By Elizabeth Rumble
From commercial to residential buildings, renovation to new construction, Halex Corporation is the preeminent multi-line manufacturer and marketer of carpet tackstrips, plywood underlayments and other accessories necessary for quality carpet and vinyl flooring installation. The company's products contribute to the smooth vinyl floors and soft wall-to-wall carpet that make a room both visually inviting and comfortable.
The Pomona, California-based company distributes to an international market within the $850 million floor coverings installation supplies industry as a high-quality producer of a complete line of floor covering installation products.
On August 1, American Capital Strategies, Ltd. (Nasdaq: ACAS) completed a $33 million recapitalization, providing Halex with additional financial strength to continue growing its global business. Antares Capital provided senior debt, including a revolving credit facility, as well as making an equity investment. The two founders of the company will own a significant stake in the company and will continue in their current executive roles.
"American Capital and Antares Capital are helping Halex move into the future," said Halex CEO Jon Hall. "We're very happy to have them as investment partners as we build upon our leadership in efficiently producing and distributing premium flooring products."
"Halex is now in a better position to refine its proprietary production machinery to suit the demands of a global marketplace," said President Craig Silvers. "We are confident that the partnership strengthens our company and our ability to pursue new opportunities in existing and new markets. Going forward, Halex can continue to work faster, better and cheaper."
Halex uses the highest-quality raw materials, a vast distribution network and a sharp eye for quality control in assembling and supplying the company's two main product lines, tackstrips and plywood underlayments, that are universally employed in new construction carpeting installations and restorations.
Tackstrips are plywood strips in which upward-facing tacks are embedded. The packaged strips are nailed into wood or concrete floors, around a room's perimeter, to hold wall-to-wall carpet in place. Underlayment is also indispensable in flooring installation projects for covering rough sub-floors and creating a smooth, unblemished surface on which vinyl, ceramic tile, carpet and other floor coverings can be laid.
Halex's top-quality tackstrips, high-grade plywood underlayment and high quality nails are invisible to the owner's eye; however, they are essential to producing durable and attractive flooring.
Jon Hall and Craig Silvers founded the company in 1990 as Silverline Machine and Manufacturing, Inc., foreseeing the benefits of globally sourced large-scale production and recognizing the need for faster, more cost-effective manufacture of carpet tackstrips than the sluggish, labor-intensive industry standard. Even though new technologies have surfaced since the tackstrip emerged in 1938, none have significantly improved the dependability, affordability and simplicity of wood-based tackstrips.
By leveraging their extensive experience in the floor coverings industry, Hall and Silvers designed a new line of high-powered, automated machinery, including a machine that rapidly fires rounds of nails and tacks into plywood boards. Starting in 1997 they added advanced robotics and expanded to an impressive106,000 square-foot facility. Much of the proprietary production machinery continues to be built on-location. The efficiencies resulting from these improved, cost-saving methodologies give Halex a competitive industry edge.
Since its inception, Halex has believed that international sourcing is an important cost advantage. By fostering strong relationships with overseas raw materials suppliers and with U.S.-based importers, management has created a powerful network that enables it to regularly purchase and ship high-volume, well-priced orders. Competitors have neither the global supplier network to make comparable arrangements nor the production capabilities to effectively match Halex's profitable approach.
The company has secured the bulk of both the domestic and worldwide tackstrip market for newly installed residential carpets. Moreover, the company has acquired several smaller distributors, increasing its competitive advantage by offering its global customers a multitude of superior-quality materials through a single source.
Management recognized that global source networking and shipping synergies placed Halex in a strong position to access numerous other components of the highly-fragmented industry. In 1998 Halex successfully penetrated the $125 million plywood underlayment manufacturing market by unveiling its own line of products.
Halex again revolutionized the industry by using an advanced underlayment saw configuration to cut each panel to precise specifications. To further guarantee a flawless floor covering installment, the innovative designers printed their patented fan-shaped nail pattern on each underlayment, improving upon the traditional linear installment guides that lead to conspicuous hammer indentations.
"The recapitalization of Halex is an exciting addition for American Capital," said Frank Do, ACAS Principal. "Already a premier player in its market, Halex is poised to move ahead with its robust network of distributors, unparalleled technologies and reputation for top-quality manufacturing."
In an August 1st transaction, American Capital provided $33 million in the form of senior subordinated debt and preferred stock to effect a recapitalization of Halex. ACAS has invested over $1.3 billion since its 1997 IPO.
Click here for more information about American Capital's portfolio.
Despite fluctuations in consumer confidence, trade publication Floor Covering Weekly indicates that future vinyl and carpet sales will remain relatively stable as increases in the average size of new U.S. homes entail additional floor covering needs. The inevitable repairs required in homes and the continued popularity of luxurious carpeting and sleek vinyl flooring also bodes well for the company.
Halex has nailed down a winning formula: combinations of cutting-edge proprietary technology, reliable infrastructure, low-cost sourcing and an established distribution network through which it can tackle additional industry market segments and continue to meet the desires and needs of its diversified global clients.
