Business Description:

Floris Tile Acquisition Corporation owned the majority of the stock in Florida Tile Corporation, Inc.

Florida Tile Corporation, Inc.is the second largest manufacturer and distributor of ceramic wall and floor tile in the United States with over $120 million in revenue. The company manufactures its products in Lawrenceburg, KY and Shannon, GA. The company distributes its products through a network of over 60 distributors, 35 company owned branches and through mass retailers such as Loews. The industry has $2.2 billion of sales and has been growing at a rate of over 6% per year for each of the past five years.

Transaction Background:
Founded by the Sikes Family in 1954, Premark International purchased the company in 1990. Premark was subsequently purchased in 1999 by Illinois Tool Works. Illinois Tool Works identified Florida Tile as a non-core business and hired CS First Boston to sell the Company in March 2002. Due to Florida Tile being an underperforming business, the auction was unsuccessful. Milestone began negotiations to purchase the company in November 2002 and concluded the transaction 12 months later.

Investment Thesis:
As a non-core division of two multi-billion dollar corporations, Florida Tile suffered from a lack of attention. Despite a growing market, Florida Tile was experiencing falling sales and poor operating margins. Milestone believed that a change of senior leadership was required to fix the business and upon closing immediately replaced the top officers of the company. The company also suffered from poor utilization and bloated expenses, in addition to having a corporate infrastructure more often found in Fortune 200 companies. Milestone believed that through a combination of cost cuts and plant consolidations that the company could be very profitable. Furthermore, with a focused, entrepreneurial management team, the company could capture its share of the growing ceramic tile market.