Quaker Fabric Corp.

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Quaker Fabric Corp.

941 Grinnell Street
Fall River, Massachusetts 02721
U.S.A.
(508) 678-1951
Fax: (508) 678-5979

Public Company
Incorporated: 1941 as Vertipile, Inc.
Employees: 1,647
Sales: $198.9 million (1996)
Stock Exchanges: NASDAQ
SICs: 2221 Broadwoven Fabric Mills, Manmade Fiber & Silk; 2299 Textile Goods, Not Elsewhere Classified

Quaker Fabric Corp. and its subsidiaries design, manufacture, and distribute woven upholstery fabrics to the residential furniture industry and specialty yarns to the upholstery and apparel industries in the United States and certain foreign countries. By upscaling its products and installing new machinery, this Massachusetts-based company prospered in the early 1990s although nearly every other textile and apparel operation seemed to have closed or left the state. In 1994 it was the second-largest U.S. manufacturer of jacquard upholstery fabrics and the fifth-largest upholstery-fabric supplier overall.

Vertipile before 1980

Quaker Fabric began as Vertipile, Inc., a company founded by Clive E. Hockmeyer in 1939 and incorporated in New York in 1941. In 1971, the year the company went public, it was leasing six buildings in Lowell, Massachusetts, for the manufacture of loose flock and flock-coated materials, used mainly in the apparel, home furnishings, and packaging industries to imitate the feel and appearance of velvet, suede, and velveteen. Net sales increased from $3.5 million in fiscal 1968 (the year ended February 29, 1968) to $4.8 million in fiscal 1971, and net income from $80,198 to $250,971. In 1971 Vertipile offered 300,000 shares of common stock to the public at $10 a share. Upon completion of the offering the founder’s sons Langdon, who was president, chairman, and chief executive officer of the firm, and Eastham, executive vice-president and secretary, owned about 63 percent of the stock.

At this time Vertipile was unique in the flocking industry for manufacturing its own loose flock and flock-coated goods for direct sales as well as commission work for clients. Flock consists of short strands of synthetic or natural textile fibers of various diameters and lengths; coating is a process by which loose flock is fixed to a backing, or substrate. Most of the company’s flock was made at this time from rayon tow, al-though it also was turning out nylon, polyester, and cotton flock and producing random-cut fibers for making suede flock-coated goods. Its operation also handled woven and nonwoven textiles, plastic films and sheetings, vinyl foams, and most substrates. The company had more than $2 million invested in buildings, processing equipment, and testing facilities.

Vertipile moved in 1972 from Lowell to a new plant and corporate quarters on a 12-acre site in Leominster, Massachusetts. A seven-year bank loan the same year enabled the company to acquire Claremont Flock Corp., a subsidiary of Applied Synthetics Corp., for $3.2 million in cash and notes. Based in Claremont, New Hampshire, Claremont was cutting and dying textile fibers.

Vertipile’s sales and income advanced rapidly in the late 1970s, reaching $22 million and $1.8 million, respectively, in fiscal 1980. By this time the company was reducing its dependence on the apparel industry by increasing its emphasis on other sectors of the product line, including not only upholstery and home furnishings but also lining for radio, camera, and eyeglass cases. Vertipile’s own loose flock, accounting for 41 percent of sales in fiscal 1979, was used in flock printing on wallpaper, curtains, greeting cards, and women’s apparel as well as in its production of flock-coated materials. In December 1978 Eastham Hockmeyer resigned as an officer and director and completed selling his shares in the company, for the most part to the employee stock-ownership fund and the company itself.

Vertipile-Quaker Fabrics Merger and Aftermath, 1984–1989

In 1984 Vertipile acquired Quaker Fabric Corp., a much larger concern with four manufacturing plants in Fall River, Massachusetts, making it one of the top three upholstery fabric mills in the country. Quaker Fabric’s product line consisted of a variety of upholstered fabrics: flat and jacquard woven fabrics; printed, tufted, and woven velvets; and knitted fabrics. It also operated a converting division, and as such was a substantial purchaser of Vertipile’s flock-coated fabrics for finishing as part of the Quaker line. The company had been incorporated in 1945 as General Textile Mills and had changed its name to Quaker Fabric at the end of 1979, following a merger with a sales company that operated as a wholly owned subsidiary of Providence Pile Fabric. Quaker Fabric had sales of $104 million and net income of about $1.5 million in 1983, compared to $24.3 million and $578,000 for Vertipile in fiscal 1984.

In order to purchase Quaker Fabric, which became a subsidiary, Vertipile paid $8 million in cash, 300,000 new common shares, and a $1.5-million, 12-percent subordinated note, borrowing $8.5 million from a bank. Quaker Fabric refinanced $15.5 million of its existing bank debt. Alan E. Symonds, president and principal shareholder of Quaker Fabric, emerged with 14 percent of the stock and became president and chief executive officer in 1985. When Langdon Hockmeyer died later that year, Symonds also became chairman of the firm. He purchased 305,000 shares of common stock from Hockmeyer’s estate in December 1986, raising his stake in the company to about 34 percent.

The enhanced Vertipile did poorly in its first year, losing $1.8 million on sales of $104.3 million in fiscal 1985. Management said that Vertipile had lost much of its flock-fabric business to Quaker’s own converting operation. The company made a profit in subsequent years. During this period its chief product was mid-priced, high-volume upholstery fabrics sold to furniture manufacturers, although it also was selling some fabrics for other home-furnishing applications, such as curtains. Vertipile changed its name to Quaker Fabric Corp. in 1987.

Following the merger, Quaker Fabric took steps to sell its tufted, velvet, and flock operations and concentrate on textured jacquard and dobbie upholstery fabrics. In March 1988 the company sold its flock and tufted upholstery-fabric product lines, including all its knitted fabrics (comprising about 25 percent of total sales), plus substantially all related equipment and inventory, to Gulp Inc. for about $5.6 million. In December of that year it sold the Claremont operation to a group of employees for $2.1 million. The Leominster plant was sold in 1989 for $3.3 million. This left Quaker Fabric in the business of making jacquard woven fabrics—the most complex form of fabric sold—having eliminated dobbie weaving entirely.

Merger with Nortex and Aftermath, 1989–1993

During fiscal 1988 Quaker Fabric had net income of $1.9 million on net sales of $105.6 million, but in fiscal 1989 it lost $7.3 million on sales of $83.1 million, which amounted to a $7.3-million drop in sales even taking into consideration businesses that the company had sold. In July 1989 the company agreed to be acquired by Unione Manifatture, S.p.A., a Milan-based holding company, for $20.5 million. Two months later Nortex International, a novelty-yarn manufacturer, took a minority stake in Quaker Fabric, which merged with Nortex. A Nortex partner, Larry Liebenow, became president of the combined privately held company.

By this time Quaker Fabric had the second-largest jacquard-weaving capacity in the United States. In contrast to the original jacquard method for weaving, by which a card with punch holes steered the loom, the weaving patterns for Quaker Fabric’s looms were governed by computers. Nevertheless, the equipment was out of date, and the company’s new owners spent $25 million to buy new looms that moved four times faster than the old ones. The consequent savings in labor costs made Quaker more competitive with Southern factories and East Asian operations. however, management decided it could not compete in the high-volume, low-cost trade and shifted its output to a dramatically expanded product line turned out in small, customized lots. The addition of Nortex made Quaker Fabric’s Fall River operation the most vertically integrated in the industry, shortening lead times and affording the company flexibility in styling. Liebenow claimed in 1991 that Quaker Fabric was the largest chenille manufacturer in the world and the lowest-cost producer.

Quaker Fabric’s revenues climbed to $98.4 million in 1991, $123.4 million in 1992, and $147.9 million in 1993. Net income rose from $1.6 million to $4.1 million before dropping to $2.8 million in 1993 because of an extraordinary $2.55-million charge for doubtful accounts stretching back to 1991. By mid-1993 the company had a product line of nearly 1,500 different upholstery fabrics, all for use in the furniture industry. Export business, accounting for less than two percent (excluding Canada) of sales in fiscal 1989, had grown to 16 percent of the total, of which more than half was going to Mexico, where the company had established a warehouse. Ninety percent of the company’s products were being sold to furniture manufacturers in 1994, and nearly two-thirds of revenue were coming from the higher end of the marketplace, compared to only 14 percent in 1990. Quaker Fabric was also selling specialty yarns to apparel and upholstery manufacturers, accounting for six percent of overall sales.

Public Company Again, 1993–1997

Quaker Fabrics repurchased its debt and equity securities from Unione Manifatture in 1993 for $32.5 million. It became a public company again in November of that year, when it sold 2.3 million shares of stock at $12 a share. By 1994 it was the fifth-largest overall upholstery fabric supplier in the United States, selling to more than 600 furniture manufacturers. Its sales grew to a record $180.8 million in 1994 and its net income to a record $9.5 million.

By contrast, 1995 results were disappointing, with net sales falling to $173.5 million and net income to $5.5 million. Liebenow attributed the drop to an erratic market, raw-material costs, and a fall in the volume of the company’s higher-margin products. He also noted a drop in export revenue of 30 percent, primarily due to a reduction in demand in Canada and Mexico. In March 1996 the company brought in a new vice-president of marketing and appointed a new vice-president of styling and design.

Quaker Fabric increased its net sales to $198.9 million in 1996 and its net income to $8.6 million. Middle-to-better-end fabric sales accounted for 69 percent of the total. Fabric sales accounted for 86 percent of the revenue total and yarn sales for 13 percent. International fabric sales increased to 18 percent of the total. In March 1997 the company consummated a public offering of 3.4 million shares of its common stock at $13.50 per share. Its long-term debt was $47.2 million at the end of 1995.

In 1996 Quaker Fabric was a full-service supplier of jacquard and plain woven upholstery fabric to the furniture market, with a product line of more than 3,000 fabric patterns. It was selling its upholstery fabrics to more than 600 domestic furniture manufacturers as well as distributing its fabrics internationally. The average gross sales price per yard was $4.05, but prices ranged from $2.50 to $18 per yard. The company’s staff of professional designers and designer technicians was creating the majority of the designs on which the company’s fabric patterns were based. While most were sold under the Quaker label, in October 1996 the company began marketing a select group of its middle-to-better-end fabrics under its Whitaker label.

Quaker Fabric’s specialty yarns included its proprietary, abrasion-resistant Ankyra chenille yarns and were being used in its own upholstery fabrics as well as being sold to outside customers, generally under the Nortex Yarns name. The company’s product offerings were noted for their wide use of chenille yarns, which have a soft, velvet-like feel. Ankyra-based chenille fabrics were developed by the company for abrasion resistance in order to compete effectively with flocks, velvets, and tufted fabrics.

Quaker Fabric was manufacturing all of its products in its four plants in Fall River, Massachusetts, where it also maintained corporate headquarters and a warehouse. The company had more than one million square feet of manufacturing space and had invested more than $51 million in new manufacturing equipment since 1991. All of the looms were equipped with jacquard heads, required to produce the complex designs referred to in the industry as “jacquards,” including a broad assortment of striped, plaid, and plain fabrics. Quaker Fabric also maintained distribution centers in Los Angeles; Tupelo, Mississippi; High Point, North Carolina; and Mexico City.

The company, Fall River’s largest manufacturer, was operating three shifts, six days a week, in 1994. About 70 percent of its employees were first- or second-generation Portuguese, and 15 to 20 percent of them spoke little or no English. As a result, its personnel staff and most of its supervisors were bilingual. All company signs and written communications were in both English and Portuguese.