Cincinnati—Citing declining sales, a high cost
of manufacturing and a severe lack of profitability, Formica executives
announced the company has exited the laminate flooring market in North America.
In a pre-Surfaces conference call, the company said it had reached an agreement
with Shaw Diversified Services, a division of Shaw Industries, for it to
“purchase our equipment assets for cash while also assuming certain
liabilities,” said Todd Vezina, vice president of sales for North America.
“Basically, Shaw will be purchasing the Stel manufacturing facility in Seattle,
not our flooring products, design, trademarks or brand name.” “
In the past two years,” he continued, “I feel
that we, as a group, and we as a company have tried to do everything possible to
turn around the business. We have invested in new products, installation
technology, new displays, buying group programs and trade shows. Granted, these
efforts have been undertaken in pretty difficult marketing conditions, but
ultimately we were unsuccessful in what we were trying to accomplish.” “Our
flooring business has accounted for more than $25 million in losses in the past
two years,” he added. “Recognizing that we can’t go on like that, as that type
of loss is unsustainable, [we have made this decision].”
“The acquisition of the Formica plant will
allow us to add about 50% additional capacity once we get everything up and
running,” said David Wilkerson, Shaw’s vice president of marketing, hard surface
division. “This obviously is significant and will help us enormously as we
continue to grow our laminate business. Since the plant is in Seattle it will
give us a manufacturing hub that can help us better serve the western half of
the U.S. “Certainly one of our goals is selling up to capacity as you would
expect and doing so as quickly as possible,” he explained. “But obviously,
expanding our capacity by that much might not happen over-night. We certainly
hope within the next 12 to 18 months we can be running that plant very
efficiently on a two or three shift [schedule].
“We definitely expect continued growth in the
laminate category,” added Wilkerson, “and believe it will ultimately be driven
by recent technological advancements—such as registered embossed surface texture
and beveled edges—and the visual improvements they bring to the product.” “The
goal, of course, is to get closer and closer to the real thing—the most popular
looks in hardwood and in tile—which is what we are focused on. I’m sure other
manufacturers of the product are trying to do that as well. We truly believe
it’s these styling and technological advancements that will help the category
grow as more consumers will consider laminate flooring as a viable floor
covering for their home because it just looks better.”
A point Formica executives wanted to make very
clear was the way it would treat its agreements with distributors and those in
the retail community. “One important thing for the retail community to know is
that Formica Corp. will continue to honor its Formica Flooring warranty in its
full scope,” said Mario Gonzalez, vice president of marketing, North America,
and general manager of flooring. “After we have terminated the relationship with
our distributors, we will deal with any consumer complaints directly. Going
forward, we are committed to continuing to provide the warranty for the products
we have sold into the market. “We have obligations to our wholesalers,” he
explained, “to continue to support them through this transition period. During
this time, we will continue to support any sale of Formica flooring in the
market by the retail community. We don’t anticipate any problems with being able
to do so. As long as the distributors are willing to work with us, we will be
willing and able to work with the retail community and, after that happens,
anything that arises will be handled by Formica Corp.”
“We put in place, either through our
existing inventory or through an agreement we have with Shaw to produce product
for us, the ability for distributors to fill their orders for a period of time
during the transition,” said Frank Riddick III, president and CEO. “This
decision has to with our strategic position and profitability in the flooring
business. It has nothing to do with our other businesses or with our Chapter 11
situation. “We have received a confirmation of our Chapter 11 exit plan,” he
explained. “We will be exiting Chapter 11 within the next 30 to 45 days as our
plan has been approved by the court. Formica has plenty of resources. This is
really a decision on how we are positioned in North America. “We sell flooring
products outside North America and we have other flooring products other than
laminate flooring,” he concluded, “ones which are in the development pipeline
and we have a broad range of surfacing solutions so none of our other business
are affected by this. It really has to do with the particular strategic
situation we find ourselves in concerning the laminate flooring business in
North America.” —Louis Iannaco
