Conso International Corporation

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Conso International Corporation

513 North Duncan Bypass
Union, South Carolina 29379
U.S.A.
(864) 427-9004
Fax: (864) 427-8820
Web site: http://www.conso.com

Public Company
Incorporated: 1993
Employees: 1,550
Sales: $125.51 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: CNSO
NAIC: 313221 Narrow Fabric Mills; 314999 All Other Miscellaneous Textile

Conso International Corporation is the world’s largest manufacturer of decorative trimmings for the home furnishings industry. Along with its subsidiaries, including the popularly known operations of Simplicity Patterns and British Trimmings, Conso produces and sells a full range of knitted and woven fringes, decorative cords, tasseled accessories, jacquard and other woven braids and apparel trims, sewing tapes, and supplies and instructional material for home sewing of apparel and decorative items. Conso also distributes decorative window accoutrements and other home furnishings accessories. Through a worldwide sales force, its products are marketed to manufacturers, distributors, and retailers. Manufacturing facilities are located in the United States, the United Kingdom, Mexico, and India.

Origins

The Conso Co. began manufacturing millinery trimmings for both men’s and ladies’ hats in 1867, right after the Civil War. It maintained a steady presence in the domestic decorative products market for much of its first 125 years. By the middle of the 20th century, the company was branching out into the manufacture of curtain ties and window shade fringes sold through such mass merchants as Kmart and Sears, as well as about 300 small drapery stores and distributors. Sales swelled to about $55 million a year during this time, and the company was employing a workforce of 1,200 people.

Conso was shuttled among a string of corporate parents beginning the 1960s: Sara Lee in 1968; Consolidated Foods in the early 1970s; and Springs Industries in 1979. Neither Conso nor its two major competitors, Holyoke, Massachusetts-based Mastex Industries and Lending Textiles of Montgomery, Pennsylvania, seemed to focus on new products or marketing approaches. In fact, Consolidated Foods all but shut down Conso’s product development and marketing departments in order to save money. Conso languished under its various owners, and by 1985 only 200 employees labored in its approximately 220,000-square-foot plant in a depressed part of the textile town of Union, South Carolina. Sales fell to around $12 million, while productivity reached a new low, with orders taking up to ten weeks to fill.

New Start As an Independent: 1980s

Enter Gary Findlay, Jr., an accountant with the Charlotte, North Carolina office of Deloitte Haskins & Sells, who, in the mid-1980s, was doing research for top buyout specialists. In 1986, at age 47, Findlay quit his job and teamed up with old friend Warren Pollock, a retired textile executive, to form Carolinas Capital Funds Group, their own buyout firm. They scraped together some capital, and began to search for unwanted subsidiaries of big corporations and individual, privately owned companies looking to sell.

The partners bought the struggling Conso Products for just over $5 million, financing most of the deal with $5 million in asset-based financing and a personal note belonging to Findlay and his wife, also an ex-Deloitte accountant. For equity, the Carolinas Group had just $55,000 from the Findlays, $55,000 from Pollock, $140,000 from two Conso managers, and a vision. They would inject new capital into the business, add new products and a sales effort, and, making use of the already existing distribution network, create a splash in the trimmings market.

The Findlays contracted with Wesley Mancini, a well-known furniture fabric designer, to create a new trimming and tassel line suitable for high-end furniture, their Empress line, which debuted in 1987. Together they compiled a color catalogue and binders of sample cards showing the company’s approximately 2,000 possible combinations of styles and colors and printed a 28-page brochure with step-by-step lessons to teach decorators, salespeople, and retail customers how cords, fringes, and tassels could be used, simultaneously creating demand for their product. They also instituted a four-point plan: Conso would produce goods of consistently high quality, offer hundreds of colors and styles grouped into collections, charge reasonable prices, and offer rapid delivery.

Their timing could not have been better. The trim market follows a feast or famine cycle, and in 1987 sales were beginning to rise as graying baby boomers were nestling deeper into their homes, and Victorian-era symbols of warmth and comfort were enjoying renewed popularity. Sales increased to $15 million by the end of that first year. In order to expand its customer base in the Midwest in 1987, Conso acquired R. Nyren Company of Chicago, a division of Lea & Sachs, Inc. that specialized in the manufacture and sale of industrial trimmings, primarily for flag companies. It also purchased Hamilton Web, a manufacturer of woven braids and jacquards, based in Providence, Rhode Island, and in 1988 bought Lorina Embroideries of Guttenberg, New Jersey. All operations were transplanted to Union in a move to manufacture all goods in-house. By 1989, with the use of decorative trim on a decided upswing, and C&A Home Fabrics, a large domestic upholstery mill, selling Conso trim, Conso’s sales had doubled to about $23 million. Eighty jobbers now offered the Empress line, up from ten in 1987, and the company was experiencing a delivery crunch. Moreover, as Findlay noted in an article in HFD, Conso was in the practice of allowing its customers to place special orders for specific colors, requiring no minimum for an order. Soon everyone wanted to come out with their own colors, Findlay recalled, adding that “with so many special orders, it bogged down delivery.” In response, the company began setting increased minimum orders. Based on the success of the Empress collection, Conso introduced its more upscale Imperial line for the 1989 market year and increased its minimum yardage for orders along with its color range.

By 1992, Conso was recognized as the leading producer of decorative trimmings for draperies and upholstered furniture, controlling approximately 75 percent of its market. It had a sales staff of 15 regional sales managers, sales offices in New York and Hickory, North Carolina, and a 25,000-square-foot handwork maquiladora in Juarez, Mexico. The company had introduced a third line, the Duchess Collection, in 1991, available exclusively to the furniture trade. It now sold directly to most of the Carolina upholstered furniture manufacturers, including Drexel Heritage, Hickory, Baker, and Sherrill, and to textile retailers Hancock’s, Calico Corners, and Fabric Bonanza. In the drapery segment, major mills customers included Burlington Industries, Springs Mills, J.P. Stevens, and WestPoint Pepperell. The Conso product line had expanded to include laces and jacquard trimmings for the craft and apparel market, and the company’s non-wovens department was making some of the decorative strapping used in the automotive business.

Expansion Overseas: 1990s

Conso had another big growth year in 1993. It made its first public offering of common stock, becoming the only publicly traded company to specialize in decorative trimmings, and simultaneously acquired British Trimmings, the largest producer of similar products in the United Kingdom, for $3.3 million cash and 115,900 of Conso’s unregistered shares. British Trimmings had opened its doors for business in 1929, and had a history not unlike Conso’s. Founded in England at a time when the hat trade was flourishing, it quickly outgrew its original plant and continued to expand at a steady pace, despite a period of recession, to become a woven and knitted trimmings manufacturer for upholstery and garments. Further growth through takeovers of competitors and suppliers followed, until British Trimmings was itself bought and sold several times during the 1970s and 1980s. Following its merger with Conso Products in 1993, British Trimmings was assigned the role of sales for the joint companies in continental Europe, the Pacific Rim, and the Middle East.

Conso continued its growth in the United Kingdom in 1994 with the purchase that June of Wendy Gushing Trimmings, Ltd. of London, a privately owned company which enjoyed sales of $800,000 during the year preceding its purchase. Gushing, who ran the company, was a highly regarded designer of original and restoration decoration trimmings and tassels; she had previously had designs in a number of the Collections marketed by both Conso and British Trimmings and now joined the Conso staff. Following the addition of Wendy Gushing Trimmings, Conso undertook to expand its foreign sales base beyond the United Kingdom by opening a new export sales office in England in 1994 to serve continental Europe and the Middle East, and a similar office in Miami that same year to serve the Caribbean and Latin America. At the time, Conso exported about ten percent of its sales. In early 1995, the company also opened an office in Thailand to serve its Pacific Rim customers, and British Trimmings produced its first wholesale catalogue, which doubled in size during the next four years.

Company Perspectives:

Conso’s principal products are decorative trimmings, workroom supplies and accessory products for home furnishings and, since the acquisition of Simplicity, patterns and instructional material produced and distributed for home sewing of apparel, home decor and crafts. Over the past twelve years, Conso’s products lines have been expanded to include decorative accessories and a number of new “Collections” of trimmings. Marketing and promotion of products have been emphasized. Conso has also sought to improve responsiveness to customers’ delivery requirements by maintaining a large but current inventory of its products.

British Trimmings significantly increased Conso’s revenues. In fiscal 1994, the company’s sales totaled $41.6 million—an increase of 81 percent in one quarter alone. Findlay stepped down as chief executive officer and president in May 1995 in order, according to his publicly delivered statement, to devote his attention primarily to the company’s strategic goals in the areas of acquisitions, expansion of product lines, and international operations. Findlay, who maintained control of 53 percent of Conso’s stock and stayed on as chair, was rumored locally to have resigned for other reasons as well: negative press surrounding the well-publicized murder of two young boys by their mother, a Union resident and Conso employee with ties to the Findlay family.

However, within half a year of Findlay’s change of status, Conso had purchased a new production and distribution facility in London to house the operations of Wendy Gushing Trimmings and a subsidiary of British Trimmings. The company as a whole had sales of $63 million in 1995, one third of which came from British Trimmings, and was filling 95 percent of its orders in three days. And the trend toward fringe showed no signs of abating. In the 1980s, upholstered furniture accounted for 36 percent of average annual furniture sales of $24 billion in the United States. By the mid-1990s, that figure was up to 46 percent of annual sales of $31 billion. British Trimmings enjoyed a prestigious decorating coup when, in early 1996, the British Royal Family hired its Wendy Gushing Trimmings subsidiary to consult in the restoration of Windsor Castle. Following this, Gary Findlay registered to sell about a quarter of the shares of his 52.4 percent stake in Conso in the over-the-counter market.

Further Acquisitions

Conso’s next move was in the direction of further acquisitions. In March 1996, for $385,962, it purchased the assets of the Claesson Company, an innovative design company of window accessory products, owned by Margareta Claesson, who became manager of Conso’s U.S.-based Decorative Accessories Division. The Claesson Company, whose sales were more than $800,000 in 1995, moved to Union, South Carolina, where it joined Conso’s existing decorative brassware and tiebacks operations. In September 1997, for $262,000, Conso added the assets of HFDC, Inc., whose products included design rings and brackets, and thereby broadened Conso’s decorative accessory products. Two years later, it acquired Simplicity Patterns Company for $33 million in cash plus liabilities of about $21.5 million. Simplicity, a fully integrated design, manufacturing, distribution, and marketing organization, founded in 1927, was one of the world’s largest producers of instructional patterns and catalogues and had net sales of $55 million for its fiscal year ended January 1998.

When Cary Findlay reassumed the position of president and chief executive of Conso in August 1998, the company was clearly the industry leader with a new 86,000-square-foot distribution center adjacent to its plant in Union. Conso’s fiscal 1996 return on equity had been 21 percent and its return on assets 14—two to three times the average for the Russell 2000 index of small companies. Conso’s net income for that year increased 39 percent to $6.4 million from $5.5 million in the prior year; net sales increased 18.6 percent to $70.7 million from $59.6 million. In fiscal 1997, that figure rose 3.9 percent to $73.4 million and the total stock market value of the company reached $70 million. British Trimmings continued to hold its share of the British wholesale market, and catalogue sales continued to expand as the company instituted plans to introduce two new collections. In addition, while the trimmings market continued to grow at a rate of six to ten percent each year, Conso’s growth was even greater because of its ever-larger share of the pie, a situation assured it as the sole owner, operator, and stockpiler of the no-longer built machinery necessary to fabricate its many varieties of trim.

Yet company gains were modest overall, and by September 1998, Conso was reporting a shrinking gross margin for the past two years as a result of pricing pressures at low and medium price points. Sales results for fiscal 1998 were well below the strong gains reported in 1995 and 1996 and the four percent gain reported in 1997. Despite an upturn in fourth quarter earnings, net sales were down slightly at $72 million while earnings dropped to $5 million from the prior year’s $7 million. In fact, though export sales increased from 11.5 to 11.9 percent, European operations were harder hit than domestic, an outcome due to the strong pound sterling and high interest rates, which created difficult trading conditions for United Kingdom manufacturers.

In response, Conso took measures in 1998 to reduce production and overhead costs; it began production at a new hand assembly plant in India, India Trimmings, reduced 13.8 percent of its personnel in the United States and 25.6 percent of its workers in the United Kingdom, and undertook construction of a new 33,000-square-foot dye house facility in Union, which, when complete, would more than double its capacity to dye yarn in the United States, reducing yarn inventory levels and outside dying costs. Management viewed Conso as a consumer products company and turned its attention to further acquisitions, with special interest given to home decorating companies that would expand Conso’s existing product lines. The company’s name was changed to Conso International Corporation as it pursued a global growth strategy that also included: consolidating certain British Trimmings operations into domestic operations; cross-merchandising among units; expanding the customer base; and expanding international production and distribution operations and export sales.

Principal Subsidiaries

British Trimmings Ltd.; Wendy Cushing Trimmings Ltd.; India Trimmings Limited; Val-Mex, S.A. de C.V.; Simplicity Capital Corporation; Simplicity Holdings; Simplicity Patterns Co., Inc.