Delta Woodside Industries, Inc. History

Address:

233 N. Main Street, Suite 200
Greenville, South Carolina 29601
U.S.A.

Telephone: (864) 232-8301
Fax: (803) 232-6164

Public Company
Incorporated: 1983 as Alchem Capital Corp.
Employees: 5,600
Sales: $535.46 million (1998)
Stock Exchanges: New York
Ticker Symbol: DLW
NAIC: 313311 Broadwoven Fabric Finishing Mills; 31321 Broadwoven Fabric Mills

Company Perspectives:

For over 90 years Delta products have been known for quality and value. Delta offers a wide variety of styles to meet the needs of its customers. From the initial design until the product is finally shipped, Delta controls the manufacturing processes to insure that each shirt meets the high quality standards that its customers expect. Time and time again.

Company History:

Delta Woodside Industries, Inc. is a holding company which, through its various operations, is engaged in the manufacture and sale of textile fabrics and apparel. The company operates 16 textile and apparel plants and 26 garment outlet stores. Its 5,600 employees work in seven different states, plus Costa Rica and Honduras. The company has three main businesses that form its core of operations, including Delta Mills Marketing Company, which manufactures woven fabrics for the apparel, home furnishings (drapery linings, bedspreads, lamp shades), institutional (surgical tapes), and industrial (sail cloth and ripstop nylon) markets, Duck Head Apparel Company, which provides medium-priced apparel that is sold in large department stores across the country, and Delta Apparel, which produces knit items, many of which are sold to screen printers and sporting goods stores, under both the Delta Apparel label and under private brand labels. The company has experienced financial problems during the mid- and late 1990s, and has been selling off many of its non-core businesses.

Early History

Delta Woodside was founded by Bettis Rainsford and Erwin Maddrey in 1983. The idea of starting a textile company first occurred to Rainsford when he heard that a mill in his home town of Edgefield, South Carolina, was closing. The shutdown of Edgefield Cotton Yarns, Inc. meant the loss of about 200 local jobs, and the idea of buying the plant appealed to Rainsford, who had returned to Edgefield after law school and dabbled in the nursing home, newspaper, and geothermal energy businesses. Lacking any knowledge of the textile industry, Rainsford hooked up with Maddrey, the former president of Riegel Textile Corp., also in South Carolina. The two men purchased Edgefield Cotton for $4 million, most of which they borrowed.

Following their acquisition of Edgefield Cotton, Rainsford and Maddrey joined forces with Buck Mickel, another local business operator and former vice-chairperson at Fluor Corporation. A company called Alchem Capital Corp. was formed, 50 percent of which was owned by RSI Corp., an outdoor equipment and office supply company controlled by Mickel. Over the next few years, Alchem grew at a steady rate, mostly by taking over mills cast off by larger companies in the struggling textile industry. Alchem's first important acquisition of this period was Woodside Mills, Inc., formerly a division of Dan River, Inc., in 1984. Four South Carolina plants were included with the $31 million purchase of Woodside Mills, whose products included textile fabrics used in the apparel, home furnishings, industrial, and medical markets. These facilities were the Easley Plant in Easley; the Haynsworth Plant in Anderson; and the Furman and Beattie Plants in Fountain Inn.

Alchem completed two important acquisitions in 1985. The company paid Cannon Mills about $4 million for its Maiden Knitting Mills, a circular knitter of finished apparel fabrics. Alchem also purchased Royal Manufacturing Co. that year. Royal, a manufacturer of men's underwear and sportswear with annual sales of about $30 million, was bought from the family of Morris H. Senderowitz, which had founded the company in Allentown, Pennsylvania, in 1910. The acquisition of Royal added four more plants to Alchem's growing collection. In 1986, Alchem made its largest purchase yet, acquiring the Stevcoknit and Delta Fabrics divisions of J.P. Stevens & Co. Stevcoknit, which produced singleknit and doubleknit fabrics, was purchased for $94 million. Delta products (with a history dating to 1903) included lightweight cottons and polyester blends for sportswear and government orders, as well as bottomweight fabrics of synthetic fibers for men's wear. The acquisition of these two J.P. Stevens divisions more than doubled Alchem's size, adding 11 plants to Alchem's ten existing facilities, and increasing the company's workforce from 2,500 to 6,000.

Growth and Expansion: Mid- to Late 1980s

Late in 1986, Alchem's name was changed to Delta Woodside Industries, Inc. The company's yearly sales had grown to over $380 million by this time, with earnings of close to $18 million. The following year, Delta Woodside went public, offering two million shares of common stock over-the-counter at $14 a share. At that time, about 25 percent of Delta Woodside's revenue was generated by the sale of unfinished woven fabrics, over 40 percent by finished woven fabrics, another 25 percent by knit fabrics, and the remainder by completed apparel. For fiscal 1987, net sales reached $417 million.

In 1988 Delta Woodside acquired Stanwood Corporation for about $14 million. Stanwood, a manufacturer of knits, underwear, and sportswear, had yearly sales of about $110 million and employed about 3,000 workers. The deal for Stanwood was structured as an exchange of one million shares of Delta Woodside stock for all of Stanwood's assets, which included 1.5 million square feet of factory space at 11 plants in Georgia, Tennessee, and Costa Rica. For the fiscal year ending in July 1988, Delta Woodside's earnings were $27.6 million, up from $21.3 million the previous year, on net sales of $489 million. In October 1988, the company's stock was listed on the New York Stock Exchange for the first time. Toward the end of that year, plans were made to consolidate Stanwood's headquarters into the Royal Manufacturing division headquarters in Greenville, as well as to consolidate Stanwood's dyeing, knitting, and finishing operations into the Maiden facilities. The company also earmarked $20 million for the completion of its new yarn plant in Spartanburg.

The steady flow of new acquisitions continued into 1989. In February of that year, the company paid about $14 million for O'Bryan Bros., Inc. By the middle of 1989, Delta Woodside's vertical integration was generally complete, with company products ranging from commodity yarns to finished apparel. By that time, the company employed about 9,500 workers in its 37 plants. For the year ending July 1, 1989, Delta earned $9.9 million on sales of $569 million. In November 1989, Delta Woodside merged with its longtime affiliate RSI Corp., Buck Mickel's company. This followed the spinoff of much of RSI's business to stockholders. The remaining incarnation of RSI consisted only of the Harper Brothers office supply operation. The last step of the merger was the amendment of RSI's articles of incorporation, changing the combined company's name to Delta Woodside Industries, Inc. Although the merger was structured in such a way that Delta Woodside was technically merged into RSI, the actual effect of the merger was the purchase of RSI by Delta Woodside at a cost of $1.1 million.

The Early 1990s

Delta's sales and earnings slumped badly in 1990. Including the new office supply operation, the company's sales dropped to $500 million, while earnings sank to $4.4 million. These setbacks were blamed primarily on weak demand in the retail sector, creating pressure throughout the chain of production. In January 1990, the company's 89-year-old Easley Plant was closed as part of a modernization program. The plant's printcloth production was moved to Woodside Mills' Beattie Plant in Fountain Inn, South Carolina. A few months later, Delta purchased the assets of the Shirt Knitting division of Durham Hosiery Mills, Inc. The division, with sales of about $48 million, was added to the company's Duck Head Apparel operation. Its plants (three in Tennessee and one in Georgia) employed about 1,200 people.

As the company entered the 1990s, increasing emphasis was placed on its Duck Head brand apparel line. The clothing was advertised in such publications as Playboy and Sports Illustrated, and televised ads were featured during college football games. Four retail outlets for "factory second" Duck Head merchandise were added, bringing the total of such stores in South Carolina, Georgia, and Tennessee to seven. In 1991, Delta Woodside benefited from a huge rush of sales attributable to the Persian Gulf War. During the nine-month period ending in March 1991, the company's sales of camouflage and other fabrics to the Defense Department leaped to $49.2 million, well over twice the total for that period the previous year. For the same period, sales in Delta's woven fabrics division grew by 38 percent. These gains were not companywide, however, as both Stevcoknit and Duck Head Apparel showed sales declines for that nine-month stretch.

For the fiscal year ending in June 1991, sales rebounded to $590 million. The biggest gains were made by the Duck Head product line, whose sales reached $61.7 million. The Duck Head line also diversified its products, adding woven and knit shirts, shorts, and women's wear to its original array of casual cotton men's pants. Three-fourths of Delta's net sales for the year were generated by the fabrics division, as was 86 percent of the company's operating profit. In this division, about $313 million in sales came from woven fabrics, while about $128 million worth of knitted fabrics were sold.

Duck Head clothing continued as one of Delta's more important product lines in 1992. Gross sales of Duck Head apparel more than doubled over the course of the year, totaling over $130 million in fiscal 1992, despite the overall sluggishness of the national retail market. Spurred by the Duck Head line, the company's apparel division showed a 69 percent increase in sales and an impressive 267 percent growth in operating profit for the year. As a result of the apparel division's success, a rearrangement in management took place that split the division into two separate management teams, one responsible for Duck Head operations, the other for Delta Apparel. The fabrics division held steady for fiscal 1992. Sales and profit figures for both woven and knit products, as well as the balance between them, were comparable to those for the previous year. The company continued to supply woven fabrics for casual and tailored pants made by such well-known brands as Levi Strauss, Lee, Haggar, and Farah. While the sale of government products declined by 20 percent for the year (largely due to the war's end), a 25 percent increase in commercial finished cotton business picked up the slack.

As a whole, Delta Woodside's net sales set a company record of $705 million for fiscal 1992. Apparel operations accounted for about 29 percent of sales, closing in on the company's stated goal of 33 percent in the product mix. Net income, at just over $40 million, was also the highest in company history. In mid-1992, Delta's original yarn plant in Edgefield, South Carolina, the company's birthplace, was closed. Shortly thereafter, a new ultramodern plant, also located in Edgefield, went into production. The new plant was named after company cofounder Bettis Rainsford. The Rainsford Plant produced combed cotton and cotton-polyester yarns used in the manufacture of knit fabrics for men's and women's apparel. Much of the yarn was used internally in the company's Stevcoknit operations.

In January 1993, Delta Woodside announced that it had acquired a 100 percent interest in Nautilus International, Inc., the Virginia-based manufacturer of fitness equipment. Nautilus had sales estimated at $18 million in 1992 and employed about 256 people. Delta also purchased 70 percent of the shares of Apparel Marketing Corporation, a New York-based company that held the license to manufacture apparel under the Nautilus brand name. This acquisition gave Delta another recognizable trade name, in addition to Duck Head, under which to market apparel. It also gave the company a solid inroad into the lucrative fitness wear business. Around the same time, Delta announced that it had completed the purchase of a new facility called the Harmony plant at Grecia in Costa Rica, which was set up to employ 210 people. The Harmony plant was acquired for the purpose of manufacturing men's pants under the Duck Head brand name.

The Mid- and Late 1990s

For all of its quick rise to the top of the apparel and textile industry, management at Delta Woodside was not able to continue its unlimited growth and expansion. In 1996 the company lost approximately $62 million, largely due to the unanticipated success of imports on the market which led to a large inventory surplus, numerous closings of unprofitable textile plants operated by the company, and restructuring expenditures because of a comprehensive reorganization strategy. The decline in share price and continuing losses at the company's apparel units led management to the decision to close even more textile plants and to consider the sale of Duck Head Apparel.

In 1998, still reeling from declining sales and profits, management decided to sell its StevcoKnit Fabrics Division, which eliminated almost 1,000 jobs. In the winter of 1999, the company sold off Nautilus to Focus Corporation, a firm in the fitness equipment industry. Other non-core operations were sold off, and even more employees were released to reduce operating costs. By the spring of the same year, a decision was made to spin off both the Duck Head Apparel and Delta Apparel divisions as separate companies, and then sell the entire remaining assets of the firm, Delta Mills, the maker of woven fabrics, to the highest bidder. Although there were prospective buyers, as of the summer of 1999 no purchase had been arranged.

In order to maximize shareholder value, the decision to break up the textile company was clearly the correct one. Yet, the sudden decline and dismantling of what started as a promising company with astute management, well-run operations, and good product lines seemed well worth more study and reflection.

Principal Subsidiaries: Delta Mills Marketing Company; Duck Head Apparel Company, Inc.; Delta Apparel, Inc.; Duck Head Retail Operations; Harper Brothers; Stevcoknit Fabrics Company.

Delta Woodside Industries, Inc. History

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