Textile Technology In FOCUSBy Alfred Dockery, Executive Editor,and Eric Vonwiller, Technical
Editor Reinventing The Jacquard Business
J. Schneider uses new technology to capture the imagination of its customers. Circa
1801 J. Schneider Fabrics, Connelly Springs, N.C., combines state-of-the-art textile machinery and
information systems to take Jacquard weaving in new directions. Josh Schneider formed the company
and recruited a team of industry veterans after making an intensive survey of Jacquard weaving
technology. He felt that several recent breakthroughs could give him a technological edge in the
upholstery and home furnishings marketplace.Key technological components at the 200,000-square-foot
plant include Luwa Bahnsons LoomSphere system; Staublis LX 3200 Jacquard head and Delta 200
drawing-in machine; Nuovo Vamatexs Leonardo and 9000 PLUS ES rapier weaving machines; and Karl
Mayers rotary creel sample warper. There was no way we could go out, as a company, and compete
and be one of the same, Schneider said. We had to look at where the weaknesses were in the
industry, the holes that can be filled if you do something different. I realized that to get into
it, we needed an edge. We didnt have that technological edge to get into the business until about a
year ago.

Circa 1801 Fabrics President John Lenox (l) with company founder, Josh
Schneider. Schneider and his team are also using information systems to tie together not just
all of the technology but all of the companys functions as well. In fact, one of the major
requirement vendors had to meet was to get their engineers together with engineers from all parties
to ensure a high level of integration. Alphatex, Charlotte, N.C., is responsible for getting all of
the different systems Staubli, Vamatex, EAT, NedGraphics integrated.The entire plant is integrated
from the warper, to the warehouse, to the looms, said John Lenox, president, Circa 1801 Fabrics.
Our customers with a password will be able to view their fabric weaving. When they check on an
order, they dont have to talk to a customer service person. They can go directly to the
loom.However, the company is not relying on technology alone. The top 12 people at Circa 1801
(including Schneider and Lenox) have more than 275 years of experience between them. Most are
second or third generation textile managers.Its the team that weve assembled, that makes the
technology useful, Schneider said. Its a double-edged sword. You can have the best technology in
the world but it drives the organization, instead of the organization driving it.Its not just your
network; its what you do with it. Everything has to be a seamless whole marketing, design,
production to survive in todays market. You are not given a choice. Plant DesignCirca 1801 is
a green field plant, designed specifically to make the most of every element of its machinery. (See
ATIs September 1998 issue for a first look at the plants construction.) The building itself has
several unique features which make it ideal for Jacquard fabric production. For example, ceiling
height is 28 feet. The extra height allows Circa 1801 to have the greatest possible distance
between its looms and the Jacquard heads. There is also no duct work over any of the heads. The
higher the head, the less the angle in the harness. The reduced angle translates into reduced
friction and increased harness life. The company estimates that its 1,200-hook harnesses will last
up to five times longer those in conventional plants, which have much lower ceilings.Another
advantage of an extremely high ceiling is that future loom configurations will be more vertical,
said John Lenox, president, Circa 1801 Fabrics. Not only is this a valid weave room for today; it
is a valid weave room for 20 years from today.The building was also designed with Luwa Bahnsons
LoomSphere air filtration system in mind. There 10-foot by 10-foot tunnels under the weave room
floor for air return.The building was also designed for rapid expansion. One of the weave room
walls is can be easily removed, and the pads have already been poured for phase two allowing Circa
1801 to double the size of its weave room and warehouse.Schneiders business plan calls for adding
28 looms per year. At this rate, the current weave room will be completely filled with looms in
three years. In four years, a 250,000-square-foot expansion is planned.Growth is a subject that the
entire Circa 1801 team has given a much thought. In order to be a force in this market they must
grow. At the same time, they dont want to become so large that they no longer know their
associates.We can be a happy medium between a European family mill and a big textile operation,
Lenox said. We are interested in custom projects. We are absolutely interested in working with the
customized products that the marketplace is requiring today. Processes And EquipmentProduction
processes begin with warping. The plants warping equipment includes Hacoba warpers and Karl Mayer
sample warpers. In an unusual arrangement, the Hacoba warpers are mounted on tracks, making them
movable.These warpers are mated with very large stationary creels designed to minimize labor. Every
aspect of production at Circa 1801 has two guiding principles in mind: flexibility and reduced
manufacturing cost.Changing over a creel takes at most two hours. The Hacoba units are also very
user friendly. It only took about two weeks to train operators to use the equipment.There are two
Karl Mayer sample warpers, capable of making warps up to 150 yard in length. The company uses these
machines in three ways: sampling, product development and custom warps.The Karl Mayer (warpers)
give you versatility, said Jeff James, president of manufacturing, Circa 1801. Especially if you
have a customer that wants a quick turnaround. Using the rotary creel on them, I can make a warp in
about three hours.If all that is needed is a short warp for a quick fabric trial, James says that a
35-yard warp can be prepared in about an hour. These warpers also do not need much operator
attention. During the plants startup phase it was not unusual to leave them running overnight.James
told ATI that he has discussed a fabric with a customer in the morning and showed her fabric that
afternoon.The plants slashing system is a Sucker Mueller single-end slasher. Single-end slashing
gives better sizing application, which translates into higher weaving efficiency. This unit is one
of the first such installations in the United States.The plants drawing-in machine is a Staubli
Delta 200. The Delta 200 a very handy machine for dobby looms, especially when we get into the
contract market very heavy, James said. You can do a full count draw through drop wires, heddles
and a reed in about an hour.

Circa 1801 J. Schneider Fabrics weave room in operation. You can also pattern your draw.
It does not have to be a straight draw. Its PC-driven so you can draw any kind of pattern you
want.This flexibility allows the company to run some styles that would normally have to go on its
Jacquard machines on its dobby machines, giving the company another cost savings. Weave RoomOf
course, the heart of the plant is its weave room. Circa 1801s weave room is clean, spacious and
well lit. All of the equipment is new and first rate.For Jacquard weaving, the plant has 18 Vamatex
9000 PLUS ES positive rapier looms driven by Staubli LX 3200 Jacquard heads. These machines are
capable of speeds in the 400 to 450 picks per minute range. At the time of ATIs visit, the company
was in negotiations to purchase 18 more 9000 PLUS ES machines. Additional Staubli Jacquard heads
are also on order.For dobby weaving, the plant has 10 high-speed Vamatex Leonardo negative rapier
looms driven by Staubli 2670 dobby heads. These dobbies are fully electronic and can drive up to 20
harness frames. These looms are capable of speeds up to 700 picks per minute.The company is working
aggressively to move styles from Jacquards to the dobbies whenever possible for the cost and speed
advantages.This is the first U.S. installation for the Leonardo machines. The loom was first shown
at OTEMAS in Osaka. It has many advanced features including a programmable inverter drive. The
inverter can be programmed for specific filling yarns. So that the loom drops its speed 40 to 60
percent for that particular pick and then speeds back up for the other filling yarns.This
programmability should be a huge advantage in upholstery weaving with its wide variety of yarn
sizes and types. Other noteworthy features include the CANBUS logic system, variable pick density,
electronic tension control and 12-color filling capability. The Leonardo also has quick style
change capability. James estimates that he can have a pattern in these looms and running within
three hours of starting the drawing-in process, even if width changes are needed. Changing to a
pattern that has already been prepared (i.e. drawn-in) takes about one hour. This combination of
machines gives the plant considerable flexibility, according to James. Again its versatility, he
said. If I get a style that can run on the dobbies, I can take it off a Jacquard machine running at
400 picks per minute and put it on a dobby and run it at 700 picks per minute. Two different
machines, two different technologies for versatility. James reports very few filling stops on
either types Vamatex machine.The Staubli LX 3200 Jacquard head, which drives the 9000 PLUS ES
machines, is highly computerized and has self-diagnosis capability. These heads can handle up to
12,000 hooks. The harness setup here is also unique. With quick connect capability, a complete
harness change can be done in one shift rather than several days.By year end, all patterns will be
downloaded to both Jacquard and dobby machines over the plants computer network.In addition, every
fourth loom will have a computer monitor and printer. Each time a loom begins a new style the
weaver will run one repeat of the fabric and then compare it with a TIFF file on the computer
monitor.The ultimate goal is to have a paperless mill. The plants computer system will control
everything from incoming yarn to cloth shipment. Everything including spare parts will be
computerized. Bar code readers with radio frequency capability will be used to keep track of yarn
inventory.Circa 1801 runs a wide range of yarns from 6,000 to 7,000 denier down to 70 denier. Fiber
type is even more varied and has included yak, camel and goat hair, as well as, wool, silk and
cotton.Diversified Systems Inc. (DSI) provided the plantgrading frames, gantries and beam storage
system. The material handling equipment here was made by Hubtex and includes cloth doffing and warp
trucks. Yarn trucks came from Excel Inc.Grob Corp. is the plants vendor for harnesses, heddles and
drop wires. You cant beat the Grob harnesses, James said. We are very pleased with their quality.
Theyve always done an excellent job. There is no comparison. Conquering New WorldsWe are doing
things out in the furniture market that no one else can do right now, Schneider said. At the same
time, the vast possibilities that the technology opens up to Circa 1801s design, production and
marketing staff make having a definite focus a necessity. For now that focus is on the residential
furniture and commercial contract markets.Our first efforts have been in creating products for the
furniture industry, Lenox said. Residential upholstery fabric is an area that we have focused on as
our first step. The niche is upper end. Our price points range from $5.95 to $19.95 per yard.With a
brand new weave room, you have two issues: making profitable goods and running looms. Our strategy
allows us to cover both bases. In the residential area, were going to make our profit. In the more
volume-oriented, contract and specialty product niche, our margins wont be as high. Its a very
stable strategy.The company has already gotten some rave reviews back from its customers.After they
make their sofa or chair they have less of our fabric sitting on their floor, Schneider said. They
dont have to cut around a lot of defects. A lot of that has to do with the Luwa Bahnson system. It
just keeps the warps so clean and the fabrics so crisp.
For more information on Circa 1801 J. Schneider, call (828) 397-7003 or fax (828)
397-6736.

June 1999

Dear Editor:A much-belated thank you for the wonderful article (written by Technical Editor Eric
Vonwiller) about our Mount Vernon Alto facility and our slub yarn capability in the January edition
of ATI. We are extremely appreciative of the time you took to learn of our operation and our market
focus. The article has helped gain for us a stronger presence in the sales yarn world. We have been
delighted to have calls come in asking specifically for us to provide samples of cotton slub yarns
that are air-jet runable.We are responding to demand for our product that is currently surging.
While business conditions have been far from excellent, we have made steady progress and are
pleased with our results. Our plant personnel have continued to advance our plant efficiency and
output. Please know we welcome you to visit again should ever the opportunity be there for
you.Thanks again for the coverage you provided our Yarn Division in our effort to become regarded
as the premier ring-spun slub yarn producer.Sincerely,Charles L. Little Jr.President, Yarn
DivisionMount Vernon Mills Inc.

June 1999

ATI was recently recognized for editorial excellence in two categories in an awards competition
sponsored by the Magazine Association of Georgia (MAG).In the Best Essay, Column or Editorial
Commentary category, ATI received a silver medal for Associate Editor Michelle M. Havichs Quality
Fabric of the Month column.The association also awarded ATI a silver medal in the Best
Photography/Illustration category for its November 1998 feature, A Textile Town Becomes
Christmastown, about Pharr Yarns, McAdenville, N.C.

June 1999

Wise Industries Inc., Kings Mountain, N.C., recently reached an agreement with Befama S.A., Poland,
to represent Befamas nonwoven equipment in North America.Befama manufactures a complete line of
high production carding and captured web cross lapping equipment. The agreement will allow Wise to
continue marketing the companys existing product line of value-driven nonwoven equipment and
provide the customer with an additional competitive, quality product line to choose from.The
relationship between the companies allows them to provide complete turnkey nonwoven installations.
The Wise control panel and automation division is able to supply the control systems using U.S.
manufactured components, while its ability to trouble shoot the control system remotely via a modem
will assure reliability and easy access to replacement parts.

May 1999

The Year 2000 (Y2K) problem is emerging as one of the most expensive accidents in history. Its cost
will certainly exceed that of the Kobe as well as the Los Angeles earthquakes plus Hurricane Andrew
(only $170 billion).With only a matter of months left before the problem hits the world head-on,
most textile, apparel and fiber business owners continue to put off their Y2K projects. Where
We StandAccording to a recent survey by the National Federation of Independent Business (NFIB) and
Wells Fargo Bank, of 500 small businesses, only 41 percent had addressed or intended to address the
Y2K problem, and 18 percent of the companies said that they were not at all or barely aware of the
problem.The survey estimates that 82 percent of all small business owners are at risk because they
use computers; use time/date systems that might be affected; or sell, lease or install equipment
that could be impaired.Most small businesses think they know about Y2K, but they dont understand
the whole picture, said William Dennis, senior research fellow at NFIB. They dont know some of the
more technical aspects of the problem.According to Dennis, the end-of-the-world scenarios in the
general press arent helping to legitimize the problem. Small business owners see stories about
possible bank failures and airplanes falling out of the sky when what they need is more discussion
about specific consequences, he said.Those textile operations that are ready to tackle Y2K still
face two major dilemmas. The first is, obviously, that there is not a great deal of time left in
which to deal with the problem. Secondly, the fix can be expensive even for an apparel or fibers
business that is not particularly computer-dependent. All of which make the tax breaks available
more important than usual.

Computer-Fix Tax BreaksUnder our tax rules, the cost related to the development of software
for the textile operations own use or for sale or lease to others may be immediately deducted.Or,
if it is more advantageous, the operation may amortize the costs over a five-year period or an even
shorter period is appropriate. All our lawmakers require is that all computer software costs be
treated consistently.One caveat, however, is that today a textile or fibers operation that
acquires, rather than develops software, can depreciate it over 36 months if it meets all of the
following requirements:It is readily available for purchase by the general public;It is not subject
to an exclusive license; andIt has not been substantially modified.Even if the software does not
meet the above requirements, a textile business should depreciate it over 36 months if it was not
acquired in connection with the acquisition of all or a substantial part of a business.Anyone who
acquires software today must amortize it over 15 years (rather than depreciate it) if it does not
meet all of the requirements listed above and if the taxpayer acquired it in connection with
acquisition of a substantial portion of a business.It appears unlikely that there will be any
significant changes in our tax laws in the foreseeable future. The Clinton administration and
Congress are fighting over the disposition of the projected budget surplus and concerned with
saving Social Security and Medicare.Clintons Year 2000 budget calls for raiding taxes and expanding
government programs by cracking down on corporate tax shelters and cashing in on the settlement
between tobacco companies and U.S. states.Congress has adopted a budget outline that calls for
using the mounting budget surplus in Social Security payments to reduce the nations $3.3 trillion
in publicly held debt. The almost identical Senate and House budget plans would keep the strict
spending limits laid out in the 1997 balanced budget pact, leaving room for significant tax cuts or
new spending. Controversial Tax BreaksIn recent months, textile mills and business owners have
seen more than their fair share of controversial court decisions and Internal Revenue Service (IRS)
rulings involving key tax breaks. These included reversals by the U.S. Tax Court, dissenting
opinions and differing positions among the various appeals courts. And behind it all, the IRS
quietly pushes its agenda. Personal vs. BusinessTemporary rules issued by the IRS disallow a
tax deduction for the interest paid on overdue individual income taxes, even when the source of the
personal income is a trade or business.A 1996 Tax Court decision, held that the applicable
regulation conflicts with the Tax Court decision, several lower courts have sided with it in
finding the IRSs regulations to be invalid.Unfortunately, the U.S. Court of Appeals for the Ninth
Circuit, in a 1998 decision, overturned the Tax Court and concluded that the regulation is a
reasonable interpretation of a finically ambiguous statute. The Eighth Circuit the only other
appeals court to address the issue has also sided with the IRS. Although the question of tax breaks
for interest paid on the unpaid taxes of a mill owner is a narrow one, more controversial and
somewhat closer to home is the on-going problem of who is and who isnt an independent contractor.

 Employee vs. ContractorThe big news here has been the rulings in the Microsoft vs.
Vizcaino case, preventing the software manufacturer from withholding benefits from workers it has
classified as freelancers.A divided Appeals Court for the Ninth Circuit upheld a three-judge panel
decision that workers classified by Microsoft as freelancers were entitles to participate in the
companys 401(k) and Employee Stock Purchase (ESOP) Plans.The employees in this case signed
employment contracts as independent contractors even though they all worked at the company for
years and performed the same work as permanent employees.It is not just high-tech companies, which
typically use larger numbers of such freelancers in code and software design, that will be affected
by this case in 2000.All businesses that give workers benefits and provide flexible work
arrangements must take note; and workers must review how many classifications will impact on 2000
contributions to both IRAs and employment taxes.On that age-old basic question of who is and who
isnt an independent contractor, however, the IRSs 20-point test and the safe harbor rules for
textile-related business operations remain intact.Although a few lawmakers have proposed making the
question of who is and who isnt easier, it appears unlikely that anything will happen to resolve
this issue completely.In an important pro-taxpayer ruling, reliance on legal tax advice triggered
safe-harbor relief. The IRS ruled in technical advice that a vision care companys reliance on legal
advice established a reasonable basis for not treating doctors of optometry as employees. A mill
that received similar advice would also, presumably, be allowed to continue treating its workers as
independent contractors. Capital Expense Or Just ExpenseEvery mill or business owner is aware
that expenses can be deducted immediately while those expenditures that are required to be
capitalized must be depreciated if they can be deduced at all.However, the IRS shows every intent
of continuing in 2000 to aggressively apply a 1992 Supreme Court decision to require capitalization
of many expenses.Business acquisition costs: Here the IRS has also decided that once a decision has
been made to acquire the business, virtually all costs incurred in an attempt to actually acquire
it are ineligible for five-year amortization and must be capitalized only to be recovered when the
business is eventually sold or otherwise disposed of.Asbestos removal cost: The Tax Court has
required costs for the removal cost of asbestos to be capitalized.Graphic design costs: The IRS did
lose one of its capitalized expenditure cases the Tax Court denied its attempt to require the
capitalization of graphic design costs for cigarette packages even though they may produce future
patronage or goodwill. Unfortunately, the IRS has announced that it will still pursue those who
attempt to deduct graphic design costs as advertising expenses rather than capitalizing them.

 Questionable Tax BreaksOne of the basic principles of operating a textile business as a
corporation permits a shareholder to contribute capital to the incorporated business without
recognizing gain on the exchange. However, when it comes to contributing property with liabilities
in excess of its basis or book value, gain must be recognized to the extent of the excess.In an
about-face, the Tax Court in another case decided that excludable discharge-of-indebtedness income
realized by an insolvent S corporation does not flow through a shareholder in the form of any
increase in stock basis.Partnerships: Noting what it calls a rising level of abuse, the IRS has let
it be known that it intends to vigorously pursue valuation issues involving family limited
partnerships. The IRS is particularly concerned about dramatic discounts that have been taken for
family limited partnerships when the partnership assets consist of cash, cash equivalents,
marketable securities and similar liquid assets.Electronic travel records: As an accommodation to
todays increasingly paperless economy, the IRS interpreted the documentary evidence rule to not
require an original document, such as an airline ticket receipt, provided an employee also
established the amount, date, place and business character of the expenditure. Reducing
Taxable IncomeMany times a textile, apparel and fibers business owner can legitimately deduct
benefits that would otherwise be classified as nondeductible personal expenses. No textile business
owner should overlook the possibility of purchasing health insurance, investing for retirement or
providing perks like a company car through the business. But perks, particularly those that benefit
the owner of a closely-held textile operation, require advance planning.It should be kept in mind
that claiming some tax deductions may have an impact on the textile operations taxes in later
years. A good example of this is the recapture or payback of certain depreciation deductions that
are required when business property is sold. Depreciation deductions begin in the tax year in which
property is placed in service. Merely buying depreciable property during 1999 is not enough. To
claim the depreciation deduction, the property must be put into productive use in the fiber,
spinning or weaving business before the end of the year.All business real estate must be
depreciated using a mid-month convention. The property is treated as being placed in service in the
middle of the month in which it is actually placed in service. A depreciation deduction for
one-half of that month, plus the rest of the months for the remainder of the year. For most other
depreciable property other than real estate, a mid-year convention is used. This means that
regardless of what month the textile business starts using the property, it is treated as if use
began in the middle of the year. Generally, that means one-half of the first years depreciation,
regardless of when the property was placed in service.If Uncle Sam will allow one-half years tax
break for asset purchases made at anytime of the year, why not purchase all business assets and put
them to use in the final days of DecemberThat strategy would give you a half-years depreciation
while at the same time, avoiding an actual cash outlay until late in the year. The IRS is aware of
this possibility and imposes a so-called mid-quarter convention to prevent everyone from doing just
that.The mid-quarter rules apply if a textile mill puts more than 40 percent of their total newly
acquired property for the year into service in the last quarter. Any mill or business that does,
must use the mid-quarter convention for all assets placed in service during the year. Plan To
Pay The PiperEvery employer is required to withhold taxes from employees pay as well as deposit the
withheld amounts with the property tax agencies. Furthermore, as an employer, a textile operation
will also have to pay certain taxes on the amount paid to workers.Together, these taxes that every
operation is required to withhold and those that they are directly required to pay compromise the
operations payroll taxes. They may include Federal, state and perhaps, local income taxes, Social
Security, Medicare taxes, Federal and state unemployment taxes and, in some states, disability
insurance taxes.Plus, regardless of whether the textile operation employs others, some payroll-type
taxes due on income that the owner receives from the business. The key to controlling payroll tax
obligations is making all payments when they are due in order to avoid getting hit with costly
penalties.

 Tax CreditsWhen they are available, tax credits are generally better for a textile
business than deductions. After all, credits reduce the apparel or fibers operations tax bill while
deductions merely reduce the income which that tax bill is computed.Today most tax credits are
narrowly targeted to encourage everyone to take certain actions that lawmakers have deemed
desirable (generally, to benefit disadvantaged low-income individuals or the environment). There
are also a few credits designed to prevent double taxation and a few designed to encourage certain
types of investments that are considered socially beneficial. Lower Tax RatesAlthough no
textile business or operation can actually lower its tax rate, there are opportunities that can
produce similar results in 2000:Choosing the optimal form of organization for the business (such as
sole proprietorship, partnership, corporation or S corporation.)Structuring a transaction so that
payments received are classified as capital gains. Long-term capital gains earned by non-corporate
taxpayers are subject to lower tax rates the other income.Shifting income from a high tax bracket
individual (such as the textile business owner) to a lower-bracket individual (such as the owners
child). One fairly simple way to accomplish this is by hiring your children. Another possibility is
to make one or more children partners in the textile business, so that net profits are shared among
a larger group.While the tax laws limit the usefulness of this strategy for shifting unearned
income to children under the age of 14, some opportunities to lower tax rates still do exist. But,
once again, the time to think about those strategies is during 1999, not 2000. Planning To
Avoid The AMTBecause some taxpayers most notably wealthy taxpayers have been so successful at
legally minimizing their taxbills, Congress came up with another way to tax them: the alternate
minimum tax (AMT). The AMT ensures that every textile business and individual will pay a tax no
matter how successful they are at using the benefits, deductions and credits in our tax law.If a
mill or textile business owner is too successful at planning his or her taxes using so called
preference items such as acceleration depreciation, capital gains, etc., the AMT is triggered.

 Restrictions On Tax PlanningThe fact that a textile operation plans to use one form of
transaction rather than another in order to minimize taxes will not invalidate the transaction for
tax purposes. However, even if the form of a transaction is valid, the IRS may look at the
substance or true nature of the transaction in order to determine what the tax consequences should
be.The general rule is that the IRS may look behind the form of any transaction in order to
determine its substance for tax purposes. If the IRS doesnt agree with the taxpayer, they are
empowered to change that deduction. Taxpayers, however, are generally locked into the form of the
transaction. The thinking here is that since a taxpayer can freely choose how to set up a
transaction, its only fair to require him or her to live with the tax consequences.Despite the
restrictions and despite the fact that there will not, in all likelihood, be any significant tax
law changes to the plan for, everyone should immediately begin thinking how to reduce their 1999
income tax bills, those bills that will become due early in 2000.Incorporating tax planning into
the day-to-day operation of your textile business will enable you to achieve a low tax bill this
year and low tax bills for the next few years at least.

May 1999