Johnston Industries, Inc. History

Company History:

Although it got its start selling auto replacement parts, Johnston Industries, Inc. is a diversified manufacturer of textile fabrics for home furnishings, basic apparel, industrial use, and the automotive industry. The company became a favorite on Wall Street and received honors in the 1990s for innovation and management. More than half of its output was for use in home furnishings--especially upholstery--in 1995, with the majority of the rest intended for industrial operations. Virtually every product in the textile spectrum was being produced by one or more of its divisions.

Johnston Industries traces its beginnings to the incorporation in 1948 of Geon Trading Corp. The company name became Geon International Corp. in 1951 and Geon Industries, Inc. in 1969. Established in the state of New York, Geon had executive offices in Woodbury, New York, when it went public in 1969, with its founder, George O. Neuwirth, as president and treasurer. At that time Geon was an importer, distributor, and exporter of auto replacement parts. It also exported tractor, industrial, aircraft, and marine parts. The company had established facilities in Los Angeles and two other southern California cities; San Francisco; Fairfax and Richmond in Virginia; Hartford and New Haven in Connecticut; Dayton and Columbus in Ohio; Indianapolis, Indiana; Springfield, Massachusetts; and Manchester, New Hampshire. It had net sales of $13.3 million in 1968, net income of $421,374, and total assets of $6.5 million.

Geon grew rapidly in the 1970s, partly by acquisition. It purchased Imported Auto Parts, Inc. and BAP of New York, Inc. in 1970, AJS Auto Parts Inc. and Eatco, Inc. in 1971, and American Aviation Manufacturing Corp. in 1972. Net sales for 1972, including those of American Aviation, came to $40.6 million and net income to nearly $1.7 million. In 1971 Geon made a second public offering of stock at $21 a share, compared to $6 a share for the initial offering. Half of the sum raised was allotted to finance an increase in inventories.

In late 1973 Geon announced it had accepted in principle a cash offer of $36 million from Burmah Oil Co. to take over the company. The deal unraveled the following February, after Geon revealed that estimated net income for 1973 was $1.4 million to $1.5 million, lower than the level projected in negotiating the sale. The final figures for 1973 showed net sales of $47.9 million, net income of $1.4 million, and a burgeoning long-term debt of $16.6 million. A federal district court later ruled that Neuwirth had violated various provisions of the Securities Exchange Act of 1934 by disclosing information about Geon's negotiations with Burmah Oil to a friend and a broker. He was succeeded as chairman and president of Geon in 1974 by Robert L. Barbanell.

American Aviation, which had become a subsidiary of Geon, was sold in 1976 to its president for $1.5 million plus notes worth perhaps an additional $1 million. The following year Geon sold the bulk of its business, that which sold replacement parts for foreign cars, to a new U.S. unit of an Australian auto-parts company, Repco Ltd., for an estimated $6 million. This business had brought Geon $30.4 million in sales during 1976 but had resulted in a loss of $6.5 million. The rest of the company had sales of $8.8 million in 1976 and net operating profit of $1.1 million. The reduced company, which was renamed GI Export Corp. in 1977, had $13.5 million in debts.

Otto Hays succeeded Barbanell as president and chief executive officer of GI Export. Net sales increased to $11.3 million in 1978 and $13.9 million in 1980, while net income rose from $791,000 to $1.8 million during this period. In 1981 Founders of American Investment Corp. of Springfield, Missouri, purchased a 43-percent interest in GI Export for about $4.8 million. Redlaw Industries Inc., a manufacturer of auto parts and foundry products, held a controlling interest in the acquiring company through its GRM Industries Inc. unit. David L. Chandler, chairman of Redlaw's board, became chairman and chief executive officer of GI Export.

GI Export acquired Johnston Industries, Inc. in 1984 for $15 million cash and a note of $18.2 million. Johnston Industries was founded in 1972 by Paul A. Johnston of Chapel Hill, North Carolina. Formerly president of Glen Alden Corp., a conglomerate, Johnston initiated his company by purchasing Glen Alden's textile division. He later added Swift Textiles of Columbus, Georgia, and Opp and Micolas Mills of Opp, Alabama. The latter two mills dated back to 1921 and 1924, respectively.

Privately held Johnston Industries was based in New York City. The company soon sold Swift Textiles but kept one of its plants, Southern Phenix Textiles Inc. of Phenix City, Alabama. Built in 1968, this was one of the first mills to make woven goods from 100 percent polyester. In 1983, its last independent year, Johnston Industries had sales in excess of $100 million and what was said to be "significant profits." The amalgamated company, which had facilities in Gastonia, North Carolina, as well as Phenix City, took the Johnston Industries name as its own in 1985. The Gastonia facility was subsequently shed, as was GI Exports' business of exporting automotive and industrial parts.

Johnston Industries had net sales of $117.9 million in fiscal 1985 (ended August 31, 1985) and net income of $5.6 million. Its sales level remained flat in the late 1980s, but its profits reached $9.5 million in fiscal 1988 (ended June 30, 1987) and $7.8 million in fiscal 1989. Its shares moved up from the American Stock Exchange to the New York Stock Exchange in 1987. The company earned only $1.9 million, however, on sales of $118.9 million for fiscal 1990. In the following fiscal year, a recessionary period for the textile industry, Johnston Industries lost $1 million on just about the same volume of sales because cotton prices soared, and the company was unable to pass on higher costs to its customers.

Investors, however, expressed confidence in Johnston Industries and in Chandler, who in 1990 also assumed the title of president. By not hiking prices the company picked up business from firms that had been buying fabric from rival manufacturers. Placing its bets on the future, Johnston Industries spent $20 million in 1990 alone on new, faster yarn machines that enabled it to cut its work force. By November 1990 its stock was trading at a year-long high, especially pleasing to Chandler, who owned some 40 percent of the shares through GRM Industries. The firm rewarded investor confidence by earning $6.8 million on net sales of $138.3 million in fiscal 1992.

Johnston Industries' diversified sales, in 1991, consisted of 42 percent in home furnishings, 20 percent in coating and laminating, 12 percent in automotive, 11 percent in specialty-market industrial textiles, ten percent in apparel, and five percent in tufting and needle punch. It also earned a tidy sum from a 37-percent stake in Jupiter Industries, a publicly traded venture-capital investment company acquired in 1990. Johnston Industries invested $46 million in textile machinery from 1989 through 1991. All the company mills but one were running three shifts a day, seven days a week, at the end of 1991.

Johnston Industries moved to integrate its holdings in 1992, when Jupiter Industries acquired WestPoint Pepperell's custom-fabrics division, producer of industrial textiles. This division was renamed the Wellington Sears Co. for the venerable firm that traced its origins to a Boston outfitter of sailing ships in 1845 but whose name had been dropped by WestPoint in 1965. Also in 1992, Johnston Industries, in partnership with an English firm, formed Tech Textiles, USA to produce and sell sophisticated high-strength reinforced fabrics used in aircraft and autos.

Textile World devoted most of its June 1994 issue to Johnston Industries, which the magazine cited as its 22nd annual Model Mill "for its outstanding performance record, aggressive management approach to product and market innovation and strategic commitment to capital spending and high-tech operations." The company had enjoyed a record 1993 in net sales, which reached $154.1 million, and net income of $8.9 million. Adding the operating sales of Jupiter (which had been renamed Jupiter National) brought that figure over $275 million. Between 1983 and 1993 Johnston Industries returned stockholders an almost twelvefold total return on their investment.

"Name a product in the textile spectrum," Textile World declared, "and one of Johnston's divisions likely manufactures it. From filaments to spuns, from wovens and nonwovens to weft-insertion warp knits, it's all done somewhere in the Johnston realm. Company divisions process a wide array of fiber, including cotton, linen, polyester, rayon, acrylic, polyolefin, nylon, glass fiber, carbon, aramids and various fiber blends."

Johnston Industries struggled through some difficulties during fiscal 1994, when net income dropped to $6.5 million on sales volume of $159.9 million. Sharply rising raw-material costs, especially for cotton and polyester, were blamed. That year corporate headquarters were moved to Columbus, Georgia, consolidating its offices in New York and Phenix City. In fiscal 1995 Johnston and Jupiter National sales came to a total of $263.3 million, of which the latter accounted for about one-third. Net income was $7.9 million. Johnston Industries purchased full control of Tech Textiles, USA in 1995. Bean Fiberglass Inc. of Jaffrey, New Hampshire, had been purchased by and consolidated with Tech Textiles, USA earlier in the year. Tech Textiles, USA was renamed Johnston Industries Composite Reinforcements Inc. in 1996.

Textile World again honored Johnston Industries in October 1995 by selecting its president and chief operating officer, Gerald B. Andrews, as the magazine's leader of the year. Interviewed by magazine staffer Mac Isaacs, Andrews emphasized the importance of investing in capital improvements, disclosing that 35 percent of the company's products had not been produced three years earlier. He said its goal was to be the premier niche-market manufacturer in North America and added that he would be "really disappointed" if in three years annual sales had not reached $500 million, and the company was not much more profitable.

Another trade magazine, ATI, joined in the chorus of praise for Johnston Industries by selecting the company for its inaugural award for innovation in February 1996. "Through its aggressive capital spending plan and mastery of product innovation," declared ATI, "Johnston now looks at 1996 sales in the $350-million range.... The company is a waking dream of what the U.S. textile industry can and should be."

Jupiter National was merged into Johnston Industries in March 1996, but not without a struggle. Although Johnston Industries owned about 55 percent of Jupiter in July 1995, Jupiter's board opposed Chandler's offer of $26 million ($29.50 a share) for the rest of the common stock and ousted him as the company's chairman and chief executive officer. The following month, however, the board agreed to accept a sweetened offer to minority stockholders of $35 million to $40 million. This payment was subsequently fixed at $33.97 a share.

Johnston Industries owned, through its subsidiaries and Jupiter National's Wellington Sears subsidiary, four textile mills in 1995. In all, the mills had an annual capacity of about 215 million linear yards of fabric (about 110 million pounds), about 21 million pounds of sales yarn, and about 93 million pounds in nonwoven operations. Some 55 percent of its production was for home furnishings; 25 percent for industrial use; nine percent for specialty markets; six percent for automotive use; four percent for apparel; and one percent miscellaneous. Its long-term debt was about $102 million. GRM Industries owned about 41 percent of Johnston Industries' common stock.

Southern Phenix Textiles was manufacturing fabrics from polyester fiber for use in home furnishings, the automotive industry, the coating and laminating trades, and by various other fabricators. Its operations included spinning, weaving, and stitch bonding and finishings, and its products were being used for foam car-seat cushions, tufted upholstery, marine coated products, mattress ticking for popularly priced mattresses, and products for soft furniture. Its lining fabric was being used for all National Football League footballs and 90 percent of the footballs used in the college game.

Opp and Micolas Mills was manufacturing more than 122 different styles of cotton fabrics and cotton/polyester blended fabrics for the coating, home-furnishings, and apparel markets. These were greige goods: that is, unbleached and undyed, as taken from the loom. This subsidiary also was producing fabrics for the footwear and building-supplies industry and for various industrial operations for use in a broad range of coated products, including apparel, wall coverings, coated fabrics for autos, such as convertible tops, cloth roof coverings, and felt window liners, rubber-coated products such as automotive V-belts and other belts for industrial machinery, industrial protective clothing, and specialty items such as tote bags, handbags, and shoes.

Wellington Sears was a diversified manufacturer of cotton and polyester fabrics for the home-furnishings and industrial markets. Its products were being used in outdoor furniture, wiper cloths, napery, furniture upholstery, mattress pads, bed linens, and other industrial applications. Tech Textiles, USA, Johnston Industries' smallest division, was producing noncrimp fabrics for composite-manufacturing uses. Its largest market was in the marine industry.

Jupiter National was also active in the venture-capital field through a wholly owned subsidiary named Greater Washington Investments, Inc. In mid-1995 Greater Washington held $29.6 million in investments and had $14.5 million of debt in subordinated debentures.

Johnston Industries' properties in 1995 included Southern Phenix's two mills and Tech Textiles, USA's mill in Phenix City, and Opp and Micolas' two mills in Opp. Wellington Sears had a large installation just off Interstate 85 between Valley, Alabama, and West Point, Georgia. It consisted of three manufacturing facilities, a finishing operation, a fabric-design center, a testing laboratory, a retail outlet, and a corporate facility. Wellington Sears also had four additional manufacturing facilities: a mill and finishing plant in Columbus, Georgia, and one each in Dewitt, Iowa, and Tarboro, North Carolina. A leased plant in Lanett, Alabama, was making nonwoven mattress pads.

Principal Subsidiaries: JI International, Inc.; Johnston Industries Composite Reinforcements Inc.; Jupiter National, Inc.; Opp and Micolas Mills, Inc.; Southern Phenix Textiles, Inc.; Wellington Sears Co.

Further Reading:

• Agovino, Theresa, "A Profitable Web Woven in Reverse," Crain's New York Business, October 28, 1991, p. 4.
• "Geon Holders Approve Selling Bulk of Business and Change in Name," Wall Street Journal, May 23, 1977, p. 4.
• "Geon Says It Overstated Interim '73 Profits, Clouding Planned Take-Over by Burmah Oil," Wall Street Journal, February 26, 1974, p. 3.
• "Johnston: Ahead of Its Time," Textile World, June 1994, pp. 30, 32, 35-36, 39-40, 43, 45-46, 49-50, 61, 63-64, 67, 69-70, 73, 75-76.
• Kalogeridis, Carla, "Watch Johnston Thrive with Flexible Drive," Textile World, December 1991, pp. 29, 31.
• ------,"New Ideas Fuel Johnston's Engine," ATI, February 1996, pp. 25-26, 28, 32, 34, 36, 38, 40, 42, 44.
• Marcial, Gene G., "A Strong Thread Runs through This Textile Maker," Business Week, October 12, 1992, p. 154.
• "Redlaw Industries Unit Acquires 43% Stake in GI Export Corp.," Wall Street Journal, August 14, 1981, p. 61.
• "The Rest of Jupiter National, Inc.," Wall Street Journal, August 17, 1995, p. B6.
• "TW's 1995 Leader of the Year: Gerald B. Andrews," Textile World, October 1995, pp. 35-36, 39-40, 43-44, 46, 49-50.

Source: International Directory of Company Histories, Vol. 15. St. James Press, 1996.