Richloom grabs top spot

Acquires John Wolf from Cone for $9M

Don Hogsett, August 13, 2001

Cementing its powerhouse position in the decorative fabrics industry, Richloom Fabrics has acquired most of the assets of one of its struggling rivals, the roughly $30-million-a-year John Wolf converting business, from financially ailing Cone Mills Corp. in a deal valued at about $9 million.

In a win-win deal for both companies, the buyout takes out one of Richloom's competitors and creates a new numero-uno, making Richloom the industry's largest player. With sales already in excess of $250 million a year, the acquisition will bring Richloom close to the $300 million mark, enabling it to leapfrog its two biggest rivals, P. Kaufmann and Covington Industries.

At the same time, the deal provides some ready cash for Cone, and allows Cone to exit a business forecast to lose $3 million to $4 million this year. Cone said it will record a one-time charge against third-quarter profits of $5 million to $6 million in connection with the sale.

The sale of the John Wolf business gets a big monkey off of Cone Mills' back at a particularly difficult moment for the American home fashions industry in general, and after several lean, destabilizing years for the decorative fabrics business. "That it certainly does," agreed Scott Wenhold, Cone Mills treasurer. "It was a painful decision — these always are — but I'm confident it was the right one. These sure are some very, very difficult times, and I don't see a recovery coming this year. I think a turn in business is a 2002 event, but even then I'm not sure exactly when."

The sale of the John Wolf business, Wenhold emphasized, underlines Cone's commitment to a challenging turnaround course the company has set for itself. "It demonstrates that we are aggressively executing our reinvention plan and doing whatever we can to restore this company to profitability."

While selling off its struggling John Wolf business, which it acquired in 1960, Cone is holding on to its larger, stronger and profitable jacquard fabrics business. That jacquard business, headquartered in Cliffside, NC, has doubled its sales in the past four years, said Cone ceo John Bakane. Operations in the jacquard business will be entirely unaffected by the sale of the John Wolf operations, said Wenhold.

The sale of the John Wolf business will eventually result in the elimination of about 25 jobs and the closing of Cone's decorative fabrics offices in New York.

The deal also leaves Cone with its commission finishing business, the largest commission printer of home furnishings fabrics in North America, which last year generated a $4.8 million loss on sales of $79.9 million, down 15.6 percent from the prior year.

Founded 110 years ago, Cone Mills, headquartered in Greensboro, NC, is the world's largest producer of denim fabrics, an industry hard hit in recent years by changing fashions, and an industry undergoing a radical transformation as it shifts much of its production to Mexico. In the wake of an ongoing restructuring designed to streamline and revitalize the company's operations, Cone last year widened its losses to $29.1 million from $22.1 million the prior year.

Cone Decorative Fabrics (John Wolf Decorative Fabrics and the jacquards woven business)
Financial Snapshot (in $000s)

2Q 2001 2001 2000 % Change
Sales $15,849 $19,973 -20.6%
Operating Profit (loss) (1,256) (292)
6 Months 2001
Sales 32,685 39,522 -17.3
Operating Profit (loss) (2,619) (508)
Full Year 2000
Sales 77,291 72,944 6.0
Operating Profit (loss) (1,642) 1,591

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