In early 2002, sales were already down eight percent for Specialty Tools & Fasteners Distributors Assn. distributors, but by the end of the year they had experienced slow but steady increases every quarter.

STAFDA's executive director Georgia Foley says distributors that rely heavily on the industrial market struggled throughout the year, as did those who specialize in the rental market. Those distributors specializing in construction, however, saw mixed results.

"Thanks to low interest rates, residential housing ran close to historically high levels," says Foley. "It was a different story for commercial construction, which trailed the previous year by 10 percent or more."

At Fastening Systems, Inc., Jacksonville, Fla., sales were down three percent for 2002, but gross margins were up three percent, making the tradeoff a good one for the company. The fourth quarter of 2002 was particularly good: Fastening Systems saw its sales grow 10 percent over the same period in 2001.

About 80 percent of Fastening Systems' business comes from the residential housing sector – one that's proven strong throughout the economic downturn.

"Things are looking pretty good this year," says president Bob Frosio, who attributes the company's recent growth spurt to healthy housing starts, particularly in the lower-end price ranges. "High-end home sales are flat," says Frosio, "but affordable and mid-priced homes are selling. Commercial construction is also coming on strong in Florida."

Working against Fastening Systems are the risings costs of doing business in an economy where prices on health and auto insurance, fuel and other necessities are skyrocketing.

"Remaining competitive is our biggest challenge," says Frosio. "This year, we'll be doing a lot of vendor consolidation and dealer reselling to make up for it."

In Texas, Mother Nature worked against construction distributors in 2002. Chris Christians, president and CEO of Lynwood Building Materials, Inc., in San Antonio, says home building stayed strong while commercial lagged; the 70 inches of rain that pelted down on the state last year resulted in contractors losing "every third day" of work.

"It was terrible in November and December," says Christians. "The contractors' schedules are so messed up due to jobs that couldn't be poured and the way the holidays fell. We flat out lost money because of that."

Going forward, Christians sees a light at the end of the tunnel, based on recent activity from Lynwood's commercial contractor customers in south central Texas.

"Between the schools, hospitals, universities and government projects," says Christians, "we're looking for a much better year in 2003."

In Grand Island, Neb., Wayne Garrett, president and CEO of Centaur Enterprises, Inc., says the construction market is "steady, and even good." The trade contractors are the busiest, he says, while general contractors are somewhat anxious about the future.

Once reliant on the automotive and agricultural markets, Centaur Enterprises is transitioning itself into the industrial and construction arenas.

"It's all a learning curve," says Garrett. "We've been very successful at providing the services our customers need, it's just been an issue of continued penetration in the broad range of products that our construction customers use."

Looking ahead, Foley displays cautious optimism for the first half of the year, and expects distributor sales to continue the slow rise that began last year.

"Overall," she says, "we don't see much change for the first six months of 2003."

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