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Lumber Liquidators' Q2 Profit Dives Almost 20 Percent
Lumber Liquidators' (Toano, Va.) second quarter 2014 suffered a loss of profit of 18.7 percent from the second quarter 2013.

Profit for the quarter dipped from $20.4 million in 2013 to $16.6 this year. In comparable stores, net sales decreased 7.1 percent in 2014; they decreased 2.4 percent in 2013.

The company's average sale declined 1.8 percent in the second quarter 2014, and there was a 5.3 percent decrease in the number of customers invoiced.

"Despite the challenges we faced in the second quarter and results that were not at the level we would have hoped, our value proposition is as strong and relevant as ever to our customers," said Robert Lynch, president and CEO of Lumber Liquidators, in a statement. "We remain focused on continuous improvement across our operations and implementing our multi-year strategic initiatives to position the company for long-term growth."
Postcard from Germany: Sand, Check, React … And More
Last week I had the opportunity to join a group of wood flooring contractors who won a spot on the annual Lägler Fly and Sand PST (Premium Sanding Training) trip to the Lägler headquarters in Güglingen, Germany. Our lucky group was able to spend four days together in Germany hosted by Karl Lägler and Palo Duro Hardwood’s Jeff Fairbanks.

Marc Schulz, Jeff Fairbanks and Karl Lägler at Lägler headquarters in Güglingen, Germany.jpg
Lagler trainer Marc Schulz, Palo Duro's Jeff Fairbanks, and Karl Lägler outside the company's German headquarters.

For many who sand floors for a living, going to Lägler is akin to a once-in-a-lifetime pilgrimage to Mecca. For those who don’t know, Karl’s father, Eugen Lägler, invented the first big machine that was a belt sander instead of a drum. Belt sanding had been done before on a larger, more industrial scale, but never on a small job-site machine. From the company’s beginning in 1956, Lägler has grown into worldwide leader in wood floor sanding, today with Karl at the helm.

Not surprisingly, dinner conversations at the Lägler home revolved around wood floor sanding, and Karl naturally grew up in the business, learning everything from sales to welding, since the company fabricates the vast majority of its parts in-house. To say the factory today is state of the art is an understatement. In addition to being spotless and bright, every work station is set up for optimal ergonomics:



An automated inventory system recognizes when a part is ordered, retrieves it from the warehouse and delivers it to the necessary work station.



For the visiting Americans, the factory seems very, well, German. Work flows are structured in the most efficient way possible, with multiple quality checks at every step along the line.

Likewise, Lägler has a structured sanding process that they teach on-site with a full team of trainers, most of whom speak multiple languages. Over the years I’ve been to dozens upon dozens of wood flooring training sessions, and Karl had some words of advice for our group that immediately resonated with me: “Sand, check, react.” What does that mean? Yes, they may be teaching a certain process for the floor and a certain grit sequence, but every job site and every species and every pattern of wood flooring is different, so every time you sand a floor, you have to clean it and inspect it after every single step. If it isn’t what you expect, take the time to make it right then instead of blindly going ahead only to find out once the floor is finished that it has to be resanded.

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It’s funny to see a group of guys who sand floors all day every day for a living get so excited about sanding a floor. But that is something I’ve always admired about the professionals in our industry: They have passion for their craft, and when given the chance to try something new, they are eager to get their hands on it. This trip was a rare opportunity to spend morning till night surrounded by other wood floor guys, and they took full advantage of it. (Conversation while riding a funicular train up a mountain in Heidelberg? Grit sequences. Conversation during dinner at a restaurant atop a mountain covered in grapevines? Dimensional change coefficients. I kid you not, but you aren’t really surprised, are you?)

If you’re a wood flooring contractor who is passionate about what you do, I encourage you to submit your application for next year’s Fly and Sand PST trip (keep an eye on the HF E-News next spring—there will be a story announcing when applications are available). And on behalf of everyone on this year’s trip, I’d like to extend a huge thank you to Karl, Jeff, Alex, Marc, Carina, Denise and all the Lägler staff for an experience we’ll never forget.

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A pre-dinner group shot in Güglingen.

To see more photos from this year's trip, check out our HF Facebook album here.
Pending Home Sales Slow in June
Pending home sales slowed in June after showing “solid” gains for the previous three months, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 1.1 percent to 102.7 in June, down from 103.8 in May and below June 2013’s 110.8.

June 2014 marks the second consecutive month above 100—considered an average level of activity.

“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” said Lawrence Yun, NAR chief economist, in a statement.

However, parts of the country are still dealing with supply shortages, flat wages and tight credit conditions—all deterrents for a higher number of buyers to take full advantage of lower interest rates, Yun added.
EIA: China's 'Ransacks' Mozambique Forests
The amount of timber smuggled out of Mozambique and imported by China, lined up end-to-end in 20-foot shipping containers with a capacity of 20 cubic meters, would stretch more than 44 miles, according to a new report from the Environmental Investigation Agency.

The report, which compiles EIA research, undercover investigations and analysis of the illegal logging and timber smuggling in Mozambique, found that 93 percent of logging in Mozambique in 2013 was illegal and that about 76 percent of timber exports were cut illegally. From 2007–2013, 93 percent of illegally cut timber exports went to China.

“The staggering level of illegal logging and timber smuggling for the Chinese market has put harvesting volumes way beyond sustainable levels, despite claims to the contrary by Mozambican officials,” said EIA Forest Campaigner Jago Wadley in a statement.

The "epidemic of crime and environmental mismanagement" in Mozambique, Wadley said, has resulted in $146 million in lost tax revenues since 2007.

"[C]ommercial stocks will largely be depleted during the next 15 years," he said.

The EIA, in the report called First Class Crisis, calls for Mozambique to suspend all timber exports until the country can guarantee harvests, consumption and trade of timber products are sustainable.
IWPA Launches Responsible Trade Initiative With Myanmar
The International Wood Products Association launched a responsible trade initiative with Myanmar (Burma), the Southeast Asian country home to about 45 percent of the world's natural teak.

The initiative, made possible by a U.S. Treasury Department license, will promote forest management reform and trade between U.S. wood importers and Myanmar's timber industries and government agencies. The hope is that encouraging trade with the U.S., whose trade is governed by international wood species treatises, will lessen the impact illegal trading in Myanmar has had on the country's forests.

“IWPA’s goal is to be a positive force in Burma by encouraging the development of independent legality verification and sustainable management of Burma’s forest resources,” said Cindy Squires, executive director of the IWPA, in a statement. “Currently, logging legality verification programs are in their infancy in Burma, and our plan is that by launching direct trade with the country we can provide critical market support for the establishment of such programs.“

In a recent report, the Environmental Investigation Agency found that two species targeted by Chinese importers for furniture manufacture, Burmese rosewood and Burmese padauk, could be commercially extinct in three years if illegal trading and demand is not culled.

U.S. importers working under the license procured by the IWPA will encourage mills in Myanmar that supply product to U.S. importers to conduct independent legality verification of the wood.

"This initiative will help wood traders meet their responsibility to know their supply chains by allowing for direct trade," Squires said.
S&P City Composites Show Home Price Growth Moderating
United States' home prices increased at a slower pace in May, according to data through 2014 released by the S&P Dow Jones Indices.

In May the 10-City Composite increased 9.4 percent year-over-year and the 20-City Composite grew 9.3 percent, both rates are down from 10.9 percent and 10.8 percent returns reported in April. In the month of May, the composites rose 1.1 percent.

“Home prices rose at their slowest pace since February of last year,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “The 10- and 20-City Composites posted just over 9 percent, well below expectations. Month-to-month, all cities are posting gains before seasonal adjustment; after seasonal adjustment 14 of 20 were lower."

Average home prices across the U.S. returned to their summer 2004 levels as of May 2014. Both composites remain 17–18 percent below their June/July 2006 peak.
Mohawk Helps Out With Its 150th Habitat for Humanity House
Mohawk Flooring (Dallas) will install flooring in its 150th Habitat for Humanity house on Aug. 2.

Mohawk and Atlanta Habitat for Humanity have partnered since 2009.

“Our commitment to Habitat and actively helping our local communities permeates our entire organization,” said Michel Vermette, senior vice president of commercial and international for Mohawk. “Our corporate contributions meet specific Habitat material needs, and our employees donate their time and labor in other areas where assistance is needed. In fact, Habitat projects serve as excellent team-building events for our business.”
Don Carlisle Founds New Wide Plank Company
Don Carlisle, who owned Carlisle Restoration Lumber and Carlisle Wide Plank Flooring for 25 years until selling in 2006, has formed a new wide plank flooring company with three partners. The business is called William & Henry Wide Plank Floors.

Carlisle said it was not until last year when he started to reconnect with sawyers, craftsmen and mill owners to begin planning the company. Carlisle also employed a few colleagues, including Peter Switzer, Heidi Carlisle, Crystal Knowles, Laura Leier and Leslie Bentley.

Products at William & Henry include wide plank heart pine and reclaimed oak, as well as black cherry and northern hickory.

“I created William & Henry, which is named after my youngest son, so we can go back to the days of working with one customer at a time, getting to know each family’s needs and vision, and then custom craft every floor by hand,” Carlisle said in a statement. “The satisfaction of achieving this for our customers is enormous and it is what drives us every day at William & Henry.”

Although the company has a website, customers won't be able to purchase product online.

“We want the phone call," Carlisle said. "We want the conversation with the customer so that we can give them a floor that is like no other floor."
Teragren Adds Aaron Cline to Tech Team
Teragren (Bainbridge Island, Wash) added 20-year-flooring veteran Aaron Cline to its technical support team as technical manager.

Cline will be involved with all stages of Teragren products, from concept to retirement, under the leadership of Vice President of Operations Tom Goodham.

“[W]e know that ultimately customer satisfaction depends on the knowledge and execution of the flooring installer, and that’s why we’ve brought on Aaron… to provide easily accessible resources and expert knowledge to our industry partners," Goodham said in a statement.
Mullican Flooring Hires Marketing Manager From Within
Mullican Flooring (Johnson City, Tenn.) promoted Amber Oaks to marketing manager.
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Oaks joined Mullican in 2012 as marketing and claims coordinator. In her new role, she will be responsible for oversight of market research and strategic planning, as well as the design elements for company merchandising, website development and marketing materials.

“Amber has been an asset to Mullican Flooring from the beginning,” said Brian Greenwell, Mullican’s vice president of sales and marketing, in a statement. “We are privileged to have her play such a key role in our organization.”
HF Briefs: Jobs Available, Lumber Liquidators
The HF Classifieds' "Jobs Wanted" section has new postings for a plant manager, dry kiln manager, production superintendent and dry kiln process specialist. See the HF Classifieds for more information.

Lumber Liquidators (Toano, Va.) donated its Dura Dance synthetic rubber underlayment to The Highsteppers Drill Team in Cincinnati. The organization teaches leadership and academic skills through dance and weekly tutor and study sessions for participants.
New Formaldehyde Lawsuit Filed Against Lumber Liquidators
Lumber Liquidators has been sued again over allegations that its product, this time its laminate flooring, from China emits formaldehyde levels well above the level requiring package labels in the state of California.

The lawsuit, filed by environmental advocacy group Global Community Monitor, says the plaintiff conducted more than 50 tests of Lumber Liquidators' Chinese-made laminate flooring. The results showed average initial formaldehyde exposures to be more than 100 times the amount allowed to be sold without a warning label under California's toxics law, Proposition 65.

"The levels of formaldehyde our tests found in Lumber Liquidators' laminate flooring are astounding and alarming," said Denny Larson, executive director of Global Community Monitor, in a statement. "It's unconscionable that Lumber Liquidators would sell this product to customers to install in their homes without informing families of the potential health risks involved, especially since they make a point of bragging about how environmentally safe it is."

Lumber Liquidators released a statement that said the allegations are "simply flat-out false."

"Our product meets relevant environmental standards and undergoes rigorous, independent, third-party testing. More specifically, our internal testing and that conducted by third parties concluded that product levels fell well below the Proposition 65 'safe harbor' limits.

"In addition to providing safe, high-quality products, we are transparent about our quality control and assurance processes – for our California customers, we provide Proposition 65 notices on customer invoices and in-store signage," the statement continues.

"In short, all of our flooring meets the highest quality and environmental standards – that's why we sell it, that's why we use it in our own homes, and that's why we are a market leader. We will not let factually inaccurate and legally flawed lawsuits filed by a party with a clear financial motive influence our approach to our business or our customers."

The lawsuit is one of five filed against Lumber Liquidators since fall. Of the three lawsuits related to formaldehyde emissions, one has been dismissed.
Armstrong To Close China Plant, Move Operations to America
Armstrong World Industries is closing its scraped engineered hardwood flooring facility in Kunshun, China, and moving the operation to Somerset, Ky.

While the plant in Kunshun has performed well, Armstrong believes it will save on costs and improve service by moving the operations to the United States, according to a statement.

"With the increasing cost of freight and labor in China, it just makes sense to move our production here where we actually sell the product," said Armstrong Flooring CEO Tom Mangas in a statement. "This helps us offset raw material cost inflation, and at the same time, we eliminate several months in lead time, and we improve our response to design trends and service requirements."

The company has been investing in people and processes at the Somerset facility for 18 months. Already, 20 jobs have been created at the facility, and Armstrong could add another 80 jobs when the transition is complete.

Production in Kunshan will end September 30. Armstrong will begin by transitioning its Frontier Hickory product line first, followed by Century Farm, Rural Living and Legacy Manor.
Armstrong Q2 Profits Far Below 2013 Results
Armstrong World Industries' second quarter results show that the company's profit for the second quarter was $21 million, a 31.4 percent drop from the same quarter in 2013.

Sales saw a slight increase of 0.5 percent. Operating income decreased 14.5 percent and diluted earnings per share dropped 25.5 percent versus the same period last year.

Armstrong said manufacturing and input costs increased, driven by rising lumber costs and the margin impact of lower volumes. The company's second quarter results, it said, were also impacted by approximately $8 million for severance and other charges associated with its decision to close two manufacturing plants abroad.

The company's wood flooring division had net sales of $139.4 in the second quarter in 2014, but operating income showed a loss of $5.1 million. In the second quarter of 2013, net sales were $138.2 million and operating income was at $2.5 million.
New-Home Sales Drop After Impressive May
New single-family home sales fell 8.1 percent to a seasonally adjusted annual rate of 406,000 units in June, according to data released by the U.S. Census Bureau.

"The numbers are a little disappointing, but May was unusually high and some pull back isn't completely unexpected," said Kevin Kelly, chairman of the National Association of Home Builders, in a statement. "Our surveys show that builders are confident about the future, and we are still seeing a gradual upward trajectory in housing demand."

Sales fell 20 percent in the Northeast, 9.5 percent in the South, 8.2 percent in the Midwest and 1.9 percent in the West.
Another Quarter Above 50, Remodeler Confidence Returning
The Remodeling Market Index rose three points to 56 in the second quarter of 2014, the fifth consecutive quarter with an RMI above 50, according to the National Association of Home Builders.

An RMI above 50 means more remodelers report higher activity compared to the prior quarter.

"With many homeowners on better financial footing, home remodeling has become more popular," said NAHB Remodelers Chair Paul Sullivan in a statement. "The completion of postponed work has helped remodelers in all regions regain confidence in the remodeling market."

Estimates from the U.S. Census Bureau show home improvement market grew 5.6 percent in 2013. The Remodeling Futures Program, a part of Harvard University's Joint Center for Housing Studies, projects annual gains in home improvement spending of 9.9 percent in 2014.

However, growth is predicted to slow to 7.0 percent in the first quarter of 2015.

“With the economy improving slower than expected and home sales struggling to keep up with last year’s pace, the recent strong gains in remodeling spending will likely moderate later this year,” Chris Herbert, research director at the Joint Center, said in a statement.
Existing-Home Sales, Inventory Rise in June
Existing-home sales in June reached an annual pace of 5 million for the first time since October 2013, and rising inventory continues to push overall supply toward a more balanced market, according to the National Association of Realtors.

Total existing-home sales went up 2.6 percent to a seasonally adjusted annual rate of 5.04 million in June from 4.91 million in May. Sales, at the highest pace since October, are still 2.3 percent below where they were a year ago.

Total housing inventory in June rose 2.2 percent to 2.30 million existing homes available for sale, or a 5.5-month supply at the current sales pace. Unsold inventory is 6.5 percent higher than a year ago.

Ultimately, said NAR Chief Economist Lawrence Yun in a statement, housing "fundamentals" are moving in a good direction.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said.

The NAR's statement shared more housing market figures:
- Single-family home sales rose 2.5 percent to a seasonally adjusted annual rate of 4.43 million in June, up from 4.32 million in May.
- The median existing-home price for all housing types in June was $223,000.
- Distressed homes accounted for 11 percent of June sales, down from 15 last year.
- The percent share of first-time buyers continues to underperform historically.
HF Briefs: Register for Surfaces East; Sales Agents Wanted
Attendee registration for The International Surface Event East at the Miami Beach Convention Center in Miami, Fla., Oct. 19–22, is open. Online registration is available at TISEeast.com.

Registration for the 2014 NAFCD + NMBDA Annual Convention is now open. The convention takes place Nov. 18–20 at the Sheraton Dallas Hotel in Dallas. Attendees registering before Sept. 16 save $100. Register online at DistributorConvention.org.

An exotic hardwood manufacturer is looking for sales agents in a variety of states to sell direct to retail stores. States include Delaware, Pennsylvania, New Jersey, Virginia, North Carolina and South Carolina. See the ad in the HF Classifieds for more information.

Aurora Hardwood West seeks an experienced salesman or sales agent with an established customer base in the Western United States. See the ad in the HF Classifieds for more information.
'Green' Coatings Company Enters Flooring Market
Hybrid Coating Technologies Inc. (HTC) is entering the wood protection coatings market with a new polyurethane patent that increased its coating's elongation by 300 percent.

HTC is currently the exclusive licensee of Green Polyurethane coatings and paint, which eliminates a toxic chemical in conventional polyurethanes called isocyanates from the entire production process, the company said in a statement.

A number of state and national organizations, including the U.S. Environmental Protection Agency, the Occupational Safety and Health Administration and California's Department of Toxic Substances Control, are considering banning isocyanates due to the harmful effects it has on workers exposed to the chemical through their occupations.
Mohawk Shares EPDs With GreenWizard Software
Mohawk Industries (Dallas) is partnering with product management software company GreenWizard Inc. to promote product transparency—a priority of sustainable building ratings systems.

Mohawk has the "largest and most varied" selection of flooring products with environmental product declarations, health product declarations and declare labels, it said in a statement. The company would give all that information to GreenWizard, which would upload the information to its softare platform.

“We love that architects, designers and building construction professionals can locate any Mohawk product in a few clicks using GreenWizard’s powerful search tool, whether it be a selection from our extensive list of more than 120 red list free Declared products, as well as products with HPDs or EPDs," said Rochelle Routman, director of sustainability at Mohawk.

The companies' partnership, given the green-themed named Emerald, will last three years.

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