Even though the company's business was growing rapidly, Gorde found it difficult to translate this success in terms that bankers could understand. "They were very leery of a T-shirt company," he says. "They'd never seen their company name used in that way." They had seen their name, however, on glass mugs, key chains, calendars, and countless other advertising specialty items. Shortly after the Richmond Graphics merger, Gorde added the company's third division, which now contributes about 12% of total sales. "As soon as I opened up the advertising specialty line," Gorde says, "they all understood what I was doing." It was an ideal solution because Gorde didn't have to produce or inventory a product, and his salespeople were already on the street selling T-shirts to customers who were also usually interested in other advertising specialties.
In fiscal year 1981, sales passed $1 million for the first time. And once again the former Yippie maestro got as much volume out of the performance as he could. "We wrote up a very, very strong, professionally written profile of the company," Gorde says, "and supporting data was worked up by our accountants and put into their binders. Then I found out the biggest VP I could get hold of in each of the major banks in Richmond and sent them the package, giving them the privilege to bid for the Virginia Textiles account. The one who offered the best service and the lowest interest rate would be privileged to lend us $500,000 for our new expansion move. And United Virginia Bank, the largest bank in the state, bought."
Continuing growth meant expansion into larger quarters, and expansion into new ventures as well. The company had grown rapidly, but so had the industry, and the mills were straining to meet the insatiable demand. Gorde himself started to build large inventories of T-shirts as a precaution against a drought. Other retailers and screen printers with less credit and smaller orders were caught in a constant scramble for product because they couldn't get it from their traditional dry-goods wholesalers who had somehow failed to build their inventories.
So Gorde started servicing these smaller customers out of his own inventory, adding an average of 15% to handle the orders. He advertised his offerings in the trade journals and quickly built his new wholesale division to $1 million in sales. In 1983, he used "four-color, blasto, professionally done, two-page ads," and by December, sales of the division, now called Blanks Alot! had passed $3 million. Altogether, Virginia Textiles's five divisions, which also include a small monogramming and embroidery business, are expected to bring in revenues of about $6.75 million in fiscal year 1984.
"What I've done," Gorde says, "is just set up a little world that I could be comfortable in, and I'm saying, 'If you can be comfortable in it too, share it with me.
For two years, Gorde shared the rewards of his world by giving employees an annual salary bonus so that they could buy stock in the company. He couldn't give them stock outright, because it would be taxed as personal income, and many employees didn't have enough cash at year-end to pay such a tax bill. Taking withholding tax and Social Security out of the salary bonus and allowing employees to invest the net solved the tax problem, but it galled Gorde. "I realized," he says, "that Uncle Sam was taking about 35 cents on the dollar out of the money that we were simply trying to give to the employees to enfranchise them." That was when Gorde started thinking about an employee stock ownership plan (ESOP).
In the spring of 1982, Gorde attended a national ESOP convention at The Capital Hilton in Washington, D.C. "There were about 300 companies there," he says, "and most of them had already instituted ESOPs. Unfortunately, from a philosophical standpoint, 95% to 98% of them did it only for the tax benefits. I left very disillusioned; it did not occur to me that ESOPs would be used simply as a methodology for avoiding taxes and that the liability for those companies who used it for that purpose was that they had to give stock to their employees. For me, giving stock to the employees was the primary benefit, not a liability. If, in fact, I could avoid the taxes and pump more stock into my employees quickly, I could speed up the process of turning the company into a corporation wholly-owned by employees."
Corey Rosen, executive director of the National Center for Employee Ownership, remembers the conference vividly because he participated in a panel discussion while Gorde was in the audience. "Jerry suddenly jumped up," he says, "and made this statement that all these people were deluding themselves and their employees. That if they didn't given them full participatory rights and control of the company, it really wasn't employee ownership and they didn't deserve all the tax breaks they were getting. At that point, several people in the audience walked out, maybe 20% of the audience. Jerry was very impassioned. I never saw anything like that before, and I've spoken at a lot of conferences."
Soon after he returned from the conference, Gorde sat down with James Tilton, an attorney at the Richmond-based law firm of Hunton & Williams, to devise an ESOP that would incorporate his ideas. "His point of view was unusual," Tilton says, "in that he really did see it as a shared work effort and a shared ownership effort. He saw it both from the standpoint of what's right and what's fair but also from what's effective."
Currently, the Virginia Textile ESOP, effective in March 1983, but retroactive over the prior 12 months, owns about 10% of the outstanding shares, while 11 out of 53 employees own the remaining shares. Twenty-eight employees have stock in their ESOP accounts and 7 of them will begin the vesting process in March 1984.
