Merchants And Manufacturers
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Stock Code UMM01
Certificate dated 28th
February 1969 for five shares of common stock in this clothing
Issued to Horace A Johnson, with the
printed signatures of the president together with that of Martin
J Schwar, treasurer
of the company. Vignette of woman in front of skyscrapers.
Ornate green border with imprint of company seal.
Certificate size is
20.5 cm high x 30.5 cm wide. It will be mounted in a mahogany
frame on request.
About This Company
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About This Company
At one time United Merchants &
Manufacturers, Inc. (UM&M) was one of the biggest companies in the garment
industry, with annual sales of textiles and apparel exceeding $1 billion. By
1995, however, the firm that a 1989 Forbes article called "The
Incredible Shrinking Company" had been in bankruptcy proceedings twice since
1977, having lost money in every year since 1985. Although it sold off
unprofitable divisions to stay afloat, UM&M continued to remain in the red
through the mid-1990s; independent auditors then considered the company's
United Merchants & Manufacturers began
as Cohn-Hall-Marx in 1912, a New York City textile converter. As a
converter, it bought unfinished fabrics (known as "gray goods") from textile
mills and sent them to finishing plants to dye or print the fabrics
according to specifications. Then it sold these finished goods to apparel
manufacturers or retail stores. Because a converter requires no
manufacturing facilities, it can make a big return on small capital if it
comes up with a popular design or color combination. Between 1916 and 1923
Cohn-Hall-Marx reported annual profits ranging from $290,967 to $844,275.
Investment bankers at the Boston
office of Kidder, Peabody & Co. approached the owner of Cohn-Hall-Marx and
proposed a merger of their converting business with manufacturing plants.
Advantages of such a consolidation included greater efficiency and
flexibility, better cost control, and the ability to deliver new styles more
quickly. Accordingly, with a $20-million investment from Kidder, Peabody,
United Merchants & Manufacturers was incorporated in 1928 to acquire
interests in New York City textile-selling houses or converters and to
purchase plants bleaching dye and prints and mills specializing in products
being sold by the selling houses.
Cohn-Hall-Marx's president, Lawrence
Marx, ran day-to-day operations at UM&M until 1938, with the rank of
vice-president. Jacob W. Schwab, a cousin of Marx and the company's original
treasurer, was president of UM&M from 1939 to 1959. His son, Martin J.
Schwab, became treasurer in 1955 and attained the presidency in 1968.
While the core business remained
Cohn-Hall-Marx, UM&M quickly purchased three textile mills in South Carolina
and plants in Jewett City, Connecticut, and New Bedford and Fall River,
Massachusetts. Its first headquarters were in Boston but were moved to New
York in 1931. Company assets were given as $24.3 million in 1930. During the
first seven months of 1931, UM&M made a profit of $1.2 million, but in the
fiscal year ending July 31, 1932--a severe Depression year--the company
suffered a loss of over $2.2 million. It rebounded the following year,
earning more than $1.4 million.
By 1935 UM&M had net sales of nearly
$35 million and had acquired a silk- and rayon-weaving plant in Louiseville,
Quebec. The company expanded into the factoring field that year, through the
creation of United Factors Corp., a subsidiary of Cohn-Hall-Marx. As
factors, United handled the accounts receivable of a roster of clients,
guaranteeing they would be paid when due. Since many of UM&M's customers
were poorly financed apparel manufacturers, factoring enabled the company to
exploit the experience of its salesmen in rating the creditworthiness of
their customers. The first dividend on UM&M's common stock was paid in 1936,
when the company had about 2,400 stockholders.
By 1940 UM&M and its associated
companies owned and operated, through subsidiaries, 12 plants, including a
cotton mill and finishing plant constructed in Buenos Aires, Argentina, in
1936. This made the company one of the first U.S. textile firms to expand
outside North America. In addition to units manufacturing and converting
textiles and related fabric products, a subsidiary was producing chemicals
for use in the textile industry. The company was listed on the New York
Stock Exchange by 1940. Sales were flat in the late 1930s, however. UM&M
lost money in fiscal 1938 and paid no dividend on common stock in 1938 and
Like the country as a whole, UM&M was
not able to put the Depression behind it until World War II. Net sales,
stagnant until fiscal 1941, reached $66.9 million in 1942, $98.2 million in
1943, and $125.6 million in 1944. Net sales reached $211.5 million in 1948,
while net income rose from $3.8 million in 1942 to $22 million in 1948. In
1945 UM&M acquired Union-Buffalo Mills Co., a manufacturer of cotton cloth
with three plants near Union, South Carolina. By mid-1949 UM&M held 34
subsidiaries in the United States, Canada, Argentina, Uruguay, and
Venezuela, not including subsidiaries of these subsidiaries. Together, they
operated 13 weaving plants, seven finishing plants, and five miscellaneous
plants and warehouses. Jacob Schwab was one of the highest-paid executives
in the United States, earning $440,542 in 1946.
UM&M became a major retailer with the
acquisition and growth of Robert Hall Clothes, Inc. and Case Clothes, Inc.
These discount clothing chains stemmed from a single store opened in
Waterbury, Connecticut, in 1940. Merged in 1948 as Robert Hall, the chain
had 75 stores and was operating coast-to-coast by mid-1949. Its annual sales
were estimated at between $50 million and $75 million. Locating at first in
lofts and hanging clothes on pipe racks, Robert Hall hewed to a
cash-and-carry, no-frills strategy that enabled it to hold its average
mark-up to about 21 percent, compared to 40 percent or more for the average
full-service clothing store. In 1946 Robert Hall started its own men's
topcoat and suit factories, but the women's lines were purchased on the open
market. The 200th store opened in 1955.
The company's growth continued to be
robust in the 1950s. Net sales of $215 million in fiscal 1950 increased to
$500.1 million in 1960. By then UM&M had 21 weaving plants--including two in
Rio de Janeiro, Brazil--and ten finishing plants. It was now merchandising
and marketing woolen and worsted fabrics as well as manufacturing and
selling cotton, silk, and rayon textile fabrics under trademarks that
included "Cohama," "Ameritext," "Juilliard," and "Comark." Between 1959 and
1960 UM&M acquired an English textile converter and--jointly with Swiss
interests--a Scottish silk-dyeing company. Robert Hall had grown into a
327-store chain. Net profits, however, rose only from $10.8 million to $14.4
million between 1950 and 1960 and dipped below $10 million during 1952--54.
In 1964 UM&M was among the five
largest domestic producers of fiberglass industrial fabrics to be charged by
the U.S. Justice Department with conspiring with distributors and each
another to fix prices and rig bids. After the companies pleaded no contest
to criminal charges in 1965, the federal government sought double damages in
civil suits. In July 1966 UM&M agreed to pay $250,000 to settle the case.
In 1966 Financial World
reported that UM&M had "finally broken out of its earnings rut," increasing
profits in fiscal 1965 to $3.13 a share, compared to the previous high of
$2.44 a share in 1956. This increase was attributed to modernized production
facilities and tightened internal controls as well as heavy demand, both
military--due to the Vietnam War--and civilian. As a result the company's
stock price had climbed to $36.50 after spending most of the previous decade
in the teens.
Textile production and related
activities accounted for about half of 1965's record sales volume of $559.7
million. The Robert Hall chain, consisting of 384 stores, accounted for 30
percent, and foreign textile operations the remaining 20 percent. The
company's merchandising and distributing units were taking 45 percent of its
weaving-plant output and 90 percent of its finishing-plant output. Sales
included a variety of cotton, silk, wool, synthetic and fiberglass textiles,
plastic products, and chemical specialties, including acrylic polymers and
resins for making durable-press apparel. UM&M was also providing financing
and factoring services for textile firms.
By 1975 UM&M was the nation's
third-largest publicly owned textile company and its largest factoring
company. Among its 70 manufacturing facilities, it held 19 weaving mills, 13
finishing factories, and 7 synthetic-yarn plants. Textiles were also being
produced in Japan, England, and Colombia under joint ventures. There were
also 16 merchandising and distributing units, including two in France, which
acted as the company's converters. UM&M also had five research and five
chemical units, plus five commercial factoring and financing offices. Its
United Factors subsidiary had an annual volume of $1.4 billion and was so
successful in analyzing creditworthiness that its losses were averaging less
than one-quarter of one percent. Another subsidiary was performing other
financial services, such as managing credit-card charges for several hundred
department stores. The number of Robert Hall stores had reached 436.
Net sales of $787 million in fiscal
1972 was a record, but net income of $15.3 million was well below the high
of $24.1 million recorded in 1966. In fiscal 1974 net income was $30.9
million, double the 1972 figure. Nevertheless, for the first five years of
the 1970s, UM&M's annual return on investment averaged less than five
percent compared to an average return of more than 11 percent in 1974 for
all manufacturing companies. Another troubling figure was the $226 million
in long-term debt, about 43 percent of the company's total capital and a
sharp rise from $99 million in 1966.
UM&M lost $26.3 million in fiscal 1975
and $19.8 million in fiscal 1976, despite record sales volume in the latter
year of more than $1 billion. To improve the situation, the company brought
in new managers, closed some unprofitable operations, and consolidated
profit centers. To reduce short-term debt, it sold its equipment-leasing
business to Crocker National Bank for about $50 million, and a financing
operation to Citicorp for $51 million. But turning around Robert Hall was a
tougher problem. This subsidiary had earned $14 million as late as 1969, but
it lost about $21 million in 1975 and a whopping pretax $41.8 million in
1976, despite having closed 135 unprofitable stores. The low-budget retailer
specializing in men's suits and coats had been slow to move into shopping
centers and suffered from a dowdy, Depression-era image.
A former Sears merchandise executive
brought in to manage Robert Hall stocked the stores with a wider array of
wearing apparel, including more infant's and children's wear, men's leisure
clothes, and jeans and tops for young people. By mid-1977, however, UM&M,
still hemorrhaging, had omitted its quarterly dividend and two of its debt
securities had been downgraded by Moody's Investor Service. Accordingly,
Martin Schwab decided to close the remaining Robert Hall stores--which had
lost $100 million since 1974--and also decided to sell the lucrative
factoring division to Crocker. George L. Staff, the president and chief
operating officer Schwab had hired in November 1975, was dismissed.
Only a month later, on July 12, 1977,
UM&M filed for protection under Chapter 11 provisions of the federal
bankruptcy act. Although UM&M listed assets of $566.5 million and
liabilities of only $381.3 million on March 31, 1977, it told a federal
judge it was unable to pay its debts as they matured. In the biggest auction
of retail-store merchandise ever, the contents of 367 Robert Hall stores
were sold in the summer of 1977 for $35 million.
UM&M lost $191.8 million in fiscal
1978. The liquidation of Robert Hall, costing more than $100 million, was
its biggest expense. The factoring division brought more than $160 million
in its sale to Crocker. Some foreign textile operations also were shed. In
June 1978, the end of its fiscal year, UM&M emerged from Chapter 11
bankruptcy on schedule--the biggest company ever to do so--having deposited
$195.9 million to cover initial payments to creditors and other expenses.
Under the plan, creditors were to be paid 35 percent in cash and the rest in
annual installments. UM&M had paid about half of its debt of $410 million by
May 1982, when it adopted a plan to eliminate the rest by issuing about 1.25
million shares of common stock and a cash payment of about $66 million.
Manufacturers Hanover Trust Co. extended a loan for this payment, secured by
A reorganized UM&M soon attracted the
interest of an Israeli investment group composed of Libora, N.V., a
Netherlands Antilles holding company, and Piryon Investment Trust Co., an
Israeli public company. Eventually the group's holdings were sold to Uzi
Ruskin, a citizen of both the United States and Israel who became a company
director in 1980. Backed by Israeli investors, Ruskin bought $3 million more
of UM&M stock in 1981, raising his stake in the company to 17 percent. He
became its president in 1982.
Ruskin and his backers apparently were
attracted to UM&M because of its $187 million in tax-loss credits against
future earnings. However, he was unable to turn the company around. It lost
$24.8 million on continuing operations in fiscal 1980, $7.3 million in 1981,
and $44 million in 1982. The tax credits were spent on acquiring losers,
according to a critical Forbes article. The worst of these was
Jonathan Logan Inc., purchased in a 1984 hostile takeover for $195 million.
A big apparel manufacturer with brand names like Misty Harbor, Act III, Rose
Marie Reid, and Villager, Jonathan Logan proved unprofitable at the purchase
price, which included $99 million in new bank loans and the issuance of
high-yield bonds. In 1986, for example, Logan lost $36 million when
including interest costs of more than $51 million.
To keep the company afloat Ruskin
first sold one-sixth of UM&M's costume-jewelry unit to the public and closed
the company's South American operations, some of its textile-printing
plants, and a dyeing-and-finishing unit. In 1988--89 he sold the fiberglass-fabrics
division, a shoe-and-handbag division, and part of the home-furnishings
group. He raised more than $100 million, but in fiscal 1989 the company
still carried an operating loss of $29 million. This sum did not include $35
million in interest payments on the company debt of $264 million. By the end
of 1989 a share of UM&M was trading for about $2, compared to $21.50 in
1986. At this price Ruskin and his supporters felt confident enough to raise
their stake in the company to about 30 percent. However, a proposal by
Ruskin in September 1989 to acquire majority control of the company and pay
for it with a new preferred-stock issue was rejected by company directors as
too complex. Three of the four outside directors resigned in November.
Early in 1990 UM&M sold its Decora and
Misty Harbor divisions for $33.6 million in order to reduce its debt.
However, in November the company again filed for Chapter 11 protection
because it was unable to repay $11.6 million on a maturing debenture. The
petition included two subsidiaries--Jonathan Logan and United Merchants
Trucking Inc.--but not Victoria Creations Inc., its costume-jewelry
UM&M emerged from bankruptcy in August
1992 but defaulted in January 1993, when it could not make a bond-interest
payment due at the beginning of the year to CIT Group/Commercial Services, a
unit of CIT Group Holdings, Inc. The restructuring agreement ending
bankruptcy had required the company to reduce its debt to CIT to $88 million
by the end of 1992, but UM&M still owed about $95 million at year's end.
However, CIT agreed to continue to advance money to UM&M.
For fiscal 1993 UM&M registered a loss
of $25.2 million, compared to a loss of $33 million the previous year. In
November 1993 CIT agreed that if UM&M reduced its debt of $124 million to
$60 million by mid-1994, it would forgive $30 million of the remaining debt
and accept a long-term subordinated income note for the other $30 million.
To pay for the latter, UM&M borrowed money from Foothill Capital and sold
its Uniblend yarn division and Clarkesville Mill division for about $8.3
million. UM&M reported a loss of only $752,000 in fiscal 1994, but
accounting changes masked a loss from continuing operations of $23.2
million. For the second straight year independent auditors expressed
"substantial doubt" that the company could continue as a going concern.
In August 1994 UM&M settled a $22
million dispute with the International Ladies Garment Workers Union (ILGWU).
The company had argued that its liability to pay this pension-plan sum had
been wiped out by Chapter 11 reorganization. After a bankruptcy judge
rejected the argument, UM&M issued ILGWU a contingent-income note due June
UM&M closed its last remaining
operation in the apparel textile division, South Carolina's Buffalo Mill, in
early 1995, the last Jonathan Logan unit, Rose Marie Reid, having been sold
in 1992. This left as its chief asset Victoria Creations, Inc., a
79-percent-owned subsidiary based in Providence, Rhode Island. Manufacturers
of women's accessories, Victoria Creations lost $9.1 million in fiscal 1991,
$7.4 million in fiscal 1992, and $1.6 million in fiscal 1993.
With the sale of Buffalo Mills, UM&M's
only businesses consisted of Victoria Creations and a chain of 51 discount
retail stores. Victoria Creations was one of the leading designers,
manufacturers, and distributors of costume jewelry in the United States and
also an exporter of such products. Its range of costume jewelry included
relatively expensive items sold under the Bijoux Givenchy, Richelieu, and
Karl Lagerfeld trade names. The retail chain consisted, in 1994, of 40
stores selling women's apparel and 11 selling women's accessories. About 60
percent of the apparel items were being sold under the Jonathan Logan name
and most of the accessories were being manufactured by Victoria Creations.
UM&M registered a net loss of $18.8
million in fiscal 1994 on net sales of $98.3 million. Its long-term debt was
about $150 million and its common stock was quoted at 12.5 cents a share at
the end of the first quarter of 1994. Ruskin owned or controlled 6.5 percent
of the common stock in September 1994, while Menachem Atzmon controlled 32.2
percent. By mid-1994 UM&M had a tax-loss carryforward of about $300 million
that could be used to shelter future profits. The company said it was
shifting the focus of its businesses to financial services and took steps in
1994 to establish a reinsurance business. Company headquarters, previously
located in Manhattan's garment district, moved to Teaneck, New Jersey, in
the early 1990s.