The Dixie Group, Inc. History

Address:

1100 S. Watkins St.
Chattanooga, Tennessee 37404
U.S.A.

Telephone: (423) 689-2501
Fax: (423) 493-7353

Public Company
Founded: 1920 as Dixie Mercerizing Co.
Employees: 5,900
Sales: $615.1 million (1996)
Stock Exchanges: NASDAQ
SICs: 2200 Textile Mill Products

Company Perspectives:

Dixie's Vision is to provide value-added products and services to consumers through retail channels of distribution or to consumer-driven manufacturers, within distinctly defined floorcover, textile, and related markets where we can be important. We shall perform these endeavors profitably, with integrity, adhering to our company's values and with a sense of urgency and responsiveness to our associates and customers.

Company History:

The Dixie Group, Inc., previously Dixie Yarns, Inc., manufactures floorcovering and textiles. One of the largest floorcovering companies in the United States, Dixie operates four distinct floorcovering businesses. Masland Carpets produces high-end residential and commercial carpets and rugs. Carriage Industries makes tufted broadloom carpet for modular homes and recreation vehicles. Bretlin Needlebond makes indoor/outdoor carpet and floor mats for home centers and mass marketers, and Candlewick Yarns produces proprietary yarn for the tufting industry. Floorcovering accounted for two-thirds of the company's sales in 1996.

The rest of the company's sales came from its three textile and apparel businesses. Dixie Yarns is one of the largest spinners and dyers of cotton and high performance yarns in the world. Caro Knit, the company's fabric manufacturer, produces fine quality 100 percent cotton knit fabrics. C-Knit Apparel makes men's and boys' knit sports apparel. The company changed its name to The Dixie Group in May 1997.

Early Years, 1920-50

In 1920, several Chattanooga hosiery mill owners and other business leaders founded the Dixie Mercerizing Company to specially treat cotton yarn which was then used to make ladies' stockings. Two of the investors were J. T. Lupton and Cartter Lupton who became, respectively, president and treasurer of the company. In its first year Dixie had sales of $1.8 million and a profit of $56,784.

Named for a British calico printer, the mercerizing process used sodium hydroxide to shrink cotton yarn. This gave the yarn a silklike luster, popular for stockings, and also made it better able to hold dye. The company's biggest problem was finding an adequate supply of quality yarn that could stand up under the high tension required for mercerizing.

The owners of the nearby Dixie Spinning Mills, including the Luptons, decided to build a modern spinning plant to meet that need. According to Dixie's 75th Anniversary publication, "a 'model town with 72 artistically designed homes' along with playgrounds and a school were part of the plans for what would become known as Lupton City." The venture eventually cost $9 million. In 1925, Dixie Spinning Mills merged with Dixie Mercerizing Company. During the mid-20s, J. Burton Frierson became treasurer of Dixie.

The company remained profitable during the Depression, and in 1936, added to its production capability with the purchase of the Durham Hosiery Mills in North Carolina. During World War II, Dixie supplied the military and, experimenting with the "miracle fibers" developed during the war, was among the first spinners in the world to make synthetic yarn for military shoe laces.

After the war, J. Burton Frierson was named president and started expanding the company again. The company purchased two plants in North Carolina and in 1950 built a new spinning plant at Lupton to produce synthetic yarn.

Diversification, 1951-79

In 1951, Dixie began to diversify, moving into the making of carpet yarn with the purchase of Dalton Candlewick, spinners of cotton yarn for the high-volume tufting industry. In 1963, Frierson retired as president, becoming chairman of the board.

The Candlewick business grew quickly in the 1960s and 70s, taking up to a 10 percent share in the commodity nylon carpet yarn market. The company's core business had steady growth as well, producing yarns and threads for knitting, sewing, lace, braid, and related apparel uses. During this period Dixie commanded about 5 percent of the commodity apparel yarn market. Recognizing that the term mercerizing no longer reflected the scope of its operations, Dixie Mercerizing Company changed its name to Dixie Yarns, Inc. in December 1964.

To meet the demand for its yarns, the company built new plants for both Candlewick and the Apparel Yarn and Thread Division. It also bought Yarn Crafters, in 1968, and Southern Stretch Yarns, in 1969. Acquisitions continued during the 1970s, with the purchase of Sellers Manufacturing Co. & Sellers Dyeing Co. and the Jordan Spinning Co.

During this period, Don Frierson was named president of Candlewick. In 1979 he became Dixie's president and CEO when his father stepped down as chairman of the board. The senior Frierson had run the company for more than 40 years and the Frierson family had controlled the stock for nearly that long.

The Specialty Yarn Niche, 1980s

In 1980, Dixie Yarns operated 17 plants in five states and had a workforce of some 5,000 employees. Revenues that year came to $217 million, with nearly 40 percent of sales coming from commodity apparel and carpet yarns. Those two markets were to prove vulnerable for the company. The surge of cheap, imported textiles from Taiwan, Hong Kong, and China severely reduced the demand among Dixie's clients for apparel yarn. At the same time, carpet manufacturers in the U.S. found they could save 10 to 15 percent on the cost of carpet yarn by spinning their own.

Rather than try to compete for those markets, Frierson's strategy was to switch to high-margin specialty yarns, essentially returning Dixie to its roots. As Ayssa Lappen explained in a 1988 Forbes article, "Cotton apparel yarn with a stretchable Lycra core costs more to manufacture than traditional, undyed commodity cotton yarn, but it also sells for about one-and-a-half times the price."

To carry out his plans, Frierson had to close plants, lay off 30 percent of the workforce, and change a 60-year corporate culture. He implemented profit sharing and quality circles and set a goal for managers of 20 percent pretax return on capital, backing it up with stock options and a cash bonus. Sales, service, and quality were the focus of staff training, augmented by $50 million spent on new equipment and product development labs.

Frierson also spent money on acquisitions. In 1986 he bought China Grove Cotton Mills Co., which gave Dixie entry into more specialty yarn markets with Nomex, a synthetic fiber used in fire-retardant clothing, and Kevlar, for bulletproof vests and uncuttable safety gloves. Late in the year he took Dixie public. The public offering involved complex stock transactions that enabled Frierson and other members of the management team to retain majority control of the stock and "keep Dixie beyond the reach of predators," according to a 1988 Textile World article.

Acquisitions and complex stock deals continued with the $78 million purchase in 1987 of Ti-Caro, Inc. The addition of Ti-Caro involved Dixie in the making of knit fabrics for the first time through its Caro Knit division which produced 100 percent cotton knit fabrics. It also opened more than 15 new specialty yarn markets and made Dixie the country's leader in three major specialty markets: specialty yarns, knit fabrics, and carpet yarns. Dixie also became the largest supplier of industrial sewing thread used in items ranging from tea bags to baseballs. The two acquisitions doubled the size of the company and moved it to number seven among publicly held U.S. textile companies.

The industry recognized Frierson's talents and vision. He served as president of the American Yarn Spinners Association and chaired the American Textile Manufacturers Institute (ATMI) International Trade Committee. During 1988 alone, he was president of ATMI, chairman of the Fiber, Fabric and Apparel Coalition, and vice president of the National Cotton Council. That year, the editors of Textile World chose Frierson as the Textile Leader of the Year. In an interview with the magazine, Frierson described his business strategy: "Our basic markets are knit fabrics, threads, carpet yarns, and fine-count and specialty yarns. What we've tried to do is enhance our position in those four areas through increased productivity or plant improvement, through developing new processes or products, or through acquisitions." Dixie's revenue in 1988 was $606 million, with the company employing almost 10,000 people in 36 plants. Those sale figures proved to be a peak for the company, however, as sales fell for the next four years.

Floor Coverings and Consumer Products, 1990s

Frierson continued to consolidate facilities, cut payroll costs, and modernize the company's equipment, spending over $154 million on capital improvements between 1988 and 1993. Frierson's goal was fairly straightforward: to shift the company's emphasis from producing yarn and textiles for manufacturers to making consumer products with its own yarn and textiles itself. The most reasonable area to focus on was carpets since the company's Candlewick Yarns already was one of the country's largest producers of high-quality yarn used to make carpets for homes and businesses, bath and accent rugs, and floorcoverings for cars.

The carpet industry was going through a period of major consolidations during the early part of the decade, and Frierson made his move in 1993. He began with the acquisition of Carriage Industries. That 24-year-old company was based in Georgia and made carpets for modular homes, recreational vehicles, and trade show industries. Major clients included Fleetwood Enterprises and Homes by Oakwood. The purchase included Carriage's subsidiary, Bretlin, Inc., which specialized in making durable indoor/outdoor needlebond carpets and runners, floor mats, and decorative accent rugs. The Bretlin Broadloom products were sold at home centers, mass marketers, and independent retailers including Home Depot, Lowe's, and Payless.

Dixie already owned shares in Masland Carpets, a manufacturer of high-end, designer-oriented carpets and rugs for the residential and commercial markets, and bought the entire company later that year. In 1994, Dixie bought California-based Patrick Carpet Mills and incorporated it into Masland, marketing its product line under the name Patrick Carpet. Masland customers included Nordstroms, Hilton Hotels, and Applebee's International, and the company was a partner in the DuPont Commercial Flooring Systems Network. At the end of 1996 Dixie bought Danube Carpet Mills, Inc., from Shelter Components Corporation for approximately $25 million. Danube made carpets for the same markets as Carriage Industries and its carpet manufacturing operations were consolidated into Carriage's facilities. Its carpet yarn plant became part of Dixie's Candlewick division.

Between 30 to 40 percent of Candlewick's yarns went to the companies in Dixie's floorcovering business. Other customers included Magee Automotive Products, Bentley Mills, Regal Rugs, and Fieldcrest. Frierson's research and development efforts at Candlewick led to the development of Weave-Tech, a spun yarn with a spandex core, and Naturesse, a heatset cotton yarn designed for bathroom rugs, which combines the aesthetics of cotton with the durability of synthetics. Three years after the purchase of Carriage Industries, the floorcovering business accounted for two-thirds of Dixie's sales.

The other part of the business, yarns and fabric, also underwent changes during the decade. Frierson's strategy in this area was to continue building on Dixie's niche of cotton and high performance specialty synthetic yarns while growing its own apparel business. As with floorcoverings, his goal was to manufacture consumer products.

Dixie Yarns continued to be the foundation for the company's textile/apparel business. While it still produced mercerized high-luster cotton, it also manufactured and marketed Supima and Pima cottons, combed and carded ring spun yarns, and Corespun yarns containing Lycra. Its spinning facilities produced DuPont's Thermastat and Coolmax polyester fibers and Courtauld's Tencel, a Lyocell fiber. By the mid-90s, Dixie Yarns was providing yarn to seven different markets in addition to various specialty markets: high-end upholstery, home furnishings, sportswear, hosiery, sweaters, underwear, and automotive body cloth.

Caro Knit, which was part of the Ti-Caro acquisition in 1987, continued to produce 100 percent cotton knit fabrics for retailers such as J.C. Penney and Brooks Brothers, catalogue retailers including Land's End and L.L. Bean, as well as sportswear manufacturer Polo. But as part of Dixie's customer product focus, Caro Knit began operating as a vertical company, using yarn from Dixie Yarns to make its fabric which was then turned into knit sports apparel by C-Knit, the third company in Dixie's textile and apparel business.

C-Knit began operating in 1995, providing cutting operations in South Carolina to prepare components that were shipped to plants controlled by Dixie in Central America where they were sewn into garments. The finished pieces were then shipped back to C-Knit warehouses in the U.S. ready to be sent to customers. Most of the garments were shirts--polo, henley, crew neck, and fleece--for customers including Ashworth, Coca Cola, and Cumberland Bay by Fruit of the Loom.

In 1996, Dixie sold its Threads USA division to American & Efird, Inc., a subsidiary of Ruddick Corporation, further honing its concentration on floorcovering and textile/apparel. More than half of Dixie's sales for the year were for consumer products, and the company redesigned its administrative and operating procedures and created a new management structure to respond more quickly and flexibly to changes in the markets.

In May 1997, shareholders voted to change the company's name to The Dixie Group, Inc. With increased sales for the first quarter of 1997 in both its business segments, it appeared that the years of restructuring had served their purpose. But Frierson did not rule out additional, "strategically appropriate acquisitions" to augment Dixie's growth.

Principal Subsidiaries: Carriage Industries, Inc.; Candlewick-Ringgold, Inc.; Candlewick-Lemoore, Inc.; Dixie Experts, Inc.; Dixie Funding, Inc.; Masland Carpets, Inc.; Patrick Carpet Mills, Inc.; T-C Threads, Inc.; Threads of Puerto Rico, Inc.

The Dixie Group, Inc. History

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