Thursday, April 18, 2024

N.C.-based window maker Jeld-Wen sheds light on its growth plans

This summer Jeld-Wen, one of the world’s leading window and door manufacturers, is opening up a new plant in Statesville.  The company plans to hire as many as 235 employees and invest $7.9 million in the Iredell County facility, which will make commercial vinyl windows, the kind that go in apartment buildings. This is the VPI Quality Windows line that Jeld-Wen acquired two years ago.

You probably have heard of Jeld-Wen. The company has been building windows and doors in North Carolina for decades, and many of you have them in your homes. But its profile has risen here over the past decade with the move of its headquarters from Oregon to Charlotte. Also, since 2017, it has been a publicly traded company.

The company was founded in 1960 by a young Air Force veteran named Richard Wendt, who was sent by an Iowa window company to try to turn around a factory in Klamath Falls, Ore., in 1957.  He did, but the company decided to sell it anyway, and Wendt and several employees bought it. That was the start of Jeld-Wen, a company with an unwieldy name but a smart, entrepreneurial owner.  (Here’s how the name was created:  The first part, Jeld, came from the first letters of the first names of his sister (Jewel), mom (Evelyn), dad (Lester), and his own (Dick). The second part was their truncated last name.)

From that modest beginning, Wendt created a national footprint. (It opened a window plant in 1962 in Charlotte). The company became one of Oregon’s largest employers. Wendt passed away in 2010 at 79, and the past decade or so has brought significant changes to his company.

These included a move of the headquarters from Oregon to Charlotte, where Jeld-Wen could be closer to major customers — such as Home Depot (its largest: 15% of Jeld-Wen’s business) — in the booming Southeast.

Another big change was in ownership. The 2007-09 recession crushed the housing industry, and Jeld-Wen, which had taken on debt, struggled as revenues dropped. In 2011, Toronto-based private-equity firm Onex acquired a controlling interest. What happened over the next few years was clear in the language of a Jeld-Wen filing in 2016, when it was preparing to go public.

“After the Onex Investment, we began the transformation of our business from a family-run operation to a global organization with independent, professional management.“ (Onex and its affiliates now own about 15% of Jeld-Wen stock.)

In late 2016, Jeld-Wen announced it would be expanding its Charlotte headquarters by 200 employees, and in 2018, Jeld-Wen moved to a new, 120,000-square-foot building in southwest Charlotte.

The company now has more than 540 N.C. employees, including about 330 at the Charlotte headquarters and more than 210 at a door plant in North Wilkesboro. In addition to the new Statesville plant, it plans to add up to 20 jobs in North Wilkesboro by next summer. Globally, it employs 23,000, about half of whom are outside North America. They work at about 140 manufacturing and distribution facilities in 19 countries, including Europe and Australia, and 2020 net revenues were $4.2 billion (sales primarily 65% doors, 20% windows).

The window and door industry is fragmented. Windows, particularly, are manufactured for the requirements of specific regions and climates. They are fragile, increasingly complex, and challenging to transport. Jeld-Wen has spent the past decade acquiring companies all over the world.

CEO Gary Michel was hired in 2018 from Honeywell after his predecessor, Mark Beck, suddenly left the company after around two years amid slumping sales. It has tried to improve its operations while also growing, a consistent theme made in company filings. Company shares, which traded at $23 in the 2017 IPO, closed Monday at about $27. That is substantially less than the S&P 500 index gain during that period.

“Prior to the ongoing operational transformation being executed by our senior executive team, our operations were managed in a decentralized manner,” Jeld-Wen has said in its 10-Ks, “with varying degrees of emphasis on cost efficiency and limited focus on continuous improvement or strategic sourcing.”

A program called the Jeld-Wen Excellence Model has aimed at reducing waste, shortening lead times and increasing productivity, and enabling revenue and profit growth from existing facilities — not simply through acquisitions.

Already, Jeld-Wen has seen results. Net revenue from 2015 through 2020 grew at a 4.6% compound annual rate; adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) grew at 7.5%.  Now the company thinks it can grow revenues by 6 to 8% on a CAGR basis by 2025, and can achieve an adjusted EBITDA margin of 15 to 17% in 2025, up from an expected 11% this year.

I talked with Dan Jacobs, a Jeld-Wen vice president, about some of the challenges of executing over the past 15 months during the pandemic. Jacobs has been with the company since graduating from college 13 years ago.

“For people like myself that are young in their careers, to industry veterans that have been manufacturing things for 40 years, I think we all learned something during the pandemic,” says Jacobs, who started out selling to Home Depot.

The number one priority was keeping employees safe, he says. Then it was managing disruptions to the supply chain and dealing with labor shortages.

“At first, demand fell out from underneath us, and some of the supply chain issues were covered up because the demand wasn’t there,” he says. “But then demand came back, not only in full force, but something nobody could have predicted. Everybody’s sitting at home, and they want to update their home. And building materials went through the roof.”

“You have this just incredible economic situation where supply’s tight and demand’s obviously exceptional, and then labor’s short. Those challenges are basically a perfect storm, to some degree. But manufacturers like challenges, and we’re problem solvers, and these are great problems to solve. This is why we do what we do. We solve the problems and come up with creative solutions.”

Another challenge that has kept Jeld-Wen busy has been a number of lawsuits. The 4th Circuit Court of Appeals earlier this year upheld an order in an antitrust case brought by another door manufacturer that would require Jeld-Wen to divest itself of a Pennsylvania plant that makes door skins, the thin layers that are used to cover frames. Jeld-Wen denies violating antitrust laws and may appeal.

Another suit, a class action, was settled recently, with Jeld-Wen and Masonite agreeing to each pay $30.8 million to plaintiffs who contended that the companies’ large share of the door skin market allowed them to fix prices and drove up prices of interior doors. Jeld-Wen also denied violating antitrust laws in this case.

There are also the public relations challenges that accompany the plant closings that are part of the company’s effort to create a more efficient network of plants and distribution centers.  In late 2019, Jeld-Wen closed a door plant in Lexington, which eliminated 135 jobs.

The company, in a February 2019 presentation, said it wanted to shrink its global manufacturing and distribution footprint — 24.6 million square feet at the end of 2018 — by more than 3 million square feet by 2022. Achieving financial goals requires modernizing technology and achieving more productivity and volume at fewer facilities.

This sometimes complicates economic development efforts.  The state announced last month that the new Statesville plant would make Jeld-Wen eligible for more than $2.2 million in incentives over 12 years if it creates all the jobs it proposes.

There are a couple of ways to look at this. One is that withholding incentives for Statesville because of the Lexington plant closing might send those new jobs somewhere else, like South Carolina, which loves to recruit companies to York and Lancaster counties, just over the line from Charlotte. Additionally, companies with large, centralized facilities often eliminate positions over time without much publicity.  Companies like Jeld-Wen, with 140 relatively smaller facilities, get a lot of publicity when they shut down a single plant. So you don’t want to hold a company to a higher standard because its operations are decentralized.

Also, each application for incentives “is reviewed on its own merits specific to the viability of the project under consideration,” says David Rhoades, a spokesman for the N.C. Department of Commerce. It’s not that the state has forgotten that Lexington was shut down. But it has to weigh this among a variety of factors.

There’s also the undeniable significance of Jeld-Wen’s headquarters move to Charlotte, which was a big deal (and also incentives-eligible). When you have a headquarters located here, that has benefits from a civic and philanthropic standpoint. Jeld-Wen recently donated $900,000 for Charlotte arts funding. Michel, the CEO, has been named chairman of the Greater Charlotte Heart Ball, a major fundraising event for the American Heart Association. Jeld-Wen has donated to a St. Jude Dream Home in Charlotte, and the company is a “touchdown” sponsor of the Atrium Health Keep Pounding 5K.

“We’re committed to this state,” says company spokesman Joe LaMuraglia, “and we’re committed to being a good corporate partner.”

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