CMI to exit gray goods business
May 14, 2001,
COLUMBIA, SC — It was a rough two weeks for CMI Industries Inc.
CMI not only faces an involuntary Chapter 11 petition from its creditors, it also announced that it will exit the woven gray goods business that had long been the backbone of its operation.
"That part of the business was profitable until the mid '90s, and we thought we were in a good position until 1998, when the Asian crisis hit," Joe Gorga, ceo, told Home Textiles Today about the financial climate that led to the closing. "Since then, we've been devastated by imports, have seen no relief and haven't been able to recover."
The woven gray goods business has not operated at a profit since 1998, Gorga said.
According to CMI's Form 10-K filed for the 2000 fiscal year, gray goods made up 56 percent of the company's sales, while 44 percent came from the elastics fabrics division. Although the company's total sales added up to almost $200 million for 2000, it was a significant decline from its more than $242 million in sales in 1998, a fall-off of 20 percent. CMI also reported a $24 million loss for 2000, as opposed to a 1998 profit of more than $3 million.
The involuntary Chapter 11 petition was filed on May 3 by certain holders of CMI's 9.5 percent Senior Subordinated Notes. Chancellor/Triton, Mt. Washington and Atlantic Global all filed the petition with the U. S. Bankruptcy Court, District of Delaware. Chancellor/Triton and Mt. Washington are each owed $2.6 million and $3.06 million, respectively, while Atlantic Global was owed the largest amount, $6.3 million.
In response to the filing, CMI said it would continue to operate and work to continue to achieve its objectives. The company also said it would seek an order from the Delaware court dismissing the petition.
"CMI intends to vigorously seek the dismissal of this unwarranted lawsuit if it is not first dismissed by the petitioning bondholders," said the company in a statement. "Representatives of the petitioning bondholders are currently discussing with [CMI] the basis for dismissing the petition and a cooperative approach to restructuring the company's debt structure outside of the bankruptcy context."
Citing continued competition, significant financial losses and softness in the economy, CMI's gray goods factory in Clinton, SC, is expected to be closed by July 8, a move that will affect approximately 600 employees. The facility was producing woven cotton, polyester and cotton/polyester blends in light to mid-weight greige printcloth and broadcloth fabrics.
"It was a difficult, gut-wrenching decision to close that plant," Gorga said. He added that CMI is working closely with the South Carolina Employment Security Commission to have employees retrained or relocated.
The company announced that the marketing and sale of the facilities would begin immediately. The Clinton facility includes air-jet spinning equipment and shuttleless weaving machines.
The company's Clarkesville, GA, plant will remain unaffected by the closing, as will the elastic fabrics operations.
CMI made a number of moves in 2000 to shore up its business. Among them, the company completed the sale of its Chatham blanket division to WestPoint Stevens. It also reduced its gray goods manufacturing capacity by closing a Geneva, AL, plant and its Bailey plant, also in Clinton, cutting its work force from 3,700 to 2,100.
Among CMI's closest competitors in the gray goods business are Thomaston Mills, which is currently looking to sell all or some of its assets, and Alice Mills, which has launched a finished bedding business to diversify its strategy.
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