Floor Covering Weekly January 14, 2013 : Page 1

Vol. 62 No. 1 A Hearst Business Publication January 14, 2013 $4 F LOOR C OVERING W EEKLY P RE -S URFACES I SSUE 2013 8 Engineered for the future Allied’s vice president Eric Davison, president Bob Davison and senior vice president Ken Wells. Carson says execution key to growth Allied acquisition feeds Haines’ aggressive growth plan By Raymond Pina [G B, M.] Haines’ Jan. 3 acquisition of Baltimore-based sundries distributor Allied Products is the latest move in the company’s two-pronged plan to expand its territory and diversify its business, according to president and CEO Bruce Zwicker. In 2007, Haines began to implement its plan by expanding into the Southeast with the acquisition of Florida-based Wheeler and the subsequent additions of warehouses and sales teams in Georgia and South Carolina. Now, the purchase of Allied kicks o phase two and the devel-opment of “separate but complementary” businesses, according to Zwicker. “Allied complements our ooring busi-ness but it’s di erent than oor covering distributing,” said Zwicker. “Where we focus on selling oors to dealers, Allied sells tools, sand paper, tack strips and adhesives to installers. We also sell adhesives, but to oor covering dealers, so reaching install-ers is an entirely new market and that’s the diversi cation we’re seeking.” While Allied’s territory overlaps with portions of Haines’ Mid-Atlantic footprint, it will continue to service installers as a separate business unit from its existing 11 locations throughout New Jersey, Mary-land, Delaware, Pennsylvania, Virginia, West Virginia, North Carolina and the Dis-trict of Columbia. Haines covers the Eastern Seaboard from New Jersey to Florida as well as eastern Kentucky. Though Haines and Allied will merge accounting and computer systems, Allied will maintain all of its employees and con-tinue operating independently, according to Zwicker. “The Allied name stays. All of the employees stay. All of their locations stay. And the management stays. So there will be very little change,” he emphasized. Allied senior vice president Ken Wells also noted the importance of the two companies continuing to run separatel y. “It wouldn’t work otherwise,” he said. “A lot of distributors have tried to get into sundries but it doesn’t work unless you have separate sales forces. A guy selling $500,000 in wood doesn’t care about the what’s next,” he said. Carson replaced retiring Frank Peters last year. Coming [O, F.] It’s been a busy from the operations side, he said year for Mohawk Flooring, according that much of his time is spent on to president Brian Carson. In his rst planning and execution — how year in the position, the company to keep the company running launched SmartStrand Silk, Wear-e ectively and e ciently. Dated Embrace nylon, acquired For example, through its many Pergo and Marazzi and initiated a acquisitions over the years, some number of new marketing programs. Brian Carson of Mohawk’s teams are scattered Carson said that while managing all of the current carpet initiatives, he’s sure to in di erent locations. But that is changing as keep his eye on the future. “I make sure that Carson looks for better solutions for the com-myself and key leaders gure out what’s next pany. So much of the key Mohawk Flooring — product, merchandising systems, market-management, he said, will be moved to Cal-Continued on page 34 ing — we’re spending time to think through By Amy Joyce Rush Marazzi deal furthers global reach By Tanja Kern Marazzi, which employs 6,300 people, had revenue of $1.16 billion in 2011, Mohawk said. Marazzi [C, G] Mohawk Industries sales are up 4 percent for 2012, and will acquire Italian ceramic tile maker earnings before interest and taxes, Marazzi Group for $1.5 billion during depreciation and amortization will the rst quarter of 2013, pending total about $191 million this year. closing and regulatory approvals. Mohawk reported 2011 sales of $6.6 “ is acquisition represents billion, up 16 percent from 2010. the next step in the expansion of “ e partnership with Mohawk Mohawk’s global business and will Jeff Lorberbaum represents a great development make Mohawk a stronger com-pany,” said Je Lorberbaum, Mohawk’s chair-opportunity for Marazzi Group,” said man and chief executive o cer. “We found Marazzi Group CEO Andrea Sasso. “It com-Marazzi attractive because of its solid man-bines Marazzi’s leading brand, innovation agement team and leadership positions in the and technological leadership with Mohawk’s Continued on page 34 U.S., Russia and Europe. e combination of leadership in the overall ooring industry Mohawk and Marazzi creates opportunities to and distribution strength.” Mohawk leadership noted several bene ts expand U.S. distribution through service cen-ters and other channels, source ceramic from to the acquisition during a conference call on our worldwide assets, utilize our relationships December 21, 2012. Worldwide consump-to expand all product categories and deploy tion of ceramic tile is estimated to be more leading innovation and design trends to all of than 110 billion square feet. Marazzi Group distributes tile in more than 100 countries, our ceramic businesses around the globe.” e Marazzi family currently owns 51 per-and global demand for ceramic tiles is grow-cent of the group. e family and investment ing by 5 percent to 6 percent a year. Sales rms Permira and Private Equity Partners outside of North America will represent 29 took the company private in 2008 with a percent of total Mohawk sales. For breaking news updated each business day, visit us online at www.fcw1.com transaction valued at $1.1 billion at the time. Continued on page 30 P e r i o d i c a l

Allied acquisition feeds Haines’ aggressive growth plan

Raymond Pina


[GLEN BURNIE, MD.] Haines’ Jan. 3 acquisition of Baltimore-based sundries distributor Allied Products is the latest move in the company’s two-pronged plan to expand its territory and diversify its business, according to president and CEO Bruce Zwicker.

In 2007, Haines began to implement its plan by expanding into the Southeast with the acquisition of Florida-based Wheeler and the subsequent additions of warehouses and sales teams in Georgia and South Carolina. Now, the purchase of Allied kicks off phase two and the development of “separate but complementary” businesses, according to Zwicker.

“Allied complements our flooring business but it’s different than floor covering distributing,” said Zwicker. “Where we focus on selling floors to dealers, Allied sells tools, sand paper, tack strips and adhesives to installers. We also sell adhesives, but to floor covering dealers, so reaching installers is an entirely new market and that’s the diversification we’re seeking.”

While Allied’s territory overlaps with portions of Haines’ Mid-Atlantic footprint, it will continue to service installers as a separate business unit from its existing 11 locations throughout New Jersey, Maryland, Delaware, Pennsylvania, Virginia, West Virginia, North Carolina and the District of Columbia. Haines covers the Eastern Seaboard from New Jersey to Florida as well as eastern Kentucky.

Though Haines and Allied will merge accounting and computer systems, Allied will maintain all of its employees and continue operating independently, according to Zwicker. “The Allied name stays. All of the employees stay. All of their locations stay. And the management stays. So there will be very little change,” he emphasized.

Allied senior vice president Ken Wells also noted the importance of the two companies continuing to run separately. “It wouldn’t work otherwise,” he said. “A lot of distributors have tried to get into sundries but it doesn’t work unless you have separate sales forces. A guy selling $500,000 in wood doesn’t care about the relatively small portion of glue sales. That’s our area of expertise.”

Allied president Bob Davison said it was time to sell as larger, regional distributors gain greater control of the industry. He also said Allied will grow and benefit under the Haines umbrella.

“Haines has a larger footprint and their higher volume will only increase our importance to the manufacturers whose products we carry,” he said. “Also, Haines is a very reputable and longstanding company. They are financially secure and have a great reputation in the industry. That was important to us.”

Haines will continue to seek additional expansion opportunities in 2013, according to Zwicker.

“We’re still looking for both floor covering and floor supply acquisitions,” he said. “We are very financially secure and under-leveraged. We see improvements in flooring demand, especially in new residential business, and think it’s a good time to invest in our growth.”

Read the full article at http://bt.e-ditionsbyfry.com/article/Allied+acquisition+feeds+Haines%E2%80%99+aggressive+growth+plan/1322760/147722/article.html.

Engineered for the future

Amy Joyce Rush


[ORLANDO,FLA.] It’s been a busy year for Mohawk Flooring, according to president Brian Carson. In his first year in the position, the company launched SmartStrand Silk, Wear- Dated Embrace nylon, acquired Pergo and Marazzi and initiated a number of new marketing programs.

Carson said that while managing all of the current carpet initiatives, he’s sure to keep his eye on the future. “I make sure that myself and key leaders figure out what’s next — product, merchandising systems, marketing — we’re spending time to think through what’s next,” he said.

Carson replaced retiring Frank Peters last year. Coming from the operations side, he said that much of his time is spent on planning and execution — how to keep the company running effectively and efficiently.

For example, through its many acquisitions over the years, some of Mohawk’s teams are scattered in different locations. But that is changing as Carson looks for better solutions for the company. So much of the key Mohawk Flooring management, he said, will be moved to Calhoun to bring product development, sales, operations and marketing closer together.

“I think the team has done exceptionally well in collaborating across many functions. That was a key part of our success this year — getting the teams in a room,” he said. “We will do more of that. Once we get through the move, it will pay big dividends in the future. When we get key folks together, great things happen.”

The company, he said, is always looking for ways to add value. “Once we identify that, the focus is on how to execute. It’s like a ballet — making it work as a cohesive unit. There is a lot on the execution side.”

Innovation
Mohawk has focused on product innovation in the last few years and Carson said it has served the company well in the downturn. SmartStrand Silk, for example, was brought to retail just last year and the company added more SKUs throughout 2012 and will continue to throughout this year.

Applying what it learned in creating Silk, the company launched Wear-Dated Embrace nylon, also marketed as soft , at its aligned retailer convention last year. It will also be expanded throughout 2013.

“We are committed to carving out a tremendous amount of time on product innovation. And there is a lot of technology we learned while developing Silk,” explained Carson. “We applied that to nylon. Now we have Silk — the ultimate in softness and performance — and Wear-Dated Embrace, the soft est nylon. All the development, merchandising vehicles and marketing solutions for the dealer is a full package. It’s been a busy year for the team.”

Growth and acquisition
Indeed, the company has been busy as it continues to grow and Carson said Mohawk is in a position to take advantage of the right opportunity when it comes around. For Mohawk, 2012 ended with two major acquisitions — Pergo and Marazzi.

With an eye on expanding its laminate business, Mohawk purchased Pergo for $150 million cash in October.

“We see hard surface as a good opportunity to grow,” Carson said. “As evidenced in Pergo, we actively pursue opportunities that fit and complement our business well. We look for strategic opportunities at good values.”

Carson said the Pergo business complements its own in a couple of key areas. “In Europe, the Quick-Step brand is very important in mainland, western Europe while Pergo had a large position in Scandinavia, the Nordic countries. So as you look at those two, they are complementary pieces,” explained Carson. “There’s some good synergy on the intellectual property side. Also, our Quick- Step brand is vertically integrated not only making the laminate but the board that goes into the laminate. They are not. That provides an opportunity for that business to get the advantage of being part of a vertically integrated laminate manufacturer.

“Overall, there are some capabilities that we are very good at and some capabilities that they are very good at which allows us to share technologies to help both businesses and both brands,” he continued. “So it was a good fit for us.”

In December, Mohawk announced that it will acquire tile maker Marazzi Group for $1.5 billion during the first quarter of this year. The move will bring a strong manufacturing component as well as a strong distribution and retail footprint in Europe and Russia.

“Marazzi North America will be operated as part of our Dal-Tile segment headed by John Turner, Jr.,” explained Carson. “From my perspective, Marazzi is a well-known, highly respected brand with great consumer appeal for its products. It is highly innovative in its products and manufacturing processes and there is the ability to cross leverage the strengths. Outside North America, they also have a strong business in Europe and Russia which grows Mohawk internationally.”

Mohawk has also made a commitment to increase its U.S. manufacturing and will continue to do so. “It’s gotten more expensive to produce (overseas); freight is going up; the supply chain can be long and clumsy for dealers and customers. We’ve seen a return to more manufacturing in the U.S.”

As a result, Mohawk has added ceramic production in North America. It has also brought wood production for U.S. consumption here to the states. Domestic wood facilities are located in Virginia, West Virginia and Arkansas. Wood plants in Malaysia primarily service overseas markets through the Columbia brand.

For carpet, the company domestically produces and then exports commercial and residential product to service its international demand. But it also has some partners in Asia and Europe that manufacture product unique to those markets. In those cases, fiber is shipped from the U.S. and made into carpet overseas.

“Where possible, it’s important to manufacture in the areas of the world that you’re selling,” noted Carson. “This allows for products better designed for the local markets and provides real service advantages.”

Building partnerships
Mohawk continues to strengthen its partnerships by offering more than just new product. It assists its dealer base by providing guidance with marketing, their online presence as well as with TV and print promotions and advertising. To help support retailers from a merchandising perspective, new SmartStrand Silk and Embrace carpet display units are delivered fully constructed.

“Our partnerships have gotten stronger,” said Carson. “The reason is, like retailers, manufacturing has also seen margins and profits compressed so we now both have the same challenges. That two-way dependency has strengthened our partnerships and has helped us grow business and profitability in the entire channel through innovation.”

What’s next for Carson is what is next for Mohawk and its dealers — a new generation of shoppers that behaves differently, has new ways of looking at things and communicating.

“How the younger generation is shopping is changing dramatically. The buying and selling experience is changing. We are helping to keep our partners on the leading edge with new technologies like, for example, social media,” noted Carson.

Read the full article at http://bt.e-ditionsbyfry.com/article/Engineered+for+the+future/1322763/147722/article.html.

Marazzi deal furthers global reach

Tanja Kern


[CALHOUN, GA] Mohawk Industries will acquire Italian ceramic tile maker Marazzi Group for $1.5 billion during the first quarter of 2013, pending closing and regulatory approvals.

“this acquisition represents the next step in the expansion of Mohawk’s global business and will make Mohawk a stronger company,” said Jeff Lorberbaum, Mohawk’s chairman and chief executive officer. “We found Marazzi attractive because of its solid management team and leadership positions in the U.S., Russia and Europe. the combination of Mohawk and Marazzi creates opportunities to expand U.S. distribution through service centers and other channels, source ceramic from our worldwide assets, utilize our relationships to expand all product categories and deploy leading innovation and design trends to all of our ceramic businesses around the globe.”

the Marazzi family currently owns 51 percent of the group. the family and investment firms Permira and Private Equity Partners took the company private in 2008 with a transaction valued at $1.1 billion at the time.

Marazzi, which employs 6,300 people, had revenue of $1.16 billion in 2011, Mohawk said. Marazzi sales are up 4 percent for 2012, and earnings before interest and taxes, depreciation and amortization will total about $191 million this year. Mohawk reported 2011 sales of $6.6 billion, up 16 percent from 2010.

“the partnership with Mohawk represents a great development opportunity for Marazzi Group,” said Marazzi Group CEO Andrea Sasso. “It combines Marazzi’s leading brand, innovation and technological leadership with Mohawk’s leadership in the overall flooring industry and distribution strength.”

Mohawk leadership noted several benefits to the acquisition during a conference call on December 21, 2012. Worldwide consumption of ceramic tile is estimated to be more than 110 billion square feet. Marazzi Group distributes tile in more than 100 countries, and global demand for ceramic tiles is growing by 5 percent to 6 percent a year. Sales outside of North America will represent 29 percent of total Mohawk sales.

In Russia, Marazzi has two manufacturing facilities, 21 distribution centers and 300 retail stores that are a blend of company owned stores and franchises. About half of its business is direct to end users, and sales are projected to grow 13 to 19 percent by expanding distribution and geographic reach within Russia. Mohawk’s chief operating officer Christopher Wellborn will take on the responsibility of leading the global ceramic segment after the merger is complete; he was president of Dal-Tile from 2002 to 2005.

In North America, the acquisition complements Dal-Tile’s presence in the United States, Canada and Mexico. Dal-Tile has around 200 service centers compared to Marazzi’s 13 centers. ff e majority of Marazzi’s U.S. sales come from distributors, home centers and the service centers, with home centers accounting for the largest share. Mohawk said it still has to work through how the company plans to use the Marazzi brand in the marketplace.

“In the U.S., our residential business is larger than theirs, and we don’t plan to get out of it,” Lorberbaum said. “We can use the Marazzi brand and expand the residential business further.”

Added Gianni Mattioli, CEO for Marazzi USA, “The combination of Marazzi USA and Dal-Tile brings together two of the strongest brands in our industry, as well as extensive and complementary product assortments and multi-channel distribution. While we will continue to maintain our individuality and uniqueness in the marketplace, together, we will be able to benefit from our combined technical resources and drive innovation across the business.”

Read the full article at http://bt.e-ditionsbyfry.com/article/Marazzi+deal+furthers+global+reach/1322765/147722/article.html.

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