Dyersburg Corporation

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Dyersburg Corporation

1315 Phillips Street
Dyersburg, Tennessee 38024
U.S.A.
(901) 285-2323
Fax: (901) 286-3474
Web site: http://www.dyersburg.com

Public Company
Incorporated: 1929 as Dyersburg Cotton Products
Company Employees: 1,392
Sales: $195.9 million (1996)
Stock Exchanges: New York
SICs: 2253 Knit Outerwear Mills; 2262 Finishing Plants—Manmade; 2261 Finishing Plants-Cotton; 6719 Holding Companies, Not Elsewhere Classified

Dyersburg Corporation, through its subsidiaries, is a major textile manufacturer and the largest producer of knitted fabrics in the United States. A vertically integrated company, its manufacturing capabilities include spinning fibers into yarn, combining those yarns with purchased yarns and knitting them into fabrics, and dying and finishing the fabrics. Dyersburg Fabrics, Inc., a wholly-owned subsidiary, is one of the largest manufacturers of knit fleece fabrics and also produces jersey and other knit fabrics. United Knitting, Inc., also wholly-owned, makes stretch fabrics and lightweight fabrics used for linings. The company sells its products to manufacturers that use the fabrics to make a wide variety of items including sweatshirts and sweatpants for women and children, blanket sleepers for infants, shorts and other lightweight apparel, duvet covers and blankets, skiwear and hunting clothes, swimsuits, and women’s hosiery. Alamac Knit Fabrics, purchased in 1997, manufactures knit fabrics for tube tops and cuffs. As of 1997, Polysindo Hong Kong Limited, an affiliate of Indonesia’s biggest textile group, owned 23 percent of the company.

Early History

The Dyersburg Cotton Products Company was started in 1929 by R. H. Wheeler, when a spinning mill in Oswego, New York, and several of its knitting customers around Adrian, Michigan, consolidated. The company’s original plant, in the Tennessee town of Dyersburg, had 275,00 square feet. Initially, the company was known for its cotton sweaters, long-Johns, and cotton fleece gloves, although it also produced and sold yarn to other knitting mills. In the late 1930s, Dyersburg introduced the first knitted fleece fabric, a wool blend used for making women’s coats, and built its second plant, in Trenton, Tennessee, with floor space of 94,000 square feet. The company soon ceased the manufacture of sweaters and underwear in order to concentrate on producing fleece fabrics for coats for women and children, as well as for children’s sleep garments.

1960-80: More Innovations

After more than 40 years manufacturing wool, wool blend, and cotton fabrics, Dyersburg expanded into the production of synthetic blankets and pile fabrics in the 1960s, becoming a leader in the fleece and pile industry. In 1969 the company changed its name to Dyersburg Fabrics to more accurately reflect its products. By then most of its fabrics were made with cotton or synthetic fibers.

During the decade, Congress called for regulations that would make children’s clothing, particularly nightgowns and pajamas, less likely to burn. During hearings, Congress had found that burns involving clothing were four times more likely to be fatal than other types of burns, and that for young children, the majority of clothing burns involved sleepwear. In July 1972, regulations went into effect that established new flammability standards for children’s sleepwear. Stricter than those for other garments, the standards specified that all garments and fabrics used in making children’s sleepwear had to self-extinguish when exposed to a small, open flame.

During the five years it took for the regulations to be developed, Dyersburg worked with Monsanto Chemical to develop a new fleece fabric that would be flame retardant. Made with Monsanto’s SEF Modacrylic fibers, Dyersburg’s material was the first to meet the new government standards.

After introducing its flame retardant fleece, Dyersburg expanded its mill facilities, and this capital investment helped the company become the country’s top acrylic fleece producer by 1976.

The 1980’s saw a surge of inexpensive, imported textiles from Taiwan, Hong Kong, and China, and, as a result, demand for U.S.-made fabrics began to drop. Responding to the changing market, Dyersburg broadened its offerings, creating new cotton-rich fleece products, providing more fabrics that apparel makers could use for women’s robes and for sweatshirts, sweatpants and other activewear for women and children. By the end of the decade, the company had emerged as the “fleece specialist.”

Dyersburg fleece was made of acrylic, polyester, cotton, or blends of these fibers. After the fabric was dyed, its surface was brushed or “napped” to give it the soft feel of fleece. Most of the fleece was sold to companies making clothes for discount retailers and chain stores. But sales of fleece fabric were seasonal, with apparel manufacturers making their major purchases in the months of April through September, the company’s third and fourth quarters of its fiscal year, in order to have garments in the store for the fall and winter.

To offset this cyclical demand, Dyersburg entered the jersey business, producing a line of fabrics used by clothing manufacturers to make tops and shorts for women and children. Most of the production and sales of the lighter-weight jersey was concentrated in the company’s first and second quarters, October through March. In addition to its main fleece and jersey products, Dyersburg also made knit fabrics for orthopedic products, cuffs for surgical gowns, gloves, and the bags used to hang meats for smoking and curing.

Many textile mills went through mergers or acquisitions during the 1980s, as textile companies attempted to diversify and move into new markets or to sell off money-losing divisions. Early in the decade, several large textile companies, including Dan River and Ti-Caro, used management-led leveraged buyouts (LBOs) as a way to avoid being purchased by an outside group. In an LBO, a small group of investors buys a company using borrowed funds. The new owners then use operating funds or the sale of assets to pay off the debt. But LBOs were not only a defensive tool. They also served as a financing tool for companies, especially mid-sized and small ones. As Dan Fort of Ernst & Whinney explained in a 1986 Textile World article: “Some of the older family-owned companies who have been very conservative financially and have accumulated a large equity base might do well to consider an LBO. By reorganizing the capital structure, putting a little debt on the books and taking out some of the equity participants, the remaining owners possibly can make quite a bit of money.”

Dyersburg joined the buy-out trend in 1986, when family-owned Dyersburg was purchased by a group of investors, including members of management and Wesray, a venture capital firm. Two years later, in 1988, the company changed its name, to Dyersburg Corporation, as well as its structure. In a recapitalization, shareholders of Dyersburg Fabrics exchanged their shares for stock in the new corporation, while Dyersburg Fabrics became a wholly-owned subsidiary of the new organization. That same year, T. Eugene McBride joined the company as executive vice-president. He was named president and chief operating officer at the beginning of 1989 and chief executive officer in 1990.

1990-95: A Public Company

The 1990s saw a growing demand from clothing makers for more cotton in their fleece materials, as consumers began to call for more natural fibers in their clothes. Moreover, polyester/cotton blends were softer, accepted dyes and prints better than did fabrics made of 100 percent synthetic fibers, and did not shrink as much as materials that were 100 percent cotton. Dyersburg responded by offering manufacturers of women’s activewear fabrics which were 50 percent polyester/50 percent cotton blends or blends with more cotton than polyester.

In 1992, Dyersburg went public, trading on the New York Stock Exchange. That year the company also introduced its first line of outerwear fleece products used in making jackets and other outdoor apparel. These fabrics were aimed at the apparel companies that made clothes for large catalog merchants and specialty retailers, a segment that greatly expanded Dyersburg’s customer base. Sales that fiscal year totaled $151.5 million.

Dyersburg’s research and development efforts produced a big win in 1993 with the company’s own branded outerwear fleece products. Developed in collaboration with Wellman Inc. and Patagonia, Dyersburg E.C.O Fleece—the E.C.O. standing for Environmentally Correct Origins—was the world’s first fleece fabric made from recycled plastic soda bottles. As the company explained on its webpage, “Millions of plastic soda bottles are used and thrown away every day. Unfortunately, few are recycled. Many go directly to landfills, which presents a permanent problem. We can’t burn them. We can’t bury them. Perhaps it’s time we started wearing them!!”

With E.C.O., Dyersburg began exporting its fleece for the first time as manufacturers in other countries bought the innovative fabric. In December, the company opened its new knitting facility, with 155,000 square feet, at the Dyersburg Industrial Park, 30 acres of land including the original facility. With the addition of the new plant, the company’s Dyersburg facility measured 888,350 square feet.

Company Perspectives:

Dyersburg consists of highly focused specialists committed to meeting the needs of the global marketplace for high-quality, top-value knitted textiles.

In determining its production schedule, Dyersburg’s planning was based on informal purchase orders received from customers. These orders, sometimes for periods ten months in advance, could be canceled at any time before Dyersburg received the customer’s color specifications. To help keep its long-term backlog small, the company introduced Dyersburg Express in 1994. Under that program, a customer could order a minimum of one roll (40 yards) from a selection of the company’s most popular products and the purchase would be shipped within 24 hours.

In January 1994, Dyersburg bought United Knitting Inc., located in Cleveland, Tennessee. The new wholly-owned subsidiary manufactured stretch fabrics that it sold to makers of women’s hosiery, intimate apparel, and higher-priced, brand-name athletic clothing, such as swimsuits, biking and running outfits, and dancewear. United Knitting’s fabrics were made from cotton and synthetic yarns, and the company had been instrumental in developing new types of stretch fabrics made from Dupont Lycra spandex and Dupont Supplex nylon. By December, Dyersburg completed a 45,000-square-foot addition, containing warehouse, distribution, and laboratory facilities, to the Cleveland plant, bringing its size to 153,000 square feet.

Total sales in fiscal 1994, which ended October 1, 1994, came to $180.5 million, with two-thirds of the sales occurring in the third and fourth quarters. The purchase of United Knitting helped even the ordering pattern out, and in fiscal 1995, sales during the first and second quarter (for garments to be sold during the spring and summer), accounted for more than 46 percent of the total $199.4 million in sales. The improved sales in fiscal 1995 also reflected the company’s strategy of shifting sales toward higher-priced cotton and outdoors fleece products.

During 1995, T. Eugene McBride was named chairman of Dyersburg’s board of directors and the company announced a plan to repurchase up to two million shares of its own stock. The company continued to introduce new fabrics, launching Kinder-fleece, a lightweight, brightly colored fabric aimed at the children’s play wear market and made of Wellman Inc.’s Fortrel® Spunnaire™ polyester, which was flame-resistant and machine washable. But although overall sales increased during fiscal 1995, the company’s profits declined due to the rising prices of the raw materials needed to make the fabrics.

1996 and Beyond

The cost of raw materials continued to climb, reaching an historic high. With weak consumer demand for clothes during this time as well, the textile and apparel industries had a difficult year. Dyersburg continued its strategy of concentrating on producing and selling higher-priced fabrics. This meant updating its facilities and expanding its marketing program.

Between 1991 and 1996, the company spent some $67 million on capital improvements, including an expanded distribution facility, a separate knitting plant, larger and redesigned finishing and dyeing operations to handle more outerwear fleece and high-performance cotton products, and, in the first half of fiscal 1996, the installation of high-efficiency equipment for manufacturing more technically complex yarns.

In marketing, Dyersburg hired more staff and attempted to reposition itself as a marketer of value-added products. While acknowledging that its traditional emphasis on reliability was still important, the company moved to establish itself as a niche manufacturer and went after new customers more aggressively. One target area was women’s sportswear, with the company offering a full range of cotton and fleece products to manufacturers of brand name clothing. Over a two-year period, the company’s customer base increased by 37 percent.

In related efforts, the company also accelerated its research and development activities and dedicated facilities to that purpose. During fiscal 1996 and into fiscal 1997 it added new names to its own line of branded products, including Dyersburg E.C.O. Lite, a very lightweight recycled fabric; Synsation, a new stretch product for the swimwear industry; Citifleece, a 100-percent polyester fleece for the sportswear market; and Pareto, a cotton-rich material with a 100-percent pure cotton face that came in fleece, French terry, and jersey. Moving into the home furnishing market for the first time, the company began marketing Mai son Fleece, a soft, lightweight fleece for throws and blankets.

Dyersburg also began exploring global opportunities. During fiscal 1996, the company established IQUE, Inc., a wholly-owned subsidiary based in Cleveland, Tennessee, to develop joint ventures with partners in Mexico and the Caribbean to whom IQUE would provide full garment sourcing. This involved selling packages of clothing components made from Dyersburg fabrics to manufacturers who sewed them into finished garments and shipped them back to the United States. To avoid competing with its existing customers, IQUE targeted programs already sourced outside the United States.

By the second half of the fiscal year, the company’s efforts were showing results as gross profits increased and earnings reached a record level even though total sales for the year were down slightly to $195.9 million.

Several other important events took place in 1997. In April, Dyersburg agreed to sell Polysindo Hong Kong Ltd. three million shares or approximately 23 percent of the company. The sellers were members of the group of shareholders who purchased Dyersburg Fabrics in 1986. Polysindo was an affiliate of PT Texmaco Jaya (Texmaco), a wholly-owned subsidiary of PT. Polysindo Eka Perkasa, Indonesia’s largest textile group. Texmaco indicated it wanted to buy a majority of Dyersburg’s common stock within 18 months of completing its initial purchase.

Moreover, in July, Dyersburg announced an agreement with WestPoint Stevens, Inc. to acquire its subsidiary, Alamac Knit Fabrics, for $136 million. Westpoint calculated that Alamac produced 1.1 feet of fabric for every person in the United States, knitting more than 100 pounds of fabric every minute. The purchase would give Dyersburg four manufacturing plants in North Carolina, and make it the largest fully integrated manufacturer of circular knitted fabrics in the United States. With Alamac’s revenues of $222 million in 1996, the purchase represented a doubling in Dyersburg’s net sales. In addition to gaining Alamac’s expertise in yarn-dyed patterns, Dyersburg would add new value-added products to its lines, including interlock and pique fabrics, and would broaden its marketing base. In keeping with its development of high performance fabrics, the company announced it would offer Dyertech Strata-System in 1998. The new fabric was made with three layers and would be marketed for technical under and outerwear.

Net sales in fiscal 1997 grew each quarter compared to 1996 sales, with the result that in the first nine months of the fiscal year sales increased by 17 percent and net income by 71 percent. Despite its high debt levels resulting from the Alamac purchase and potential difficulties integrating a company equal its size into its operations, Dyersburg appeared to be moving in the right direction. Standard & Poor indicated a stable outlook for the company, noting in particular its broad range of textile offerings, increased leveraging power in buying raw materials, its vertically integrated operations, and its experienced management team.