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Pillowtex Corporation

Pillowtex Corporation

4111 Mint Way
Dallas, Texas 75237
U.S.A.
Telephone: (214)333-3225
Fax: (214)330-6016
Web site: http://www.pillowtex.com

Public Company
Incorporated:
1954
Employees: 12,000
Sales: $1.35 billion (2000)
Stock Exchanges: New York
Ticker Symbol: PTEXQ
NAIC: 31321 Broadwoven Fabric Mills; 314129 Other Household Textile Product Mills

Pillowtex Corporation is one of the three biggest producers of bedding and bath textiles in the United States. It is the leading manufacturer of what is known in the industry as top-of-the-bed products, including blankets, pillows, mattress pads, and comforters. Through its subsidiary, Fieldcrest Cannon Inc., Pillowtex is also the leading U.S. manufacturer of towels, and it sells many well-known home textile brands, including Royal Velvet, Cannon, and Charisma. Pillowtexs customers include practically every major North American retailer, from department stores and mass merchandisers to catalogs to large institutional organizations such as the U.S. Postal Service. The company offers more than 10,000 products, which are manufactured in plants throughout the United States and Canada. Its Dallas facilities include what is arguably North Americas biggest feather and down processing plant. The company grew rapidly through acquisition, culminating in the merger in 1997 with Fieldcrest Cannon, a firm even larger than itself. Heavy debt sent the company into Chapter 11 in 2000.

Postwar Origins

Pillowtex was founded in 1954 by John H. Silverthorne to manufacture bed pillows in Dallas. The company soon began acquiring manufacturing plants in Atlanta, Chicago, Connecticut, and Los Angeles, forming the basis of what would become a hub and spoke manufacturing and distribution network, one of the most sophisticated systems in the industry. Sales mounted slowly but steadily from 1958 on, reaching $4 million by 1965 and $7.5 million in the early 1970s.

Notwithstanding its relatively modest growth in the early years, Pillowtex developed a reputation as a potent competitor. According to a 1990 article in trade journal HFD-The Weekly Home Furnishings Newspaper, one customer went so far as to nickname it the gorilla. Rivals had no choice but to concede the companys preeminence in pillows. One unidentified competitor told HFDs Sharyn Bernard, Theyre an excellent company. Everyone thinks of Pillowtex [when they want bed pillows]. The firm also garnered a reputation for having a creative sales force and for establishing, rather than following, product trends.

John Silverthorne continued to own and operate Pillowtex throughout much of its first four decades in business. In 1973, the founder established a long-range succession scheme by promoting Charles Chuck Hansen, Jr., to president. Hansen had joined the company in 1965 at the age of 25 and quickly advanced from the ranks of sales representatives to the executive offices. Although he had not originally expected to make a lifetime career at Pillowtex, he told the Dallas Business Journals Sean Wood that he hoped to make it the largest and most profitable maker and seller of pillows, comforters and bed pads.

Hansen and Silverthorne believed that the best way to achieve that goal was to buy market share. The company averaged one acquisition about every four years from 1970 to 1981, adding Perl Pillow, Synthetic Pillows, Inc., and Globe Feather & Down during the period. By 1982, organic growth and acquisitions had boosted the pillow companys sales to about $56 million and made it the leader of the industry.

Diversification into Other Top-of-the-Bed Goods in the 1980s

Having achieved dominance in its core business, Pillowtex sought growth through other avenues in the 1980s. Acquisitions throughout the decade both supplemented Pillowtexs pillow making operations and added mattress pads to the product line. The company purchased two mattress pad companiesLos Angeles-based Bedcovers, Inc. and Acme Quilting Co., Inc., Americas oldest mattress pad producerin 1983 alone. The Acme purchase also gave Pillowtex the capacity to manufacture comforters, throw pillows, moving van pads, and such decorative goods as dust ruffles and pillow shams.

Hansen noted that these additions not only boosted Pillowtexs sales volume, but also helped to shield it from downturns in individual categories. A desire to gain manufacturing and marketing synergies was another motivation behind the acquisition strategy.

Pillowtex grew so fast in the late 1980s that one competitor filed suit against it, charging that the company had violated antitrust laws and was becoming a monopoly. The lawsuit arose from Pillowtexs 1987 acquisition of Sumergrade Corporation, a North Carolina manufacturer. The $9.3 million purchase of this bankrupt business made Pillowtex the nations leading producer of down comforters and boosted its capacity in decorative throw pillows, a fast-growing, high-margin segment. (The Texas company would further augment its decorative pillow business with the 1991 acquisition of Nettle Creek Corporation.)Sumergrade also gave its new parent a valuable Ralph Lauren Home Furnishings license and enhanced its presence on the East Coast. The antitrust suit was unsuccessful, and Pillowtexs growth continued unabated.

Some competitors speculated that Pillowtexs rapid expansion would be its downfall, making it a slow-moving giant. The company combated that tendency with a quick response (QR) program that incorporated electronic data interchange (EDI). QR coordinated information shared by the merchandiser and the manufacturer such that when a sales clerk scanned the inventory number of a given product, the network automatically reordered the item from Pillowtex. The system reduced paperwork and lead time, thereby cutting costs for both parties and creating a just-in-time-like operation. By the mid-1990s, all but about 10 percent of the companys customers placed their orders through EDI, leading analysts with Wheat, First Securities to call Pillowtex one of the most technologically integrated and advanced of pillow and blanket manufacturers.

Rapid Growth in the Early 1990s

Chuck Hansen advanced to chief executive officer and chairman when the founder died of cancer in December 1992. The new leader quickly prepared Pillowtex for an initial public offering (IPO) in 1993. The floatation offered about one-third of the companys equity to the public, while Hansen and Silverthornes widow, Mary R. Silverthorne, split most of the remaining interest. This arrangement permitted the company to raise funds for both the Silverthorne estate and Pillowtexs growth, while maintaining control among corporate insiders.

Pillowtex moved boldly into the blanket segment in the ensuing 30 months, using part of the $53 million proceeds of the IPO to bankroll the acquisition of three blanket companies and two pillow/comforter manufacturers. The growth-hungry firm bought two old-line blanket manufacturers, Tennessee Woolen Mills, Inc. and Manetta Mills, Inc., in 1993 at a total cost of $20.9 million in cash. A year later, Pillowtex shelled out a whopping $112 million ($101 million cash and $11 million debt) for Beacon Manufacturing Company, then the largest player in the blanket segment.

Other acquisitions diversified Pillowtex internationally. Torfeaco Industries Limited, a well-established producer of pillows, mattress pads, and decorative bedding, came on board in 1993. In 1994, the growing firm paid $3.6 million for Imperial Feather Company, a pillow and comforter manufacturer. With overseas sales totaling about 10 percent of total revenues in 1995, Pillowtex laid plans to launch production and distribution operations in Europe and South America.

Pillowtexs pro forma sales nearly doubled in the early 1990s, from $259 million in 1991 to $474.9 million in 1995. Operating income increased from $19.1 million to $36.5 million during the same period, due in part to rising productivity. The companys selling, general, and administrative expenses (already ranked among the industrys lowest) declined from nearly 13 percent of sales in 1991 to 9 percent of sales by 1995. Nevertheless, net income declined from $13.2 million to a low of $7.7 million in 1994. The decreases in bottom-line profitability were attributed to debt service from Pillowtexs mid-decade acquisition spree, rising raw materials costs, and difficulties in reconciling its new affiliates. The decline in net earnings pushed Pillowtexs stock, which had risen from an introductory price of $14 per share in 1993 to a high of more than $21 early in 1994, down to less than $9 by the end of the year.

The company tried to alleviate some of its raw materials problems with the $6 million acquisition of Newton Yarn Mills, a North Carolina cotton yarn spinning factory, from Dixie Yarns Inc. in 1995. In addition, a savvy acquisition in 1996 gave Pillowtex Fieldcrest Cannons $71 million blanket and throw business at a cost of $30 million.

Company Perspectives:

At Pillowtex, our entire history is dedicated to helping people sleep well. Since 1954, weve been producing the best line of bedding materials. Weve grown into the largest manufacturer of bed pillows, mattress pads, down comforters, and blankets; as well as a leading provider of comforter covers. Every night, we help millions of people rest. And every morning, we make sure they get out on the right side of the bed.

Pillowtexs revenues rose to $490.7 million in 1996, and its net climbed to more than $14 million. Although in 1995 Hansen had told the Dallas Business Journals Wayne Carter, We dont control the stock price; I just try to run the company, by the end of 1996 he took a more considered approach to shareholders concerns, noting in that years annual report that the heart of Pillowtexs mission is the commitment to provide a superior investment return to our shareholders. Buoyed in part by the late 1995 institution of a dividend, the stock rose from less than $12 to $18 over the course of 1996.

The Mid-1990s and Beyond

A major management shift that started in 1995 reflected Pillowtexs transition from an entrepreneurial firm into a diversified corporation and telegraphed possible management succession scenarios. That year, the company reorganized into two operating segments, the Pillowtex division, in charge of pillows, mattress pads, and comforters, and the Beacon division, manufacturing woven blankets. This transitional phase soon yielded to a second shuffling. In 1997, the company reorganized along functional lines, appointing former Chief Financial Officer and Executive Vice-President Jeffrey Cordes as president and chief operating officer, former Pillowtex division President Christopher Baker as president of the manufacturing division, and hiring Kevin Finlay away from Fieldcrest Cannon Inc. to serve as president of the sales and marketing division.

Wheat, First Securities late 1996 analysis of Pillowtex forecast earnings growth of 22 percent in 1997, as efficiencies from its earlier acquisitions began to take effect and the company paid down substantial amounts of debt. In 1995, CEO Hansen told Dallas Business Journals Wayne Carter, Were not obsessed with the need to grow. Were obsessed with being the most profitable. Nonetheless, he affirmed that the company would continue to pursue growth through acquisition in the waning years of the 20th century, noting in Pillowtexs 1996 annual report the firms next major milestone: $1 billion in annual sales. Pillowtex intended to achieve that goal through internal development as well as its ongoing acquisition strategy. Organic growth strategies included a plan to leverage brand equity, especially among its own labels like Health Horizons antibacterial pillows and mattress pads, to boost sales in the late 1990s. The company also boldly mounted a challenge to Sunbeams utter domination of the electric blanket category in early 1997, hoping to capture 20 percent of this $150 million market.

Doubling Size, Going Bankrupt in the Late 1990s

In 1996, Pillowtex had snapped up the blanket and throw manufacturing business of giant towel-maker Fieldcrest Cannon Inc. In September 1997, Pillowtex announced that it had agreed to acquire the whole of Fieldcrest Cannon, a Kannapolis, North Carolina-based company that was the first name in bed and bath products. Fieldcrest was to be run as a subsidiary of Pillowtex, keeping its North Carolina base. The combined company would have sales of $1.6 billion, and 15,000 employees, making it either the second or third largest home textile manufacturer in the United States. Pillowtex paid $410 million to buy Fieldcrest and assumed $315 million of Fieldcrests debt. The deal accomplished several of Pillowtexs stated goals: it easily pushed it into the billion-dollar-company category, and it gave the firm a complete array of home textiles, including Fieldcrests top brands Royal Velvet, Cannon, and Charisma. Pillowtex announced that it would work to upgrade Fieldcrests technology, budgeting $80 million in 1998 for capital improvements at the new subsidiary. Although this was the biggest acquisition the company had made yet, it was not the last. In under a year, Pillowtex again made the news with its announcement that it had acquired The Leshner Corp., a maker of terrycloth kitchen and bath products. Leshner had sales of $105 million, and its inclusion in the Pillowtex stable bumped total company revenue up to $1.7 billion.

Integrating the parts of the new, mammoth Pillowtex did not go smoothly. When it acquired Fieldcrest Cannon, Pillowtex also took on a long-running labor dispute at the towel-makers North Carolina factories. After a struggle dating back to the 1970s, the Union of Needletrades, Textile and Industrial Employees finally won the right to organize Fieldcrests six plants in Kannapolis in 1999. The Kannapolis workers had been paid about $2 an hour less than workers at Pillowtexs other unionized plants, and other issues in the union elections were sick pay, overtime, and pensions. Pillowtex also had poured millions of dollars into updating Fieldcrests computer system, but did not come up with a satisfactory result. Problems with the computer system depressed sales at the division. Starting with the second quarter of 1999, Pillowtex began to lose money. Over the next 15 months, the company lost more than $67 million. Sales continued to shrink, and the company was oppressed with the debt it had taken on. Key players began to leave the company, including the president of sales and marketing, vice-president of international sales and marketing, and, eventually, the chief financial officer and the president/chief operating officer. By the second quarter of 2000, the company had to own up to a quarterly loss of more than $8 million, while interest rates rose, and total debt was more than $1 billion. CEO Hansen continued in an optimistic vein, announcing that although business in some categories fell, sales were up 5 percent with Pillowtexs top ten customers. When asked about the possibility of a bankruptcy filing, Hansen told industry journal Home Textiles Today (July 31, 2000), No way in hell. Thats sure as hell not on my agenda. One day after again posting dismal losses for the third quarter, Hansen resigned. Within weeks, the company filed for Chapter 11, which allowed it protection from its creditors while it reorganized its business.

Pillowtex pinned its hopes on its new president and chief operating officer, Tony Williams. Williams announced that he would simplify the company, trimming its product lines, reorganizing its manufacturing processes, and shortening cycle times to eliminate excess inventory. He also hired brand management consultants to help market Pillowtexs many leading brands. Williams predicted that Pillowtex would recover quickly and emerge from bankruptcy in 2002.

Key Dates:

1954:
The company is founded in Dallas.
1973:
Chuck Hansen becomes president.
1987:
Sumergrade Corporation is acquired, making Pillowtex the nations leading producer of down comforters.
1993:
Initial public offering.
1997:
Massive Fieldcrest Cannon acquisition vaults company to one of top home textile producers in the country.
2000:
The company files for Chapter 11 bankruptcy protection.

Principal Subsidiaries

Fieldcrest Cannon Inc.

Principal Competitors

WestPoint Stevens Inc.; Dan River Inc.; Springs Industries, Inc.

Further Reading

Bedding Manufacturer Files for Bankruptcy Protection, Wall Street Journal, November 15, 2000, p. B17.

Bernard, Sharyn K., Pillowtex Prestige: 36-Year-Old Company Builds Strength Through Diversification, HFD-The Weekly Home Furnishings Newspaper, December 3, 1990, pp. 4041.

Burkins, Glenn, Union Claims Victory at Pillowtex Plants, Wall Street Journal, June 25, 1999, p. A2.

Carter, Wayne, Pillowtex Straightens Out Lumps, Dallas Business Journal, September 22, 1995, pp. 8, 22.

Eckhouse, Kim, Brands Boom in Basics: Adding Names to Pillows and Pads, HFN-The Weekly Newspaper for the Home Furnishing Network, April 21, 1997, pp. 2728.

Frinton, Sandra, At Home in Bed; Pillowtexs Growth Stays Close to Basics, HFN-The Weekly Newspaper for the Home Furnishing Network, September 11, 1995, pp. 2324.

, Buy, Pay, Diversify: Companies Map Out 96 Strategies, HFN-The Weekly Newspaper for the Home Furnishing Network, December 11, 1995, pp. 2122.

, Health Push in Pillows and Pads, HFN-The Weekly Newspaper for the Home Furnishing Network, April 22, 1996, pp. 3536.

, Pillowtex 95 Results Up, HFN-The Weekly Newspaper for the Home Furnishing Network, February 19, 1996, p. 32.

Hitchcock, Nancy A., Business Strategy Speeds Flow of Goods and Data, Modern Materials Handling, March 1993, pp. 54D5-54D7.

Hogsett, Don, New Pillowtex Sheriff Takes Aim, Home Textiles Today, January 1, 2001, p. 1.

, Pillowtex Done in by Aggressive Growth, Home Textiles Today, November 20, 2000, p. 23.

, Pillowtex Forced to File Chapter 11, Home Textiles Today, November 20, 2000, p. 1.

, Pillowtex Posts $8.1 Mil. 2Q Loss, Home Textiles Today, July 31, 2000, p. 1.

Home Textiles Today Top 15, Home Textiles Today, January 13, 1977, pp. 69.

Johnson, Sarah, Finlay to Pillowtex, HFN-The Weekly Newspaper for the Home Furnishing Network, March 10, 1997, pp. 2728.

Kinter, Kim, and Donna Boyle Schwartz, Pillowtex Aims to Expand, HFD-The Weekly Home Furnishings Newspaper, February 2, 1987, pp. 2930.

Lazaro, Marvin, Pillowtex Has It in the Bag, Home Textiles Today, March 19, 2001, p. 1.

McCurry, John W., Pillowtex Buys Fieldcrest Cannon, Textile World, October 1997, p. 21.

Palmeri, Christopher, Southern Comfort, Forbes, April 25, 1994, p. 191.

Pillowtex Inks Deal for Leshner, HFN, June 15, 1998, p. 14.

Rush, Amy Joyce, and Sarah Johnson, Pillowtex Going Electric in Blankets, HFN-The Weekly Newspaper for the Home Furnishing Network, February 17, 1997, p. 4.

Schwartz, Donna Boyle, User-Friendly Basic Bedding: Technical Jargon Yields to Lifestyle Marketing, HFN-The Weekly Newspaper for the Home Furnishing Network, October 21, 1996, pp. 4142.

Slott, Mira, Finlay Out as PTex Honcho, Home Textiles Today, March 13, 2000, p. 1.

, Sumergrade Acquisition Brings Pillowtex Decorative Pillow Gains, HFD-The Weekly Home Furnishings Newspaper, January 18, 1988, pp. 4344.

Stringer, Kortney, Pillowtex CEO Resigns, Board Member Takes Over After Disappointing Results, Wall Street Journal, October 30, 2000, p. BIO.

Troy, Colleen, and Schwartz, Donna Boyle, Purofied Antitrust Suit Fails, HFD-The Weekly Home Furnishings Newspaper, July 13, 1987, pp. 5960.

Wattman, Karla, Duties, China Quota Roil Industry, HFD-The Weekly Home Furnishings Newspaper, May 2, 1994, pp. 4041.

, In the Public Eye: Cash Infusion Puts Pillowtex into High Growth Mode, HFD-The Weekly Home Furnishings Newspaper, April 26, 1993, pp. 3334.

, Pillowtex Gains Northern Exposure, HFD-The Weekly Home Furnishings Newspaper, November 15, 1993, p. 48.

Wood, Sean, Pillowtex Tries to Keep from Getting Comfortable, Dallas Business Journal, June 25, 1993, p. S23.

April Dougal Gasbarre
update: A. Woodward

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Pillowtex Corporation

Pillowtex Corporation

4111 Mint Way
Dallas, Texas 752371605
U.S.A.
(214) 333-3225
Fax: (214) 330-6016
Web site: http://www.pillowtex.com

Public Company
Incorporated:
1954
Employees: 4,250
Sales: $490.7 million (1996)
Stock Exchanges: New York
SIC: 2392 Housefurnishings, Not Elsewhere Classified; 2221 Broadwoven Fabric Mills-Manmade

With nearly half a billion dollars in sales in 1996, Dallas-based Pillowtex Corporation is a leading manufacturer and distributor of what it calls top-of-the-bed textile products. That year, the company ranked number one in bed (or sleep) pillows, with more than 50 percent of the U.S. market. It also led the down comforter and blanket markets and ranked among the top five producers of mattress pads and throw blankets. These top stakes in key segments of the home textiles market helped position Pillowtex fourth in the overall industry, according to a survey published in the January 13, 1997 edition of Home Textiles Today.

Diversifications through more than a dozen acquisitions over its nearly five decades in business had kept Pillowtex in the bedroom, but expanded its product offerings from basics to more fashion-oriented goods. By the mid-1990s, it made everything from basics like pillow protectors and comforter covers to decorative throw blankets and pillows as well as coordinated pillow shams, dust ruffles, and window treatments. Its products were sold under such well-known licensed brands as Ralph Lauren Home Collection, Fieldcrest Cannon, Royal Velvet, Disney, and even the U.S. Postal Service. They were distributed primarily through department stores and mass merchandisers. Known by some competitors as the mill of pillows, its Dallas facilities included what was arguably North Americas biggest feather and down processing plant. Following a 1993 initial public offering, the firm accelerated its long-held strategy of growth through acquisition. While its shares were publicly traded, company insiders continued to control a majority stake through early 1997.

Postwar Origins

Pillowtex was founded in 1954 by John H. Silverthorne to manufacture bed pillows in Dallas. The company soon began acquiring manufacturing plants in Atlanta, Chicago, Connecticut, and Los Angeles, forming the basis of what would become a hub and spoke manufacturing and distribution network, one of the most sophisticated systems in the industry. Sales mounted slowly, but steadily, from 1958 on, reaching $4 mil-lion by 1965 and $7.5 million in the early 1970s.

Notwithstanding its relatively modest growth in the early years, Pillowtex developed a reputation as a potent competitor. According to a 1990 article in trade journal HFD-The Weekly Home Furnishings Newspaper, one customer went so far as to nickname it the gorilla. Rivals had no choice but to concede the companys preeminence in pillows. One unidentified competitor told HFDs Sharyn Bernard, Theyre an excellent company. Everyone thinks of Pillowtex [when they want bed pillows]. The firm also garnered a reputation for having a creative sales force and for establishing, rather than following, product trends.

John Silverthorne would continue to own and operate Pillowtex throughout much of its first four decades in business. In 1973, the founder established a long-range succession scheme by promoting Charles Chuck Hansen, Jr. to president. Hansen had joined the company in 1965 at the age of 25 and quickly advanced from the ranks of sales representatives to the executive offices. Although he had not originally expected to make a lifetime career at Pillowtex, he told the Dallas Business Journals Sean Wood that he hoped to make it the largest and most profitable maker and seller of pillows, comforters and bed pads.

Hansen and Silverthorne believed that the best way to achieve that goal was to buy market share. The company averaged one acquisition about every four years from 1970 to 1981, adding Perl Pillow, Synthetic Pillows, Inc., and Globe Feather & Down during the period. By 1982, organic growth and acquisitions had boosted the pillow companys sales to about $56 million and made it the leader of the industry.

Diversification into Other Top-of-the-Bed Goods in the 1980s

Having achieved dominance in its core business, Pillowtex sought growth through other avenues in the 1980s. Acquisitions throughout the decade both supplemented Pillowtexs pillowmaking operations and added mattress pads to the product line. The company purchased two mattress pad companiesLos Angeles-based Bedcovers, Inc. and Acme Quilting Co., Inc., Americas oldest mattress pad producerin 1983 alone. The Acme purchase also gave Pillowtex the capacity to manufacture comforters, throw pillows, moving van pads, and such decorative goods as dust ruffles and pillow shams.

Hansen noted that these additions not only boosted Pillowtexs sales volume, but also helped to shield it from downturns in individual categories. A desire to gain manufacturing and marketing synergies was another motivation behind the acquisition strategy.

Pillowtex grew so fast in the late 1980s that one competitor filed suit against it, charging that the company had violated antitrust laws and was becoming a monopoly. The lawsuit arose from Pillowtexs 1987 acquisition of Sumergrade Corporation, a North Carolina manufacturer. The $9.3 million purchase of this bankrupt business made Pillowtex the nations leading producer of down comforters and boosted its capacity in decorative throw pillows, a fast-growing, high margin segment. (The Texas company would further augment its decorative pillow business with the 1991 acquisition of Nettle Creek Corporation.) Sumergrade also gave its new parent a valuable Ralph Lauren Home Furnishings license and enhanced its presence on the East Coast. The antitrust suit was unsuccessful, and Pillowtexs growth continued unabated.

Some competitors speculated that Pillowtexs rapid expansion would be its downfall, making it a slow-moving giant. The company combated that tendency with a quick response (QR) program that incorporated electronic data interchange (EDI). QR coordinated information shared by the merchandiser and the manufacturer such that when a sales clerk scanned the inventory number of a given product, the network automatically reordered the item from Pillowtex. The system reduced paperwork and lead time, thereby cutting costs for both parties and creating a just-in-time-like operation. By the mid-1990s, all but about ten percent of the companys customers placed their orders through EDI, leading analysts with Wheat, First Securities to call Pillowtex one of the most technologically integrated and advanced of pillow and blanket manufacturers.

Rapid Growth Marks the Early 1990s

Chuck Hansen advanced to chief executive officer and chairman when the founder died of cancer in December 1992. The new leader quickly prepared Pillowtex for an initial public offering (IPO) in 1993. The floatation offered about one-third of the companys equity to the public, while Hansen and Silverthornes widow, Mary R. Silverthorne, split most of the remaining interest. This arrangement permitted the company to raise funds for both the Silverthorne estate and Pillowtexs growth, while maintaining control among corporate insiders.

Pillowtex moved boldly into the blanket segment in the ensuing 30 months, using part of the $53 million proceeds of the IPO to bankroll the acquisition of three blanket companies and two pillow/comforter manufacturers. The growth-hungry firm bought two old-line blanket manufacturers, Tennessee Woolen Mills, Inc. and Manetta Mills, Inc., in 1993 at a total cost of $20.9 million in cash. A year later, Pillowtex shelled out a whopping $112 million ($101 million cash and $11 million debt) for Beacon Manufacturing Company, then the largest player in the blanket segment.

Other acquisitions diversified Pillowtex internationally. Torfeaco Industries Limited, a well-established producer of pillows, mattress pads, and decorative bedding, came on board in 1993. In 1994, the growing firm paid $3.6 million for Imperial Feather Company, a pillow and comforter manufacturer. With overseas sales totaling about ten percent of total revenues in 1995, Pillowtex laid plans to launch production and distribution operations in Europe and South America.

Company Perspectives:

We are committed to being a market leader in home textiles and providing a superior return on the investment of our shareholders. We will strive to achieve unparalleled customer satisfaction by assessing, understanding and ful-filling the needs and desires of our customers, and providing the best marketing and merchandising support in the industry. We will provide the highest quality and most competitive products available. We will seek to achieve measurable annual improvements in operating productivity and cost control. We will grow revenues through customer-focused product development, expanding distribution of current products and acquisitions. We will maintain a stimulating work environment that offers opportunities for challenging professional growth, and retains and motivates our employees. We will actively seek to enhance the quality of life in those communities in which we have operations and offices. We will adhere to the highest ethical business practices.

Pillowtexs pro forma sales nearly doubled in the early 1990s, from $259 million in 1991 to $474.9 million in 1995. Operating income increased from $19.1 million to $36.5 million during the same period, due in part to rising productivity. The companys selling, general, and administrative expenses (already ranked among the industrys lowest) declined from nearly 13 percent of sales in 1991 to nine percent of sales by 1995. Nevertheless, net income declined from $13.2 million to a low of $7.7 million in 1994. The decreases in bottom-line profitability were attributed to debt service from Pillowtexs mid-decade acquisition spree, rising raw materials costs, and difficulties in reconciling its new affiliates. The decline in net earnings pushed Pillowtexs stock, which had risen from an introductory price of $14 per share in 1993 to a high of more than $21 early in 1994, down to less than $9 by the end of the year.

The company tried to alleviate some of its raw materials problems with the $6 million acquisition of Newton Yarn Mills, a North Carolina cotton yarn spinning factory, from Dixie Yarns Inc. in 1995. In addition, a savvy acquisition in 1996 gave Pillowtex Fieldcrest Cannons $71 million blanket and throw business at a cost of $30 million.

Pillowtexs revenues rose to $490.7 million in 1996, and its net climbed to more than $14 million. Though in 1995 Hansen had told the Dallas Business Journals Wayne Carter, We dont control the stock price; I just try to run the company, by the end of 1996 he took a more considered approach to share-holders concerns, noting in that years annual report that the heart of Pillowtexs mission is the commitment to provide a superior investment return to our shareholders. Buoyed in part by the late 1995 institution of a dividend, the stock rose from less than $12 to $18 over the course of 1996.

The Mid-1990s and Beyond

A major management shift that started in 1995 reflected Pillowtexs transition from an entrepreneurial firm into a diversified corporation and telegraphed possible management succession scenarios. That year, the company reorganized into two operating segments, the Pillowtex division, in charge of pillows, mattress pads, and comforters, and the Beacon division, manufacturing woven blankets. This transitional phase soon yielded to a second shuffling. In 1997, the company reorganized along functional lines, appointing former Chief Financial Officer and Executive Vice-President Jeffrey Cordes as president and chief operating officer, former Pillowtex division President Christopher Baker as president of the manufacturing division, and hiring Kevin Finlay away from Fieldcrest Cannon Inc. to serve as president of the sales and marketing division.

Wheat, First Securities late 1996 analysis of Pillowtex fore-cast earnings growth of 22 percent in 1997, as efficiencies from its earlier acquisitions began to take effect and the company paid down substantial amounts of debt. In 1995, CEO Hansen told Dallas Business Journals Wayne Carter, Were not obsessed with the need to grow. Were obsessed with being the most profitable. Nonetheless, he affirmed that the company would continue to pursue growth through acquisition in the waning years of the 20th century, noting in Pillowtexs 1996 annual report the firms next major milestone: $1 billion in annual sales.

Pillowtex intended to achieve that goal through internal development as well as its ongoing acquisition strategy. Organic growth strategies included a plan to leverage brand equity, especially among its own labels like Health Horizons antibacterial pillows and mattress pads, to boost sales in the late 1990s. The company also boldly mounted a challenge to Sunbeams utter domination of the electric blanket category in early 1997, hoping to capture 20 percent of this $150 million market. Acquisitions were sure to remain focused on textiles for the bedroom.

Principal Subsidiaries

Beacon Manufacturing Company; Tennessee Woolen Mills, Inc.; Manetta Home Fashions, Inc.; Torfeaco Industries Limited (Canada).

Principal Divisions

Manufacturing Division; Sales & Marketing Division.

Further Reading

Bernard, Sharyn K., Pillowtex Prestige: 36-Year-Old Company Builds Strength through Diversification, HFD-The Weekly Home Furnishings Newspaper, December 3, 1990, pp. 4041.

Carter, Wayne, Pillowtex Straightens Out Lumps, Dallas Business Journal, September 22, 1995, pp. 8, 22.

Eckhouse, Kim, Brands Boom in Basics: Adding Names to Pillows and Pads, HFN-The Weekly Newspaper for the Home Furnishing Network, April 21, 1997, pp. 2728.

Frinton, Sandra, At Home in Bed; Pillowtexs Growth Stays Close to Basics, HFN-The Weekly Newspaper for the Home Furnishing Network, September 11, 1995, pp. 2324.

, Buy, Pay, Diversify: Companies Map Out 96 Strategies, HFN-The Weekly Newspaper for the Home Furnishing Network, December 11, 1995, pp. 2122.

, Health Push in Pillows and Pads, HFN-The Weekly Newspaper for the Home Furnishing Network, April 22, 1996, pp. 3536.

, Pillowtex 95 Results Up, HFN-The Weekly Newspaper for the Home Furnishing Network, February 19, 1996, p. 32.

Hitchcock, Nancy A., Business Strategy Speeds Flow of Goods and Data, Modern Materials Handling, March 1993, pp. 54D5-54D7.

Home Textiles Today Top 15, Home Textiles Today, January 13, 1977, pp. 69.

Johnson, Sarah, Finlay to Pillowtex, HFN-The Weekly Newspaper for the Home Furnishing Network, March 10, 1997, pp. 2728.

Kinter, Kim, and Schwartz, Donna Boyle, Pillowtex Aims To Expand, HFD-The Weekly Home Furnishings Newspaper, February 2, 1987, pp. 2930.

Palmeri, Christopher, Southern Comfort, Forbes, April 25, 1994, p. 191.

Rush, Amy Joyce, and Johnson, Sarah, Pillowtex Going Electric in Blankets, HFN-The Weekly Newspaper for the Home Furnishing Network, February 17, 1997, p. 4.

Schwartz, Donna Boyle, User-Friendly Basic Bedding: Technical Jargon Yields to Lifestyle Marketing, HFN-The Weekly Newspaper for the Home Furnishing Network, October 21, 1996, pp. 4142.

Slott, Mira, Sumergrade Acquisition Brings Pillowtex Decorative Pillow Gains, HFD-The Weekly Home Furnishings Newspaper, January 18, 1988, pp. 4344.

Troy, Colleen, and Schwartz, Donna Boyle, Purofied Antitrust Suit Fails, HFD-The Weekly Home Furnishings Newspaper, July 13, 1987, pp. 5960.

Wattman, Karla, Duties, China Quota Roil Industry, HFD-The Weekly Home Furnishings Newspaper, May 2, 1994, pp. 4041.

, In the Public Eye: Cash Infusion Puts Pillowtex into High Growth Mode, HFD-The Weekly Home Furnishings Newspaper, April 26, 1993, pp. 3334.

, Pillowtex Gains Northern Exposure, HFD-The Weekly Home Furnishings Newspaper, November 15, 1993, p. 48.

Wood, Sean, Pillowtex Tries To Keep from Getting Comfortable, Dallas Business Journal, June 25, 1993, p. S23.

April Dougal Gasbarre

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"Pillowtex Corporation." International Directory of Company Histories. . Encyclopedia.com. 14 Dec. 2017 <http://www.encyclopedia.com>.

"Pillowtex Corporation." International Directory of Company Histories. . Encyclopedia.com. (December 14, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/pillowtex-corporation-0

"Pillowtex Corporation." International Directory of Company Histories. . Retrieved December 14, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/pillowtex-corporation-0