Textiles

Last updated: April 2008

Overview

The current domestic industry has been described as both "dead and alive". The major domestic producers of commodity type fabrics, home furnishings, and related products (sheeting, towels, curtains, etc.) have fallen by the wayside, including the likes of big name players: Pillowtex, Fieldcrest Cannon, Avondale Mills, Springs Industries, and most recently West Point Stevens. To the contrary is the carpet industry, which has not been impacted by foreign competition due to the size and weight of the product. The carpet sector has been characterized by consolidation and experienced steady growth until just a few years ago. Although there is growth in commercial carpet products, the residential side has been slowed by a drop in housing startups and consumers desire for hardwood or laminate flooring products. With the pricing of hardwood and ceramic products increasing, the carpet industry is expected to maintain a competitive edge as a less expensive alternative.

The textile industry is comprised of a diverse, fragmented group of businesses that produce, process, and/or manufacture textile related products (fiber, yarn, and fabric) for further processing into apparel, home furnishings, industrial goods, and carpeting. Textile establishments receive and prepare fibers; transform fibers into yarn, thread or webbing; convert the yarn into fabric or related products; and dye and finish these materials at various stages of production.

The U.S. textile industry had undergone dramatic change over the past 15 years as a result of NAFTA; the availability of lower cost labor in South America, the Middle East, and Asia; as well as the effects of an ever-increasing global economy. Domestic manufacturing has been negatively impacted to the extent where the majority of textile producers have either consolidated, moved off shore, or shut down operations altogether. Certain major producers, niche market suppliers, and those producing specialty textiles have managed to maintain a share of the marketplace and, in some cases, prospered handsomely. At one time not long ago, the industry was one of the largest domestic employers along with the automotive industry. Due to the large concentration of manufacturing and related facilities that once populated the southeast, this area of the country in particular has experienced significant job loss and a plethora of vacant industrial real properties.

The U.S. textile industry has become concentrated and now includes about 10,000 companies with combined annual sales of $65 billion. The 50 or so largest companies hold more than 60% of the market and about 100 companies have annual sales over $100 million. Fabrics (woven or knitted) account for approximately 40% of industry revenue, carpets 20%, yarns and threads 20%.

Demand for these products is driven by consumer consumption in the apparel and home furnishings segments and also the growing industrial applications segment of textiles.

The two highest priority issues that face U.S. textile producers today are an undervalued Chinese currency and the expiration of import quotas on sensitive apparel imports as of December 31, 2008. In addition, textile manufacturers have concerns about trade agreements with other countries that are directly related to trade with China.

Industry Condition – Fair to Poor

Mergers & Acquisitions

• Parkdale Mills Inc. of Gastonia, N.C. acquired US Cotton LLC, a Rio Rancho, N.M. based manufacturer of private label cotton-based consumer products, including cotton balls, pads, and swabs sold through major U.S. and Canadian retail chains. With this strategic acquisition, Parkdale Mills is now able to establish presence in the growing personal care products market and also channel its yarn-manufacturing byproducts into downstream products.

Key Industry Indicators

• U.S. Apparel Imports
  In February, U.S. apparel imports rose firm the first time in four months. Shipments from China declined significantly for the second consecutive month while imports from Vietnam surged by 61% according to statistical data released in mid March 2008. Shipments decreased from a large number of countries, which indicate these are difficult times for the global textile and clothing business.
• Shipments
  Projections for the 2008 business climate indicate that there will be continued downturn in all of the following: textile mill shipments, mill product shipments, apparel shipments, and rug shipments.
• U.S.-China Textile Trade Deficit
  The U.S.-China textile trade deficit reached a record high of $31.8 billion in 2007. In response, efforts are being renewed in Congress to enact legislation to help offset the trade advantage China is gaining from its undervalued currency.
• U.S. Dollar vs. Chinese Renminbi
  An undervalued Chinese currency creates an unfair trade advantage in world trade, making exports from China cheaper and discouraging imports into China. Although the U.S. scrapped all of its textile and apparel quotas in 2005, quotas safeguarding 34 product categories were initiated that run through the end of 2008. Domestic textile manufacturers are fearful that China will enter into those categories when quotas are removed.
  
  
• Employment - Textile
  Employment in the textile mill, textile product mill, and apparel categories is expected to fall incrementally.

Commodity Tracker

• Cotton
  In 2007, cotton products totaled 58% of next textile trade in the U.S. An increasing number of farmers are choosing to plant competing crops that yield higher prices, resulting in decreased cotton acreage in the U.S. In the U.S., the price of cotton has increased nearly 20% over the past year, but prices remain low compared with a wide range of other commodities. Domestic cotton consumption was slightly lower in 2007.

Overview

The majority of the machinery installed at domestic manufacturing facilities in the 1970's, 1980's, and even 1990's that was utilized to produce textile products has either been idled, retired, or moved offshore. The result is limited demand or marketability of such equipment. Some of this equipment is not salable at any price. There is demand and an existing market for late model equipment that is near or at state-of-the-art and offers automation which reduces direct labor overhead, improves quality, and increases productivity. This market demand is primarily from international sources in the Middle East.

One segment of the industry where equipment values have been relatively stable during this horrific downturn is nonwovens. As opposed to either broad woven of knitted fabrics, nonwovens are produced for both consumer and industrial applications. Nonwoven fabrics are produced in wide widths, then processed and converted to desired size at a significantly lesser cost. Specialty industrial fabrics represent the best segment of this group and are also shielded from foreign competition and produce better profit margins overall.

Recent auction results of late model machinery from the shuttered West Point Stevens plants have realized positive results in the form of 25% to 30% of original cost. The primary buyers are comprised of end users and resellers from the Middle East, in particular Pakistan. Virtually all of the machinery and equipment is being relocated to offshore facilities.

Used Equipment Values – Fair Overall (Average for Newer Equipment; Poor for Older Equipment)

• Supply of used equipment – Stable
• Demand for used equipment – Decreasing
• Pricing Trends – Down 15% to 20% annually for new/very late model equipment. The loss in value for older equipment is much steeper.

Liquidation Monitor

• Recent bankruptcy filings
  • Dan River, Inc. filed on April 20, 2008
  • The Fashion House Holdings, Inc. filed on April 16, 2008
  • Propex Inc. filed on January 18, 2008
  • Joan Fabrics Corporation filed on April 10, 2007
  • Delta Mills (Delta Woodside Industries, Inc.) filed on October 13, 2006
  • Avil Knitwear (Anvil Holdings, Inc.) filed on October 2, 2006
  • London Fog Group, Inc. filed on March 20, 2006
  • G+G Retail, Inc. filed on January 25, 2006

Factors Influencing Value & Marketability

• Late model, highly automated equipment is most desirable

Valuation Monitor

AccuVal routinely provides appraisal, consulting, and asset management services to segments the Textile industry, including woven and knitted fabrics, nonwoven fabrics for consumer and industrial applications, yarn mills, and the carpet industry. View industries serviced >>

Representative Clients Our Associates Have Served

• Dan River, Inc.
• Beaulieu Group, LLC
• Burlington Industries, Inc.
• R.L. Stowe Mills, Inc.

Success Stories

• Expert Appraisal Helps Proud Business Emerge From Bankruptcy
• Fully-Integrated Canadian Textile Mill Sold in its Entirety to Pakistan
• $5 Million Savings Generated by Implementing New Income Tax and Property Tax Strategy
• View all Success Stories