Walton Monroe Mills, Inc.

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Walton Monroe Mills, Inc.

P.O. Box 1046
Monroe, Georgia 30655
U.S.A.
(404) 267-9411
Fax: (404) 267-5196

Private Company
Incorporated: 1895
Employees: 5,000 (including Avondale Mills subsidiary)
Sales: $500 million
SICs: 2211 Broadwoven Fabric Mills-Cotton (Primary); 2281 Yarn Spinning Mills

Walton Monroe Mills, Inc., a manufacturer of yarn and undyed fabric, has been managed by the same family since its 1895 origins. Like other venerable mills, Walton Monroe was forced to adapt to an era of foreign competition, new technologies, and industry consolidation ushered in by the 1960s. Unlike many of other smaller mills, Walton Monroe survived the sea of change. After launching an aggressive campaign of capital investment and improved efficiency in the early 1980s, Walton Monroe acquired Dakotah Mills in 1984 and Avondale Mills, Inc., in 1986 to become the 325th largest U.S. private company by 1993.

When George W. Felker, Jr., started Walton Monroe Mills in Monroe, Georgia, in 1895, the textile industry was still in its infancy. Many local investors were unable to complete payment on their stock subscriptions, and the funds necessary to complete the mill had to be borrowed at high interest rates. Nevertheless, the Felker family had roots in the region dating back to 1820, and a combination of social credibility paired with business savvy placed Walton Monroe among the surfeit of mills taking root in the Carolinas and in Georgia.

George W. Felker, Jr., maintained consistent and profitable production of yarn and undyed fabric, establishing Walton Monroe as a fixture in an industry that was still in its formative years. Industrial management was still undeveloped. Felker employed a skeleton staff, running the administrative office virtually alone. He wrote his letters in long hand and copied them into letter copy books for preservation; he inspected, weighed, classified, and purchased all the cotton for production; and he served as a small but effective sales force. He also explored new generations of mill machinery that expedited automation but often created technical problems in the process.

Walton Monroe business held steady ground well into the 1950s, when Felker began seasoning his son to carry on the family business. George W. Felker III graduated from Georgia Tech with a degree in textile engineering and served in the Army in World War II, achieving the rank of lieutenant colonel and earning the Legion of Merit and five battle stars. After working for textile firms in New York, Boston, and Danville, Virginia, the battle-tried son returned to Monroe to head the family-controlled business as president from 1962 to 1980 and chairman from 1980 to 1992.

He returned home to a new type of battle, as the textile industry was confronting fierce foreign competition, tighter profit margins, and runaway technology in the late 1950s and early 1960s. A 1964 Textile World article entitled ‘The Mill of Tomorrow” warned mill owners to heed advancing trends or go out of business. “Technology today is moving at a swift pace,” reported the article, “a pace that doesn’t tolerate laggards, shows no mercy to men without vision, scorns those who are less than bold, and grants its rewards only to those who lead the parade of progress.” The feature delineated nine key goals toward which mills should progress: plant construction that was enclosed, economical, and efficient; plant services that were complete and compact; plant design that was streamlined for efficiency; management that was bold, imaginative, and decisive; yarn manufacturing that was high speed and simplified; fabric manufacturing that was Complex and controlled; fibers that were varied, blended, and tailor-made; finishing plants that were speedy, programmed, and automatic; and an economic climate described as sunny and brisk. These were the steps that George W. Felker III took, successfully carrying his company into the 1980s, when yet another wave of challenges confronted the textile industry and yet another Felker son, G. Stephen Felker, was seasoned to continue the family concern.

In 1977 George W. Felker III convinced his son to join as the fourth generation of Felkers heading the company. In a March 1988 Georgia Trend article he mused, “Had I not been able to get Stephen back here, I would have considered selling. Otherwise, I don’t know who would have headed it after me.” In his early years, Stephen Felker seemed an unlikely candidate for head of the family business. As a 1974 graduate of the University of Virginia, he displayed a greater inclination toward teaching literature, admitting greater devotion toward Ernest Hemingway and James Joyce than toward textiles. Nevertheless, after graduation he was hired as a management trainee at Avondale Mills, Inc., a yarn and denim weaver in Sylacauga, Alabama. Company officials were impressed by Felker’s relaxed manner, his energy, and his aptitude at understanding the complexities of the industry. He left Avondale on excellent terms and joined his father at Monroe. “When he was ready to leave here, our vice president of manufacturing reported that if Stephen ever wanted to come back, he’d very much like to have him,” said John Hudson, division president of Avondale in 1977.

Felker entered the textile industry amidst international trade negotiations of crucial importance. The General Agreement on Tariffs and Trade (GATT) aimed to liberalize world trade in various sectors, including textiles and apparel. Among other measures, GATT moved toward phasing out tariffs and quotas on textiles, alarming many textile manufacturers already threatened by lower-priced imports on the rise. Early GATT agreements, concluded in the early 1960s, resurfaced in 1986 for updating and general revision. Of particular interest to textile manufacturers was the Multi-Fiber Arrangement (MFA), the clause providing the guidelines for bilateral import agreements between countries and the primary means of controlling textile and apparel imports to the United States. Though the MFA was historically revised every three years, the late 1980s brought proposals to replace all existing quotas over a period of 10 to 15 years with a system of global product quotas, creating a scoalled global basket that would allow all product imports to grow at a specific rate depending on demand for that product and the importance of that product to its country of origin. A tariff rate quota system would also be introduced, establishing a given rate of duty for a given import; imports in excess of that rate would incur substantially higher tariff rates. The American Textile Manufacturers Institute (ATMI) maintained that such measures would foster a flood of imports that could push many American mills out of business.

More promising prospects surfaced in the North American Free Trade Agreement (NAFTA) that would establish a free trade zone between Canada, the United States, and Mexico, creating one of the world’s largest trading blocks with a combined population of 360 million people. According to the agreement’s “rule of origin” clause, abatements of duties and quotas of apparel and fabric would apply to such products made from yarn spun in one of the three participating nations. Many textile manufacturers hoped that NAFTA would spur market activity and increase North American competitiveness in world markets.

Stephen Felker became president of Walton Monroe in 1980. During his first three years as CEO, company sales dropped from $30 million to $25 million. In addition, plant equipment was outdated and company coffers were low. “I had three choices,” Felker explained in a March 1988 Georgia Trend article. “I could sell out. I could sit back and do nothing. Or I could jump and go for it.”

In order to carry out the third choice, Felker borrowed $17 million from First National Bank of Atlanta, representing one of the first major loans in the history of Walton Monroe. With an eye on the future, the company invested in equipment that extended beyond immediate needs. New rapiers were installed in a modern, expandable plant. To maximize the versatility already inherent in the machines, the company bought them with four-color capability, even though operations used a pickand-pick weft-insertion system. The weaving machines all featured programmable dobby motions, even though most current bottomweight apparel and lightweight industrial fabrics were produced with cam motions. The building was also state-of-theart and designed for future growth. Measuring 85 feet in width with no columns, the construction permitted the doubling of floor space by simple displacement of one exterior wall. Modern amenities included underfloor tunnels to carry lint and waste away from work areas, filters with automatic cleaning capabilities, and a high-velocity, blow-through air-conditioning system. “We built a new plant which can be easily doubled when the time comes,” explained Felker in a May 1985 article in Textile World.

Walton Monroe’s progressive planning continued in 1984 with the purchase of Dakotah Mills, a North Carolina fabric manufacturer, for $5.5 million. With expanded facilities and its new state-of-the-art machinery, the company was able to vary width, weave, and weight of fabrics. Production was accordingly increased and diversified to include custom-tailored cloth for sport shoe companies, convertible tops for automobile manufacturers, and furniture upholstery, among other products. From 1980 to 1986 sales doubled to $84 million.

In 1986 Walton Monroe greatly expanded and diversified its offering line by acquiring Avondale Mills, Inc., an established manufacturer of denim and yarn, for $165 million. The acquisition startled textile experts because of the novel logistics of a small, privately owned mill like Walton Monroe acquiring a large, publicly owned company like Avondale. Walton Monroe had $84 million in sales, compared with $240 million for the Alabama mill. “When you march out and buy Avondale with the assets of a Walton Monroe, well, that’s a helluva maneuver,” cited Walter Forbes, CEO of the Signal Thread Co. in a March 1988 Georgia Trend article. However impressive, the maneuver was not simple.

Avondale Mills, one of Alabama’s oldest and largest textile firms, seemed an unlikely target for takeover until 1985, when the company lost $14 million and saw sales decline 20 percent from a high of $300 million in the early 1980s. Over the course of five strained years, the company went through four CEOs. When the Comer family decided to sell it, Walton Monroe became an attractive client, not only because it shared the family-run, generation-old profile of the traditional southern mill, but because Stephen Felker had worked for Avondale and shared important affinities with the proprietors. Mutual affinities aside, Felker had to come up with the funds before other competitors beat him to it.

In order to finance the purchase, Felker first turned to Drexel Burnham Lambert, where dealings were organized with Dennis Levine, the managing partner later convicted for securities violations involving insider trading on Wall Street. Perceiving that Levine was manipulating negotiations to leave him as a minority partner in Avondale, Felker dropped negotiations. He then turned to First Boston Corp. where a new corporation, AM Acquisition Inc., was formed with 50.1 percent owned by Walton Monroe and 49.9 percent owned by two affiliated entities of First Boston. Formation of AM Acquisition was an important strategic step in winning a three-way bidding war for Avondale. In addition to Walton Monroe, two other firms were actively bidding for the Alabama mill: Spectrum Dyed Yarns of New York, and Dominion Textile Inc., Canada’s largest surviving primary textile and fabrics group. Dominion filed a complaint in a federal court in Atlanta against Avondale and Walton Monroe seeking to prevent the agreement. But on March 27, 1986, AM Acquisition purchased 51 percent of Avondale at $28.20 per share and entered into an agreement with the Avodnale board to purchase the balance of the company in a cash merger at the same price. With an innovative “bridge” or “mezzanine” financing scheme, Felker arranged to buy back First Boston’s 49.9 percent equity position in AM Acquisition as cash flow permitted. “It’s always nice to beat the big boys in New York,” cited Rod Dowling, manager director/corporate finance for Robinson-Humphrey in an April 14, 1986, article in Atlanta Business Chronicle. Dowling was instrumental in thwarting Dominion’s hostile countertakeover attempt masterminded by Merill Lynch Pierce Fenner & Smith.

Part of Felker’s success stemmed from his ability to gain Avondale’s trust. “I believe they had faith I would continue to operate Avondale Mills under its present name with management remaining in place, for the most part,” he said in Atlantic Business Chronicle. “I want to assure you that the company has a very special place in my heart,” Felker said in a July 2, 1986, United Press article. It was this trust that enabled AM Acquisition to purchase 39 percent of Avondale stock from a descendant of the mill’s founder, former Alabama Governor B. B. Comer, while Dominion arrived at purchasing only one percent.

Felker brought to Avondale the same energy that he used to acquire it. While cutting general and administrative expenses by two-thirds, he pumped $40 million into new machinery. He spread out management authority in mill operations, moving, in his words, “the decision-making process to the lowest level,” and cut out layers of inefficient bureaucracy. The Avondale debt was reduced by improved cash flow and financing through the Trust Company Bank of Atlanta.

With the Avondale acquisition, Walton Monroe’s employment of about 900 people throughout the Southeast grew to include about 3,700 workers in Alabama, Georgia, North Carolina, and South Carolina. With Avondale, Walton Monroe entered into the denim business and set new sights on fancy, light-weight denims as well as the possibility of other apparel-fabric takeovers. “The real key to Felker’s continued success will be how well he weathers the next downturn,” said Lam Hardman III, president of Harmony Grove Mills in Commerce, Georgia, in a March 1988 Georgia Trend article. Additionally, Standard & Poor’s predicted an upturn in demand for apparel and industrial fabrics with an improving economy in 1993, estimating an increase in earnings for textile manufacturers of 15.0 percent to 20.0 percent for 1993.