T R E N D T R A C K E R  
Insights from the Jeld-Wen IPO  
Public Filings Provide a Benchmark for the Industry  
B Y M I C H A E L C O L L I N S  
eld-Wen recently filed the nec-  
essary documents with the  
Securities Exchange Commission  
SEC) to undertake an initial public  
FIGURE 1 - Dollar Weighted  
Product Segmentation  
FIGURE 2 - Dollar Weighted  
Construction Applications  
offering (IPO) of its stock. Once the  
IPO is complete, Jeld-Wen stock will  
be actively traded and available for  
purchase by investors. For participants  
in the door and window industry, such  
a public filing is a treasure-trove of  
information just waiting to be ana-  
lyzed. We’ve reviewed the financial  
statements in the Jeld-Wen filing  
document and have come away with  
information that is relevant to all par-  
ticipants in the industry.  
11% Other  
10% Non-Related  
4% Windows  
7% Residential R&R  
6% Doors  
43% Residential New  
Source: Building Industry Advisors  
A Big Player  
Jeld-Wen operates 113 manufacturing facilities in 19 dif- goods sold (COGS) consisted of materials costs. With a  
ferent countries. Thus, they are not a pure-play U.S. door COGS of 80.3 percent, this means that 42.6 percent of Jeld-  
and window manufacturer. For instance, Jeld-Wen partic- Wen’s overall revenue was used for materials purchases.  
ipates in three markets (with the percentage of total reve- Bearing in mind the importance of materials costs, the  
nues from each): North America (60 percent), Europe (29 company plans to continue to improve its gross margins  
percent), and Australasia (11 percent). If we dollar-weight through steps that represent good, basic business blocking  
the company’s geographically segmented revenues versus and tackling. Jeld-Wen reports that, in the past, materials  
these categories, though, a clearer view of the overall busi- purchased at its many facilities were handled in a region-  
ness emerges, as illustrated in Figures 1 and 2.  
al, decentralized manner. For a company of this size and  
As of the 12 months that ended March 26, 2016, the scope, that means volume purchasing power was not being  
company generated an impressive $3.4 billion in revenue. used to its fullest extent. The company will change that  
Financial analysts will then look at the company’s gross in the future, along with decreasing labor, overtime, and  
profit and gross margin for clues to its performance. Jeld- materials waste and improving quality in order to reduce  
Wen has enjoyed a strong increase since 2013 in its gross warranty claims.  
margin (its gross profit divided by revenues). In 2013,  
gross margins were just 14.8 percent, and they rose to 20.2 EBITDA Analysis  
percent by 2015.  
The next key measure in the typical analytical approach  
There are several ways a company can increase its gross is to look at EBITDA margins, a company’s earnings before  
margins. One is by putting the clinch on its vendors and interest, taxes, depreciation and amortization (EBITDA)  
beating down the cost of its components. Fortunately the divided by its revenues. In the case of Jeld-Wen, they have  
company did not need to employ such tactics. Rather, it been able to increase their adjusted EBITDA margins  
was able to do so through increased pricing and improve- steadily, from 4.4 percent in 2013 to 9.5 percent for the year  
ments in the mix of higher-margin and lower-margin trailing March 2016. For door and window manufacturers,  
products. It is a positive indicator for the whole industry 10 percent EBITDA margins are indicative of a solid level  
that Jeld-Wen has been able to pass along and stick to of performance. It will be informative to see if the various  
price increases and that its customers are willing to buy growth initiatives outlined by Jeld-Wen succeed in driving  
higher-margin products.  
that profitability even higher.  
The IPO filing cites that 53 percent of the total cost of  
The company disclosed the broad strokes of its plan  
Door & Window Market  
for achieving improved growth and profitability. The plans  
address several fronts and appear to have real merit in  
the current environment. The company has increased its  
commitment to R&D, hiring some 20 engineers. We would  
recommend that some of these engineers focus on basic  
materials research, improving the ways that various materi-  
als interact with each other. Historically, such basic research  
has been the source of the most game-changing innovations  
across many industries. Jeld-Wen will improve its command  
of such unmet needs and potentially develop profitable  
new products through the expansion of its current group of  
product line managers. The company will also continue its  
past record of actively seeking strategic acquisitions.  
Finally, Jeld-Wen has implemented a rigorous overall  
governance policy to ensure that the most impactful new  
products and ideas are pursued.  
June/July 2016