Cone Mills LLC
Cone Mills LLC
804 Green Valley Road, Ste. 300
Greensboro, North Carolina 27408
Telephone: (336) 379-6220
Fax: (336) 379-6287
Web site: http://www.cone.com
Incorporated: 1891 as the Cone Export & Commission Company
Sales: $445.6 million (2002)
NAIC: 313210 Broad Woven Fabric Mills
Cone Mills LLC has more than a century of experience in the textile industry. While operating as Cone Mills Corporation, it was known as the world's largest manufacturer of denim fabric and the United States' largest printer of home-furnishings fabrics. Started by two brothers with a background in wholesale groceries, Cone grew steadily throughout its early years, concentrating on the manufacture of denim for work clothes. The competitive world textile industry caused the company to begin making cutbacks in the late 1970s, and it moved to diversify its product mix in order to maintain profitability. Despite resurgence in the popularity of denim with the baby boomers, Cone Mills found itself unable to thrive in the wake of rising raw material costs, narrowing profit margins, and the changing global marketplace. The company filed for Chapter 11 bankruptcy protection in the fall of 2003 and was acquired by WL Ross & Co. the next spring. Cone Mills now operates as part of International Textile Group which also includes former competitor Burlington Industries.
Roots in Family Grocery Business: 1840s–90s
Cone Mills was founded by Moses and Caesar Cone. They were the two eldest sons of a Baltimore wholesale grocery merchant, Herman Cone, who had immigrated to the United States from Bavaria in the 1840s, changing his name from Kahn to what he considered a more American spelling. In their teens, Cone's sons worked with him in his store. By 1876, the business had expanded to include tobacco and leather goods, and Moses and Caesar had begun to travel the Southeast, taking orders from merchants for their father's goods.
In their travels, the brothers had an opportunity to observe the textile industry of the South. Beginning in the late 1880s, the Cones made investments in three Southern cotton mills: the C.E. Graham Manufacturing Company of Asheville, North Carolina, the Salisbury Cotton Mills, and the Minneola Manufacturing Company. All three of these factories used outmoded equipment to produce coarse, low quality plaids and sheeting. The fabrics enjoyed a vogue as a result of their low cost, yet in competition with the products of more modern Northern mills, they sold slowly.
Convinced that there was a glut of coarse plaids on the market, the Cone brothers persuaded their own business partners, as well as other Southern mill owners, to diversify their offerings. The Cones assigned brand names to key products, and published guarantees of quality. With these steps, sales began to rise. By 1890, the Cones had convinced 38 of the roughly 50 southern mill owners that they could benefit from hiring a selling agency to market their products. Faced with declining profits in their grocery business, Moses and Caesar, along with their father and another brother, Julius, liquidated H. Cone & Sons, in order to form the Cone Export & Commission Company in 1891. The enterprise was known facetiously by its competitors as the "plaid trust." The brothers signed five-year contracts with the mill owners to market their goods, at a 5 percent commission.
With fundraising for the new business complete, Moses Cone went to New York in 1891 to set up an office. Although as a Southerner he met with some hostility, he soon established his place in the business community, and the company was able to move to Worth Street, in the heart of the textile industry. In short order, the Cones were selling more fabric than they could provide, as mill owners left their selling syndicate.
The Cone brothers vowed to go into the fabric production business themselves. Their plans to build two mills, one for denim and one for flannel, were delayed by a financial panic in 1893, but within two years, the Cones had moved ahead, constructing a denim mill on land they owned in Greensboro, North Carolina. Since the plant was near its supply of raw materials, the cotton fields of the South, the Cones named their new factory the Proximity Cotton Mill, and set up a holding company for this plant and the others in which they held an interest called the Proximity Manufacturing Company. In 1896, the first lengths of fabric rolled off the big looms at Proximity. Caesar Cone felt that denim, a sturdy fabric for use in work clothes, would be in constant demand as the United States expanded and industrialized.
More Mills: 1900s–20s
Just three years later, the Cones opened Revolution Mills, a modern facility to weave soft cotton flannel. In 1902, a second denim plant was under construction. Called White Oak, it was named for the enormous tree that grew on its site. With ten different warehouses for cotton and its own power plant, the mill began turning out indigo blue denim by 1905. Moses Cone died at age 51 in 1908, and his brother carried on the company, opening a fourth mill, the Proximity Print Works, in 1912. This facility was designed to "finish" or print cotton with multiple colors, creating a type of cotton product new to the South.
More than just a workplace, the Cone mills became an entire world for their employees, who were cared for in a paternalistic, and some would say totalitarian, system by the mill owners. The Cones built housing near their mills, both boarding houses and single family homes, which made up segregated Cone villages. Stores sold dairy products and meat produced on company farms. For each village, the company built a school and donated land for churches. Two mill YMCAs were built to provide outlets for recreation, and the company also instituted a Welfare Office, with social workers and nurses to look after its employees.
By 1913, the Proximity Manufacturing Company owned all or half interests in seven cotton production facilities. During the following year, the company paid both its first dividend, and its first income taxes. In 1915, the company began to produce denim fabric for Levi's jeans, opening up an important new market. With the coming of World War I in 1914, Cone products continued to be in demand, both by the Allies overseas, and then, after 1917, by the American armed forces. In March of that year, Caesar Cone, the company's only living founder, died after a brief illness, and leadership of the company was turned over to his younger brothers, Julius and Bernard.
During the 1920s, as the American economy boomed in the Jazz Age, the Cones undertook cautious expansion, as they converted from wartime practices back to civilian production. In 1920, the company bought the Salisbury Cotton Mills, which produced chambrays, coverts, ticking, and upholstery cloth. Further diversification came in 1925, when the company's New York distribution arm began marketing cotton blankets and felts produced by the Houston Textile Company of Texas. Over the next six years, the company gradually took over the Eno Cotton Mills of Hillsborough, North Carolina, which manufactured fine combed broadcloth for shirts.
In the late 1920s, the company also bought two gingham mills, the Cliffside Mill and Haynes Mill, which also had their own railroad to bring their products to the nearest main rail line. The Cones scrapped the mills' old box looms and installed terrycloth manufacturing equipment, enabling the Cones to enter the towel market. In addition, the company bought a mill built on solid granite called the Granite Cotton Factory from a Greensboro bank. On the same property, Cone also established the Tabardrey Manufacturing Company.
Economic Depression and Warfare: 1930s–40s
With the stock market crash of 1929 and the ensuing Great Depression, the Cones refrained from any further expansion throughout most of the 1930s. The company did introduce two new cotton fabrics, a light-weight flannel called "flannelette," and a crepe called "Proximity Plisse." Despite the popularity these products enjoyed, the company was forced to curtail production at its plants as the Depression wore on. In a move that would bode well for the future, however, Cone introduced "deeptone" denim in 1936, a smoother, darker indigo fabric that was designed to appeal to wearers more than the earlier, rougher fabrics.
By 1941, Cone was on more secure financial footing, and the company acquired the Florence Mills and its subsidiary, the American Spinning Company. Further expansion was halted with the American entry into World War II, when wartime production goals were implemented. In addition to an accelerated output of denim, Cone found itself producing such unfamiliar items as camouflage cloth, tent cloth, and osnaburg, for use in sandbags.
Seventy percent of the output of the fabric mills of North Carolina was diverted to the defense effort during the war, and at its end, it was clear that the Cones' operations needed to undergo a reorganization to thrive in the newly competitive civilian market. Accordingly, in 1945, the company merged all its separate mill properties into the Proximity Manufacturing Company, and also dissolved the old Cone Export and Commission Company, replacing it with a similar entity under the control of Proximity.
This move was followed in 1946 by the purchase of two more cotton mills, bringing to 16 the number of textile manufacturing facilities owned by Cone. In the next year, Cone branched out for the first time into synthetic fibers, purchasing a rayon plant next to one of its old cotton mills, and later adding a rayon spinning plant to bolster its production.
Cone Mills continues to be one of America's leading textile manufacturers. We are the world's largest and most diversified producer of denim fabrics and the largest commission printer of home furnishings fabrics in the United States. Cone Mills sells to markets around the globe, in over 35 countries.
On the first day of 1948, Proximity's president announced that the company would change its name to Cone Mills Corporation. Further expansion followed this switch. In 1950, Cone merged with the Dwight Manufacturing Company, a producer of twills and drills located in Alabama, and in the following year, the company was purchased outright. Also in that year, Cone formed the Guilford Products Company, manufacturing cloth diapers to serve the growing market produced by the postwar baby boom.
In the Public Eye: 1950s–60s
In November 1951, Cone made its largest organizational shift to date, selling stock to the public for the first time. In trading on the New York Stock Exchange, the company's shares were valued at $28.58. In the wake of the company's debut as a publicly traded enterprise, Cone moved to further consolidate its similar operations, and to diversify its activities to protect itself against weakness in demand for any one product. In 1952, the company purchased the Union Bleachery in Greenville, South Carolina. In doing so, Cone gained the first license for the "Sanforizing" process granted in the United States.
Despite the fact that denim pants were beginning to be worn by teenagers as fashion statements, as opposed to being worn exclusively by manual laborers, the demand for denim began to drop in the mid-1950s, causing Cone to look to development in its other areas of business for growth. The company began to emphasize its dyeing, printing, and finishing operations. Its flagship Proximity Cotton Mills was converted from the manufacture of denim, which was no longer in high demand, to the production of poplins, twills, and corduroy.
In 1957, Cone purchased three converting companies, and also moved further into the synthetics field, forming Spinco fabrics for blended and synthetic goods. Increasingly, the company found its market share threatened by products from other nations, where labor costs were lower. In response to this threat, in the following year, Cone stepped up its marketing efforts, and streamlined its manufacturing operations further, forming a finishing division to coordinate its various activities in that field. In addition, Cone inaugurated a Research and Development Department, to facilitate innovation in textile production. Overall, despite these efforts, the company's financial results throughout the 1950s were somewhat uneven.
In the 1960s, Cone began to diversify its operations further. In the first year of the decade, the company branched out into the decorative fabrics field, purchasing a controlling interest in John Wolf Textiles, which marketed fabrics for use in home furnishings. In the following year, Cone strengthened its presence in the furniture industry by organizing Olympic Products, which made polyurethane foam cushions and other foam products. This marked the company's first step outside the textile industry. In addition to this expansion in its activities, Cone broadened its geographical scope in 1961, buying an 11 percent interest in Fabrica Argentina de Alpargatas, which manufactured fabric, shoes, and other consumer goods in Brazil, Argentina, and Uruguay.
As a result of cotton pricing structures imposed by the federal government, Cone found itself losing its competitive edge in pricing for all-cotton fabrics to foreign producers. To combat this trend, the company began to increase the amount of synthetic fibers that it used in the fabrics it wove. These synthetic blends resulted in the introduction of stretch fabrics in 1962, and permanent press fabrics in 1964. In the following year, the company made a major shift in emphasis from all-cotton products to those made from a mix of cotton and synthetic fibers. These fabrics, which were used for newly fashionable casual and leisure-wear clothes, brought a higher price than simple cotton. Cone eventually offered more than 170 different blended cotton and synthetic products.
Cone Export & Commission Company is formed from liquidated grocery business H. Cone & Sons to market textile goods.
The company's first denim manufacturing plant, Proximity Cotton Mill, begins production.
Company begins weaving soft cotton flannel.
Second denim plant begins turning out indigo blue denim.
Fourth mill is opened to print cotton with multiple colors.
Stock market crash puts an end to decade of expan-sion.
Separate mills merge under Proximity Manufactur-ing Company.
Name is changed to Cone Mills Corporation.
Company goes public, begins trading on New York Stock Exchange.
Decline in demand for denim prompts formation of Spinco fabrics for blended and synthetic goods.
Company expands geographically with interest in South American company.
Cone Mills steps outside textile industry for first time.
Flooded warehouse results in fashion trend.
Begins plant modernization drive to cut costs, com-bat cheap imports.
Company goes private to circumvent takeover.
Cone goes public again.
Company enters into joint denim manufacturing ef-fort in Mexico.
Company files for Chapter 11 bankruptcy protec-tion.
Assets are acquired by WL Ross & Co.
Denim Back in Demand: 1970s–80s
By the end of the decade, however, Cone had also seen a resurgence in the demand for its first product, denim, as jeans became a staple among the baby boom generation, evolving from functional work clothes to a fashion item. The extent of denim's domination of the youth fashion market was demonstrated in 1969, when Cone's denim warehouse at its White Oak plant was flooded after a torrential downpour fell on Greensboro. Faced with the task of washing and dying vast amounts of fabric, the company decided, at the suggestion of one of its marketing employees, to run the damaged fabric through a bleach solution while restoring it, to randomly remove its indigo dye. The resulting product, dubbed "pinto wash" denim, touched off a fashion fad. As further evidence of denim's popularity, Cone's Proximity Cotton Mills were converted back to their original function, the manufacture of denim, in 1970, to meet the rising demand. In addition, the company was producing a growing quantity of corduroy, as this fabric became a popular fashion item.
Cone continued to purchase companies that fit into its existing operations, adding a cushion manufacturer, the Prelude Company, in 1970. By the following year, however, it had become clear that some divisions of the company were not profitable, and Cone shut down two weak operations, a blanket plant in Houston, and the John Wolf Apparel Fabrics Division.
In 1972, Cone expanded its program to sell off unused real estate that the company had acquired over the years, buying the Cornwallis Development Company, a real estate developer, which became a separate Cone division. This company would eventually profitably develop over 1,000 acres of land in the Greensboro area.
Throughout the 1970s, Cone struggled against an industrywide tide of cheap imported fabrics, which worked to keep profits down. The company relied heavily on its two main products, denim and corduroy, which enjoyed continuing fashion popularity. In 1974, Cone opened a new denim factory at its Cliffside plant. In 1975, the company embarked upon a nine-year program of plant modernization that was designed to make operations as efficient as possible, so that costs could be kept low.
Early in the 1980s, Cone entered another new market when it purchased the Chemical Chair House company, which manufactured molded urethane foam for use in the furniture and transportation industries. After changing its acquisition's name to Conitron, Cone built a new urethane plant for this company in Trinity, North Carolina. In the following year, Cone added to its polyurethane plant holdings when it purchased Ragan Hardware to add to its Olympic Division.
In 1983, Cone became a victim of the rage for corporate stock speculation when it was targeted for hostile takeover by Western Pacific Industries. In response, the company engineered a leveraged buyout of all of its outstanding stock, going private once again.
In further efforts to combat the impact of imported fabrics on its market, Cone joined with other American textile manufacturers to promote increased consumption of domestic products. "Crafted with Pride in the U.S.A." became the rallying cry for a public relations campaign designed to offset the impact of lower prices for imported products. Nevertheless, this factor, in combination with a loss in popularity for corduroy, caused Cone to close, convert, or sell ten of its mills in the years between 1977 and 1990. Such founding pillars of the company as the Proximity Cotton Mills and Print Works, the Revolution Mill, and the Minneola Mill shut their doors forever during this time.
Shrinking Fabric: 1990s
In addition to these measures, Cone streamlined its operations, and turned its attention to quality improvement programs and customer service. In 1990, the company also decided to move its marketing division to Greensboro. In the following year, Cone returned to the stock market, offering shares in the company in June 1992. At the same time that it strengthened its financial standing through this move, Cone—continuing a strategy begun in late 1991—moved to shrink its operations, withdrawing from the corduroy manufacturing business, as well as other areas.
Cone Mills had returned to the public market on a high note, but earnings began to slip in subsequent years and dropped into the red in 1995. Although 1995 sales reached a record high of about $910 million, the company posted a $3.3 million net loss.
According to the Daily News Record, Cone Mills attributed the shortfall to "high raw cotton prices, the weak apparel retail market, continued deterioration of decorative print markets and a troubled Mexican economy." During the year, Cone Mills had opened a denim facility, Parras Cone de Mexico, in a joint venture with Compania Industrial de Parras, SA de CV, Mexico's largest denim producer.
In 1996, 85 percent of Cone Mills' revenue came from apparel fabric—primarily denim—with the remaining 15 percent from home furnishings and other businesses. A loss again was posted on the year. The company was selling off noncore businesses in an effort to turn things around, but the bleak news continued.
In 1998, Cone Mills launched a major restructuring effort to cut costs. The following year, investment group Summit Capital Corp., which had gradually acquired a 12.6 percent stake in Cone Mills, offered to take the company private through a buyout. The offer was rejected and Cone Mills adopted a poison pill defense to prevent a hostile takeover of the company down the road.
Under restructuring the company's workforce was reduced, plants closed, and lines of business ended. To be sure, Cone wasn't the only U.S. fabric manufacturer struggling. The North American Free Trade Agreement, enacted in 1994, while increasing trade, had not helped the slumping industry, according to the Atlanta Journal-Constitution in December 2000. "In fact, the elimination of quotas and duties between the United States and Mexico has encouraged Mexican firms to set up fabric mills, contributing to the surplus of fabrics that makes it harder for U.S. manufacturers to compete," Fernando Silva, managing partner for Atlanta-based Kurt Salmon Associates' soft goods practice, told Chris Burritt. The global oversupply of denim had driven the wholesale price down nearly 27 percent in four years.
Still, Cone Mills remained the world's largest producer of denim fabrics and North America's largest commission printer of home furnishing fabrics as the 21st century began and planned to continue to invest in manufacturing plants south of the border.
A New Life for Century-Old Fabric Maker: 2000–04
In 2002, Cone Mills reported its first profitable year since 1994. The company earned $7.2 million versus a $40.6 million loss in 2001. While pleased with the turnaround, CEO John Bakane was critical of the U.S. trade policy and tied it to the ongoing downturn in the economy, Scott Malone reported for WWD. Bakane "noted that China's manufacturing plants are attracting 20 million new workers a year at a time when the entire U.S. manufacturing sector employs 17 million." He also noted that "Cone and other U.S. manufacturers need to modernize their plants and migrate to lower-cost nations to prepare for the onslaught of competition in 2005, when the 145 nations of the World Trade Organization are to drop quotas on apparel and textiles."
Cone Mills' Parras Cone de Mexico joint venture contributed $8.3 million to 2002 operation income. In addition, a Turkish joint venture, established in 2002, had begun serving the European division of Levi Strauss & Co.
But in September 2003, Cone Mills failed to make a scheduled bond interest payment of $4.1 million. As part of a deal to be purchased by WL Ross & Co., Cone Mills planned to file for Chapter 11 bankruptcy protection. Likewise, competitor Burlington Industries had filed for bankruptcy in 2001 and was set to be purchased by financier Wilbur Ross.
WL Ross & Co. paid $46 million in cash for Cone Mills and assumed certain liabilities in the deal that was completed in March 2004. WL Ross & Co. formed International Textile Group (ITG) from Cone Mills and Burlington Industries. Ross had completed a similar deal when he formed International Steel Group out of three bankrupt steel companies.
Both textile companies had made large cuts in the work force in the year before the bankruptcies and together employed about 7,300. The new company's total revenue was $900 million. To exceed the $1 billion mark, ITG was planning to develop new fabric technologies, boost brand name identities, and lower operating costs.
Ross, chairman of the combined companies, said in the Daily News Record, "Consumers know apparel brands but they're ignorant of fabric brands. If you can make a banana into Chiquita, we can do this with our fabrics."
In May 2004, the company announced plans for a denim plant to begin operation in Guatemala City in 2005 and was looking toward additional manufacturing opportunities in Asia. Already under the Cone Mills division of the IT were the Mexican plant and joint ventures in India and Turkey.
In operation for over a century and providing denim and casual sportswear fabrics internationally for about a half century, perhaps as part of ITG, Cone Mills would finally become a household word.
Milliken & Co.; Springs Industries, Inc.; W.L. Gore & Associates, Inc.
Burritt, Chris, "Seven Years into NAFTA, U.S. Textile Makers Seek Payoff in Mexico," Atlanta Journal-Constitution, December 17, 2000.
A Century of Excellence: The History of Cone Mills, 1891 to 1991, Greensboro, N.C.: Cone Mills Corporation, 1991.
Clune, Ray, Spirited Denim Sales Are Helping Cone Mills Weather Troubled Times," Daily News Record, May 16, 1996, pp. 9+.
"Cone Mills Announces 1999 Results," PR Newswire, February 10, 2000.
"Cone Mills Down 15% on Continued Denim Glut," Dow Jones Newswire, July 2, 1997.
"Cone Mills Drops $2.5M in 'Worst Quarter' Ever," WWD, February 13, 2002, p. 23.
"Cone Mills Quarter Best Since 1996," WWD, July 24, 2002, p. 17.
"Cone Mills Sets Poison Pill," WWD, October 15, 1999, p. 2.
"Cone Mills to Discontinue Khaki Fabric," WWD, October 31, 2001, p. 3.
"Cone Mills, WL Ross Complete Sale," PR Newswire, March 12, 2004.
Elliott, Frank, "Cone Goes Hungry on a High-Fiber Diet," Business North Carolina, April 1997, pp. 20+.
"ITG Finalizes Burlington, Cone Mills Additions," HFN The Weekly Newspaper for the Home Furnishing Network, August 9, 2004, p. 18.
Lloyd, Brenda, "Rose's Strategy: A Branding Blitz for Textile Firms," Daily News Record, March 22, 2004, p. 1.
Malone, Scott, "Cone Reverses Loss with $3M in Income," WWD, February 7, 2003, p. 1.
—, "Mills Break Losing Streak," WWD, June 6, 2000, p. 10.
—, "Ross Combines Burlington, Cone Mills into $900M ITG," HFN The Weekly Newspaper for the Home Furnishing Network, March 29, 2004, p. 4.
—, "Wilbur Ross Plans Guatemalan Plant," WWD, May 14, 2004, p.3.
"Ross to Buy Cone Mills," Business Journal Serving the Greater Triad Area," September 16, 2003.
"Ross's Strategy: Branding Blitz for Textile Firms," Daily News Record, March 22, 2004, p.1.
—update: Kathleen Peippo