A week after closing the sale of Capella Wood Floors, Wood & Wood Products talks with the owners about the acquisition of and plans for the company.
Shannon Fuller and Richard Lingle have something no one else has in the domestic hardwood flooring market can claim: 100 percent of the 3/4-inch engineered hardwood flooring market.
On July 8, Fuller and Lingle closed the sale of Capella Wood Floors, which they bought from Anderson-Tully for an undisclosed amount. With the sale, which started with talks in January, the pair say they inherited the only company in the country that manufactures 3/4-inch engineered hardwood flooring. Capella also produces 3/8-inch engineered hardwood flooring, but that product does not hold such a distinction in the marketplace. The company's sales and production are split about evenly between both product thicknesses, Fuller says. For now, the flooring goes solely to floor covering distributors like Elias Wilf Corp., Mastercraft and Reader's Wholesale.
Anderson-Tully, one of the nation's largest hardwood lumber suppliers, opened the three-building, 300,000-square-foot Capella facility in Vicksburg, MS, eight years ago as a veneer mill, Fuller says. About three years ago, the company started to produce engineered hardwood flooring, consisting of a plywood-type construction that lends more durability, dimensional stability and flexibility than solid wood flooring, Fuller explains.
But Anderson-Tully was not as successful as it had hoped, Fuller adds. Therefore, Capella was put up for sale.
"[Anderson-Tully] had a series of product launches and retractions, and launches and retractions, and over the three-and-a-half year period, decided they as Anderson-Tully did not want to continue manufacturing hardwood flooring," he says.
Though they had never met before the sale, the acquisition opportunity came at the perfect time for Fuller and Lingle.
"I had been looking for the last couple years for some way of taking the raw materials and turning them into a finished product," Lingle says. "I looked at a number of different ideas, or different manufacturers, and just by stroke of luck, [Capella came on the market]. An employee [at Capella] was helping me buy some flooring for my new house. As simple as it sounds, we got to talking and he said, 'The place is up for sale.' He introduced me to Shannon, from then on, it took off."
It happened just as easily on Fuller's end - he already worked for Capella.
"[Anderson-Tully] presented the company for sale, and I was here acting in a consulting capacity for the last year," Fuller adds. "Richard Lingle and myself got together and started looking at the opportunity and the growth in the engineered hardwood flooring market, and decided that we would buy it."
The growth of engineered hardwood flooring was something that attracted Fuller. He says the demand for engineered hardwood flooring has been very high lately, due mainly to the recent boom in home remodeling and new housing starts. In fact, the U.S. Commerce Department in July set June's seasonally adjusted annual rate of housing starts at 1.8 million.
"The hardwood flooring market has experienced high single-digit and double-digit growth for the last seven or eight years. As long as residential housing stays strong, we expect that number to continue," Fuller says.
That was not all that attracted Fuller and Lingle, though.
"The second was a manufacturing facility with brand new equipment and a product that was already being manufactured that is quite unique. The third thing was that Anderson-Tully wanted to sell it and were willing to sell it at what we felt was at a more than fair price, which would allow us to be profitable in the engineered hardwood flooring market," Fuller says.
Engineering a Market
Capella's 3/8-inch flooring consists of three or five plies with typically a 1/12-inch wear layer; standard grade oak is unique in having a 1/8-inch wear layer. The 3/4-inch blanks in all species are comprised of five plies with a 1/6-inch wear layer. The 3/4-inch engineered flooring is most popular in the same regions as 3/4-inch solid flooring is, namely the Northeast, Denver, CO, and the Midwest, Fuller says.
The flooring is manufactured from Forest Stewardship Council-certified hardwood logs - mainly red oak, pecan, maple and American cherry - that are cut to lengths up to 72 inches, the longest offered on the market; those logs, along with sweetgum, which serves as a crossband, are then rotary-peeled on a Coe high-speed lathe. The peeled veneers are inspected by a Ventek scanner, then sent to one of two Coe computer-controlled dryers.
Upon exiting the dryers, the veneers are sorted by grade to a face, a center or a back. Anything that has split or cracked too much or that has defects is placed into a "reclip" bin and either sent to a composer in the pressing building for splicing into full sheets or used as boiler fuel for the log steamers.
The veneers are interleafed to include a face, a center and a back - if it is three-ply. They are again stacked and left to sit three to five days to equilibrate to a more even moisture content, the goal of which is 6 to 9 percent. Before this interleafing, they are put through the Verti-Bond process (see side bar, right). The patented bonding process - which perforates all but the top ply, then allows glue to flow between the layers to bond them all together - and the required equipment was also purchased with the company, Fuller says.
"This is very significant to the company," Fuller says. "It allows us to make a more stable product."
After the Verti-Bond and interleafing process, the blanks are placed in one of two 24-opening Spartex presses, with openings 4 feet by 8 feet, for up to 10 days of cooling, depending on the time of year. The pressing cycles run from three to eight minutes, depending on the product; the 3/8-inch flooring is at the lower end of the cycle. Once cooled, the sheets are ripped and trimmed, then taken to two Progressive Systems Inc. side- and end-matchers that provide tongues and grooves for the flooring planks.
The blanks are finished on a 350-foot-long Giardina flat-line UV finishing line (see below), complete with Costa & Grissom widebelt sanders.
Despite their experience of reshaping businesses they possess, both say they have no immediate plans to change daily operations or business strategies at Capella. Since Capella had already been in the market for three years, the brand name has been established.
"The name Capella has value in the market place, and we wanted to continue that, to keep the continuity and not have to reinvent the wheel, if you will, with regards to market strategies," Lingle says.
The only planned operational changes at the moment are developing its products to satisfy customer want and need, however, Fuller and Lingle remained hush-hush on what those developing products may be. They are also looking to add more work shifts. Fuller says he hopes to add 50 more employees by the end of the year. Capella currently operates on the output capacity of one shift.
"With the exception of one or two individuals who did not come through in the conversion, we've actually retained employees, and our intentions are to expand," Lingle says. "We've already expanded the employee base from January and continue to go toward more expansion with double shifting and triple shifting."
In addition to the sale, Capella and Anderson-Tully will continue with a customer-vendor relationship. With about 350,000 acres of timberland along the Mississippi River, Anderson-Tully is one of the largest hardwood timber manufacturers in the country. Since Anderson-Tully supplied timber to Capella when it still owned the flooring company, a deal was struck to keep Anderson-Tully as the supplier for six years. Fuller and Lingle expect the deal to continue even longer.
Lingle says the agreement between the companies makes Capella one of Anderson-Tully's biggest customers, in terms of size and volume.
"This was a very beneficial transaction for all parties," he adds. "Our best interests and [Anderson-Tully's] best interests, being one and the same, is something that is second to none and invaluable. We have an unlimited supply of logs, and [Anderson-Tully has] a very good customer."
While Capella possesses 100 percent of the market for 3/4-inch engineered hardwood flooring, Fuller and Lingle know it won't last forever.
"Competition's coming. We're not naive," Lingle admits. "We've developed quite a market, and others are going to capitalize on that market as well."
In all, the facility is capable of producing 25 million square feet of flooring planks a year. And that, Fuller says, just happens to be the goal.
"To get this facility to capacity and do the things necessary to increase that output, whatever that may be," he says. "That's far enough down that road, though. We've got some ideas on what we've got to do, but right now we just want to maximize the output of this facility."
One of the things that makes engineered hardwood flooring more stable is its multi-ply construction. What propels Capella Wood Floors to even more stability is its patented Verti-Bond process.
Developed by Anderson-Tully, the Verti-Bond patent was purchased along with the Capella company by Shannon Fuller and Richard Lingle, who closed the sale July 8.
The bonding process starts with three or five plies stacked cross-grained to guard against expansion and contraction due to humidity changes. All but the top layer are run through an incisor to receive perforations, then glue is applied. A press forces the glue into the wood and tightly bonds each ply vertically, end-to-end and horizontally.
In addition to the dimensional stability, Capella claims the flooring needs minimal acclimation time to its new environment, meaning it does not have to sit in a room adjusting to the humidity before being installed, though Fuller says acclimation is recommended.
This aspect of engineered flooring lends more convenience to the installers, because they can get the flooring done in minimal time, without being an obstacle for other contractors, designers or architects that may be working in the same area.
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