Jeld-Wen IPO Brings Strengths—and Challenges—to Light

June 3rd, 2016 by Tara Taffera

When Jeld-Wen filed its initial public offering (IPO) with the Securities and Exchange Commission on June 1, the filing offered insights into the future growth plans of this global manufacturer.
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“We are in the early stages of implementing our business transformation and, as a result, we believe we have an opportunity to continue growing our profitability faster than the growth in our end-markets,” The filing reads. “We believe that our focus on operational excellence will result in the continued expansion of our profit margin and free cash flow as we systematically transform our business.”

Currently, 60 percent of Jeld-Wen’s net revenues are in North America, 29 percent in Europe and 11 percent in Australasia. For North America, here’s how it breaks down by product type: doors (57 percent); windows (33 percent); and other (10 percent). 52 percent of its revenue comes from the residential remodeling segment.

All this growth, which includes new product development, will require the hiring of additional personnel. In fact, according to the filing, the company has hired more than 20 engineers “who will work closely with our expanded group of product line managers to identify unmet market needs and develop new products.”

All those products need to be marketed, and the IPO states there are plans for that as well. “We recently began to make meaningful investments in new marketing initiatives to enhance the positioning of the Jeld-Wen family of brands.”

And while the company has made several acquisitions in the past few years, it says there is still potential growth in new markets and geographies.

“We believe there are opportunities to expand our company through the acquisition of complementary door and window manufacturers in new geographies as well as providers of product lines and value-added services. While this has not been a major focus in recent years, we expect it to be a key element in our long-term growth.”

But with growth comes challenges, and the door and window maker highlights these for potential investors. This includes changes in building codes (including Energy Star standards) that could increase the cost of its products, as well as domestic and foreign governmental regulations that could increase the costs of business operations. Environmental regulations come into play as well.

“We may be subject to significant compliance costs with respect to legislative and regulatory proposals to restrict emission of greenhouse gases,” reads the IPO.

Also, when outlining the risks, the filing does state, “our indebtedness could adversely affect our financial flexibility and competitive position … We are a highly leveraged company. As of March 26, 2016, we had $1,246.1 million of term loans outstanding …”

Other potential impacts include raw material costs of commodities including vinyl extrusions, glass, aluminum, wood, steel, plastics, fiberglass and other composites. “Changes in the underlying prices of these commodities have a direct impact on the costs of products sold.”

When disclosing the company’s consolidated financial results, net revenues decreased $126.1 million or 3.6 percent in the year ended December 31, 2015. The company attributes this to an unfavorable foreign exchange impact of 8 percent. However, net revenues in North America increased $26.1 million, or 1.3 percent, to $2.015.7 billion

 

 

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