenue growth as a result of the DBCI and ACT acquisitions. (See “Results of Operations” section).actions.
Adjusted EBITDA increased by $12.1$16.5 million or 37.0% forfrom the three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021,April 2, 2022, primarily due to increased revenue which was partially offset by increased cost of salesrevenues and general and administrative expenses.
Adjusted EBITDA as a percentage of revenue decreased 1.8%increased 4.8% for the three monthsmonth period ended April 2, 2022 compared to the three months ended March 27, 2021,1, 2023 primarily due to increased revenue due to commercial actions taking full effect in third quarter 2022 which was partially offset by inflationary increases in raw material, labor and logistics costs in advance of commercial and cost containment actions taking full effect. In addition to the inflationary cost pressures, Janus also experienced incremental costs as a public company and incremental headcount costs associated with strategic investmentsthe robust pace of activity for the balance of the year and investing in the continued build out of our Nokē Smart entry ground game and customer service department.service. (See “Non-GAAP Financial Measures” section).
Basis of Presentation
The unaudited consolidated financial statementsUnaudited Condensed Consolidated Financial Statements have been derived from the accounts of Janus and its wholly owned subsidiaries. Janus’sJanus’ fiscal year follows a 4-4-5 calendar which divides a year into four quarters of 13 weeks, grouped into two 4-week “months” and one 5-week “month.” As a result, some monthly comparisons are not comparable as one month is longer than the other two. The major advantage of a 4-4-5 calendar is that the end date of the period is always the same day of the week, making manufacturing planning easier as every period is the same length. Every fifth or sixth year will require a 53rd week.
We have presented results of operations, including the related discussion and analysis forfor:
•The thirteen weeks period ended April 1, 2023 compared to the three monthsthirteen weeks period ended April 2, 2022 compared to the three months ended March 27, 2021.2022.
Components of Results of Operations
Sales of products.Product Revenues. Sale of products representsProduct revenues represent the revenue from the sale of products, including steel roll-up and swing doors, rolling steel doors, steel structures, as well as hallway systems and facility and door automation technologies for commercial and self-storage customers. Product revenue is recognized upon transfer of control to the customer, which generally takes place at the point of destination (Janus Core) and at the point of shipping (all other operating segments). We expect our product revenue may vary from period to period on, among other things, the timing and size of orders and delivery of products and the impact of significant transactions. Revenues are monitored and analyzed as a function of sales reporting within the following sales channels:channels, Self-Storage New Construction, Self-Storage R3, and Commercial and Other.
Sales of services.Service revenues. Service revenue reflectsrevenues reflect installation services to customers for steel facilities, steel roll-up and swing doors, hallway systems, and relocatable storage units which is recognized over time based on the satisfaction of our performance obligation. Janus is highly integrated with customers at every phase of a project, including facility planning/design, construction, access control and R3 of damaged, or end-of-life products or rebranding of facilities due to market consolidation. Service obligations are primarily short term and completed within a one-year time period. We expect our service revenue to increase as we add new customers and our existing customers continue to add more and more content per square foot.
Cost of sales. OurProduct cost of sales consists of the cost of products and cost of services. revenues. Cost of products includes the manufacturing cost of our steel roll-up and swing doors, rolling steel doors, steel structures, and hallway systems which primarily consists of amounts paid to our third-party contract suppliers and personnel-related costs directly associated with manufacturing operations as well as overhead and indirect costs. We expect cost of revenues to increase in absolute dollars in future periods as we expect our revenues to continue to grow.
Service cost of revenues. Cost of services includes third-party installation subcontractor costs directly associated with the installation of our products. Our cost of sales includesrevenues include purchase price variance, cost of spare or replacement parts, warranty costs, excess and obsolete inventory charges, shipping costs, and an allocated portion of overhead costs, including depreciation. We expect cost of salesrevenues to increase in absolute dollars in future periods as we expect our revenues to continue to grow.
Selling and marketing expense. Selling expenses consist primarily of compensation and benefits of employees engaged in selling activities as well as related travel, advertising, trade shows/conventions, meals and entertainment expenses. We expect selling expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow.
General and administrative expense. General and administrative (“G&A”) expenses are comprised primarily of expenses relating to employee compensation and benefits, travel, meals and entertainment expenses as well as depreciation, amortization, and public companynon-recurring costs. We expect general and administrative expenses to increase in absolute dollars in future periods as we expect our revenues to continue to grow. We also expect G&A expenses to increase in the near term as a result of operating as a public company, including expenses associated with compliance with the rules and regulations of the Commission, and an increase in legal, audit, insurance, investor relations, professional services and other administrative expenses.
Interest expense. Consists of interest expense on short-term and long-term debt and amortization on deferred financing fees and interest associated with finance lease liabilities(see (See “Long Term“Long-Term Debt” section).
Factors Affecting the Results of Operations
Key Factors Affecting the Business and Financial Statements
Janus’sJanus’ management believes our performance and future growth depends on a number of factors that present significant opportunities but also pose risks and challenges.
Factors Affecting Revenues
Janus’sJanus’ revenues from products sold are driven by economic conditions, which impacts new construction of self-storage facilities, R3 of self-storage facilities, and commercial revenue.
Janus periodically modifies sales prices of their products due to changes in costs for raw materials and energy, market conditions, labor and logistics costs and the competitive environment. In certain cases, realized price increases are less than the announced price increases due to project pricing, competitive reactions and changing market conditions. Janus also offers a wide assortment of products that are differentiated by style, design and performance attributes. Pricing and margins for products within the assortment vary. In addition, changes in the relative quantity of products purchased at different price points can impact year-to-year comparisons of net sales and operating income.
Service revenue is driven by the product revenue and the increase in value-added services, such as pre-work planning, site drawings, installation and general contracting, project management, and third-party security. Janus differentiates itself through on-time delivery, efficient installation, best in-classcustomer service satisfaction, and a reputation for high quality products.
Factors Affecting Growth Through Acquisitions
Janus’sJanus’ business strategy involves growth through, among other things, the acquisition of other companies. Janus tries to evaluate companies that it believes will strategically fit into its business and growth objectives. If Janus is unable to successfully integrate and develop acquired
businesses, it could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse effect on its financial results.
Janus may not be able to identify suitable acquisition or strategic investment opportunities or may be unable to obtain the required consent of its lenders and, therefore, may not be able to complete such acquisitions or strategic investments. Janus may incur expenses associated with sourcing, evaluating and negotiating acquisitions (including those that do not get completed), and it may also pay fees and expenses associated with financing acquisitions to investment banks and other advisors. Any of these amounts may be substantial, and together with the size, timing and number of acquisitions Janus pursues, may negatively affect and cause significant volatility in its financial results.
In addition, Janus has assumed, and may in the future assume, liabilities of the company it is acquiring. While Janus retains third-party advisors to consult on potential liabilities related to these acquisitions, there can be no assurances that all potential liabilities will be identified or known to it. If there are unknown liabilities or other obligations, Janus’sJanus’ business could be materially affected.
Seasonality
Generally, Janus’sJanus’ sales tend to be the slowest in January due to more unfavorable weather conditions, customer business cycles and the timing of renovation and new construction project launches.
Factors Affecting Operating Costs
Janus’sJanus’ operating expenses are comprised of direct production costs (principally raw materials, labor and energy), manufacturing overhead costs, freight, costs to purchase sourced products and selling, general and administrative (“SGG&A”) expenses.
Janus’sJanus’ largest individual raw material expenditure is steel coils. Fluctuations in the prices of steel coil are generally beyond Janus’sJanus’ control and have a direct impact on the financial results. In 2021 and 2022, Janus entered into agreements with two of its largest suppliers in order to lock in steel coil prices for part of Janus’sJanus’ production needsneeds. These agreements are renewed annually and partially mitigate the potential impacts of short-term steel coil price fluctuations. This arrangement allowsThese arrangements allow Janus to purchase quantities of product within specified ranges as outlined in the contracts.
Freight costs are driven by Janus’sJanus’ volume of sales of products and are subject to the freight market pricing environment.
Results of Operations - Consolidated
The period to period comparisons of our results of operations have been prepared using the historical periods included in our unaudited condensed consolidated financial statements. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this document. We have derived this data from our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue.
Results of Operations
(dollar amounts in thousands)
For the three monthsmonth period ended April 1, 2023 compared to the period ended April 2, 2022 compared to the three months ended March 27, 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 2, 2022 | | March 27, 2021 | | $ | | % |
| REVENUE | | | | | | | |
| Sales of products | $ | 197,306 | | | $ | 121,696 | | | $ | 75,610 | | | 62.1 | % |
| Sales of services | 32,214 | | | 31,128 | | | 1,086 | | | 3.5 | % |
| Total revenue | $ | 229,520 | | | $ | 152,824 | | | $ | 76,696 | | | 50.2 | % |
| Cost of Sales | 152,950 | | | 99,531 | | | 53,419 | | | 53.7 | % |
| GROSS PROFIT | $ | 76,570 | | | $ | 53,293 | | | $ | 23,277 | | | 43.7 | % |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 13,349 | | | 9,458 | | | 3,891 | | | 41.1 | % |
| General and administrative | 28,106 | | | 19,586 | | | 8,520 | | | 43.5 | % |
| Operating Expenses | $ | 41,455 | | | $ | 29,044 | | | $ | 12,411 | | | 42.7 | % |
| INCOME FROM OPERATIONS | $ | 35,115 | | | $ | 24,249 | | | $ | 10,866 | | | 44.8 | % |
| Interest expense | (8,775) | | | (8,126) | | | (649) | | | 8.0 | % |
| Other expense | (28) | | | (1,559) | | | 1,531 | | | (98.2) | % |
| Other Expense, Net | $ | (8,804) | | | $ | (9,685) | | | $ | 881 | | | (9.1) | % |
| INCOME BEFORE TAXES | $ | 26,311 | | | $ | 14,564 | | | $ | 11,747 | | | 80.7 | % |
| Provision (benefit) for Income Taxes | 6,607 | | | (155) | | | 6,762 | | | (4362.6) | % |
| NET INCOME | $ | 19,704 | | | $ | 14,719 | | | $ | 4,985 | | | 33.9 | % |
Revenue
(dollar(dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | |
| | | Variance % | | Revenue Variance Breakdown |
| April 2, 2022 | | March 27, 2021 | | Variance | | | Domestic Acquisitions | | Organic
Growth | | Organic
Growth
% |
| Sales of products | $ | 197,306 | | | $ | 121,696 | | | $ | 75,610 | | | 62.1 | % | | $ | 20,378 | | | $ | 55,232 | | | 45.4 | % |
| Sales of services | 32,214 | | | 31,128 | | | 1,086 | | | 3.5 | % | | 1,698 | | | (612) | | | (2.0) | % |
| Total | $ | 229,520 | | | $ | 152,824 | | | $ | 76,696 | | | 50.2 | % | | $ | 22,076 | | | $ | 54,620 | | | 35.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| REVENUES | | | | | | | |
| Product revenues | $ | 209,664 | | | $ | 197,306 | | | $ | 12,358 | | | 6.3 | % |
| Service revenues | 42,240 | | | 32,214 | | | 10,026 | | | 31.1 | % |
| Total revenues | $ | 251,904 | | | $ | 229,520 | | | $ | 22,384 | | | 9.8 | % |
| Product cost of revenues | 120,068 | | | 128,560 | | | (8,492) | | | (6.6) | % |
| Service cost of revenues | 31,903 | | | 24,390 | | | 7,513 | | | 30.8 | % |
| Cost of Revenues | 151,971 | | | 152,950 | | | (979) | | | (0.6) | % |
| GROSS PROFIT | $ | 99,933 | | | $ | 76,570 | | | $ | 23,363 | | | 30.5 | % |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 14,821 | | | 13,349 | | | 1,472 | | | 11.0 | % |
| General and administrative | 34,100 | | | 28,106 | | | 5,994 | | | 21.3 | % |
| Operating Expenses | $ | 48,921 | | | $ | 41,455 | | | $ | 7,466 | | | 18.0 | % |
| INCOME FROM OPERATIONS | $ | 51,012 | | | 35,115 | | | $ | 15,897 | | | 45.3 | % |
| Interest expense | (15,998) | | | (8,775) | | | (7,223) | | | 82.3 | % |
| Other income (expense) | (15) | | | (29) | | | 14 | | | (48.3) | % |
| INCOME BEFORE TAXES | $ | 34,999 | | | $ | 26,311 | | | $ | 8,688 | | | 33.0 | % |
| Provision for Income Taxes | 9,017 | | | 6,607 | | | 2,410 | | | 36.5 | % |
| NET INCOME | $ | 25,982 | | | $ | 19,704 | | | $ | 6,278 | | | 31.9 | % |
Revenue (dollar amounts in tables in thousands) | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
| April 1, 2023 | | April 2, 2022 | | Organic Growth | |
% |
| Sales of products | $ | 209,664 | | | $ | 197,306 | | | $ | 12,358 | | | 6.3 | % |
| Sales of services | 42,240 | | | 32,214 | | | 10,026 | | | 31.1 | % |
| Total | $ | 251,904 | | | $ | 229,520 | | | $ | 22,384 | | | 9.8 | % |
The $76.7$22.4 million revenue increase for the three monthsmonth period ended April 2, 20221, 2023 compared to the three months ended March 27, 2021 is primarily attributable to increased volumes as a result of favorable industry dynamics in all three sales channels coupled with inorganic growth of $22.1 million as a result of the DBCI and ACT acquisitions.
The following table and discussion compare Janus’s sales by sales channel (dollar amounts in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Three Months Ended | | | | Variance |
| April 2, 2022 | | % of sales | | March 27, 2021 | | % of sales | | $ | | % |
| New Construction - Self Storage | $ | 81,001 | | | 35.3 | % | | $ | 56,117 | | | 36.7 | % | | $ | 24,884 | | | 44.3 | % |
| R3 - Self Storage | 67,328 | | | 29.3 | % | | 42,990 | | | 28.1 | % | | 24,338 | | | 56.6 | % |
| Commercial and Other | 81,191 | | | 35.4 | % | | 53,717 | | | 35.1 | % | | 27,474 | | | 51.1 | % |
| Total | $ | 229,520 | | | 100.0 | % | | $ | 152,824 | | | 100.0 | % | | $ | 76,696 | | | 50.2 | % |
New construction sales increased by $24.9 million or 44.3% for the three months ended April 2, 2022 compared to the three months ended March 27, 2021, respectively. The increase in the three monthsmonth period ended April 2, 2022 is primarily due to commercial initiatives and strong growth relatedattributable to the 2021 pent up demandpositive impact from commercial actions taken in greenfield projects caused by permitting delays associated with the COVID-19 global pandemic continuing to ship in the first quarter of 2022.
The following table and discussion compares Janus’ sales by sales channel (dollar amounts in tables in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| Consolidated | April 1, 2023 | | % of sales | | April 2, 2022 | | % of sales | | $ | | % |
| New Construction - Self Storage | $ | 83,144 | | | 33.0 | % | | $ | 81,001 | | | 35.3 | % | | $ | 2,143 | | | 2.6 | % |
| R3 - Self Storage | 85,437 | | | 33.9 | % | | 67,328 | | | 29.3 | % | | 18,109 | | | 26.9 | % |
| Commercial and Other | 83,323 | | | 33.1 | % | | 81,191 | | | 35.4 | % | | 2,132 | | | 2.6 | % |
| Total | $ | 251,904 | | | 100.0 | % | | $ | 229,520 | | | 100.0 | % | | $ | 22,384 | | | 9.8 | % |
New construction sales increased by $2.1 million or 2.6% for the three month period ended April 1, 2023 compared to the three month period ended April 2, 2022. The increase in the three month period ended April 1, 2023 is primarily due to commercial initiatives.
R3 sales increased by $24.3$18.1 million or 56.6%26.9% for the three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021April 2, 2022, due to the increase of conversions and expansions as self-storage capacity continues to be brought online through R3 as opposed to greenfield sites coupled with the positive impacts from commercial actions.
Commercial and other sales increased by $27.5$2.1 million or 51.1%2.6% for the three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021April 2, 2022, due to Janus Core and ASTA experiencingASTA’s continued sales across the various end-markets that the segment serves and favorable market gains due to the continued e-commerce movement coupled with share gains in both the commercial steel roll up door market and ASTA’s rolling steel product line. In addition, the commercial and other sales channel continued to benefit from the commercial actions instituted in 2021.actions.
Cost of Sales and Gross Margin
Gross margin increased by 6.3% to 39.7% for the three month period ended April 1, 2023, from 33.4% for the three month period ended April 2, 2022. This increase is primarily due to the commercial and cost containment initiatives taking effect in third quarter 2022 which was offset by continued increased raw material, labor and logistics costs.
(dollarDollar amounts in tables in thousands)
Gross margin decreased by 1.5% | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| Product cost of revenues | $ | 120,068 | | $ | 128,560 | | | $ | (8,492) | | (6.6) | % |
| Service cost of revenues | $ | 31,903 | | $ | 24,390 | | | $ | 7,513 | | 30.8 | % |
| Cost of Revenues | $ | 151,971 | | | $ | 152,950 | | | $ | (979) | | | (0.6) | % |
The cost of revenues decrease of $1.0 million or 0.6% for the three month period ended April 1, 2023 compared to 33.4%the three month period ended April 2, 2022. The decrease in product cost of revenues of $8,492 for the three months ended April 2,1, 2023, is primarily attributable to the decline in steel coil pricing due to supplier agreements Janus entered into in 2022, from 34.9%while the increase in service cost of revenue for the three months ended March 27, 2021April 1, 2023, was due primarily to the increase in service costs to support the service revenue growth of 31.1%
Operating Expenses - Selling and marketing
Selling and marketing expense increased raw material, labor and logistics costs in advance of commercial and cost containment initiatives taking effect.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | Cost of Sales Variance Breakdown |
| April 2, 2022 | | March 27, 2021 | | Variance | | Variance % | | Domestic Acquisitions | | Organic Growth | | Organic Growth % |
| Cost of Sales | $ | 152,950 | | $ | 99,531 | | | $ | 53,419 | | 53.7 | % | | $ | 17,677 | | $ | 35,743 | | 35.9% |
The $53.4$1.5 million or 53.7% increase in cost of sales11.0% for the three monthsmonth period ended April 2, 2022 compared to the three months ended March 27, 2021 is primarily attributable to revenue increases, increased raw material, labor and logistics costs on a global basis, and inorganic growth of $17.7 million as a result of the DBCI and ACT acquisitions.
Operating Expenses - Selling and marketing
Selling and marketing expenses increased $3.9 million or 41.1% from the three months ended March 27, 2021 compared to the three monthsmonth period ended April 2, 2022,1, 2023. This is primarily due to increased marketing, trade showtravel and payroll related costs for additional headcount to support revenue growth coupled with limited travel, marketing and trade show costs in the prior year due to the pandemic. In addition, there was an increase in selling and marketing expenses of $0.9 million as a result of the DBCI and ACT acquisitions.growth.
Operating Expenses - General and administrative
General and administrative expenses increased $8.5$6.0 million or 43.5% from21.3% for the three monthsmonth period ended March 27, 2021April 2, 2022 compared to the three monthsmonth period ended April 2, 2022,1, 2023. The increase for the three month period is primarily due to an increase in general liability and health insurance costs, professional fees and payroll related costs for additional headcount to support the continued top line revenue growth coupled with the transition to a public company and $2.8 million as a result of the DBCI and ACT acquisitions.growth.
Interest Expense
Interest expense increased $0.6$7.2 million or 8.0%82.3% for the three monthsmonth period ended March 27, 2021April 2, 2022 compared to the three monthsmonth period ended April 2, 2022,1, 2023, primarily due to the new borrowings of $155.0 millionincrease in August 2021.interest rates in 2023. (See “Liquidity and Capital Resources” section).
Other Expense
Other expense decreased by $1.5 million or 98.2% from $1.6 million of other expense for the three months ended March 27, 2021 to $0.03 million of other expense for the three months ended April 2, 2022. The decrease in other expense for the three months ended April 2, 2022is primarily due to a $1.4 million loss on extinguishment of debt included in the three months ended March 27, 2021 but not present in the three months ended April 2, 2022.
Income Taxes
Income tax expense increased by $6.8$2.4 million or 4362.6%36.5% from $(0.2) million for the three months ended March 27, 2021 to $6.6 million for the three monthsmonth period ended April 2, 2022, to $9.0 million expense for the three month period ended April 1, 2023, due to astatutory rate differentials, changes in estimated state income tax structure change from a limited liability company that was considered a disregarded entity for tax purposes to a Corporation as a result of the Business Combination that occurred on June 7, 2021.and apportionment rates, and permanent differences.
Net Income
The $5.0$6.3 million or 33.9%31.9% increase in net income for the three monthsmonth period ended March 27, 2021April 1, 2023 as compared to the three monthsmonth period ended April 2, 2022, respectively, is largely due to an increase in revenue partially offset by increasesan increase in raw material, labor and logistics costs coupled with increases in selling and general and administrative expenses and interest expense and income taxes.for the three month period ended April 1, 2023.
Segment Results of Operations
We operate in and report financial results for two segments: Janus North America and Janus International with the following sales channels: Self-Storagechannels, New Construction, Self-Storage R3, and Commercial and Other.
Segment operating income is the measure of profit and loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. For these reasons, we believe that Segmentsegment operating income represents the most relevant measure of Segment profit and loss. Our chief operating decision maker may exclude certain charges or gains, such as corporate charges and other special charges, to arrive at a Segment operating income that is a more meaningful measure of profit and loss upon which to base our operating decisions. We define Segment operating margin as Segment operating income as a percentage of the segment’s Net revenues.
The segment discussion that follows describes the significant factors contributing to the changes in results for each segment included in Net earnings.Results of Operations.
Results of Operations - Janus North America
(dollar amounts in thousands)
For the three monthsmonth period ended April 1, 2023 compared to the three month period ended April 2, 2022 compared to the three months ended March 27, 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 2, 2022 | | March 27, 2021 | | |
| | | $ | | % |
| REVENUE | | | | | | | |
| Sales of products | $ | 200,157 | | | $ | 120,893 | | | $ | 79,264 | | | 65.6% |
| Sales of services | 25,099 | | | 25,641 | | | (542) | | | (2.1)% |
| Total revenue | $ | 225,256 | | | 146,534 | | | $ | 78,722 | | | 53.7% |
| Cost of Sales | 152,970 | | | 96,772 | | | 56,198 | | | 58.1% |
| GROSS PROFIT | $ | 72,286 | | | 49,762 | | | $ | 22,524 | | | 45.3% |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 12,617 | | | 8,695 | | | 3,922 | | | 45.1% |
| General and administrative | 24,814 | | | 17,152 | | | 7,662 | | | 44.7% |
| Operating Expenses | $ | 37,431 | | | $ | 25,847 | | | $ | 11,584 | | | 44.8% |
| INCOME FROM OPERATIONS | $ | 34,855 | | | $ | 23,915 | | | $ | 10,940 | | | 45.7% |
Revenue
(dollar(dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variances | | Variance % | | Revenue Variance Breakdown |
| April 2,
2022 | | March 27,
2021 | | | | Domestic Acquisitions | | Organic
Growth | | Organic Growth % |
| Sales of products | $ | 200,157 | | | $ | 120,893 | | | $ | 79,264 | | | 65.6 | % | | $ | 20,378 | | | $ | 58,886 | | | 48.7 | % |
| Sales of services | 25,099 | | | 25,641 | | | (542) | | | (2.1) | % | | 1,698 | | | (2,240) | | | (8.7) | % |
| Total | $ | 225,256 | | | $ | 146,534 | | | $ | 78,722 | | | 53.7 | % | | $ | 22,076 | | | $ | 56,646 | | | 38.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | | | |
| | | $ | | % |
| REVENUES | | | | | | | |
| Product revenues | $ | 204,439 | | | $ | 200,157 | | | $ | 4,282 | | | 2.1% |
| Service revenues | 33,775 | | | 25,099 | | | 8,676 | | | 34.6% |
| Total revenues | $ | 238,214 | | | $ | 225,256 | | | $ | 12,958 | | | 5.8% |
| Product cost of revenues | 119,347 | | | 134,134 | | | (14,787) | | | (11.0)% |
| Service cost of revenues | 25,379 | | | 18,836 | | | 6,543 | | | 34.7% |
| Cost of Revenues | 144,726 | | | 152,970 | | | (8,244) | | | (5.4)% |
| GROSS PROFIT | $ | 93,488 | | | $ | 72,286 | | | $ | 21,202 | | | 29.3% |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 13,900 | | | 12,617 | | | 1,283 | | | 10.2% |
| General and administrative | 30,710 | | | 24,814 | | | 5,896 | | | 23.8% |
| Operating Expenses | $ | 44,610 | | | $ | 37,431 | | | $ | 7,179 | | | 19.2% |
| INCOME FROM OPERATIONS | $ | 48,878 | | | $ | 34,855 | | | $ | 14,023 | | | 40.2% |
Revenue (dollar amounts in tables in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Organic Growth |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| Product revenues | $ | 204,439 | | | $ | 200,157 | | | $ | 4,282 | | | 2.1 | % |
| Service revenues | $ | 33,775 | | | $ | 25,099 | | | $ | 8,676 | | | 34.6 | % |
| Total | $ | 238,214 | | | $ | 225,256 | | | $ | 12,958 | | | 5.8 | % |
The $78.7$13.0 million and or 53.7%5.8% revenue growth increase is primarily attributable to increased volumes as a result of favorable industry dynamics in all threeR3 sales channels,channel growth due to new capacity additions and the positive impact from commercial actions taken in 2021, coupled with inorganic growth of $22.1 million as a result of the DBCI and ACT acquisitions.actions.
The following table and discussion comparecompares Janus North America sales by sales channel (dollar amounts in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 2, 2022 | | % of total sales | | March 27, 2021 | | % of total sales | | |
| | | | | $ | | % |
| New Construction - Self Storage | $ | 75,709 | | | 33.6 | % | | $ | 48,701 | | | 33.2 | % | | $ | 27,008 | | | 55.5 | % |
| R3 - Self Storage | 61,572 | | | 27.3 | % | | 39,331 | | | 26.9 | % | | 22,241 | | | 56.5 | % |
| Commercial and Other | 87,975 | | | 39.1 | % | | 58,502 | | | 39.9 | % | | 29,473 | | | 50.4 | % |
| Total | $ | 225,256 | | | 100.0 | % | | $ | 146,534 | | | 100.0 | % | | $ | 78,722 | | | 53.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Variance |
| April 1, 2023 | | % of Total Sales | | April 2, 2022 | | % of Total Sales | | | | |
| | | | | $ | | % |
| New Construction - Self Storage | $ | 68,243 | | | 28.6 | % | | $ | 75,709 | | | 33.6 | % | | $ | (7,466) | | | (9.9) | % |
| R3 - Self Storage | $ | 82,253 | | | 34.5 | % | | $ | 61,572 | | | 27.3 | % | | $ | 20,681 | | | 33.6 | % |
| Commercial and Other | $ | 87,718 | | | 36.9 | % | | $ | 87,975 | | | 39.1 | % | | $ | (257) | | | (0.3) | % |
| Total | $ | 238,214 | | | 100.0 | % | | $ | 225,256 | | | 100.0 | % | | $ | 12,958 | | | 5.8 | % |
New Construction sales increaseddecreased by $27.0$7.5 million or 55.5%9.9% for the three monthsmonth period ended April 1, 2023 compared to the three month period ended April 2, 2022, compared to the three months ended March 27, 2021, primarily due to commercial initiatives and strong growth related to shipments on the first quarter of 2022 benefiting from pent up demand in greenfield projects caused by permitting delays associated with the COVID-19 global pandemic that negatively impacted first quarter 2021.in the three month period ended April 2, 2022, offset by commercial initiatives.
R3 sales increased by $22.2$20.7 million or 56.5%33.6% for the three monthsmonth period ended April 1, 2023 compared to the three month period ended April 2, 2022, compared to the three months ended March 27, 2021,respectively, primarily due to the continued trend of new self-storage capacity being brought online through conversions and expansions coupled with the positive impacts from commercial actions.
Commercial and Other sales increaseddecreased by $29.5$0.3 million or 50.4%0.3% for the three monthsmonth period ended April 1, 2023 compared to the three month period ended April 2, 2022, compareddue to primarily due to the three months ended March 27, 2021 due to increasesfirst quarter of 2022 benefiting from strong market competitions in both Janus Core and ASTA commercial steel roll up door market, from continued strong momentum of the ASTAand rolling steel product line andmarket, due to pent up demand in the three month period ended April 2, 2022, offset by commercial initiatives implemented due to offset the inflationary increases of raw materials, labor, and logistics costs.
Cost of SalesRevenues and Gross Margin
(dollar amounts in thousands)
Gross Margin decreasedincreased by 1.9%7.1% to 39.2% for the three month period ended April 1, 2023, from 32.1% for the three month period ended April 2, 2022 is primarily attributable to the decline in steel coil pricing due to supplier agreements Janus entered into in 2022, and an increase in service revenues for the three months ended April 2, 2022 from 34.0%1, 2023, primarily due to project mix and timing.
(Dollar amounts in tables in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| Product cost of revenues | $ | 119,347 | | $ | 134,134 | | | $ | (14,787) | | (11.0) | % |
| Service cost of revenues | $ | 25,379 | | $ | 18,836 | | | $ | 6,543 | | 34.7 | % |
| Cost of Revenues | $ | 144,726 | | $ | 152,970 | | | $ | (8,244) | | (5.4) | % |
The $8.2 million or 5.4% decrease in cost of revenues for the three months ended March 27, 2021, primarily due to continued increased raw material, labor and logistics costs in advance of commercial and cost containment initiatives taking full effect.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance | | Variance % | | Cost of Sales Variance Breakdown |
| April 2,
2022 | | March 27,
2021 | | | | Domestic Acquisitions | | Organic Growth | | Organic Growth % |
| Cost of Sales | $ | 152,970 | | $ | 96,772 | | | $ | 56,198 | | 58.1% | | $ | 17,677 | | $ | 38,521 | | 39.8% |
The $56.2 million or 58.1% increase in cost of sales for the three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021April 2, 2022, is primarily due to increased revenue coupled with an increasea decrease in raw material, labor,cost of revenues due to the commercial and logistics costs. In addition, there was an inorganic increase of $17.7 million as a result of the DBCI and ACT acquisitions.cost containment initiatives taken in 2022.
Operating Expenses - Selling and marketing
Selling and marketing expenses increased $3.9$1.3 million or 45.1%10.2% from $8.7 million for the three months ended March 27, 2021 to $12.6 million for the three monthsmonth period ended April 2, 2022 to $13.9 million for the three month period ended April 1, 2023 primarily due to increased marketing and trade showtravel and payroll related costs for additional headcount to support revenue growth coupled with lower spend on travel, marketing and trade shows in the prior year due to the pandemic. In addition, there was an increase in selling and marketing expenses of $0.9 million as a result of the DBCI and ACT acquisitions.growth.
Operating Expenses - General and administrative
General and administrative expenses increased $7.7$5.9 million or 44.7%23.8% from $17.2 million for the three months ended March 27, 2021 to $24.8 million for the three monthsmonth period ended April 2, 2022 to $30.7 million for the three month period ended April 1, 2023. The increase for the three month period is primarily due to an increase in general liability and health insurance costs, professional fees and payroll related costs for additional headcount to support the incrementalcontinued top line revenue coupled with the incremental costs associated with the transition to a public company and $2.8 million as a result of the DBCI and ACT acquisitions.growth.
Income from Operations
Income from operations increased by $10.9$14.0 million or 45.7%40.2% from $23.9 million for the three months ended March 27, 2021 to $34.9 million for the three monthsmonth period ended April 2, 2022 to $48.9 million for the three month period ended April 1, 2023, primarily due to an increase in revenue and a reduction in cost of revenues, partially offset by an increase in cost of sales, selling and general and administrative expenses.
Results of Operations - Janus International
(dollar amounts in thousands)INTERNATIONAL
Results of Operations - Janus International -International- For the three monthsmonth period ended April 1, 2023 compared to the three month period ended April 2, 2022 compared to the three months ended March 27, 2021(dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months ended | | Variance |
| April 2, 2022 | | March 27, 2021 | | |
| | | $ | | % |
| REVENUE | | | | | | | |
| Sales of products | $ | 10,798 | | | $ | 7,073 | | | $ | 3,725 | | | 52.7 | % |
| Sales of services | 7,116 | | | 5,487 | | | 1,629 | | | 29.7 | % |
| Total revenue | $ | 17,914 | | | $ | 12,560 | | | $ | 5,354 | | | 42.6 | % |
| Cost of Sales | 13,641 | | | 9,055 | | | 4,586 | | | 50.6 | % |
| GROSS PROFIT | $ | 4,273 | | | 3,505 | | | $ | 768 | | | 21.9 | % |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 732 | | | 763 | | | (31) | | | (4.1) | % |
| General and administrative | 3,292 | | | 2,435 | | | 857 | | | 35.2 | % |
| Operating Expenses | $ | 4,024 | | | $ | 3,198 | | | $ | 826 | | | 25.8 | % |
| INCOME FROM OPERATIONS | $ | 249 | | | $ | 307 | | | $ | (58) | | | (18.9) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | | | |
| | | $ | | % |
| REVENUE | | | | | | | |
| Product revenues | $ | 13,106 | | | $ | 10,798 | | | $ | 2,308 | | | 21.4 | % |
| Service revenues | 8,466 | | | 7,116 | | | 1,350 | | | 19.0 | % |
| Total revenues | $ | 21,572 | | | $ | 17,914 | | | $ | 3,658 | | | 20.4 | % |
| Product cost of revenues | 8,458 | | | 8,088 | | | 370 | | | 4.6 | % |
| Service cost of revenues | 6,523 | | | 5,553 | | | $ | 970 | | | 17.5 | % |
| Cost of Revenues | 14,981 | | | 13,641 | | | 1,340 | | | 9.8 | % |
| GROSS PROFIT | $ | 6,591 | | | $ | 4,273 | | | $ | 2,318 | | | 54.2 | % |
| OPERATING EXPENSE | | | | | | | |
| Selling and marketing | 923 | | | 732 | | | 191 | | | 26.1 | % |
| General and administrative | 3,389 | | | 3,292 | | | 97 | | | 2.9 | % |
| Operating Expenses | $ | 4,312 | | | $ | 4,024 | | | $ | 288 | | | 7.2 | % |
| INCOME FROM OPERATIONS | $ | 2,279 | | | $ | 249 | | | $ | 2,030 | | | 815.3 | % |
Revenue
(dollar (dollar amounts in tables in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variances | | Variance % | | Revenue Variance Breakdown |
| April 2, 2022 | | March 27, 2021 | | | | Organic
Growth | | Organic
Growth |
| Sales of products | $ | 10,798 | | | $ | 7,073 | | | $ | 3,725 | | | 52.7 | % | | $ | 3,725 | | | 52.7 | % |
| Sales of services | 7,116 | | | 5,487 | | | 1,629 | | | 29.7 | % | | 1,629 | | | 29.7 | % |
| Total | $ | 17,914 | | | $ | 12,560 | | | $ | 5,354 | | | 42.6 | % | | $ | 5,354 | | | 42.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Organic Growth |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| Product revenues | $ | 13,106 | | | $ | 10,798 | | | $ | 2,308 | | | 21.4 | % |
| Service revenues | $ | 8,466 | | | $ | 7,116 | | | $ | 1,350 | | | 19.0 | % |
| Total | $ | 21,572 | | | $ | 17,914 | | | $ | 3,658 | | | 20.4 | % |
The $5.4$3.7 million revenue increase includes a 42.6%or 20.4% increase in revenue is due to organic growth driven by increased sales volumes, due to improved market conditions and commercial actions instituted in 2021.instituted.
The following table illustrates the sales by channel for the three monthsmonth period ended April 1, 2023 and April 2, 2022 and March 27, 2021 (dollar amounts in thousands).2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | |
% of total sales | | Variance |
| April 2, 2022 | |
% of total sales | | March 27, 2021 | | | $ | | % |
| New Construction - Self Storage | $ | 11,897 | | | 66.4 | % | | $ | 8,901 | | | 70.9 | % | | $ | 2,996 | | 33.7 | % |
| R3 - Self Storage | 6,017 | | | 33.6 | % | | 3,659 | | | 29.1 | % | | 2,358 | | 64.4 | % |
| Total | $ | 17,914 | | | 100.0 | % | | $ | 12,560 | | | 100.0 | % | | $ | 5,354 | | 42.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | |
% of Total Sales | | Variance |
| April 1, 2023 | |
% of Total Sales | | April 2, 2022 | | | $ | | % |
| New Construction - Self Storage | $ | 18,538 | | | 85.9 | % | | $ | 11,897 | | 66.4 | % | | $ | 6,641 | | 55.8% |
| R3 - Self Storage | 3,034 | | | 14.1 | % | | $ | 6,017 | | 33.6 | % | | $ | (2,983) | | (49.6) | % |
| Total | $ | 21,572 | | | 100.0 | % | | $ | 17,914 | | 100.0 | % | | $ | 3,658 | | 20.4 | % |
New Construction sales increased by $3.0$6.6 million or 33.7%55.8% to $18.5 million for the three month period ended April 1, 2023 compared to $11.9 million for the three monthsmonth period ended April 2, 2022 from $8.9 million for the three months ended March 27, 20212022. The increase was due to increased volumes, commercial actions, and improved market conditions as the international market continues to open up after the COVID-19 pandemic.
R3 sales increaseddecreased by $2.4$3.0 million or 64.4%49.6% to $3.0 million for the three month period ended April 1, 2023 from $6.0 million for the three monthsmonth period ended April 2, 2022 from $3.7 millionprimarily due to project timing and mix factors affecting the first quarter of 2023.
Cost of Revenues and Gross Margin
Gross Margin increased by 6.7% to 30.6% for the three monthsmonth period ended March 27, 2021,April 1, 2023, from 23.9% for the three month period ended April 2, 2022. The increase in the Gross Margin for three month period ended April 1, 2023 is due primarily due to increased volumes, commercial actions, andrevenue resulting in improved market conditions as the international market continues to open up after the COVID-19 pandemicabsorption.
Cost of Sales and Gross Margin
(dollarDollar amounts in tables in thousands)
Gross Margin decreased by 4.0% to 23.9% for the three months ended April 2, 2022 from 27.9% for the three months ended March 27, 2021. The decline in gross margin for the three months ended April 2, 2022 is the result of higher raw material, labor and logistics costs and an increase in mezzanine product sales which have a lower margin profile than typical product offerings as these products are buy-resale, coupled with increased overhead costs as the business continues to add infrastructure to support the strategic growth plan.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance | | Variance % | | Cost of Sales Variance Breakdown |
| April 2, 2022 | | March 27, 2021 | | | | Organic
Growth | | Organic
Growth
% |
| Cost of Sales | $ | 13,641 | | | $ | 9,055 | | | $ | 4,586 | | | 50.6 | % | | $ | 4,586 | | | 50.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | $ | | % |
| Product cost of revenues | $ | 8,458 | | | $ | 8,088 | | | $ | 370 | | | 4.6 | % |
| Service cost of revenues | $ | 6,523 | | | $ | 5,553 | | | $ | 970 | | | 17.5 | % |
| Cost of Sales | $ | 14,981 | | | $ | 13,641 | | | $ | 1,340 | | | 9.8 | % |
Cost of salesrevenues increased by $4.6$1.3 million or 50.6%9.8% from $9.1 million for the three months ended March 27, 2021 to $13.6 million for the three monthsmonth period ended April 2, 2022, generally in line with a 42.6%to $15.0 million for the three month period ended April 1, 2023, due to an increase in revenues coupled with an increase in raw material labor and logistics costs andrelated to an increase in mezzanine product sales.
Operating Expenses - Selling and marketing
Selling and marketing expense slightly decreasedincreased by $0.2 million or 26.1% from $0.8 million for the three months ended March 27, 2021 to $0.7 million for the three monthsmonth period ended April 2, 2022.2022 to $0.9 million for the three month period ended April 1, 2023.
Operating Expenses - General and administrative
General and administrative expenses increased $0.9by $0.1 million or 35.2%2.9% from $2.4 million for the three months ended March 27, 2021 to $3.3 million for the three monthsmonth period ended April 2, 2022 primarily due to $3.4 million for the continued investment in personnel and infrastructure to support the strategic growth objectives and public company requirements of the international business operations.period ended April 1, 2023.
Income from Operations
Income from operations remained consistentincreased from $0.3 million for the three months ended March 27, 2021 to $0.2 million for the three monthsmonth period ended April 2, 2022.2022 to $2.3 million for the three month period ended April 1, 2023. The increase for the period is primarily due to an increase in revenue.
Non-GAAP Financial Measures
(dollar amounts in thousands)Measure
Janus uses measures of performance that are not required by or presented in accordance with GAAP in the United States. Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.
Janus presents Adjusted EBITDA which is a non-GAAP financial performance measure, which excludes from reported GAAP results, the impact of certain items consisting of acquisition events and other non-recurring charges. Janus believes such expenses, charges, and gains are not indicative of normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure used by Janus to evaluate its operating performance, developgenerate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Accordingly, Janus believes these measures provide useful information to investors and others in understanding and evaluating Janus’sJanus’ operating results in the same manner as its management and board of directors. In addition, the Adjusted EBITDAthey provide useful measures for period-to-period comparisons of Janus’sJanus’ business, as the adjustmentsthey remove the effect of certain non-cash items and certain variable charges. Adjusted EBITDA is defined as net income excluding interest expense, income taxes, depreciation expense, amortization, and other non-operational, non-recurring items.
Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income (loss), which is the nearest GAAP equivalent of Adjusted EBITDA. These limitations include that the non-GAAP financial measures:
•exclude depreciation and amortization, and although these are non-cash expenses, the assets being depreciated may be replaced in the future;
•do not reflect interest expense, or the cash requirements necessary to service interest on debt, which reduces cash available;
•do not reflect the provision for or benefit from income tax that may result in payments that reduce cash available;
•exclude non-recurring items which are unlikely to occur again and have not occurred before (e.g., the extinguishment of debt); and
•may not be comparable to similar non-GAAP financial measures used by other companies, because the expenses and other items that Janus excludes in the calculation of these non-GAAP financial measures may differ from the expenses and other items, if any, that other companies may exclude from these non-GAAP financial measures when they report their operating results.
Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with GAAP.
The following table present a reconciliation of net income to Adjusted EBITDA for the periods indicated:
(dollarindicated (dollar amounts in tables in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 2, 2022 | | March 27, 2021 | | |
| | | $ | | % |
| Net Income | $ | 19,704 | | | $ | 14,719 | | | $ | 4,985 | | | 33.9 | % |
| Interest Expense | 8,775 | | | 8,126 | | | 649 | | | 8.0 | % |
| Income Taxes | 6,607 | | | (155) | | | 6,762 | | | (4362.6) | % |
| Depreciation of property and equipment | 1,857 | | | 1,473 | | | 384 | | | 26.1 | % |
| Amortization | 7,225 | | | 6,832 | | | 393 | | | 5.7 | % |
| EBITDA | $ | 44,168 | | | $ | 30,995 | | | $ | 13,173 | | | 42.5 | % |
Loss on extinguishment of debt(1) | — | | | 1,421 | | | (1,421) | | | (100.0) | % |
COVID-19 related expenses(2) | 109 | | 198 | | (89) | | | (45.1) | % |
Facility relocation(3) | 103 | | — | | 103 | | | — | % |
Acquisition Expense(4) | 287 | | | — | | 287 | | | — | % |
| Adjusted EBITDA | $ | 44,667 | | | $ | 32,614 | | | $ | 12,053 | | | 37.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Variance |
| April 1, 2023 | | April 2, 2022 | | | | |
| | | $ | | % |
| Net Income | $ | 25,982 | | | $ | 19,704 | | | $ | 6,278 | | | 31.9% |
| Interest Expense | 15,998 | | | 8,775 | | | 7,223 | | | 82.3% |
| Income Taxes | 9,017 | | | 6,607 | | | 2,410 | | | 36.5% |
| Depreciation | 2,180 | | | 1,857 | | | 323 | | | 17.4% |
| Amortization | 7,416 | | | 7,225 | | | 191 | | | 2.6% |
| EBITDA | $ | 60,593 | | | $ | 44,168 | | | $ | 16,425 | | | 37.2% |
COVID-19 related expenses(1) | — | | | 109 | | | (109) | | | (100.0)% |
Restructuring charges(2) | 590 | | | 103 | | | 487 | | | 472.8% |
Acquisition Expense(3) | — | | | 287 | | | (287) | | | (100.0)% |
| Adjusted EBITDA | $ | 61,183 | | | $ | 44,667 | | | $ | 16,516 | | | 37.0% |
(1)Adjustment for loss on extinguishmentconsists of debt regardingsignage, cleaning and supplies to maintain work environments necessary to adhere to CDC guidelines during the write offCOVID-19 pandemic. See “Impact of unamortized fees and third-party fees as a result of the debt modification completed in February 2021.COVID-19” section.
(2)Expenses which are one-timeAdjustments consist of the following: 1) facility relocations, 2) severance and non-recurring related to the COVID-19 pandemic. (See Impact of COVID-19 section).hiring costs associated with our strategic transformation, including executive leadership team changes, strategic business assessment and transformation projects.
(3)Expenses related to the facility relocation for ASTA.
(4)Expenses related to the transition services agreement for the DBCI acquisition which closed August 18, 2021.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, days sales outstanding, inventory turns, days payable outstanding, capital expenditure forecasts, interest and principal payments on debt and income tax payments.
Our primary sources of liquidity include cash balances on hand, cash flows from operations, proceeds from equity, debt offerings and borrowing availability under our existing credit facility. We believe our operating cash flows, along with funds available under the line of credit, provide sufficient liquidity to support Janus’sJanus’ short and long-term liquidity and financing needs, which are working capital requirements, capital expenditures, service of indebtedness, as well as to finance acquisitions.
Financial Policy
Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments and (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings.
Liquidity Policy
We maintain a strong focus on liquidity and define our liquidity risk tolerance based on sources and uses to maintain a sufficient liquidity position to meet our obligations under both normal and stressed conditions. At Janus, we manage our liquidity to provide access to sufficient funding to meet our business needs and financial obligations, as well as capital allocation and growth objectives, throughout business cycles.
Cash Management
Janus manages its operating cash management activities through banking relationships for the domestic entities and international entities. Domestic subsidiaries monitor cash balances on a monthly basis and excess cash is transferred to Janus to pay down intercompany debt, interest on the intercompany debt and intercompany sales of products and materials and other services. International subsidiaries monitor excess cash balances on a periodic basis and transfer excess cash flow to Janus in the form of a dividend. Janus compiles a monthly standalone business unit and consolidated 13-week cash flow forecast to monitor various cash activities and forecast cash balances to fund operational activities.
Holding Company Status
The Company was formed to consummate the business combination and act as a holding company of Janus Core, as such it owns no material assets and does not conduct any business operations of its own. As a result, the Company is largely dependent upon cash dividends and distributions and other transfers from its subsidiaries to meet obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or make other distributions to us.
Foreign Exchange
We have operations in various foreign countries, principally the United States, the United Kingdom, France, Australia, and Singapore. Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars.
LIBOR Reform
In connection with the potential transition away from the use of the LIBORLondon Interbank Offered Rate (“LIBOR”) as an interest rate benchmark, we are currently in the process of identifying and managing the potential impact to Janus. The majority of Janus’sJanus’ exposure to LIBOR relates to the Amendment No. 4 1stFirst Lien note payable which is discussed further below.
Debt Profile (dollar amounts in table in thousands)
| | | Principal Amount | | Issuance Date | | Maturity Date | | Interest Rate | | Net Carrying Value | | Principal Amount | | Issuance Date | | Maturity Date | | Interest Rate | | Net Carrying Value |
| | April 2,
2022 | | January 1,
2022 | | April 1, 2023 | | December 31, 2022 |
| Notes Payable - Amendment No. 4 1st Lien | 726,413 | | | February 12, 2021 | | February 12,
2025 | | 4.25%1 | | 720,363 | | | 722,379 | | |
| Notes Payable - Amendment No. 4 First Lien | | Notes Payable - Amendment No. 4 First Lien | $ | 726,413 | | | February 12, 2018 | | February 12,
2025 | | 8.09%1 | | $ | 662,295 | | | $ | 714,312 | |
| Financing leases | Financing leases | | 617 | | | — | | Financing leases | | 2,044 | | | 1,043 | |
| Total principal debt | Total principal debt | | $ | 720,980 | | | $ | 722,379 | | Total principal debt | | 664,339 | | | 715,355 | |
| Less unamortized deferred finance fees | | 9,743 | | | 10,594 | | |
| Less current portion of long-term debt | | 8,215 | | | 8,067 | | |
| Less: unamortized deferred finance fees | | Less: unamortized deferred finance fees | | 5,872 | | | 7,158 | |
| Less: current portion of long-term debt | | Less: current portion of long-term debt | | 8,649 | | | 8,347 | |
| Long-term debt, net of current portion | Long-term debt, net of current portion | | $ | 703,022 | | | $ | 703,718 | | Long-term debt, net of current portion | | $ | 649,818 | | | $ | 699,850 | |
(1)The interest rate on the Amendment No. 4 1stFirst Lien term loan as of April 2, 2022,1, 2023, was 4.25%8.09%, which is a variable rate based on LIBOR, subject to a 1.00% floor, plus an applicable margin percent of 3.25%.
As of April 2, 20221, 2023 and January 1,December 31, 2022, the Company maintained one letter of credit totaling approximately $0.4 million and $0.4 million, respectively, on which there were no balances due.
On August 18, 2021, the Company completed a refinancing in the form of itsthe Amendment No. 4 First Lien, Amendment No. 3, in which the principal terms of the amendment were a reduction in the overall interest rate based upon the loan type chosen, new borrowings of $155.0 million and a consolidation of the prior outstanding tranches into a single tranche of debt with the syndicate. The Amendment No.4 First Lien is comprised of a syndicate of lenders originating on August 18, 2021 in the amount of $726.4 million with interest payable in arrears. The outstanding loan balance is to be repaid on a quarterly basis of 0.25% of the original balance beginning the last day of September 30, 2021 with the remaining principal due on the maturity date of February 12, 2025. As chosen by the Company, the amended loan bears interest at a floating rate per annum consisting of LIBOR, plus an applicable margin percent (total(effective rate of 4.25%8.09% as of April 2, 2022)1, 2023). UnamortizedThe debt issuance costs are approximately $9.7 million at April 2, 2022. This refinancing amendment was accounted for as modification of existing terms and as such no gain or loss was recognized for this transaction and any third party fees were expensed with bank fees, original issue discount and charges capitalized and are being amortized as a component of interest expense over the remaining loan term.
On February 12, 2018, Janus entered into a revolving line of credit facility with a domestic bank replacing the predecessor revolving line of credit. The line of credit facility is for $50.0 million with interest payments due in arrears that matures on February 12, 2023. The interest rate on the facility is based on a Base Rate, unless a LIBOR Rate option is chosen by Janus. If the LIBOR Rate is elected, the interest
computation is equal to the LIBOR Rate, subject to a 1.00% floor, plus the LIBOR Rate Margin. If the Base Rate is elected, the interest computation is equal to the Base Rate plus the Base Rate Margin. At the beginning of each quarter the applicable margin is set and determined by the administrative agent based on the average net availability on the line of credit for the previous quarter.
On August 18, 2021, the Company increased the available line of credit from $50.0 million to $80.0 million, incurred additional fees for this amendment of $0.4 million and extended the maturity date from February 12, 2023 to August 12, 2024. There was $0 and $6.4 million outstanding balance on the line of credit as of April 2, 2022 and January 1, 2022. As of April 2, 2022 and January 1, 2022 the interest rate in effect for the facility was 3.8% and 3.5%, respectively. The line of credit is secured by accounts receivable and inventories.substantially all business assets.
The revolving line of credit facility and Amendment No. 4 1stFirst Lien note payable contain affirmative and negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, fundamental changes, dispositions, restricted payments, investments, transactions with affiliates as well as other covenants customary for financings of these types.
The line of credit facility also includes a financial covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the line of credit facility and the borrowing base, and (ii) $5.0 million. In such circumstances, we would be required to maintain a minimum fixed charge coverage ratio for the trailing four quarters equal to at least 1.0 to 1.0; subject to our ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of April 2, 2022,1, 2023, we were compliant with our covenants under the agreements governing our outstanding indebtedness.
On August 18, 2021, the Company increased the existing available line of credit facility with a domestic bank, from $50.0 million to $80.0 million, incurred additional fees for this amendment of $0.4 million and extended the maturity date from February 12, 2023 to August 12, 2024. There was $— million outstanding balance on the line of credit as of April 1, 2023 and December 31, 2022. The interest rate on the facility is based on a Base Rate, unless a LIBOR Rate option is chosen by Janus. If the LIBOR Rate is elected, the interest computation is equal to the LIBOR Rate, subject to a 1.00% floor, plus the LIBOR Rate Margin. If the Base Rate is elected, the interest computation is equal to the Base Rate plus the Base Rate Margin. At the beginning of each quarter the applicable margin is set and determined by the administrative agent based on the average net availability on the line of credit for the previous quarter. As of April 1, 2023 and December 31, 2022 the interest rate in effect for the facility was 8.3% and 7.8%, respectively. The line of credit is secured by accounts receivable and inventories.
Statement of cash flows
(dollar amounts in thousands)
The following table presents a summary of cash flows from operating, investing and financing activities for the following comparative periods. For additional detail, please see the Condensed Consolidated Statements of Cash Flows in the Unaudited Condensed Consolidated Financial Statements.
Three monthsmonth period ended April 2, 20221, 2023 compared to the three monthsmonth period ended March 27, 2021:April 2, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| April 2, 2022 | | March 27, 2021 | | Variance |
| | | $ | | % |
| Net cash provided by operating activities | $ | 24,777 | | | $ | 25,560 | | | $ | (783) | | | (3.1) | % |
| Net cash used in investing activities | (2,880) | | | (3,873) | | | 993 | | | (25.6) | % |
| Net cash used in financing activities | (8,405) | | | (2,492) | | | (5,913) | | | 237.3 | % |
| Effect of foreign currency rate changes on cash | (58) | | | 54 | | | (112) | | | (207.4) | % |
| Net increase in cash and cash equivalents | $ | 13,434 | | | $ | 19,249 | | | $ | (5,815) | | | (30.2) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| April 1, 2023 | | April 2, 2022 | | Variance |
| | | $ | | % |
| Net cash provided by (used in) operating activities | $ | 50,246 | | | $ | 24,777 | | | $ | 25,469 | | | 102.8 | % |
| Net cash provided by (used in) investing activities | (7,055) | | | (2,880) | | | (4,175) | | | 145.0 | % |
| Net cash provided by (used in) financing activities | (52,158) | | | (8,405) | | | (43,753) | | | 520.6 | % |
| Effect of foreign currency rate changes on cash | 233 | | | (58) | | | 291 | | | (501.7) | % |
| Net increase (decrease) in cash | $ | (8,734) | | | $ | 13,434 | | | $ | (22,168) | | | (165.0) | % |
Net cash provided by operating activities
Net cash provided by operating activities increased by $0.8$25.5 million to $50.2 million for the three month period ended April 1, 2023 compared to $24.8 million for the three monthsmonth period ended April 2, 2022 compared to $25.6 million for the three months ended March 27, 2021.2022. This was primarily due to an increase of $7.2$7.5 million to net income adjusted for non-cash items and noncash adjustments, as well as gaining efficiencies within our net working capital balances as the three month period ended April 2, 2022 had an investmentincrease in net working capital balances of $10.5$7.9 million, to continue to support revenue growth, which was driven bywhile the three month period ending April 1, 2023 had a $1.3 million increase in prepaid and other current assets, $2.7 million increase in inventory to ensure supply to our plants in the current raw material constrained environment coupled with raw material inflation, $18.8 million increase in accounts receivable and deferred revenue as a resultdecrease of increased sales volume and commercial initiatives, $4.7 million increase in accounts payable, and a $7.6 million increase in other accrued expenses. Additionally, there was a $2.5 million improvement in other assets and long-term liabilities.net working capital balances of $10.1 million.
Net cash used in investing activities
Net cash used in investing activities decreasedincreased by $1.0$4.2 million for the three monthsmonth period ended April 2, 20221, 2023 as compared to the three monthsmonth period ended March 27, 2021.April 2, 2022. This decreaseincrease was driven primarily by the acquisition of G&M Stor-More Pty Ltd. with a net payment of $1.6 million in the first quarter of 2021 which was offset by a $0.6$3.2 million increase in capital expenditures and a $1.0 million increase in cash paid for the three monthsIndemnity holdback liability related to the ACT acquisition for the period ended April 1, 2023 as compared with the period ended April 2, 2022 as compared with the three months ended March 27, 2021.to continue to support our strategic growth initiatives.
Net cash used in financing activities
Net cash used in financing activities increased by $5.9$43.8 million for the three monthsperiod ended April 2, 20221, 2023 as compared to the three monthsperiod ended March 27, 2021.April 2, 2022. This increase was driven primarily by an increase in principal payments on long-term debt due to a $50.0 million voluntary principal payment in the period ended April 1, 2023, this was partially offset by a $6.4 million pay downpayment on the line of credit and $0.4 increase in principal payments of long term debt which was offset by a decrease of $0.8 million in deferred financing fees and $0.1 million of distributions paid to Midco unitholders in the first quarter of 2021.period ended April 2, 2022.
Capital allocation strategy
We continually assess our capital allocation strategy, including decisions relating to M&A, dividends, stock repurchases, capital expenditures, and debt pay-downs. The timing, declaration and payment of future dividends, falls within the discretion of the Janus’s Board of Directors and will depend upon
many factors, including, but not limited to, Janus’s financial condition and earnings, the capital requirements of the business, restrictions imposed by applicable law, and any other factors the Board of Directors deems relevant from time to time.
Contractual Obligations
(dollar amounts in thousands)
Summarized below are our approximate contractual obligations as of April 2, 20221, 2023 and their expected impact on our liquidity and cash flows in future periods:periods (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Less than 1 year | | 1-3 years | | 3-5 years | | Thereafter |
| Long Term Debt Obligations | $ | 720,980 | | | $ | 6,170 | | | $ | 14,435 | | | $ | 700,353 | | | $ | 22 | |
| | | | | | | | | |
Long Term Supply Contracts (1) | 38,343 | | | 38,343 | | | — | | | — | | | — | |
Other Long Term Liabilities (2) | 60,509 | | | 5,578 | | | 13,024 | | | 10,946 | | | 30,961 | |
| Total | $ | 819,832 | | | $ | 50,091 | | | $ | 27,459 | | | $ | 711,299 | | | $ | 30,983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | 2023 | | 2024-2025 | | 2026-2027 | | Thereafter |
| Debt Obligations | $ | 664,339 | | | $ | 6,524 | | | $ | 657,507 | | | $ | 297 | | | $ | 11 | |
Supply Contracts (1) | 20,756 | | | 7,576 | | | 13,180 | | | — | | | — | |
ASC 842 Liabilities | 45,043 | | | 4,425 | | | 10,021 | | | 8,050 | | | 22,547 | |
| Total | $ | 730,138 | | | $ | 18,525 | | | $ | 680,708 | | | $ | 8,347 | | | $ | 22,558 | |
(1)Long Term Supply Contracts relate to the multiple fixed price agreements.
(2)Other Long-Term Liabilities relate to operating lease liabilities and $0.1 million of contingent consideration related to the ACT acquisition.
Long-Term Debt Obligations is comprised of an Amendment No 4 First Lien Term Loan (see Note 8 to our Unaudited Condensed Consolidated Financial Statements in this Form 10-Q for a further discussion) that expires on February 12, 2025. The Company’s intention is to amend and extend or refinance this loan well in advance of the current maturity date. In addition, the Company has finance lease liabilities included in long-term debt.
Other Long Term LiabilitiesASC 842 liabilities consist of operating lease liabilities for real and personal property leases with various lease expiration dates (see Note 149 to our Unaudited Condensed Consolidated Financial Statements in this Form 10-Q for a further discussion) and $0.9 million of contingent consideration related to the ACT acquisition.. The amount listed in the thereafter category is primarily comprised of five real property leases with expiration dates ranging from 2026 – 2036.
The table above does not include warranty liabilities because it is not certain when this liability will be funded and because this liability is considered immaterial.
In addition to the contractual obligations and commitments listed and described above, Janusthe Company also had another commitment for which it is contingently liable as of April 2, 20221, 2023 and January 1,December 31, 2022 consisting of an outstanding letter of credit of $0.4 million.
Off-Balance Sheet Arrangements
As of April 2, 2022, we did not have any off-balance sheet arrangements that are material or reasonably likely to be material to our financial condition or results of operations.
Related Party Transactions
See Note 12 to our Unaudited Consolidated Financial Statements for a discussion of related party transactions.
Subsequent Events
See Note 19 to our Unaudited Consolidated Financial Statements for a discussion of subsequent events.
Critical Accounting Policies and Estimates
For the critical Accounting Policies and Estimates used in preparing Janus’s consolidated financial statements,Janus’ Unaudited Condensed Consolidated Financial Statements, Janus makes assumptions, judgments and estimates that can have a significant impact on its revenue, results from operations, and net income, as well as on the value of certain assets and liabilities on its consolidated balance sheets. Janus bases its assumptions, judgments and estimates on historical experience and various other factors that Janus believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.
The consolidatedCompany’s critical accounting estimates requiring significant judgement that could materially impact the Company's results of operations, financial statements have been preparedposition and cash flows are described in accordance with U.S. GAAP. To prepare these financial statements, Janus makes estimates, assumptions,Management’s Discussion and judgments that affect what Janus reports as its assetsAnalysis of Financial Condition and liabilities, what Janus discloses as contingent assets and liabilities atResults of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Since the date of the consolidated financial statements, andCompany’s most recent Annual Report, there have been no material changes in the reported amounts of revenues and expenses during the periods presented.
In accordance with Janus’s policies, Janus regularly evaluates its estimates, assumptions, and judgments, including, but not limited to, those concerning revenue recognition, inventory, accounts receivable, depreciation and amortization, contingencies, goodwill and other long
lived asset impairment, unit-based compensation, derivative warrant liability, contingent consideration, and income taxes, and bases its estimates, assumptions, and judgments on its historical experience and on factors Janus believes reasonable under the circumstances. The results involve judgments about the carrying values of assets and liabilities not readily apparent from other sources. If Janus’s assumptions or conditions change, the actual results Janus reports may differ from these estimates. Janus believes the followingCompany’s critical accounting policies affect the more significant estimates assumptions, and judgments Janus uses to prepare these consolidated financial statements.
Emerging Growth Company Status
Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the FASB or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. Janus qualifies as an emerging growth company. Janus intends to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly, the information contained herein may be different than the information you receive from other public companies.
Revenue Recognition
Under ASC 606, a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. Our performance obligations include material, installation, and software support fees for the Nokē Smart Entry solution. Material revenue is recognized at a point in time when the product is transferred to the customer which is at the time of a customer pickup or when the delivery of the material to the customer takes place. Installation services are a separate single performance obligation and revenue is recognized over time based upon appropriate input measures. Revenue for software support fees is recognized over time for the period the software support revenue covers. For contracts with multiple performance obligations, the standalone selling price is readily observable. Our revenues are generated from contracts with customers and the nature, timing, and any uncertainty in the recognition of revenues is not affected by the type of good, service, customer or geographical region to which the performance obligation relates. Payment terms are short-term, are customary for our industry and in some cases, early payment incentives are offered.
Contract assets are disclosed as costs and estimated earnings in excess of billings on uncompleted contracts, and contract liabilities are disclosed as billings in excess of costs and estimated earnings on uncompleted contracts in the consolidated balance sheet.
Contracts that include installation are billed via payment requests (normally The American Institute of Architects (AIA) standard construction documents) instead of Company-generated invoices. The pay requests will often be submitted during the month following the period in which the revenues have been recognized, resulting in unbilled accounts receivable (costs and estimated earnings in excess of billings on uncompleted contracts) at the end of any given period. Accounts receivable also include any retention receivable under contracts.
Janus elected to apply an accounting policy election which permits an entity to account for shipping and handling activities as fulfillment activities rather than a promised good or service when the activities are performed, even if those activities are performed after the control of the good has been transferred to the customer. Therefore, Janus expenses shipping and handling costs at the time revenue is recognized. Janus classifies shipping and handling expenses in Cost of Sales in the Consolidated Statements of Operations and Comprehensive Income.
Janus elected a practical expedient which allows an entity to recognize the promised amount of consideration without adjusting for the time value of money if the contract has a duration of one year or less, or if the reason the contract extended beyond one year is because the timing of delivery of the product is at the customer’s discretion. Janus’s contracts typically are less than one year in length and do not have significant financing components.
Janus has not experienced significant returns, price concessions or discounts to give rise to any portfolio having variable consideration. Based on this, Janus has concluded the returns, discounts and concessions are not substantive and do not materially impact the adoption and continued application of ASC 606.
Allowance for credit losses
On January 2, 2022, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“CECL”), which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The Company selected the loss-rate method to be used in the CECL analysis for trade receivables and contract assets.
The Company determined that pooling accounts receivable by business units was the most appropriate because of the similarity of risk characteristics within each line such as customers and services offered. Historical losses and customer-specific reserve information that are used to calculate the historical loss rates are available for each business unit. During the pooling process, the Company identified two
distinct customer types: commercial and self-storage. As these customer types have different risk characteristics, the Company concludes to pool the financial assets at this level within each business unit.
Commercial customers typically are customers contracting with the Company on short-term projects with smaller credit limits and overall, smaller project sizes. Due to the short-term nature and smaller scale of these types of projects, the Company expects minimal write-offs of its receivables at the Commercial pool.
Self-storage projects typically involve general contractors and make up the largest portion of the Company’s accounts receivable balance. These projects are usually longer-term construction projects and billed over the course of construction. Credit limits are larger for these projects given the overall project size and duration. Due to the longer-term nature and larger scale of these types of projects, the Company expects a potential for more write-offs of its receivable balances within the Self-Storage pool.
See Note 2 to our Unaudited Consolidated Financial Statements for further discussion of allowance for credit losses.
Inventories
Inventory is costed based on management estimates associated with material costs and allocations of certain labor and overhead cost pools for which a portion is ultimately captured within inventory costs. Inventories are measured using the first-in, first-out (FIFO) method. Labor and overhead costs associated with inventory produced by Janus are capitalized. Inventories are stated at the lower of cost or net realizable value.
Janus maintains a reserve with general and specific components for inventory obsolescence. The general component of the reserve is updated monthly whereas the specific component is adjusted on a periodic basis to ensure that all slow moving and obsolete inventory items are appropriately accrued for. At the end of each quarter, management within each business entity, performs a detailed review of its inventory on an item by item basis and identifies which products are believed to be obsolete, excess or slow moving. Management assesses the need for and the amount of any obsolescence write-down based on customer demand for the item, the quantity of the item on hand and the length of time the item has been in inventory.
Property and Equipment
Property and equipment acquired in business combinations are recorded at fair value, when material, as of the acquisition date and are subsequently stated less accumulated depreciation. Property and equipment otherwise acquired are stated at cost less accumulated depreciation. Depreciation is charged to expense on the straight-line basis over the estimated useful life of each asset. Leasehold Improvements are amortized over the shorter of the lease term or their respective useful lives. Maintenance and repairs are charged to expense as incurred.
The estimated useful lives for each major depreciable classification of property and equipment are as follows:
| | | | | |
Manufacturing machinery and equipment | 3-7 years |
Office furniture and equipment | 3-7 years |
Vehicles | 3-5 years |
Leasehold improvements | Over the shorter of the lease term or respective useful life |
Goodwill
Janus reviews goodwill for impairment on an annual basis or more frequently whenever events or changes in circumstances indicate that its more likely than not that the goodwill may be impaired. If such circumstances or conditions exist, management applies the one step process under ASU 2017-04, the Company compares the fair value of the reporting unit with its carrying amount. The Company recognizes a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment).
Janus measures the fair value of the reporting units to which goodwill is allocated using an income based approach, a generally accepted valuation methodology, using relevant data available through and as of the impairment testing date. Under the income approach, fair value is determined using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The key estimates and factors used in this approach include, but are not limited to, revenue growth rates and profit margins based on internal forecasts, a weighted average cost of capital used to discount future cash flows, and a review with comparable market multiples for the industry segment as well as our historical operating trends, all of which are subject to uncertainty. Future adverse developments relating to such matters as the growth in the market for our reporting units, competition, general economic conditions, and the market appeal of products or anticipated profit margins could reduce the fair value of the reporting units and could result in an impairment of goodwill in the reporting unit.
Intangible Assets
Fair values assigned to the definite life intangible assets, consisting of customer relationships, noncompete agreements, backlog and other intangibles (i.e., software) are amortized on the straight-line basis over estimated useful lives less than 15 years. Such assets are periodically evaluated as to the recoverability of their carrying values. In determining the impairment of intangible assets, management considers an analysis under ASC 360-10-35-21. If an intangible asset is tested for recoverability and the undiscounted estimated future cash flows to which the asset relates is less than the carrying amount of the asset, the asset costs is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of the intangible asset exceeds its fair value.
Trade names and trademarks have been identified as indefinite-lived intangible assets and are not amortized, but instead are tested for impairment annually or when indicators of impairment exist.
The estimated useful lives for each major classification of intangible asset are as follows:
| | | | | |
Trademark and Trade Name | Indefinite |
Customer Relationships | 10-15 years |
Non-Competition Agreement | 3-8 years |
Software | 10 years |
Backlog | Less than 1 year |
Significant judgment is also required in assigning the respective useful lives of intangible assets. Our assessment of intangible assets that have a finite life is based on a number of factors including the competitive environment, market share, brand history, underlying product life cycles, churn rate, operating plans, cash flows (i.e., economic life based on the discounted and undiscounted cash flows), future usage of intangible assets, and the macroeconomic environment. The costs of finite-lived intangible assets are amortized to expense over the estimated useful life.
The approaches used for determining the fair value of the trade names, customer relationships, non-compete agreements, and other intangibles acquired depends on the circumstances and can include the following:
•The income approach (within the income approach, various methods are available such as multi-period excess earnings, with and without, incremental and relief from royalty methods).
•In each method, a tax amortization benefit is included, which represents the tax benefit resulting from the amortization of that intangible asset depending on the tax jurisdiction where the intangible asset is held.
•The cost approach – this approach estimates the cost to recreate the intangible assets and is used when cash flows about the intangible asset are not easily available.
Long-Lived Asset Impairment
Janus evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows to which the asset relates is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value. No such charges were recognized during the periods presented.
Using a discounted cash flow method involves significant judgment and requires Janus to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates. Judgments are based on historical experience, current market trends, consultations with external valuation specialists and other information. If facts and circumstances change, the use of different estimates and assumptions could result in a materially different outcome. Janus generally develops these forecasts based on recent sales data for existing products, acquisitions, and estimated future growth of the market in which Janus operates.
Income Taxes
Prior to June 7, 2021, the Company was a limited liability company taxed as a partnership for U.S. federal income tax purposes. The Company was generally not directly subject to income taxes under the provisions of the Internal Revenue Code and most applicable state laws. Therefore, taxable income or loss was reported to the members for inclusion in their respective tax returns.
After June 7, 2021, the Group is taxed as a Corporation for U.S. income tax purposes and similar sections of the state income tax laws. The Group’s effective tax rate is based on pre-tax earnings, enacted U.S. statutory tax rates, non-deductible expenses, and certain tax rate differences between U.S. and foreign jurisdictions. The foreign subsidiaries file income tax returns in the United Kingdom, France, Australia, and Singapore as necessary. For tax reporting purposes, the taxable income or loss with respect to the 45% ownership in the joint venture operating in Mexico will be reflected in the income tax returns filed under that country’s jurisdiction. The Group’s provision for income taxes consists of provisions for federal, state, and foreign income taxes.
The provision for income taxes for the three months ended April 2, 2022 and March 27, 2021 includes amounts related to entities within the group taxed as corporations in the United States, United Kingdom, France, Australia, and Singapore. The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate on year to date ordinary income and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. Additionally, the income tax effects of significant unusual or infrequently occurring items are recognized entirely within the interim period in which the event occurs.
Management of Janus is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes federal and certain states. Based on Janus’ evaluation, Janus has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements. Tax penalties and interest, if any, would be accrued as incurred and would be classified as tax expense on the consolidated statements of operations.
Janus recognizes accrued interest associated with uncertain tax positions as part of interest expense and penalties associated with uncertain tax positions as part of other expenses.
Business Combinations
Under the acquisition method of accounting, Janus recognizes tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. Janus records the excess of the fair value of the purchase consideration, plus fair value of noncontrolling interest, plus fair value of preexisting interest in the acquiree over the value of the net assets acquired as goodwill. The accounting for business combinations requires us to make significant estimates and assumptions, especially with respect to intangible assets and the fair value of contingent payment obligations. Janus uses a variety of information sources to determine the value of acquired assets and liabilities including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; and legal counsel or other advisors to assess the obligations associated with legal, environmental or other claims. Critical estimates in valuing customer relationships, noncompete agreements, trademarks and tradenames, and other intangible assets (e.g., backlog, software, and technology) acquired, include future cash flows that we expect to generate from the acquired assets. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material.
We record contingent consideration resulting from a business combination at its fair value on the acquisition date. We generally determine the fair value of the contingent consideration using the Monte Carlo simulation, and Probability-Weighted Payment method. Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value as an adjustment to operating expenses within the Consolidated Statements of Operations and Comprehensive Income. Changes in the fair value of the contingent consideration can result from changes in assumed discount periods and rates, and from changes pertaining to the achievement of the defined milestones. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period.
Equity Incentive Plan and Unit Option Plan
2021 Omnibus Incentive Plan
Effective June 7, 2021, the Group implemented an equity incentive program designed to enhance the profitability and value of its investment for the benefit of its stockholders by enabling the Group to offer eligible directors, officers and employees equity-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Group’s stockholders.
The Company measures compensation expense for restricted stock units (“RSUs”) issued under the 2021 Omnibus Incentive Plan (the “Plan”) in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Stock-based compensation is measured at fair value on the grant date and recognized as compensation expense over the requisite service period. The Company records compensation cost for these awards using the straight-line method. Forfeitures are recognized as they occur.
2018 Equity Incentive Plan
After being acquired by CCG on February 12, 2018, Intermediate implemented a new equity incentive program (the “2018 Plan”) on March 15, 2018 designed to enhance the profitability and value of its investment for the benefit of its members by enabling Janus to offer eligible individuals equity-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Parent’s members. Under the 2018 Plan, incentive units are issued in the form of Class B Common Unit awards that are subject to either service condition (the “Time Vesting Units”) or market and implied performance vesting conditions (the “Performance Vesting Units”). Implied performance condition, which is a liquidity event such as an IPO or change in control, exists as the achievement of the market condition is only likely upon the occurrence of such liquidity events. Janus measures and recognizes compensation expense for all incentive units granted based on the estimated fair values on the date of grant. The compensation expense is recognized on a straight-line basis over the requisite service period for Time Vesting Units while compensation expense for Performance Vesting Units are not recognized until the implied performance condition is achieved. If the market condition is not yet achieved at the time that performance condition is achieved, the proportionate amount of compensation expense recognized on a straight-line basis over the derived service period will be recognized and the remaining compensation cost will be recognized on a straight-line basis over the remaining derived service period regardless of whether the market condition is ultimately achieved. Forfeitures are recognized as they occur.
For Time Vesting Units granted in fiscal 2018, Janus used a market approach, specifically the subject company transaction method (the “Black-Scholes” method), weighted on the probability of Janus’s Performance Vesting Units achieving the vesting conditions to estimate the fair value of Janus’s equity. Monte Carlo simulations were used to determine the probability. The Black-Scholes method was used since it is based on the terms of the then-recent acquisition of Janus by CCG in February 2018, representing the most reliable indication of value. The Black-Scholes option pricing model (“BSOPM”) was used to allocate the equity value to different classes of equity, with inputs for unit value of Janus, term to exit, risk-free rate, expected volatility, and exercise price. For Performance Vesting Units granted in fiscal 2018, Janus used a combination of probability analysis and Monte Carlo Simulation to estimate the fair value with inputs for Janus’s equity value, risk-free rate, expected volatility, expected tax and non-tax distributions, probability of merger and acquisition, expected term of the awards, and expected timing of achieving the vesting conditions. Discount for lack of marketability was applied in the valuation of all grants.
For Time Vesting Units granted in fiscal 2019 and fiscal 2020, Janus used a combination of the income and market approach, guideline public company method and comparable transaction method equally to estimate the fair value of Janus’s equity. Key inputs and assumptions to the valuation include income tax rate estimate, revenue, capital expenditure, change in net working capital, operating expense, and depreciation forecasts. BSOPM was used to allocate the equity value to different classes of equity, with inputs for unit value of Janus, term to exit, risk-free rate, expected volatility, and exercise price. For Performance Vesting Units granted in fiscal 2019 and fiscal 2020, Janus used a combination of probability analysis and Monte Carlo Simulation to estimate the fair value with inputs for Janus’s equity value, risk-free rate, expected volatility, expected tax and non-tax distribution, probability of merger and acquisition, expected term of the award, and expected timing of achieving the vesting condition. Discount for lack of marketability was applied in the valuation of all grants.
The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our share-based compensation expense could be materially different. See Note 9, “Equity Incentive Plan and Unit Option Plan,” of the accompanying unaudited consolidated financial statements for more information. Effective June 7, 2021 this plan was terminated as a result of the Business Combination transaction closing.assumptions.
Recently Issued Accounting Standards
See Note 2 to our Condensed Unaudited Condensed Consolidated Financial Statements in this Form 10-Q for a discussion of recently issued and adopted accounting pronouncements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk
Foreign currencyThere have been no material changes in exposures
Janus is exposed to foreign currency exchangemarket risk relatedsince December 31, 2022. For information regarding our exposure to currency translation exposure becausecertain market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the operations of its subsidiaries are measured in their functional currency which is the currency of the primary economic environment in which the subsidiary operates; particularly, the United Kingdom and Australia. Any currency balances that are denominated in currencies other than the functional currency of the subsidiary are re-measured into the functional currency, with the resulting gain or loss recorded in the other income (expense) in Janus’ income statement. In turn, subsidiary income statement balances that use functional currencies other than the U.S. dollar are translated into U.S. dollars in consolidation using the average exchange rate in effect during each fiscal month during the period, with any related gain or loss recorded as foreign currency translation adjustments in other comprehensive income (loss). The assets and liabilities of subsidiaries that use functional currencies other than the U.S. dollar are translated into U.S. dollars in consolidation using period end exchange rates, with the effects of foreign currency translation adjustments included in accumulated other comprehensive income (loss).
Janus seeks to naturally hedge its foreign exchange transaction exposure by matching the transaction currencies for its cash inflows and outflows and maintaining access to credit in the principal currencies in which it conducts business. Janus does not currently use hedging instruments to hedge our foreign exchange transaction or translation exposure but may consider doing so in the future.
Other comprehensive income (loss) includes foreign currency translation adjustments.
Commodity/raw material price exposures and concentration of supplier riskyear ended December 31, 2022.
Janus’s biggest commodity group spend is steel coils, which is subject to price volatility due to external factors, and comprises approximately, 63.3% and 60.7% of commodity spend, for the period ended April 2, 2022 and period ended March 27, 2021, respectively. Historically, exposures associated with these costs were primarily managed through terms of the sales and by maintaining relationships with multiple vendors. Prices for spot market purchases were negotiated on a continuous basis in line with the market at the time. Other than short term supply contracts and occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis. In early 2020 Janus entered into multiple fixed price agreements to combat fluctuations in the price of steel locking in prices and will continue to do so in the future. These fixed price agreements expect to cover 30.5% of estimated steel purchases for fiscal year end 2022. We have not entered into hedges with respect to our raw material costs at this time, but we may choose to enter into such hedges in the future.
Interest rate exposure
As indicated in Note 8 of Janus’ unaudited consolidated financial statements, Janus’ outstanding borrowing under its credit facility includes the Amendment No. 4 1st Lien term loan for $721.0 million as of April 2, 2022. These borrowings accrue interest at our option of (i) a LIBOR rate, subject to a 1.00% floor, plus the applicable margin or (ii) a base rate (i.e., prime rate or federal funds rate) plus the applicable margin.
In addition, Janus has a $80 million credit facility. For the three months ended April 2, 2022 and January 1, 2022, there is $0 and $6.4 million outstanding under this facility, respectively. The facility accrues interest at our option of (i) a LIBOR rate plus the applicable margin or (ii) a base rate plus the applicable margin. At April 2, 2022 and January 1, 2022, the interest rate was 3.8% and 3.5%, respectively.
Janus experiences risk related to fluctuations in the LIBOR rate and base rate at any given time. As of April 2, 2022 and January 1, 2022, the Amendment No. 4 debt carried a total interest of 4.25%, respectively.
Taking into account the LIBOR floor of 1.0%, a hypothetical increase or decrease in 100 basis points of the LIBOR rate on the amounts outstanding under the Amendment No. 4 to 1st Lien term loan as of April 2, 2022, would have led to an approximate $1.8 million increase and no change in the interest expense of the Amendment No. 4 to 1st Lien term loan on an annual basis. Historically, our management entered into interest rate hedges, but has not done so within the periods presented. Management would consider using such mitigating strategy in the future to combat potential exposure.
Credit risk
As of April 2, 2022 and January 1, 2022, our cash and cash equivalents were maintained at major financial institutions in the United States, Europe, Singapore, and Australia, and our current deposits are likely in excess of insured limits. We believe these institutions have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us.
Our accounts receivable primarily relate to revenue from the sale of products and services to established customers. To mitigate credit risk, ongoing credit evaluations of customers’ financial condition are performed, deposits are required for select customers, and lien rights on any jobs in which Janus provides subcontracted installation services are available. As of April 2, 2022 and January 1, 2022, Janus’ top 10 customers represented less than 20% and 25% of our gross trade accounts receivable, respectively.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, with the participation of certain members of management (collectively “the management team”) evaluated the effectiveness of our disclosure controls and procedures as of April 2, 2022,1, 2023, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, or SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As discussed in Item 9A “Controls and Procedures” in our 2021 Annual Report on Form 10-K, the Company identified unremediated material weaknesses related to the Control Environment and Control Activities elements established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”) as of December 31, 2022.
Based on the evaluation of our disclosure controls and procedures as of April 2, 2022,the end of the period covered by this form 10-Q, our Chief Executive Officer and Chief Financial Officer concluded, thatas of such date, our disclosure controls and procedures were not effectiveineffective due to the existence of the material weaknesses describeddiscussed further below.
Material WeaknessesChanges in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies,There have been no changes in the Company’s internal control over financial reporting suchduring the quarter ended April 1, 2023, that a reasonable possibility exists that a material misstatement of our annualhave materially affected, or interim financial statements could not be prevented or detected on a timely basis. At April 2, 2022,are reasonably likely to materially affect, the following material weaknesses existed:
Entity Level Controls
Management did not maintain appropriately designed entity-level controls impacting the (1) control environment, (2) risk assessment procedures, and (3) monitoring activities to prevent or detect material misstatements to the financial statements and assess whether the components ofCompany’s internal control were present and functioning. These deficiencies were primarily attributed to an insufficient number of qualified resources to support and provide proper oversight and accountability over the performance of controls.
Control Activities
Management did not have adequate selection and development of effective control activities resulting in the following material weaknesses:
•Information Technology (IT) General Controls – Certain information technology general controls for security and administration of key IT systems were not designed properly or did not operate effectively. Specifically, (i) periodic user access reviews of roles and permissions were not performed sufficiently throughout the period for certain key IT systems, (ii) certain key IT systems were not logically restricted between business and IT administration access privileges, resulting in improper segregation of duties for certain business processes, and (iii) there was an insufficient evaluation of third party service organization controls for a single business unit.
•Management Review Controls – Management review controls over revenue, income taxes, complex non-routine transactions, and other business processes were not designed with an appropriate level of precision to detect a material misstatement and sufficient appropriate evidence was not maintained to support the execution and evaluation of the procedures performed, including the review of the completeness and accuracy of the source data utilized, over the significant estimates and business assumptions used in these areas.
•Financial Reporting – Management did not design and implement effective controls over processes and disclosure of amounts in the financial statements, including the review of the completeness and accuracy of the underlying support of amounts contained in the financial statements.
Remediation of Material Weaknesses
Remediation of the identified material weaknesses and strengthening our internal control environment is a priority for us.Management is actively engaged in the implementation of remediation planscontinues to addressmake progress towards remediating the control deficiencies contributing to the material weaknesses. The remediationremedial actions include, but are not limited to, the following:
Entity Level Controls• – In an effort to provide additional support, oversight and accountability over the performance of controls, the Company recently hired a Tax Director, V.P. of Finance and Accounting, and a SEC Reporting Manager and is actively recruiting for other key financial reporting positions. Management will continue to assess the composition of its resource needs, both internal and external, which may include adding additional accounting and compliance resources at both the corporate and subsidiary levels. Management may also consider engaging additional third-party advisors when necessary to supplement its existing resources.
As previously disclosed, the Company hired a Director of Internal Audit and has engaged third-party consultants to manage the Company’s SOX 404 assessment of internal control over financial reporting as well as monitoring management’s remediation efforts.
General Information Technology General Controls - User access assessments for logical security (roles and privileges) will be performed and periodic user access reviews for key IT systems will be implemented.All IT processes will be centrally managed and IT Management will transition certain hosting and administration responsibilities from third-parties.
Management Review Controls – Management will enhance the design of and implement controls around the rigorto monitor user access and segregation of the review process over revenue, income taxes, complex non-routine transactions, and other business processes.
Financial Reporting – Management will enhance the design of controls over the processes and disclosures of amountsduties in a timely manner to key information systems used in the financial statements includingreporting process. Additionally, management will create a transaction log of administrative users’ activity and review for unauthorized activity.
•Revenue - As part of the financial statement close process, management will: 1) provide additional oversight to project managers around the review of the completenessjob completion progress on open installation projects; 2) design management review controls over the stand-alone selling price on contracts with multiple performance obligations; and accuracy3) design and implement controls over cutoff for certain point-in-time revenue and maintain adequate documentation of controls which ensure the underlying support of amounts containedproper cutoff for point in the financial statements.time revenue.
The material weaknesses cannot be considered remediated until the applicable controls have been identifieddesigned and implemented and have operated for a sufficient period of time, and management has concluded, through testing, that these controls are operating effectively.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions, and cannot provide absolute assurance that its objectives will be met. Management continues to refine and assess its overall control environment.
Changes in Internal Control Over Financial Reporting
There were no changes, other than the remediation efforts described above, in our internal control over financial reporting identified in connection with the evaluation required by Rule13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting due to the COVID-19 pandemic. While some remote work has continued, most of our workforce have returned and are working from our company locations. We are continually monitoring and assessing the COVID-19 situation and our internal controls to minimize any impact on their design and operating effectiveness.
PART II — II—OTHER INFORMATION
Item 1. LEGAL PROCEEDINGSLegal Proceedings
See Note 1816 to the Consolidated Financial Statements, which is incorporated herein by reference.
Item 1A. RISK FACTORSRisk Factors
For information regarding factors that could affect the Company'sCompany’s results of operations, financial condition, and liquidity, see the risk factors discussed in Part I, Item 1A “Risk Factors” in our 20212022 Annual Report on Form 10-K. There have been no material changes to10-K for the risk factors disclosed in Part I, Item 1A of our 2021 Annual Report on Form 10-K.fiscal year ended December 31, 2022.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIESDefaults upon Senior Securities.
None.
Item 4. MINE SAFETY DISCLOSURESMine Safety Disclosures.
Not applicable.
Item 5. OTHER INFORMATIONOther Information.
None.
Item 6. EXHIBITS
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
| | | | | | | | | | | | | | |
| Exhibit Number | Description |
| 3.1 | |
| 3.2 | |
4.110.1+ | |
| 10.2+ | |
31.110.3+ | |
| 10.4+ | |
| 31.1* | |
31.231.2* | |
| 32.1** | |
| 32.2** | |
101.INS101.INS^ | Inline XBRL Instance Document |
101.SCH101.SCH^ | Inline XBRL Taxonomy Extension Schema Document |
101.CAL101.CAL^ | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF101.DEF^ | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB101.LAB^ | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE101.PRE^ | Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
104104^ | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith.
** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed “furnished” withto accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
^ Submitted electronically with this Report in accordance with the provisions of Regulation S-T.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereuntohereunto duly authorized.
| | | | | | | | | | | | | | |
| Date: | May 17, 202211, 2023 | | By: | /s/ Scott SannesAnselm Wong |
| | | Name: | Scott SannesAnselm Wong |
| | | Title: | Chief Financial Officer |
| | | | |