T R E N D T R A C K E R
mcollins@buildingia.com
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
J
(
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
2
4% Windows
4
7% Residential R&R
6
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
8
Door & Window Market
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