Page 1 of 33
Index to Exhibits-Pages 31-32
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission file number 1-3634
CONE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Maple Street, Greensboro, North Carolina 27405
(Address of principal executive offices) (Zip Code)
(910) 379-6220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding as of November 1,
1994: 27,749,221 shares.
Page 1
<PAGE>
FORM 10-Q
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and thirty-nine weeks ended
October 2, 1994 and October 3, 1993
(Unaudited) . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets
October 2, 1994 and October 3, 1993
(Unaudited) and January 2, 1994 . . . .4 & 5
Consolidated Statements of Stockholders' Equity
Thirty-nine weeks ended October 2, 1994
and October 3, 1993 (Unaudited) . . . . . .6
Consolidated Statements of Cash Flows
Thirty-nine weeks ended October 2, 1994
and October 3, 1993 (Unaudited) . . . . . .7
Notes to Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . .8
Item 2. Managements's Discussion and Analysis of
Financial Condition and Results of Operations. 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . 28
Item 6. Exhibits and Reports on Form 8-K. . . . . . . 29
Page 2
<PAGE>
FORM 10-Q
PART I
Item 1.
<TABLE>
<S> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
Oct. 2, 1994 Oct. 3, 1993 Oct. 2, 1994 Oct. 3, 1993
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 203,475 $ 192,644 $ 601,056 $ 590,194
Operating Costs and Expenses:
Cost of sales 163,951 147,700 477,161 452,533
Selling and administrative 18,932 17,954 57,212 55,155
Depreciation 5,802 5,321 17,405 15,879
188,685 170,975 551,778 523,567
Income from Operations 14,790 21,669 49,278 66,627
Other Income (Expense):
Interest income 279 163 416 398
Interest Expense (1,779) (1,742) (5,868) (5,210)
Other income - - 321 -
(1,500) (1,579) (5,131) (4,812)
Income from Continuing Operations before
Income Taxes 13,290 20,090 44,147 61,815
Income Taxes 4,731 8,281 15,716 23,719
Income from Continuing Operations 8,559 11,809 28,431 38,096
Gain on Disposal - Discontinued Operations -
(Net of income tax of $276) - - 439 -
Income before Cumulative Effect of
Accounting Change 8,559 11,809 28,870 38,096
Cumulative Effect of Accounting Change for
Postemployment Benefits - (Net of
income tax benefit of $772) - - (1,228) -
Net Income $ 8,559 $ 11,809 $ 27,642 $ 38,096
Income Available to Common Shareholders:
Income from Continuing Operations $ 7,887 $ 11,137 $ 26,415 $ 35,973
Income before Cumulative Effect of
Accounting Change $ 7,887 $ 11,137 $ 26,854 $ 35,973
Cumulative Effect of Accounting Change - - (1,228) -
Net Income $ 7,887 $ 11,137 $ 25,626 $ 35,973
Earnings Per Share - Fully Diluted:
Income from Continuing Operations $ .28 $ .40 $ .95 $ 1.29
Income before Cumulative Effect of
Accounting Change $ .28 $ .40 $ .96 $ 1.29
Cumulative Effect of Accounting Change - - (.04) -
Net Income $ .28 $ .40 $ .92 $ 1.29
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 27,853 27,889 27,859 27,924
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
October 2, October 3, January 2,
ASSETS 1994 1993 1994
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 2,850 $ 3,226 $ 503
Accounts receivable - trade, less
provision for doubtful accounts $3,000;
$3,988; $3,000 64,205 47,302 44,175
Inventories:
Greige and finished goods 83,813 83,949 84,923
Work in process 17,226 16,714 15,968
Raw materials 19,802 14,241 20,612
Supplies and other 28,485 29,710 30,621
149,326 144,614 152,124
Other current assets 4,834 3,762 5,542
Total Current Assets 221,215 198,904 202,344
Investments in Unconsolidated Affiliates 27,489 25,201 26,420
Other Assets 4,454 2,599 3,171
Property, Plant and Equipment:
Land 20,411 21,097 20,758
Buildings 72,697 69,834 71,942
Machinery and equipment 257,749 236,071 239,846
Other 27,172 22,886 25,799
378,029 349,888 358,345
Less accumulated depreciation 173,112 153,402 158,669
Property, Plant and Equipment-Net 204,917 196,486 199,676
$ 458,075 $ 423,190 $ 431,611
Note: The balance sheet at January 2, 1994 has been derived from the audited financial
statements at that date.
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
October 2, October 3, January 2,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993 1994
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ 11,400 $ 5,296 $ 5,099
Current maturities of long-term debt 256 1,201 767
Accounts payable - trade 31,243 35,599 26,746
Sundry accounts payable and accrued expenses 34,789 39,253 44,231
Income taxes payable 942 2,384 -
Deferred income taxes 27,952 26,298 27,295
Total Current Liabilities 106,582 110,031 104,138
Long-Term Debt 75,744 77,176 77,172
Deferred Items:
Deferred income taxes 36,249 34,933 36,652
Other deferred items 6,095 2,541 3,615
42,344 37,474 40,267
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares; 1993, 465,077 shares - Employee Stock
Ownership Plan 38,395 46,508 46,508
Class A Preferred Stock held in escrow(1993, 81,125 shares) - (8,113) (8,113)
Class B Preferred Stock-no par value; authorized
5,000,000 shares - - -
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 27,749,221 shares;
1993, 27,706,816 shares and 27,744,783 shares 2,775 2,771 2,774
Capital in excess of par 75,361 75,359 75,397
Retained earnings 118,467 81,984 93,468
Currency translation adjustment (1,593) - -
Total Stockholders' Equity 233,405 198,509 210,034
$ 458,075 $ 423,190 $ 431,611
Note: The balance sheet at January 2, 1994 has been derived from the audited financial statements
at that date.
</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTY-NINE WEEKS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993
(amounts in thousands, except share data)
(Unaudited)
Class A Preferred Class A Preferred Nonvoting
Stock Stock - Escrow Common Stock
Shares Amount Shares Amount Shares Amount
Balance, January 2, 1994 465,077 $ 46,508 (81,125)$ (8,113) - $ -
Net income - - - - - -
Currency translation adjustment (net of
income tax benefit of $1,002) - - - - - -
Class A Preferred Stock
- Employee Stock Ownership Plan:
Cash dividends paid - - - - - -
Shares issued (7.0% dividend on shares
held in Cone Mills escrow account) 5,679 567 (5,679) (567) - -
Shares received from Employee Stock
Ownership Plan Trustee -
Cone Mills escrow account (86,804) (8,680) 86,804 8,680 - -
Shares redeemed (4) - - - - -
Common Stock
Options exercised - - - - - -
Purchase of common shares - - - - - -
Balance, October 2, 1994 383,948 $ 38,395 0 $ 0 - $ -
Class A Preferred Class A Preferred Nonvoting
Stock Stock - Escrow Common Stock
Shares Amount Shares Amount Shares Amount
Balance, January 3, 1993 459,282 $ 45,928 (75,330)$ (7,533) 1,231,327 $ 123
Net income - - - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - - - -
Shares issued (8.0% dividend on shares
held in Cone Mills escrow account) 5,795 580 (5,795) (580) - -
Nonvoting Common Stock - converted
to Voting Common Stock - - - - (1,231,327) (123)
Common Stock:
Options exercised - - - - - -
Purchase of common shares - - - - - -
Balance, October 3, 1993 465,077 $ 46,508 (81,125)$ (8,113) 0 $ 0
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTY-NINE WEEKS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993
(amounts in thousands, except share data)
(Unaudited)
Capital in Currency
Common Stock Excess Retained Translation
Shares Amount of Par Earnings Adjustment
Balance, January 2, 1994 27,744,783 $ 2,774 $ 75,397 $ 93,468 $ -
Net income - - - 27,642 -
Currency translation adjustment (net of
income tax benefit of $1,002) - - - - (1,593)
Class A Preferred Stock
- Employee Stock Ownership Plan:
Cash dividends paid - - - (2,643) -
Shares issued (7.0% dividend on shares
held in Cone Mills escrow account) - - - - -
Shares received from Employee Stock
Ownership Plan Trustee -
Cone Mills escrow account - - - - -
Shares redeemed - - - - -
Common Stock - - - - -
Options exercised 13,000 1 72 - -
Purchase of common shares (8,562) - (108) - -
Balance, October 2, 1994 27,749,221 $ 2,775 $ 75,361 $ 118,467 $ (1,593)
Capital in Currency
Common Stock Excess Retained Translation
Shares Amount of Par Earnings Adjustment
Balance, January 3, 1993 26,435,888 $ 2,644 $ 75,227 $ 46,962 $ -
Net income - - - 38,096 -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - (3,074) -
Shares issued (8.0% dividend on shares
held in Cone Mills escrow account) - - - - -
Nonvoting Common Stock - converted
to Voting Common Stock 1,231,327 123 - - -
Common Stock:
Options exercised 47,400 5 254 - -
Purchase of common shares (7,799) (1) (122) - -
Balance, October 3, 1993 27,706,816 $ 2,771 $ 75,359 $ 81,984 $ -
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6a
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
Oct. 2, 1994 Oct. 3, 1993
(Unaudited) (Unaudited)
Cash Flows Provided By Operating Activities $ 23,752 $ 50,421
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates (2,882) (25,201)
Proceeds from sale of property, plant and equipment 2,298 3,832
Capital expenditures (22,505) (29,693)
Net cash used in investing activities (23,089) (51,062)
Cash Flows from Financing Activities:
Net borrowings (payments) - short-term loans 6,301 (1,357)
Principal payments - long-term debt (47,517) (61,869)
Proceeds from long-term debt borrowings 45,578 62,746
Dividends paid - Class A Preferred (2,643) (3,074)
Other (35) 136
Net cash provided by (used in) financing activities 1,684 (3,418)
Net increase (decrease) in cash 2,347 (4,059)
Cash at Beginning of Period 503 7,285
Cash at End of Period $ 2,850 $ 3,226
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,631 $ 6,828
Income taxes, net of refunds $ 13,573 $ 17,001
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid to ESOP trustee for Cone escrow account $ 567 $ 580
Class A Preferred Stock issued $ 567 $ 580
Class A Preferred Stock received from ESOP trustee $ 8,680 $ -
Class A Preferred Stock escrow account closed $ 8,680 $ -
Common Stock issued $ - $ 123
Nonvoting Common Stock converted $ - $ 123
</TABLE>
See Notes to Consolidated Financial Statements.
Page 7
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1994
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") condensed
consolidated financial statements for October 2, 1994
and October 3, 1993 are unaudited, but in the opinion
of management reflect all adjustments necessary to
present fairly the consolidated balance sheets of
Cone Mills Corporation and Subsidiaries at October 2,
1994, January 2, 1994 and October 3, 1993 and the
related consolidated statements of income for the
respective thirteen and thirty-nine weeks ended
October 2, 1994 and October 3, 1993, and
stockholders' equity and cash flows for the thirty-
nine weeks then ended. All adjustments are of a
normal recurring nature. The results are not
necessarily indicative of the results to be expected
for the full year.
These statements should be read in conjunction with
the audited financial statements and related notes
included in the Company's annual report on Form 10-K
for fiscal 1993.
Substantially all components of textile inventories
are valued at the lower of cost or market using the
last-in, first-out (LIFO) method. Nontextile
inventories are valued at the lower of average cost
or market. Because amounts for inventories under the
LIFO method are based on an annual determination of
quantities as of the year-end, the inventories at
October 2, 1994 and October 3, 1993 and related
consolidated statements of income for the thirteen
and thirty-nine weeks then ended are based on certain
estimates relating to quantities and cost as of the
end of the fiscal year.
Page 8
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Sale of Accounts Receivable
On August 11, 1992, the Company entered into an
agreement extendable to August 1995, with the
subsidiary of a major financial institution, which
allowed the sale without recourse of up to $40
million of an undivided interest in eligible trade
receivables. This agreement was amended on June 30,
1994 to allow the sale of up to $50 million in
eligible trade receivables. Accounts receivable is
shown net of $45 million sold at October 2, 1994, net
of $40 million sold at October 3, 1993, and net of
$35 million sold at January 2, 1994 under this
agreement. Cash flows provided by operating
activities for the thirty-nine weeks ended October 2,
1994 and October 3, 1993 include the sale of accounts
receivable of $10 million and $16 million,
respectively.
Note 3. Long-Term Debt
(amounts in thousands)
<TABLE>
<S> <C> <C> <C>
October 2, 1994
Current
Total Maturity Long-Term
8% Senior Note $75,000 $ - $ 75,000
Industrial Revenue Bonds 813 224 589
Other 187 32 155
$76,000 $ 256 $ 75,744
(amounts in thousands) October 3, 1993
Current
Total Maturity Long-Term
8% Senior Note $75,000 $ - $ 75,000
Industrial Revenue Bonds 1,414 685 729
Other 1,963 516 1,447
$78,377 $ 1,201 $ 77,176
</TABLE>
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Class A Preferred Stock
The dividend rate for Class A Preferred Stock is 7.00%,
which is payable March 31, 1995.
On July 29, 1994, the Trustee of the Employee Stock
Ownership Plan, as Escrow Agent, released and returned to
the Company 86,804 shares of its Class A Preferred Stock
(see Note 7). The Escrow Agreement which controlled these
shares has now been terminated, and these Class A Preferred
shares are no longer outstanding.
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Stock Option Plans
<TABLE>
<S> <C> <C> <C> <C>
1984 Stock Option Plan:
Option price per share $ 5.25 $ 6.50
Outstanding at 1/3/93 190,200 111,800
Canceled (3,000) -
Exercised (39,400) (8,000)
Outstanding at 10/3/93 147,800 103,800
Exercised (52,600) -
Outstanding at 1/2/94 95,200 103,800
Exercised (9,000) (4,000)
Outstanding at 10/2/94 86,200 99,800
1992 Stock Option Plan:
Option price per share $15.625
Granted 2/18/93 500,000
Outstanding 1/2/94 500,000
Canceled (8,000)
Outstanding at 10/2/94 492,000
1994 Stock Option Plan:
Option price per share $12.875
Granted 5/17/94 6,000
Outstanding at 10/2/94 6,000
Options exercisable
at 10/2/94 86,200 45,900 196,800 6,000
</TABLE>
The 1994 Stock Option Plan for Non-Employee Directors,
approved by shareholders at the May 10, 1994 annual
meeting, grants to each eligible director an option to
purchase 1,000 shares of Common Stock on the fifth
business day following each annual meeting of
shareholders. The option price is the last reported sale
price on the New York Stock Exchange composite tape on
the date of grant. The plan allows the grant of options
to purchase an aggregate of 100,000 shares of Common
Stock. Options granted under the plan will be
nonqualified stock options with a term of seven years.
No options will be granted under the 1994 Plan after
August 18, 2003. Options may be exercised at grant,
however, shares are restricted from sale until six months
after the grant date.
Page 11
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Earnings Per Share
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
October 2, 1994 October 3, 1993
Primary and Primary and
Fully Diluted Fully Diluted
Net income $ 8,559 $11,809
Less: Class A Preferred
dividends (672) ( 672)
Adjusted net income $ 7,887 $11,137
Weighted average common
shares outstanding 27,749 27,696
Common share equivalents
from:
Assumed exercise of
outstanding options,
less shares assumed
repurchased 104 193
Weighted average common
shares and common share
equivalents outstanding 27,853 27,889
Earnings per common
share and common share
equivalent $ .28 $ .40
</TABLE>
Page 12
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Earnings Per Share (continued)
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
October 2, 1994 October 3, 1993
Primary and Primary and
Fully Diluted Fully Diluted
Income from continuing
operations $ 28,431 $38,096
Less: Class A Preferred
dividends (2,016) (2,123)
Adjusted income from
continuing operations 26,415 35,973
Gain on disposal-
discontinued operations 439 -
Adjusted income before cumulative
effect of accounting change 26,854 35,973
Cumulative effect of
accounting change (1,228) -
Adjusted net income $ 25,626 $35,973
Weighted average common
shares outstanding 27,748 27,682
Common share equivalents from:
Assumed exercise of outstanding
options, less shares assumed
repurchased 111 242
Weighted average common shares
and common share equivalents
outstanding 27,859 27,924
Earnings per common share and
common share equivalent:
Income from continuing
operations $ .95 $ 1.29
Income before cumulative effect
of accounting change $ .96 $ 1.29
Cumulative effect of
accounting change (.04) -
Net income $ .92 $ 1.29
</TABLE>
Primary and fully diluted earnings per share have been
computed by dividing the net earnings available to common
shareholders by the sum of the weighted average common shares
and common share equivalents outstanding.
Page 13
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Litigation and Contingencies
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs"), former employees of the Company, instituted
a class action suit against the Company and Wachovia Bank
& Trust Company, N.A. ("Wachovia") and certain current and
former employees of the Company and Wachovia. The suit was
brought on behalf of salaried employees of the Company who
were participants in certain Company retirement plans. The
Plaintiffs asserted a variety of claims related to actions
taken and statements made concerning certain employee
benefit plans maintained by the Company.
On March 20, 1992, the United States District Court in
Greenville, South Carolina, entered a judgment finding that
the Company had promised to contribute certain surplus
funds (or their equivalent in Company stock) relating to
the overfunding of the Company's pension plans to the 1983
ESOP by December 23, 1985, that such surplus amounted to
$69 million, that the Company's actual contribution totaled
approximately $55 million, and that the Company and certain
of its executive officers therefore had breached their
fiduciary duties under the Employee Retirement Income
Security Act of 1974 ("ERISA") to certain participants in
the 1983 ESOP. The District Court ordered the Company to
pay to the 1983 ESOP for the benefit of plan participants,
both salaried and hourly, the sum of $14.2 million in cash
or the equivalent in Company stock. In addition, the
District Court awarded $3.5 million in attorneys' fees to
the Plaintiffs, $2.2 million of which was to be paid from
the sum awarded to the 1983 ESOP. Judgment was entered in
favor of the defendants on all remaining claims except for
claims relating to the ESOP contribution.
Page 14
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On March 20, 1992, the Company and the individual
defendants appealed the District Court's judgment against
them to the United States Court of Appeals for the Fourth
Circuit. On April 2, 1992, the Plaintiffs appealed the
District Court's judgment to the Court of Appeals insofar
as it dismissed certain of their claims. To secure the
judgment on appeal the Company had deposited in escrow with
the trustee of the 1983 ESOP an $8 million letter of credit
and 75,330 shares of Class A Preferred Stock valued at $7.5
million which subsequently earned dividends of an
additional 11,474 shares valued at $1.2 million. To record
these escrow transactions, the Company increased
outstanding Class A Preferred Stock by $8.7 million. The
increase in outstanding Class A Preferred Stock was offset
by a contra stockholders' equity account labeled "Class A
Preferred Stock held in escrow." These escrow account
transactions did not have an effect upon net income or
stockholders' equity of the Company.
On May 6, 1994, the Court of Appeals, sitting en banc,
affirmed the prior conclusion of a panel of three of its
judges, and unanimously reversed the $15.5 million judgment
and unanimously affirmed all of the District Court's
rulings in favor of the Company. However, the Court of
Appeals affirmed, by an equally divided court, the District
Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to proof
of any detrimental reliance, Plaintiffs could establish
that a letter to salaried employees on December 15, 1983
could allow recovery on a theory of equitable estoppel.
Accordingly, the case was remanded to the District Court
for a determination of whether the Plaintiffs can establish
detrimental reliance creating estoppel of the Company.
The issue of detrimental reliance and other issues related
to whether the Plaintiffs can prevail on remand in the
District Court are factually oriented, and additional
proceedings will likely be necessary. For that reason, and
because of the uncertainties inherent in the litigation
process, it is not possible to predict the ultimate outcome
of this lawsuit. However, the Company intends to continue
to defend this matter vigorously, and it is the opinion of
the Company's management that this lawsuit, when finally
concluded, will not have a material adverse effect on the
Company's financial condition.
Page 15
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Because judgment of the District Court was reversed, the
escrowed stock and letter of credit were ordered released
by order of the District Court entered July 22, 1994.
Subject to the Court's order, the stock was redeemed, the
offsetting contra account eliminated and letter of credit
terminated. None of these escrow transactions had an
effect on net income or stockholders' equity.
Note 8. Discontinued Operations
(amounts in thousands)
On January 4, 1994 the Company completed the sale of all
remaining assets identified with discontinued operations.
Proceeds from this sale were $3,500. This concluded the
Company's December 5, 1991 plan to discontinue and
liquidate its corduroy and other bottomweight continuous
piece-dyed fabrics product line.
Note 9. Accounting Change - Postemployment Benefits
(amounts in thousands)
At January 3, 1994 the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." This
statement requires an accrual method of recognizing
postemployment benefits rather than recording an expense
when paid. The cumulative effect of this accounting
change, included in first quarter 1994 earnings, resulted
in a one-time charge to income of $2,000 and a reduction in
net income of $1,228. Additional expenses resulting from
the implementation of this accounting statement were
insignificant.
Note 10. Acquisition
On October 17, 1994, the Company announced it had signed a
letter of intent to purchase the assets of the Raytex
Division of Golding Industries, Inc. Raytex is one of the
largest domestic commission printers of wide fabrics for
home furnishing products. Cone expects to pay
approximately $58 million and to assume certain obligations
for the assets of Raytex. The proposed acquisition is
subject to certain regulatory approvals and approval by the
respective Boards of Directors. The proposed acquisition
is expected to be completed during the fourth quarter of
1994.
Page 16
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENTS' DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Third Quarter Ended October 2, 1994 Compared with Third
Quarter Ended October 3, 1993.
Beginning in the fourth quarter of 1993 and extending through
the first half of 1994, Cone Mills experienced no growth in
sales because of denim inventory adjustments throughout the
softgoods pipeline and sluggish demand for home furnishings
prints. As these denim inventories returned to a better
balance between supply and demand, sales growth for the
company resumed during the third quarter. However, operating
results continue to compare unfavorably with 1993 amounts
primarily because of the inability to raise prices of apparel
fabrics sufficiently to cover significantly higher raw
material costs.
Third quarter 1994 sales were $203.5 million up 5.6% as
compared with third quarter 1993 sales of $192.6 million. For
the quarter the company had net income of $8.6 million or $.28
per share of common stock after preferred dividends as
compared with net income of $11.8 million and $.40 per share
for the third quarter of 1993.
The company's net income of $8.6 million declined by $3.2
million from the previous year. The decline was caused
primarily by lower gross profits in the apparel fabrics
segment. The company's gross profit (net sales less cost of
sales and depreciation) as a percentage of net sales was 16.6%
compared with 20.6% for the third quarter of 1993. The decline
resulted primarily from the inability to increase denim prices
to cover rising cotton costs, and, to a lesser extent, a
general wage increase in July of approximately 4% for hourly
employees and higher depreciation expense.
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
The company operates in two principal business segments,
apparel fabrics and home furnishings products. The following
table sets forth certain net sales and operating income
information regarding these segments for the third quarters of
1994 and 1993:
<TABLE>
<S> <C> <C> <C> <C>
Third Quarter
1994 1993
NET SALES
Apparel $152.6 75.0% $146.9 76.3%
Home Furnishings 50.9 25.0 45.7 23.7
Total $203.5 100.0% $192.6 100.0%
OPERATING INCOME (1)(2)
Apparel $ 11.1 7.3% $ 18.1 12.3%
Home Furnishings 4.8 9.4 4.1 8.9
</TABLE>
(1) Percentages reflect operating income as a percentage of
segment net sales.
(2) Excludes general corporate expenses.
Apparel Fabrics. Sales of apparel fabrics were $152.6
million, up 3.8% as compared with year-ago levels. The
overall increase in segment sales resulted primarily from
higher volume. Prices, adjusted for mix changes, were
approximately even with year-ago levels. The mix for the
most recent quarter was less favorable than last year with
respect to both average prices and margins.
Apparel segment profit margins declined to 7.3%, compared
with 12.3% for the third quarter of 1993 because of lower
denim earnings as previously discussed. (See analysis of
gross profits above.) Specialty sportswear earnings
increased as compared with year-ago levels, the result of
improved operating results for shirtings and novelty
fabrics.
For the third quarter of 1994, export sales for the apparel
segment, primarily denims, were $33.9 million up 8.9% from
the third quarter of 1993.
Page 18
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. Sales of home furnishings were $50.9
million, up 11.4% as compared with year-ago levels as all
product lines showed sales growth. Sales of the decorative
fabrics product group improved despite the continued
softness in print fashion demand. Sales of polyurethane
foam and related products by the Olympic Products division
were higher than previous year levels as the division
benefited from stronger sales for automotive applications.
Home furnishings segment earnings as a percent of sales
increased to 9.4% for the third quarter of 1994 as compared
with 8.9% for the third quarter of 1993. Export sales of
home furnishings products, primarily John Wolf fabrics,
were $1.2 million for the third quarter of 1994 as compared
with $1.6 million for the 1993 period. Export sales in 1994
continue to be impacted by weak economic conditions in
European markets.
Total company selling and administrative expenses increased
from $18.0 million for the third quarter of 1993 to $18.9
million for the 1994 period. However, in each period selling
and administrative expenses represented 9.3% of sales.
Income taxes as a percent of taxable income were 35.6% in the
third quarter of 1994 compared with 41.2% for the 1993 period.
The higher tax rate in 1993 reflected the retroactive federal
income tax increase adopted by Congress in August 1993.
Nine Months Ended October 2, 1994 Compared with Nine Months
Ended October 3, 1993.
Net sales for the first nine months of 1994 were $601.1
million, up 1.8% from nine months 1993 sales of $590.2. Income
of $.96 per share, before the cumulative effect of adoption of
SFAS No. 112, was down from the first nine months of 1993
results of $1.29 per share. Included in the 1994 results was
a net gain of $.4 million, or $.01 per share, arising from the
final disposal of assets of the company's discontinued
operations. During the first quarter of 1994, the company
adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which resulted in an after-tax, non-
cash charge of $1.2 million, or $.04 per share, and reduced
net income to $.92 per share, for the first nine months of
1994. Net income for the first nine months of 1994 was $27.6
million as compared with $38.1 million for the 1993 period.
Page 19
<PAGE>
FORM 10-Q
Item 2. (continued)
Gross profit (net sales less cost of sales and depreciation)
as a percentage of net sales was $17.7% as compared with 20.6%
for the 1993 period. The decline resulted primarily from the
inability to raise denim prices to cover higher cotton costs,
higher unit production costs associated with operating denim
facilities at less than capacity during the first six months
of 1994, and a shift in mix toward lower margin specialty
sportswear fabrics and polyurethane foam products.
Business segment information for the first nine months of 1994
and 1993 was as follows:
<TABLE>
<S> <C> <C> <C> <C>
Nine Months
1994 1993
NET SALES
Apparel $448.6 74.6% $444.3 75.3%
Home Furnishings 152.5 25.4 145.9 24.7
Total $601.1 100.0% $590.2 100.0%
OPERATING INCOME (1)(2)
Apparel $ 37.2 8.3% $ 53.6 12.1%
Home Furnishings 14.8 9.7 14.8 10.2
</TABLE>
(1) Percentages reflect operating income as a percentage of segment net sales.
(2) Excludes general corporate expenses.
Apparel Fabrics. Apparel fabrics net sales were $448.6
million for the first nine months of 1994, an increase of
1.0% from the first nine months of 1993. The higher sales
were due to increases in sales volume. Overall, apparel
fabric segment sales benefited from increases in the
specialty sportswear group, primarily flannel shirtings,
partially offset by a slight decrease in denim sales.
Average prices adjusted for product mix changes were
essentially unchanged. Export sales for the first nine
months of 1994 were up slightly to $99.4 million.
Operating margins in the first nine months of 1994 for the
apparel fabrics segment were 8.3% of net sales compared
with 12.1% for the 1993 period. Margins were lower in 1994
because of a decline in denim earnings as discussed above.
(See analysis of gross profits above.)
Page 20
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. First nine months 1994 net sales of
$152.5 million for the home furnishings segment were up
4.5% as compared with year-ago results. Operating income
for both the 1994 and 1993 period was $14.8 million. Sales
and operating profits for the fabrics product group were
down in 1994 as the company continued to experience weak
decorative print fabric markets. Olympic's polyurethane
product sales and operating profits were up in the 1994
period as the division experienced stronger sales in
automotive markets.
Export sales of home furnishings products were $4.3 million
in the first nine months of 1994 as compared with $5.2
million in 1993. Export sales have been impacted by poor
economic conditions in European markets.
Total company selling and administrative expenses were $57.2
million or 9.5% of sales for the first mine months of 1994 as
compared with $55.2 million or 9.3% of sales for the 1993
period. Expenses in 1994 were impacted by higher salary and
benefit costs.
Interest expense for the first nine months of 1994 increased
$.7 million compared to the 1993 period, primarily the result
of a $.4 million interest charge on the settlement of 1990 and
1991 income taxes by the Internal Revenue Service.
Income taxes as a percent of taxable income were 35.6% in the
first nine months of 1994 compared with 38.4% for the 1993
period. The higher tax rate in 1993 reflected the federal
income tax increase in August 1993. Both periods reflect tax
benefits resulting from operation of the company's foreign
sales corporation.
Page 21
<PAGE>
FORM 10-Q
Item 2. (continued)
Liquidity and Capital Resources
The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of America (the "Term Loan") and stockholders' equity.
Primary sources of liquidity are internally generated funds,
a $60 million Credit Agreement with Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") as Agent Bank (the
"Revolving Credit Facility"), and a $50 million Receivables
Purchase Agreement (the "Receivables Purchase Agreement") with
Delaware Funding Corporation, an affiliate of Morgan Guaranty.
The Receivables Purchase Agreement was increased from $40
million in the second quarter of 1994. On October 2, 1994 the
company had funds available of $65.0 million under its
Revolving Credit Facility and Receivables Purchase Agreement.
During the first nine months of 1994, the company generated
$23.8 million in funds from operating activities, including
$45.0 million from net income adjusted for non-cash
depreciation expenses, partially offset by increased working
capital requirements, primarily increases in trade receivables
and reductions of accounts payable and accrued expenses. Major
uses of cash during this period included $22.5 million for
capital expenditures, $2.6 million for preferred stock
dividends and $2.9 million for investment in the Mexican joint
venture. Funding came primarily from operating cash flow and
short term borrowings and the additional sale of accounts
receivables to support working capital needs.
During the first nine months of 1993, the Company generated
$50.4 million in funds from operating activities, including
$54.0 million from net income adjusted for non-cash
depreciation, partially offset by increased working capital
requirements, primarily resulting from reductions of accounts
payable and accrued expenses. Major uses of cash during this
period included $29.7 million for capital expenditures and
$3.1 million for preferred stock dividends. Cone Mills
purchased 20% of Compania Industrial de Parras S.A., (CIPSA),
the largest denim manufacturer in Mexico, for approximately
$24 million, and was in the beginning stages of building a
joint venture denim plant with CIPSA. The investment in the
joint venture was approximately $2 million for the first nine
months of 1993. Funding for those cash uses came primarily
from operating cash flow, cash available at the beginning of
the period, and the Receivables Purchase Agreement.
Page 22
<PAGE>
FORM 10-Q
Item 2. (continued)
On October 2, 1994 the company's long-term capital structure
consisted of $75.7 million of long-term debt and $233.4
million of stockholders' equity. For comparison, on October 3,
1993 the company had $77.2 million of long-term debt and
$198.5 million of stockholders' equity. Long-term debt
(including current maturities of long-term debt) as a percent
of long-term debt and stockholders' equity was 25% on October
2, 1994, compared with 28% on October 3, 1993. The company
believes it has significant unused debt capacity as it
considers the target leverage for Cone Mills to be
approximately 35 - 40% long-term debt as a percent of total
capital. (See Financial Outlook and Strategy.)
Accounts receivables on October 2, 1994, were $64.2 million,
up from $47.3 million at October 3, 1993. At the end of the
1994 period, the company had sold $45 million of accounts
receivable, an increase of $5 million from the amount sold at
October 3, 1993. Receivables, including those sold pursuant to
the Receivables Purchase Agreement, represented 50 days of
sales outstanding at October 2, 1994 compared with 43 days at
October 3, 1993, as fewer payments were made in advance of due
date.
Inventories on October 2, 1994, were $149.3 million, up $4.7
million from October 2, 1993 levels of $144.6 million,
primarily from increased inventories of raw materials.
Capital spending in 1994 is expected to be $37.5 million and
includes expansion and upgrading of yarn preparation
facilities, new weaving machines, and a new fiber production
line at Olympic Products. In addition, the company expects its
total investment in the Mexican joint venture denim company
will reach approximately $25 million, with an estimated 80% of
that amount being invested in 1995. Capital spending in the
first nine months of 1994 was $22.5 million and the investment
in the Mexican joint venture was $2.9 million.
Federal, state and local regulations relating to the workplace
and the discharge of materials into the environment are
continually changing; therefore, it is difficult to gauge the
total future impact of such regulations on the company.
Existing government regulations are not expected to cause a
material change in the company's competitive position,
operating results or planned capital expenditures. Cone Mills
has an active environmental committee which fosters protection
of the environment and compliance with laws.
Page 23
<PAGE>
FORM 10-Q
Item 2. (continued)
In November 1988 certain former employees of the company
instituted a class action suit against the company and certain
other defendants in which the plaintiffs ("Plaintiffs")
asserted a variety of claims related to the 1983 ESOP and
certain other employee benefit plans maintained by the
company. In March 1992 a judgment in the amount of $15.5
million (including an attorneys' fees award) was entered
against the company with respect to an alleged promise to make
additional company contributions to the 1983 ESOP and all
claims unrelated to the alleged promise were dismissed. The
company, the individual defendants and the Plaintiffs
appealed.
On May 6, 1994, the Court of Appeals, sitting en banc,
affirmed the prior conclusion of a panel of three of its
judges and unanimously reversed the $15.5 million judgment and
unanimously affirmed all of the District Court's rulings in
favor of the company. However, the Court of Appeals affirmed,
by an equally divided court, the District Court's holding that
Plaintiffs should be allowed to proceed on an alternative
theory whether, subject to proof of any detrimental reliance,
Plaintiffs could establish that a letter to salaried employees
on December 15, 1983 could allow recovery on a theory of
equitable estoppel. Accordingly, the case was remanded to the
District Court for a determination of whether the Plaintiffs
can establish detrimental reliance creating estoppel of the
company.
The issue of detrimental reliance and other issues related to
whether the Plaintiffs can prevail on remand in the District
Court are factually oriented, and additional proceedings will
likely be necessary. For that reason, and because of the
uncertainties inherent in the litigation process, it is not
possible to predict the ultimate outcome of this lawsuit.
However, the company intends to continue to defend this matter
vigorously, and it is the opinion of the company's management
that this lawsuit, when finally concluded, will not have a
material adverse effect on the company's financial condition.
Page 24
<PAGE>
FORM 10-Q
Item 2. (continued)
To secure the judgement on appeal from the District Court to
the Court of Appeals, the company had deposited in escrow with
the trustee of the 1983 ESOP an $8 million letter of credit
and 75,330 shares of Class A Preferred Stock valued at $7.5
million which subsequently earned dividends of an additional
11,474 shares valued at $1.2 million. The letter of credit
was substituted for an $8 million cash deposit made in April
1992. To record this escrow transaction, the company
increased outstanding Class A Preferred Stock by $8.7 million
and established an offsetting contra stockholders' equity
account.
Because the judgement of the District Court was reversed, the
escrowed stock and letter of credit were ordered released by
order of the District Court entered July 22, 1994. Subsequent
to the court's order, the stock was redeemed, the offsetting
contra account eliminated and letter of credit terminated.
None of these escrow transactions have had an effect on net
income or stockholders' equity.
The company is a party to various other legal claims and
actions incidental to its business. Management believes that
none of these claims or actions, either individually or in the
aggregate, will have a material adverse effect on the
financial condition of the company.
Financial Outlook and Strategy
In 1992 and 1993, Cone Mills benefited from favorable apparel
fabric markets characterized by increasing prices and volume
in both domestic and international denim markets and the rapid
expansion of sportswear fabrics markets. While first half 1994
sales did not grow due to short-term denim inventory
adjustments in the softgoods pipeline, the company believes
that demographic trends and other market developments continue
to present favorable long-term opportunities for growth. Even
though the first nine months operating earnings were lower
than year-ago levels and while the company does not anticipate
improvement in fourth quarter results, the company's sales are
advancing, apparel fabric order backlogs are up and assuming
cotton prices remain relatively stable, management expects to
see earnings growth resume in 1995.
Page 25
<PAGE>
FORM 10-Q
Item 2. (continued)
The company has purchased cotton, its principal raw material,
from suppliers at fixed prices for delivery throughout the
remainder of the year and into 1995. Although these prices,
which are similar to third quarter costs, compare favorably
with those of the present spot market, the price of cotton has
increased significantly since late 1993 and has caused a
reduction in profit margins in 1994. While the company was
unable to increase prices in its largest product lines during
first half 1994, moderate price increases were effected for
second half 1994. Efforts to restore margins will be affected
by the strength of demand for the company's products, cotton
and other raw material prices, and productivity improvement
programs.
The company has set priorities for the use of cash flow and
unused debt capacity. The first is international denim
manufacturing and marketing opportunities and in 1993, the
company purchased a 20% ownership in CIPSA, the largest denim
manufacturer in Mexico, for approximately $24 million and
signed agreements with CIPSA providing for the formation of a
joint venture company to build and operate a world-class denim
manufacturing facility. The partners plan to invest a total of
approximately $50 million, with each partner providing 50% of
this investment. Capital requirements for the joint venture
will primarily occur in 1995. The joint venture has signed a
credit agreement with a Mexican bank for approximately $63
million of debt financing. This debt is not guaranteed by Cone
Mills Corporation or CIPSA.
In order to meet the company's goal of $1 billion in sales and
commensurate growth in earnings by 1996, Cone Mills' second
priority for cash flow and unused debt capacity is
acquisitions. On October 17, 1994 the company announced it had
reached an agreement in principle to acquire the assets of
Golding Industries, Inc., Raytex Division. Golding/Raytex is
one of the largest domestic commission printers of wide
fabrics used primarily in home furnishing products, including
comforters and bedspreads. Cone expects to pay approximately
$58 million and to assume certain obligations for the
Golding/Raytex assets. Management expects the acquisition to
increase annual company sales by approximately 5%. The
proposed acquisition is subject to certain conditions,
including completion of Cone's due diligence, certain
regulatory approvals, negotiation of a definitive agreement,
and final approval of the respective Boards of Directors of
Cone and Golding.
Page 26
<PAGE>
FORM 10-Q
Item 2. (continued)
The company continues to actively seek other possible
acquisitions to which it believes it can add value through
application of its manufacturing and marketing expertise.
There can be no assurance that any actual transaction will
ultimately result, but the consummation of any such
transaction could involve a significant financial commitment.
Other potential uses of cash include common stock repurchases,
the reduction of preferred stock, or cash dividends depending
on the expected benefits to shareholders. On February 17,
1994, the Board of Directors of Cone Mills Corporation
authorized the repurchase, from time to time, of up to 2.5
million shares of the company's outstanding common stock in
open market transactions. As of November 1, 1994, 6,800 shares
have been repurchased in open market transactions and future
repurchase decisions will be based on the company's expected
capital structure, alternative investment opportunities, and
the market price of the common stock.
The company believes that its internally generated operating
funds and funds available under its credit facilities are
sufficient to meet its working capital, capital spending,
possible stock repurchases, and financing commitment needs for
the foreseeable future, including investments in the joint
venture and the pending acquisition of Raytex. In conjunction
with the Raytex acquisition, the company expects to increase
its available lines of credit.
Page 27
<PAGE>
FORM 10-Q
PART II
Item 1. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs"), former employees of the Company, instituted a
class action suit against the Company and Wachovia Bank &
Trust Company, N.A. ("Wachovia") and certain current and
former employees of the Company and Wachovia. The suit was
brought on behalf of salaried employees of the Company who
were participants in certain Company retirement plans. The
Plaintiffs asserted a variety of claims related to actions
taken and statements made concerning certain employee benefit
plans maintained by the Company.
On March 20, 1992, the United States District Court in
Greenville, South Carolina, entered a judgment finding that
the Company had promised to contribute certain surplus funds
(or their equivalent in Company stock) relating to the
overfunding of the Company's pension plans to the 1983 ESOP by
December 23, 1985, that such surplus amounted to $69 million,
that the Company's actual contribution totaled approximately
$55 million, and that the Company and certain of its executive
officers therefore had breached their fiduciary duties under
the Employee Retirement Income Security Act of 1974 ("ERISA")
to certain participants in the 1983 ESOP. The District Court
ordered the Company to pay to the 1983 ESOP for the benefit of
plan participants, both salaried and hourly, the sum of $14.2
million in cash or the equivalent in Company stock. In
addition, the District Court awarded $3.5 million in
attorneys' fees to the Plaintiffs, $2.2 million of which was
to be paid from the sum awarded to the 1983 ESOP. Judgment
was entered in favor of the defendants on all remaining claims
except for claims relating to the ESOP contribution.
On March 20, 1992, the Company and the individual defendants
appealed the District Court's judgment against them to the
United States Court of Appeals for the Fourth Circuit. On
April 2, 1992, the Plaintiffs appealed the District Court's
judgment to the Court of Appeals insofar as it dismissed
certain of their claims.
Page 28
<PAGE>
FORM 10-Q
Item 1. (continued)
On May 6, 1994, the Court of Appeals, sitting en banc,
affirmed the prior conclusion of a panel of three of its
judges and unanimously reversed the $15.5 million judgment and
unanimously affirmed all of the District Court's rulings in
favor of the Company. However, the Court of Appeals affirmed,
by an equally divided court, the District Court's holding that
Plaintiffs should be allowed to proceed on an alternative
theory whether, subject to proof of any detrimental reliance,
Plaintiffs could establish that a letter to salaried employees
on December 15, 1983 could allow recovery on a theory of
equitable estoppel. Accordingly, the case was remanded to the
District Court for a determination of whether the Plaintiffs
can establish detrimental reliance creating estoppel of the
Company.
The issue of detrimental reliance and other issues related to
whether the Plaintiffs can prevail on remand in the District
Court are factually oriented, and additional proceedings will
likely be necessary. For that reason, and because of the
uncertainties inherent in the litigation process, it is not
possible to predict the ultimate outcome of this lawsuit.
However, the Company intends to continue to defend this matter
vigorously, and it is the opinion of the Company's management
that this lawsuit, when finally concluded, will not have a
material adverse effect on the Company's financial condition.
The Company is a party to various other legal claims and
actions incidental to its business. Management believes that
none of these claims or actions, either individually or in the
aggregate, will have a material adverse effect on the
financial condition of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this Form 10-Q are listed in the
accompanying Index to Exhibits.
(b) Reports on Form 8-K
None
Page 29
<PAGE>
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CONE MILLS CORPORATION
(Registrant)
Date November 15, 1994 JOHN L. BAKANE
John L. Bakane
Vice President and
Chief Financial Officer
Page 30
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1993.
* 4.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
* 4.3 Note Agreement dated as of August 13, 1992,
between Cone Mills Corporation and The
Prudential Insurance Company of America,
with form of 8% promissory note attached,
filed as Exhibit 4.01 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.4 Credit Agreement dated as of August 13, 1992,
among Cone Mills Corporation, the banks
listed therein and Morgan Guaranty Trust
Company of New York, as Agent, with form
of note attached, filed as Exhibit 4.02 to
the Registrant's report on Form 8-K dated
August 13, 1992.
* 4.5 Specimen Class A Preferred Stock Certificate,
filed as Exhibit 4.5 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 Registration Rights Agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
Page 31
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.8 The 401(k) Program (formerly the
Supplemental Retirement Program) of
Registrant, amended and restated
effective January 1, 1994, filed as
Exhibit 4.9 to the Registrant's
Registration Statement on Form S-8
(File Nos.33-51951 and 33-51953).
* 4.9 Cone Mills Corporation 1983 ESOP as
amended and restated effective March 1,
1993, filed as Exhibit 4.9 to Registrant's
report on Form 10-K for the year ended
January 2, 1994.
27 Financial Data Schedule 33
* Incorporated by reference to the statement or report
indicated.
Page 32
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation consolidated financial statements dated October 2, 1994, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> OCT-02-1994
<CASH> 2,850
<SECURITIES> 0
<RECEIVABLES> 67,205
<ALLOWANCES> 3,000
<INVENTORY> 149,326
<CURRENT-ASSETS> 221,215
<PP&E> 378,029
<DEPRECIATION> 173,112
<TOTAL-ASSETS> 458,075
<CURRENT-LIABILITIES> 106,582
<BONDS> 75,744
<COMMON> 2,775
0
38,395
<OTHER-SE> 192,235
<TOTAL-LIABILITY-AND-EQUITY> 458,075
<SALES> 601,056
<TOTAL-REVENUES> 601,056
<CGS> 494,566
<TOTAL-COSTS> 551,778
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,452
<INCOME-PRETAX> 44,147
<INCOME-TAX> 15,716
<INCOME-CONTINUING> 28,431
<DISCONTINUED> 439<F1>
<EXTRAORDINARY> 0
<CHANGES> 1,228
<NET-INCOME> 27,642
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
<FN>
<F1>Discontinued operations gain
</FN>
</TABLE>
