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MODULE 2, MINI REPORT 2

November 1, 2012GWL Roofing Limited

Overview

GWL Roofing Limited (GWL) manufactures roofing materials, and installs and services roofs for industrial, commercial, and investment (ICI) properties. GWL’s head office and sole manufacturing facility are located in eastern Quebec. In addition, GWL has distribution facilities located across eastern Canada and the northeastern United States. The U.S. location houses the administrative functions of GWL’s wholly-owned U.S. subsidiary, GWL Roofing U.S. Limited (GWL-US).

Gaston Laroche, who was a roofer by trade, founded GWL in 1963. Gaston’s business philosophy was to offer his customers superior products at premium prices. Under Gaston’s leadership, GWL grew slowly, but profitably. In 1985, his eldest son, Daniel, succeeded Gaston, who passed away in 1988. Daniel Laroche expanded the company at a moderate pace and profits grew steadily.

Up to the late1980s, GWL’s products and services were sold almost exclusively in Quebec. The company expanded its sales base to Ontario and the Atlantic Provinces over the next decade. With growing demand for its products, GWL required more production capacity and in 1995, it built a new 100,000 square foot manufacturing facility in a small town in eastern Quebec. GWL financed its new manufacturing facility and expansion capital needs, in part, through an initial public offering, which was completed in 1994. GWL disposed of the old facility.

Daniel Laroche retired in 2009 and his younger brother, Pierre, succeeded him. Daniel has maintained a seat on GWL’s board of directors and has been acting Chair since his retirement. Pierre, who earned an MBA from a prominent university in the Midwestern United States, believed that, over the long term, an aggressive growth strategy would maximize shareholder value.

Under Pierre’s leadership, GWL expanded to the northeastern United States in late 2010. Pierre chose this region for expansion due to the fact that the weather there was similar to that of eastern Canada, and, thus, GWL’s products would enjoy a natural advantage. Pierre also began aggressively promoting GWL’s products in an attempt to

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broaden the company’s target base of customers. Consequently, sales have continued to grow in the past few years; however, GWL has had to rely on increasing amounts of bank financing through the line of credit to support this growth initiative.

Products and Services

GWL manufactures roofing materials that are specifically designed for ICI properties. The company does not operate in the residential roofing market. When an ICI property customer requires a new roof, it provides GWL with the specifications for its property, such as physical dimensions, and the nature of the activity conducted at the property (distribution, manufacturing, administration, etc.). Based on a consultation with a GWL sales representative, the appropriate type of roofing material is selected from GWL’s product portfolio, which offers various grades of products in terms of strength (density) and composition (type of material, flexibility, heat resistance, etc.). GWL employees then install the roof on the customer’s property. Installation normally takes place during the period of April through October. GWL also sells its roofing materials to independent roofing companies that have their own team of installers.

GWL has a sophisticated research and development laboratory at its manufacturing facility where it continuously tests various materials and designs to improve its products. Through its R&D efforts, management of GWL believes that it has developed the best roofing materials available for ICI...
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