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U.S.-China tariff tiff troubles some flooring executives

April 2/9, 2018: Volume 33, Issue 21

By Ken Ryan

 

Flooring executives are acting with trepidation amid the escalating trade dispute between the U.S. and China, which ratcheted up a few notches last week when the Trump administration threatened to impose tariffs on some $50 billion in Chinese imports across 1,300 categories of products.

The imports targeted for 25% levies range from high value-added goods, such as medicines and medical equipment, to intermediate products like machine tools and chemicals as well as durable consumer goods such as dishwashers, TVs and automobile parts. The list also includes machinery used in the production of some flooring products, including carpet and rugs, as well as milling or molding machines for products such as wood, cork, hard rubber, plastics or similar hard materials.

The day after Trump’s announcement, the Chinese Ministry of Commerce announced plans to impose a 25% tariff on $50 billion worth of U.S. exports. The 106 affected products included soybeans and chemicals and came one day after China announced tariffs on $3 billion in imports of U.S. food and other goods, 128 categories in all.

The penalties will not happen right away, if at all. The designation of targeted products will be followed by a comment period in which American companies can provide feedback to the Trump administration on the product choices. The administration will hold a public hearing on the submissions on May 15 in Washington, and companies will have until May 22 to file final objections.

The move stems from a White House investigation into China’s use of pressure, intimidation and theft to obtain American technologies.

Flooring executives argue that in a global economy, any trade war between economic powers would ultimately result in a slowdown of the world economy. Thomas Baert, president of CFL Flooring, a China-based LVT supplier, said issuing large import tariffs sounds like a great idea since theoretically it would help local production in the West but would hurt categories like LVT, which are mostly sourced in China. “In our industry, the product categories that are imported at this stage cannot be made on the domestic machines,” Baert said. “Although several manufacturers are now transforming some production lines to be able to, it is questionable whether this will truly replace China production.”

Don Finkell, CEO of American OEM, a domestic wood manufacturer, had a different take as he pointed to the U.S. trade deficit. “We’re running at an $800 billion trade deficit with the rest of the world, of which $500 billion of that is with China. Most economists say that it is unsustainable, but they don’t really agree on what the consequences are. It’s been this way for more than a decade and growing. Since more jobs are involved in making a product than in importing a product, loss of jobs seems to be the long-term consequence of a trade deficit.”

Finkell said wood flooring going to China from the U.S. has a combination of tariffs, fees and taxes in the range of 27%. If there is a tariff on wood flooring under these trade actions, he said he would expect it to be in the range of 25%. He termed it “significant but not catastrophic to the industry.”

Flooring observers say the tariffs—should they be implemented—would impact the full line distributor to a greater extent than other sectors since wholesalers have been importing LVT/WPC/SPC products in large part to promote their own private-label brands. Jeff Hamar, president of Galleher, a top 20 distributor from Santa Fe Springs, Calif., which sources from China, said he would be very surprised if flooring is ever involved in the tariffs. “There are already duties on wood flooring produced in China so, in theory, the government is already adjusting those prices to reflect market realities,” he said. “If they were to go after rigid LVT flooring the argument would be that there is so little U.S. domestic capacity, who are they harming? Clearly, any duty would be passed onto the consumer and would result in higher prices. Duties on LVT would cut the gap between wood and LVT possibly helping wood flooring sales.”

Jonathan Train, CEO of Houston-based Swiff-Train Co., which also sources extensively from Asia, is clearly not an advocate for excessive tariffs. “Small tariffs that are clearly understood and fairly implemented are fine and do not block trade,” he said. “Plus, they add a reasonable means of revenue for the government. But larger, volatile and retroactive tariffs disrupt markets unnecessarily and do not fix anything.”

Many economists see a trade war as little more than punishing the other country rather than protecting domestic producers. Some flooring executives have similar views. “Unfortunately, it’s going to be a ‘tit for tat’ kind of game that we can’t afford to play,” said Olga Robertson, president of the FCA Network. “Imagine just for one second if Walmart couldn’t fill their stores with goods—it would be Armageddon.”

manufacturing to make more stuff here in the U.S.,” said Olga Robertson, president of the FCA Network, Shorewood, Ill. “But unfortunately, it’s going to be a ‘tit for tat’ kind of game that we can’t afford to play. Imagine just for one second if Walmart couldn’t fill their stores with goods—it would be Armageddon.”

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Galleher, Quad-C seal the deal on ownership stake

November 6/13, 2017: Volume 32, Issue 11

By Ken Ryan

 

Screen Shot 2017-11-13 at 9.20.12 AMSanta Fe Springs, Calif.—Galleher, the No. 5 ranked flooring wholesaler among FCNews’ top 20 distributors with 2017 sales projected at $198 million, has closed an investment with Quad-C Management, whereby the private equity firm will take a majority stake in Galleher. Financial terms of the transaction were not disclosed.

The Quad-C deal marks the second major transaction Galleher has pulled off in the last 10 years. In 2007, Galleher sold its business to Itochu, a Japanese company, before purchasing it back in 2010. “We’ve done it again,” Jeff Hamar, president and CEO of Galleher, told FCNews. Jeff, his brother Todd, and Rick Coates, both senior vice presidents, were the three principals involved in selling the majority stake to Quad-C. Jeff Hamar called the process “long and thorough,” but in the end he said he couldn’t be more excited. “It gives us a partial exit and a lot of capital for acquisitions and growth.”

Hamar said he would remain as president and CEO and is looking forward to staying for a long time. “We continue to own a substantial part of the company, just not a majority.”

In announcing the deal, Thad Jones, a partner at Quad-C, praised Galleher for its portfolio of high-quality, innovative products and extensive experience in the industry. “We recognized the company’s value proposition with both retail showrooms and professional contractors, as well as the strength of its vendor relationships,” he said. “We look forward to supporting Galleher in the company’s next chapter of growth.”

Screen Shot 2017-11-13 at 9.20.23 AMThe investment will provide Galleher with the financial strength to pursue growth opportunities both organically and through acquisitions. Galleher has been averaging 20-plus percent growth year-over-year for the past five years. “Nobody in distribution has grown like we have—it has been pretty remarkable,” Hamar said. “We have five brands now (Monarch, Reward, Royal Custom Flooring, Sequoia Carpet and Pacific Pride Flooring), which is 50% of our sales. Our manufacturing capacity is substantial. We sold in 35 states last year.”

While California was hit very hard by the 2007-2009 recession, Hamar said the state bounced back stronger than the rest of the country. Galleher’s growth spurt coincided with the state’s recovery. And now the wholesaler is looking to drive that momentum with Quad-C’s help. (The private equity firm has made prior investments in the flooring industry, including Stanton Carpet.)

“We have some ideas for acquisition targets,” Hamar said. “Would we be interested in a $10 million deal in Maine? Probably not—not for $10 million. Would we be interested in a $10 million deal in [a Western state]? That would make more sense. I wouldn’t rule anything in or out.”

Galleher’s last acquisition was back in January this year, when it acquired the production assets of the Copper Plank Custom Mill in Scottsdale, Ariz. The acquisition provided Galleher with an integrated custom engineered flooring plant and increased the number of its prefinished lines to five. The acquisition also gave Galleher the ability to produce custom solid flooring, reclaimed flooring, moldings and stair parts.

Galleher employs more than 325 people and currently operates 23 locations in California, Nevada and Arizona.

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Galleher joins forces with Quad-C Management

qcCharlottesville, Va.—Quad-C Management has closed an investment in Galleher, one of the oldest, largest and fastest growing value-added floor covering distributors in the United States. Terms of the transaction were not disclosed.

Founded in 1937, Galleher currently operates 23 locations in California, Nevada and Arizona with over 325 employees. The company distributes a broad offering of hardwood, resilient, vinyl and laminate flooring as well as carpet and installation accessories to more than 5,000 customers while also providing unique custom hardwood manufacturing capabilities. Galleher’s management team, led by Jeff Hamar, president, is maintaining a large ownership stake in the company and will continue to lead Galleher following the Quad-C investment.

“Customers have come to know Galleher for its high quality, innovative products and top-notch service,” said Thad Jones, a Partner at Quad-C. “Having extensive experience in this industry, we recognized the company’s value proposition with both retail showrooms and professional contractors, as well as the strength of Galleher’s vendor relationships. These factors, as well as the accomplished Galleher management team, have driven very strong revenue growth and consistent market share gains. We look forward to supporting Galleher in its next chapter of growth.”

Since the beginning of the current housing recovery, Galleher sales have increased from $50 million to nearly $200 million, an average annual compound growth rate of 20% over the past seven years.  Galleher is a top-five, full-line floor covering distributor and is recognized throughout the industry for innovative sales and business practices.

“Quad-C has extensive experience in flooring, specialty distribution and building materials, and will be an excellent partner moving forward,” Hamar said. “This investment will provide the financial strength to usher in a new and exciting future for Galleher and grow the company both organically and through acquisitions.”

The Galleher investment highlights Quad-C’s expertise in the building products and specialty distribution sectors. Recent and past investments include Stanton Carpet, Tandus Flooring, Wolf Home Products, InterWrap and Generation Brands.

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Galleher, 3M provide support for fire relief

Screen Shot 2017-10-16 at 2.47.03 PMSan Francisco—Galleher and 3M are partnering to help those impacted by the fires in California. Both companies are sending food, clothing and supplies to people in need in Napa, Solano and Sonoma counties. 3M and Galleher will also be delivering smoke masks, earplugs, garbage bags and bottled water to Santa Rosa and Napa.

Galleher is also allowing relief workers to use its Rohnert Park warehouse—near Santa Rosa—as a staging area, helping to offload trucks of donations pouring in from all over the country and storing the supplies until they can be distributed to those most in need.

The company is also asking its customers to donate supplies. Donations can include: nonperishable foods, canned goods, chips/snacks, energy bars, dry salami, cereal, powdered milk, instant coffee, dog food/toys, eye drops, personal-hygiene items, diapers (sizes 1-6), Pedialyte, mouth wash, nail clippers and new clothing.

Anyone interested in donating can check the following links for individuals with specific needs, including people looking for used clothing.

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Galleher, Tarkett enter distribution partnership

Screen Shot 2017-05-30 at 9.31.31 AMSanta Fe Springs, Calif.– Galleher Corp. has entered into a distribution agreement with Tarkett to begin immediate distribution of the Johnsonite brand throughout Galleher’s distribution territory, which covers all of Arizona, Nevada and California.

“Galleher is thrilled to be rekindling our relationship with Tarkett and Johnsonite,” said Jeff Hamar, CEO of Galleher. “This product line is the perfect fit for us as we focus on expanding more robustly into the commercial flooring segment. Johnsonite constitutes the most complete, compelling and reputable suite of commercial flooring products and accessories on the market today, and we couldn’t be more excited about this opportunity.”

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Galleher invests in custom wood finishing plant

April 10/17, 2017: Volume 31, Issue 22

By Reginald Tucker
Screen Shot 2017-04-27 at 11.12.09 AMPhoenix—Galleher, a top five floor covering distributor, has begun the process of building a factory here dedicated to the production of high-end custom-made wood flooring products. The new, 60,000-square-foot facility, which includes both production and warehouse space, is expected to be up and running by June 2017.

“Today, high-end contractors are turning more to prefinishing—either in their own shops or through custom prefinishing like ours,” said Todd Hamar, senior vice president, who conducted a tour of the site earlier this month. “The colors designers are demanding nowadays are often only achieved through processes like fuming, bleaching and reactive stains that are difficult—if not impossible—to work with on site. Designers are also increasingly seeking to customize texture in ways that are too tedious to achieve on the job site.”

That’s where the new facility comes in, Hamar said. The new plant—when completed—will offer the following capabilities:

Custom platforms. Customers can choose from a wide range of unfinished platforms Galleher stocks in house or it can press and profile the client’s custom-made engineered flooring in virtually any combination of species, grade, width or length. This includes reclaimed material.

Custom texturing. Services include precision wire-brushing, hand-scraping, tumbling and edge distressing.

Moldings and stair parts. Tread assembly, CNC cutting and finishing.

Reactive stains. Colors are applied and dried in a carefully controlled environment to maintain proper humidity levels—which is crucial to the reactive staining process.

Custom fuming. Ideal process for creating the base for popular colors such as neutral grays and browns.

State-of-the-art coating capabilities. Dedicated lines for UV oil and urethane finishes, plus vacuum coaters, standalone spray booth and a spray line. Hand finishing as well as commercial-grade finishes are also offered.

“By coloring and texturing in a shop, customers have the opportunity to work with these processes in a controlled environment using labor-saving machines,” Hamar said. “More importantly, clients have the opportunity to dial in the look and get approval before installation.”

When the plant is complete, Hamar estimates the facility will be able to process anywhere between 30,000 and 40,000 square feet per month. The site will also handle production of Galleher’s high-end Monarch Plank line.

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Galleher acquires additional manufacturing capacity

Screen Shot 2017-02-22 at 10.38.24 AMSanta Fe Springs, Calif.—Galleher has acquired the production assets of the Copper Plank Mill in Phoenix. The acquisition will immediately accelerate Galleher’s growth plans and entry into new markets with its expanded custom manufacturing capacity.

Galleher has invested heavily in recent years in product development, design and custom manufacturing, and now offers a comprehensive suite of wood flooring products for commercial & residential applications. With this acquisition, Galleher will have five fully operational prefinish lines, an integrated custom engineered flooring plant and the ability to produce custom solid flooring, reclaimed flooring, moldings and stair parts. Galleher now operates from 23 facilities in the western U.S.

“We believe the addition of this significant manufacturing operation will allow Galleher to greatly expand our sales efforts around the country and better serve our customers by allowing us to improve the lead times and quality of what our custom hardwood flooring program is doing today,” said Jeff Hamar, president of Galleher.

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Distribution: Carpet

Distributors see action in soft surface segment

By Ken Ryan

Oct. 21/28 2013; Volume 27/number 13

Screen Shot 2013-10-28 at 9.32.07 AMCMH Space Flooring, a top flooring distributor, is growing by double digits—primarily on the strength of its hard surfaces business. However, that didn’t prevent the Wadesboro, N.C., wholesaler from expanding into carpet when it had the opportunity.

“The carpet business was new to us in 2012, and each month it gets stronger,” said Hoy Lanning, president and CEO. “Carpet is still 50% of the flooring business; we feel we have a wonderful opportunity to add carpet to our shipments. This way our dealers can get all of their flooring products from one source.” Continue reading Distribution: Carpet

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FCNews’ annual top 20 flooring distributors

 Distributors emerging from economic stronger, more relevant than ever

By Ken Ryan

Oct. 21/28 2013; Volume 27/number 13

Screen Shot 2013-10-25 at 4.47.45 PMDistributors. They are the backbone of the industry, the group on which manufacturers rely for moving their products to the point of sale. It is a segment that faces as many challenges as any and works on razor-thin margins.

Still, the good ones have not only succeeded but thrived. In fact, most project growth of 5% to 15% in 2013, driven in part by a housing comeback, both remodeling and new construction.

FCNews’ annual top 20 distributor listing not only looks at the industry’s leaders but also reveals the 10 highest-volume wholesalers in the resilient, wood and laminate categories. In most cases, the information was obtained from the respective high-level executives. Continue reading FCNews’ annual top 20 flooring distributors

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Distributors tighten credit standards; stay committed to supporting retailers

By K.J. Quinn

The job of a flooring wholesaler has never been easy, and today is vastly more complex than it was several years ago. While distributors have essentially morphed from selling agents to service companies, one critical core function which remains constant is serving as a source of credit for customers to help finance their businesses.

“Well-capitalized wholesalers provide an often overlooked or underappreciated service to the channel,” said Scott Rozmus, president, FlorStar Sales, Romeoville, Ill., and a member of the North American Association of Floor Covering Distributors’ (NAFCD) board of directors. “They help the engine go.” Continue reading Distributors tighten credit standards; stay committed to supporting retailers