When a business historically has been dependent on new construction for 90-95 percent of its sales, a prolonged downturn in that market — a reality since late 2008 — could be disastrous.
But Pensacola, Fla.-based U S Block Windows Inc. has avoided disaster so far by working diligently to build sales in the replacement business and by marketing all of its windows under the Hy-Lite name it acquired in March 2009 from Fortune Brands Inc.
The firm also has lowered its costs by moving manufacturing of the acrylic block windows that Hy-Lite used to mold in China back to its factory in Pensacola. The vinyl extrusions for Hy-Lite window frames are also now made in the U.S. instead of China.
“We got a boost when we acquired Hy-Lite Products Inc. because they had twice as many sales as we did,” said Roger Murphy, president of U S Block Windows, which now does business as Hy-Lite, a U.S. Block Windows Co.
“But our focus for the last 18-24 months has been to go into the replacement market,” he said in an interview at the International Builders Show, held in Orlando in January. “We have to change people's concept of block windows because most people don't know they can get one that can be opened to let in air but maintain privacy. An operating block window is a new concept to most people.”
Traditionally, acrylic block windows with vinyl frames have been used primarily in new-construction bathroom applications, and the vast majority of them have been fixed windows that don't open.
So far, he said Hy-Lite's push into the remodeling market has been encouraging, but sales are still slow.
“As far as huge dollars, they are not there yet,” said Murphy, who joined the firm in 2001 and was named president in 2005. “It is slow now, but we see it becoming our fastest-growing segment and accounting for 20-25 percent of our volume in two to three years.”
Another improvement is the availability of decorative glass. “As awareness grows of operable decorative-glass window options, we predict a surge in sales,” he said.
But moving into the replacement market remains a heady challenge for companies that make acrylic block windows, he said, because it is “an educational sell” — which is why Hy-Lite decided to have a booth at IBS for the first time in the company's history.
“We are planting the seeds of where you can use block windows for privacy applications and eliminate expensive windows,” he said.
“We are spending dollars on the marketing and sales side to push awareness in both the builder and the remodeling markets,” said Murphy.
“As we build awareness, sales will come. It is a product that has a lot of potential growth, even in a downturn.”
The firm's biggest accomplishments in 2010 were expanding into new customer bases and new channels and stepping up its presence at major home-improvement retail chains, he said. “We put on more than 1,500 sales demonstrations and product training sessions.”
Hy-Lite is also working to get builders to include operable windows as an option in new-home construction. “On the remodeling side, we sell a lot more operable block windows,” said Murphy, “but many builders are not giving consumers that option. We are working to get them to do that in model-home programs.”
The company also is working to boost sales of its acrylic block radius walls, mainly used in commercial buildings like hospitals and restaurants.
“Without the weight concerns and structural support limitations of true glass, commercial designers are free to use these walls anywhere inside a structure,” Murphy said. “I believe they will gain in popularity in college campus settings, retail shops and libraries.”
While working to build its window replacement sales, Hy-Lite also taken measures during the past two years to take cost out of its business and remain competitive. “We have restructured our cost basis so that even a small increase will give us an impact,” said Murphy, including moving production of Hy-Lite's acrylic block windows and vinyl frames from China back to the U.S.
“It cost too much to have it molded there and transported back to the U.S. It was a no-brainer to move that into our plant in Pensacola. We just began running their products. We took $1.5 million of product out of inventory and gained cash efficiencies because we no longer had eight to 10 weeks of lead time on shipping,” he said.
“We added 15,000 square feet of storage space [to the plant] and were able to eliminate 50,000 square feet of storage space,” said Murphy. “It gave us better inventory management and control, and more space efficiency. We freed up cash, reduced space, improved service/delivery times to customers and reduced shipping time.”
The company buys all of its vinyl extrusions in the U.S. The Pensacola site has four buildings with 100,000 square feet of manufacturing space. Also, a plant in Tempe, Ariz., has 25,000 square feet of space that is used strictly for window assembly, largely to serve California and the Southwest, where most of Hy-Lite's customers were located prior to the acquisition.
Currently, sales are divided roughly 50-50 between Hy-Lite-brand products and U S Block's own product lines.
To further improve cost structure, the company continues to work on reducing the amount of material in its frames while maintaining structural strength. With rising oil prices, “we have to try and keep our resin prices down” or use less resin, he said.