SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
AMENDMENT NO. 1 TO CURRENT REPORT
ON FORM 8-K DATED DECEMBER 2, 1994
Pursuant to Sections 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of Earliest Event Reported) December 2, 1994
CONE MILLS CORPORATION
(Exact Name of Registrant as Specified on its Charter)
North Carolina 1-3634 56-0367025
(State or Other Jurisdiction (Commission File IRS Employer
of Incorporation) Number Identification No.
1201 Maple Street, Greensboro, North Carolina 27405
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (910) 379-6246
N/A
(Former Name or Former Address, if Changed Since Last Report)
Page 1
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FORM 8-K
Item 7. Financial Statements and Exhibits.
This report is being filed to provide financial statements and
pro forma financial information required by this item with
respect to the Registrant's acquisition of substantially all
of the assets of M.P.M. Transportation, Inc., a wholly owned
subsidiary of Lancer Industries, Inc. and successor of Golding
Industries, Inc. ("Golding") by merger with Golding as of the
day immediately preceding the acquisition, all as described in
the Registrant's Current Report on Form 8-K dated December 2,
1994.
(a) The following historical financial statements of Golding
Industries, Inc. and Subsidiary are filed herewith on
the pages indicated:
Pages
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet as of September 30, 1994 4
Consolidated Statements of Operations for the nine
months ended September 30, 1994 and September 30,
1993 5
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1994 and September 30,
1993 6
Note to unaudited Consolidated Financial Statements 7
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants 8
Consolidated Balance Sheet as of December 31, 1993 9
Consolidated Statement of Operations for the year
ended December 31, 1993 10
Consolidated Statement of Shareholder's Deficit for
the year ended December 31, 1993 11
Consolidated Statement of Cash Flows for the year
ended December 31, 1993 12
Notes to Consolidated Financial Statements 13
Page 2
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FORM 8-K
Item 7. (continued)
(b) The following unaudited pro forma consolidated financial
information of Registrant is filed herewith on the pages
indicated:
Introduction to Selected Pro Forma Financial Data 22
Pro Forma Condensed Consolidated Balance Sheet as of
October 2, 1994 23
Pro Forma Condensed Consolidated Statement of Income
for the thirty-nine weeks ended October 2, 1994 24
Pro Forma Condensed Consolidated Statement of Income
for the year ended January 2, 1994 25
(c) The following exhibits are filed in connection with this
report:
2* Asset Purchase Agreement dated December 2, 1994
by and among Cone Mills Corporation, Lancer
Industries, Inc. and M.P.M. Transportation, Inc.
23 Consent of Coopers & Lybrand L.L.P.
*Previously filed
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FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
September 30, 1994
(Unaudited)
(in thousands)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -
Trade receivables, net of allowance for doubtful accounts of $193 4,046
Inventories 797
Other current assets 2,338
Total current assets 7,181
Property, plant and equipment, net 19,057
Goodwill, net of accumulated amortization of $984 6,195
Other intangible assets, net of accumulated amortization of $896 2,206
$ 34,639
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Current maturity of long-term debt $ 223
Accounts payable 2,255
Accrued compensation 309
Accrued severance 581
Accrued expenses and other current liabilities 861
Total current liabilities 4,229
Long-term debt 34,186
Due to affiliate 4,407
Deferred income taxes 2,597
45,419
Shareholder's deficit:
Series A Preferred stock, $ .01 par value; 15,000 shares
authorized; 15,000 shares issued and
outstanding 1,500
Class A common stock, $.01 par value; 6,000
shares authorized; 697 shares issued
and outstanding 7
Class B common stock, $.01 par value; 5,303
shares authorized; none issued and
outstanding -
Additional paid-in capital 4,043
Foreign currency translation adjustment (27)
Accumulated deficit (16,303)
(10,780)
$ 34,639
</TABLE>
The accompanying note is an integral part of the consolidated
financial statements.
Page 4
<PAGE>
FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<S> <C> <C>
Nine Months Nine Months
Ended Ended
Sept. 30, 1994 Sept. 30, 1993
(unaudited) (unaudited)
Net sales $ 33,972 $ 37,848
Cost of goods sold 23,640 28,530
Gross profit 10,332 9,318
Selling, general and administrative expenses 3,732 5,059
Amortization expense 240 394
Writedown of unamortized goodwill 7,979 -
11,951 5,453
Income (loss) from operations (1,619) 3,865
Interest expense 3,502 3,951
Loss before income taxes (5,121) (86)
Income tax benefit (445) (39)
Net loss $ (4,676) $ (47)
</TABLE>
The accompanying note is an integral part of the consolidated
financial statements.
Page 5
<PAGE>
FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
<TABLE>
<S> <C> <C>
Nine Months Nine Months
Ended Ended
Sept. 30, 1994 Sept. 30, 1993
Cash Flows Provided By (Used In) Operating Activities $ (947) $ 1,894
Cash Flows from Investing Activities:
Capital expenditures (3,528) (1,071)
Proceeds from sale of property, plant & equipment 440 -
Net proceeds from asset sale 9,000 -
Net cash provided by (used in) investing activities 5,912 (1,071)
Cash Flows from Financing Activities:
Principal payments - long-term debt (6,654) (902)
Net borrowings (payments) - Intercompany debt (47) (7)
Increase in long-term equipment financing 1,682 -
Net cash used in financing activities (5,019) (909)
Effect of exchange rate changes on cash (1) (3)
Net decrease in cash (55) (89)
Cash at Beginning of Period 55 126
Cash at End of Period $ - $ 37
</TABLE>
The accompanying note is an integral part of the consolidated
financial statements.
Page 6
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FORM 8-K
Item 7. (continued)
NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Golding Industries, Inc. condensed consolidated financial
statements for September 30, 1994 and September 30, 1993 are
unaudited, but in the opinion of management reflect all
adjustments necessary to present fairly the consolidated
balance sheet of Golding Industries, Inc. and Subsidiary at
September 30, 1994 and the related statements of operations
and cash flows for the nine months ended September 30, 1994
and September 30, 1993. 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 for fiscal
1993.
Page 7
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FORM 8-K
Item 7. (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Golding Industries, Inc.:
We have audited the accompanying consolidated balance sheet of
Golding Industries, Inc. and Subsidiary, a wholly-owned
subsidiary of Lancer Industries, Inc., as of December 31,
1993, and the related consolidated statements of operations,
shareholder's deficit and cash flows for the year then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Golding Industries, Inc. and Subsidiary
as of December 31, 1993, and the consolidated results of their
operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
February 25, 1994, except for Note 11
as to which the date is April 18, 1994
Page 8
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FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
as of December 31, 1993
(in thousands)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 55
Trade receivables, net of allowance for
doubtful accounts of $268 in 1993 4,927
Inventories 4,690
Machinery parts and supplies 1,711
Other 522
Total current assets 11,905
Property, plant and equipment, net 17,263
Goodwill, net of accumulated amortization
of $1,938 14,380
Other intangible assets, net of accumulated
amortization of $788 2,284
$ 45,832
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 3,288
Accrued compensation 446
Accrued severance 490
Accrued expenses and other current liabilities 768
Total current liabilities 4,992
Long-term debt 39,381
Due to affiliate 4,436
Deferred income taxes 3,126
51,935
Shareholder's deficit:
Class A common stock, $.01 par value; 6,000
shares authorized; 697 shares issued and
outstanding 7
Class B common stock, $.01 par value; 5,303
shares authorized; none issued and
outstanding -
Additional paid-in capital 5,543
Foreign currency translation adjustment (26)
Accumulated deficit (11,627)
(6,103)
$ 45,832
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 9
<PAGE>
FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1993
(in thousands)
<TABLE>
<S> <C>
Net sales $ 49,265
Cost of goods sold 37,378
Gross profit 11,887
Selling, general and administrative expenses 6,411
Amortization expense 508
Other expenses 529
7,448
Income from operations 4,439
Interest expense 5,247
Loss before income taxes (808)
Income tax provision 27
Net loss $ (835)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 10
<PAGE>
FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
for the year ended December 31, 1993
(in thousands)
<TABLE>
<S> <C> <C> <C> <C>
Class A Additional Currency
Common Paid-In Translation Accumulated
Stock Capital Adjustments Deficits
Balance, December 31, 1992 $ 7 $ 4,043 $ ( 23) $ (10,792)
Conversion of due to
affiliate 1,500
Net Loss (835)
Foreign currency translation
adjustment ( 3)
Balance, December 31, 1993 $ 7 $ 5,543 $ ( 26) $ (11,627)
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
Page 11
<PAGE>
FORM 8-K
Item 7. (continued)
GOLDING INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31, 1993
(in thousands)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $ (835)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 1,675
Amortization 508
Provision for doubtful accounts 57
Deferred income taxes 27
Gain on disposal of property, plant and equipment (51)
Changes in operating assets and liabilities:
Trade receivables 640
Inventories 2,178
Other assets (245)
Accounts payable (530)
Accrued expenses and other current liabilities 74
Net cash provided by operating activities 3,498
Cash flows from investing activities:
Property, plant and equipment additions (1,595)
Proceeds from sale of property, plant and equipment 100
Net cash used in investing activities (1,495)
Cash flows from financing activities:
Proceeds from working capital loan 14,343
Payments on working capital loan (16,410)
Net payments to affiliate (4)
Net cash used in financing activities (2,071)
Effect of exchange rate changes on cash (3)
Net decrease in cash and cash equivalents (71)
Cash and cash equivalents, beginning of year 126
Cash and cash equivalents, end of year $ 55
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest expense $ 5,164
Income taxes $ 5
Noncash transaction, conversion of due to affiliate
to additional paid-in capital $ 1,500
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
Page 12
<PAGE>
FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
1. Summary of Significant Accounting Policies:
ORGANIZATION - Golding Industries, Inc. is a wholly-owned
subsidiary of Lancer Industries, Inc., ("Lancer").
PRINCIPLES OF CONSOLIDATION - The accompanying
consolidated financial statements include the accounts of
Golding Industries, Inc. and its subsidiary, Golding
Brothers Canadian, Ltd. (collectively, the "Company").
Significant intercompany accounts and transactions have
been eliminated in consolidation.
TRANSLATION OF FOREIGN CURRENCY - The assets and
liabilities of Golding Brothers Canadian, Ltd. are
translated at the rate of exchange in effect at the
balance sheet date and revenue and expense accounts are
translated at average rates of exchange during the year.
Translation adjustments are reflected as a separate
component of shareholder's deficit.
STATEMENT OF CASH FLOWS - For purposes of the statement
of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three
months or less to be cash equivalents.
INVENTORIES - Inventories are stated at the lower of cost
or market with cost determined by the last-in, first-
out (LIFO) method for approximately 99%, of the
Company's inventories at December 31, 1993, and by the
first-in, first-out (FIFO) method for all other
inventories.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and
equipment are stated at cost, less accumulated
depreciation. Depreciation is recorded over the
estimated useful lives of the assets by the straight-line
method. Gain or loss on the sale or disposal of
property, plant and equipment is reflected in operations
when the related asset is sold or disposed.
INTANGIBLE ASSETS - Intangible assets consist principally
of goodwill and deferred financing costs. Goodwill
represents the excess of the purchase price and related
Page 13
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
acquisition costs over the estimated fair values of the
net assets acquired and is being amortized on a straight-
line basis over a period of forty years.
Deferred financing costs associated with obtaining long-
term financing are amortized over the terms of the
related agreements, ranging from three to eight years.
INCOME TAXES - Effective January 1, 1993, the Company
adopted the provisions of Statement of Financial
Accounting Standards NO. 109, "Accounting for Income
Taxes" (FAS 109). Accordingly, deferred income taxes
have been recorded for the differences between the tax
basis of assets and liabilities and their carrying
amounts for financial reporting purposes, referred to as
temporary differences. Financial statements for prior
periods have not been restated and the cumulative effect
of the accounting change is immaterial.
INTEREST EXPENSE - The Company has included sales term
discounts in interest expense, such costs being incurred
specifically for reduction of interest expense from
credit borrowings. The amount was $415 for the year
ended December 31, 1993.
CONCENTRATIONS OF CREDIT RISKS - The Company extends
credit to various companies in the textile industry,
principally bedding manufacturers and other manufacturers
in the home fashion industry, in the normal course of
business. The Company performs credit evaluations of
its customers' financial condition and, generally,
requires no collateral from its customers. Management
believes that allowances for doubtful accounts are
adequate to absorb estimated losses as of December 31,
1993.
2. Inventories:
Inventories consist of the following at December 31,
1993:
Raw materials and supplies $1,275
Work in process 163
Finished goods 3,252
$4,690
Page 14
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
If the first-in, first-out (FIFO) cost method of
accounting had been used for inventories, the
inventory balances would have been $123 higher at
December 31, 1993.
3. Property, Plant and Equipment:
Property, plant and equipment consist of the following
at December 31, 1993:
Land and land improvements $ 828
Buildings and building improvements 6,364
Machinery and equipment 16,636
23,828
Less accumulated depreciation (6,565)
$17,263
4. Long-Term Debt:
Long-term debt consists of the following:
Revolving loan $19,500
Working capital loan 404
Term loan 1,500
Subordinated note, net of discount
for warrants 17,977
$39,381
Aggregate maturities for the long-term debt are as
follows:
1994 $ -
1995 3,404
1996 3,000
1997 3,500
1998 29,477
$39,381
The Company has commitments totaling $44,000 as of
December 31, 1993 under a credit agreement. The credit
agreement comprises four separate notes: a revolving
note, a working capital note, a term note and a
subordinated note.
Page 15
<PAGE>
FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Under the terms of the revolving loan, the Company may
borrow up to a maximum of $19,500. This maximum amount
will reduce to $16,500, $13,500 and $10,000 at December
31, 1995, 1996 and 1997, respectively. The remaining
balance is payable on December 31, 1998 (see Note 11).
Under the provisions of the credit agreement, the working
capital loan was automatically extended until
December 31, 1995, at which time it is payable. The
amount available under the working capital loan is $5,000
at December 31, 1993 and will reduce to $3,750 on
December 31, 1994 (see Note 11).
Both the revolving loan and the working capital loan bear
interest at a reference rate (as defined in the credit
agreement) plus 1.5% per annum, payable monthly. At
December 31, 1993, this rate was 7.5%.
The term loan is due on December 31, 1998. Interest is
payable quarterly at an annual rate of 14%.
The subordinated note is due on December 31, 1998 and
interest is payable quarterly at an annual rate of
14.68%.
The subordinated note was issued with detachable stock
purchase warrants. The warrants entitle the lender to
purchase up to 153,000 shares of Class B common stock at
$5.71 per share and are exercisable through March 27,
1999. The warrants had not been exercised as of
December 31, 1993.
Upon written notice from the holder of the warrants, and
providing it does not create an event of default under
any of its existing loan agreements, the Company is
obligated to repurchase the warrants or common shares
issued pursuant to exercise of such warrants at a
repurchase price based on a formula defined in the
warrant agreement. At December 31, 1993, application of
the formula results in a negative repurchase price.
The Company has the right to repurchase all or a portion
of the warrants or common shares issued pursuant to such
warrants at the higher of the aforementioned formula
price or a minimum repurchase price, which increases
annually through March 28, 1998, as defined in the
warrant agreement.
Page 16
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
The warrants were assigned a value of $50, representing
an original issue discount on the subordinated note.
This amount has been credited to additional paid-in
capital. The unamortized discount on the subordinated
notes was $23 at December 31, 1993.
Borrowings under the credit agreement are collateralized
by substantially all the assets of the Company, including
the assignment of all leases, rents and life insurance
policies and a pledge of the outstanding Class A common
stock of Golding Industries, Inc. and 65% of the
outstanding common stock of Golding Bros. Canadian, Ltd.
The credit agreement contains various covenants that,
among other restrictions, require the Company to maintain
certain financial ratios, including minimum levels of
working capital and net worth, and prohibits loans,
advances and the payment of dividends.
5. Income Taxes:
The provision (benefit) for income taxes consists of the
following for the year ended December 31, 1993:
Deferred taxes:
Federal $(37)
State 64
27
Provision for income taxes $ 27
The net deferred tax liabilities recorded on the balance
sheet are as follows:
1993
January 1* December 31
Depreciation and amortization $(4,336) $(4,201)
Accounts receivable 119 102
Inventory (1,488) (1,332)
Property, plant and equipment (646) (642)
Other 71 208
Net operating loss carryforward 3,181 2,739
$(3,099) $(3,126)
*Date of implementation of FAS 109.
Page 17
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
The following is a reconciliation between the provision
for income taxes and the amount computed by applying the
Federal statutory rate of 34 percent to the loss before
income taxes:
Statutory tax benefit on pretax loss $(260)
State income tax 29
Amortization of goodwill 170
Other 88
Provision for income taxes $ 27
6. Pension Plans:
The Company has two defined benefit plans covering
substantially all hourly and salaried employees. In
the hourly plan, the benefit formula is a flat benefit
for each year of service. In the salaried plan, the
benefits are based on each employee's final average
compensation.
The Company's current funding policy is to contribute
annually the amounts required to comply with the
minimum funding requirements of the Employee
Retirement Income Security Act of 1974, as amended.
During 1993, the Company froze accruals for both
pension plans in order to evaluate the plans. The
suspensions are temporary; therefore, no loss on
curtailment has been recognized.
Pension expense includes the following components for
the year ended December 31, 1993:
Benefits earned during the year (service costs) $ 122
Interest cost on projected benefit obligation 242
Return on plan assets (280)
Net pension expense $ 84
Assumed rates used in actuarial computation
in determining net pension expense:
Weighted average discount rate 8.0%
Rate of increase in compensation 4.0%
Weighted average expected long-term rate
of return on assets 8.5%
Page 18
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
6. Pension Plans, continued:
The following table sets forth the plans' funded status and
the amounts recognized in the consolidated balance sheets as
of December 31, 1993:
Actuarial present value of benefit obligation:
Vested benefit obligation $3,075
Accumulated benefit obligation 3,128
Projected benefit obligation 3,552
Plan assets at fair value substantially invested
in common stock funds 3,411
Plan assets in excess of (less than) projected
benefit obligation (141)
Unrecognized loss 509
Prepaid pension cost $ 368
Assumed rates used in determining the actuarial
present value of the projected benefit obligation:
Weighted average discount rate 7.5%
Rate of increase in compensation 4.0%
Weighted average expected long-term rate of
return on assets 8.5%
7. Employee Savings Plan:
The Company sponsors an employee savings plan under
Section 401(k) of the Internal Revenue Code. This plan
covers all full time employees with more than a year of
service. The Company matches fifty percent of employee
contributions up to six percent of compensation. The
Company contributed $98 in 1993.
8. Commitments:
The Company is obligated to make payments under
noncancelable operating leases (primarily for office
space) expiring at various dates through 1996. Rental
costs are subject to adjustment for increases in taxes
and maintenance costs. Rental expense for the period was
$430 in 1993.
Page 19
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FORM 8-K
Item 7. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
8. Commitments, continued:
At December 31, 1993, future minimum payments required
under noncancelable operating leases exceeding one year
are as follows:
1994 $169
1995 38
1996 3
$210
9. Related Party Transactions:
In connection with the credit agreement discussed in Note
4, $4,409 of cash advances from Lancer, including $306 of
management fees accrued but not paid, were converted,
during 1992, into a subordinated, long-term, non-interest
bearing note due January 1, 1999. Lancer also provided
a $1,500 term loan to the Company due January 1, 1999.
This note bears interest at the rate of 14% per annum
payable quarterly. Interest paid during 1993 was $210.
The $1,500 term loan was converted to additional paid-in
capital during 1993 (see Note 11).
Expenses incurred by Lancer on behalf of the Company
during 1993 were $15, and are included in the amount due
to affiliate.
10. Class B Common Stock:
Each share of Class B common stock shall automatically
convert into one share of Class A common stock upon the
closing of an underwritten public offering, the sale,
transfer, or other disposition of any Class A common
stock or the consummation of any reorganization,
reclassification or recapitalization of the capital stock
of the Company.
11. Subsequent Event:
On April 18, 1994, the Company entered into an asset
purchase agreement (the "Agreement") to sell certain
trade receivables, inventory and other intangible assets
Page 20
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FORM 8-K
Item 7. (continued)
relating to its mattress ticking business for $8,822. In
connection with the Agreement, the purchaser was granted
an exclusive perpetual license to use certain tradenames,
trademarks and copyrights to be used solely for the
purpose of marketing mattress ticking.
Additionally, the Company entered into a mattress
printing agreement with the purchaser whereby the
purchaser has agreed to purchase at certain specified
prices certain minimum amounts of ticking yardage through
December 1995.
Some of the proceeds were used to reduce the outstanding
principal amount on its revolving note and its working
capital loan. Maximum amounts under the revolving note
will reduce to $12,000, $9,000, $6,000 and $2,500 at the
date of sale, December 31, 1995, 1996 and 1997,
respectively.
A summary of the book value of significant assets sold is
as follows:
Accounts receivable $3,483
Inventory 3,700
Property, plant and equipment 396
Other assets 58
$7,637
In connection with the sale, the Company recorded a
writedown of approximately $8,000 of unamortized goodwill
related to their mattress ticking business. The net
loss, including the goodwill writedown, of approximately
$6,815 will be recorded during 1994.
In April 1994 the Company converted $1,500 of additional
paid-in capital to preferred stock. The Series A
preferred stock has a liquidation preference of $100 per
share, pays no dividends and has no voting rights. The
Company may redeem the shares at its option for $100 per
share. The Company may not redeem any shares until all
amounts outstanding under the credit agreement (see
Note 4) have been paid.
The asset sale will result in recognition of $4,000 of
timing differences for income tax purposes. After the
recognition of these differences, the Company has a net
operating loss carryforward of $2,023 for future years.
Page 21
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FORM 8-K
Item 7. (continued)
SELECTED PRO FORMA FINANCIAL DATA
The following pro forma consolidated financial information
consists of a pro forma condensed consolidated statement of
income for the thirty-nine weeks ended October 2, 1994 and
for the year ended January 2, 1994, and a pro forma
condensed consolidated balance sheet as of October 2, 1994
(collectively, the "Pro Forma Statements"). The Pro Forma
Statements give effect to the Registrant's acquisition of
substantially all of the assets of M.P.M. Transportation,
successor by merger with Golding Industries, Inc., and the
assumption of certain liabilities. Pro forma adjustments
are based on the allocated purchase price of the net assets
acquired and include the adjustment of property, plant and
equipment and certain intangibles to appraised fair market
value with the balance being allocated to goodwill. The
pro forma condensed consolidated statements of income give
effect to the acquisition as if it had occurred at the
beginning of the periods presented. The pro forma
condensed consolidated balance sheet gives effect to the
acquisition as if it had occurred on October 2, 1994.
Page 22
<PAGE>
FORM 8-K
Item 7. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
October 2,1994
(Unaudited)
(amounts in thousands)
<TABLE>
<S> <C> <C> <C> <C>
CONE GOLDING ADJUSTMENTS PRO FORMA
ASSETS
Current assets:
Cash $ 2,850 $ - $ - $ 2,850
Accounts receivable, net 64,205 4,046 (5,000)(1) 63,251
Inventories 149,326 797 - 150,123
Other current assets 4,834 2,338 - 7,172
Total current assets 221,215 7,181 (5,000) 223,396
Investments in unconsolidated affiliates 27,489 - - 27,489
Other assets 4,454 8,401 25,684 (2) 38,539
Property, plant & equipment , net 204,917 19,057 4,738 (3) 228,712
$ 458,075 $ 34,639 $ 25,422 $ 518,136
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 11,400 $ - $ - $ 11,400
Current maturities of long-term debt 256 223 - 479
Accounts payable - trade 31,243 2,255 - 33,498
Sundry accounts payable and accrued expenses 35,731 1,751 (256)(4) 37,226
Deferred income taxes 27,952 - - 27,952
Total current liabilities 106,582 4,229 (256) 110,555
Long-term debt 75,744 34,186 21,902 (5) 131,832
Due to affiliate - 4,407 (4,407)(4) -
Deferred items 42,344 2,597 (2,597)(4) 42,344
Stockholders' equity:
Class A Preferred Stock 38,395 - 38,395
Series A Preferred Stock - 1,500 (1,500)(6) -
Common stock 2,775 7 (7)(6) 2,775
Capital in excess of par 75,361 4,043 (4,043)(6) 75,361
Retained earnings (deficit) 118,467 (16,303) 16,303 (6) 118,467
Currency translation adjustment (1,593) (27) 27 (6) (1,593)
Total stockholders' equity 233,405 (10,780) 10,780 233,405
$ 458,075 $ 34,639 $ 25,422 $ 518,136
Pro forma adjustments have been made to reflect the following:
(1)Cone used all of its available funds under its receivables purchase facility to finance a portion
of the purchase price. At October 2, 1994, Cone had $5 million of available funds under the
receivables purchase facility that would have been used to finance a portion of the purchase
price at that date.
(2)Elimination of Golding intangible assets ($8,401) and allocation of a portion of the purchase price
to intangible assets $(34,085).
(3)Write-up of Golding property, plant and equipment to appraised fair market value.
(4)Elimination of certain Golding liabilities not assumed.
(5)Elimination of certain Golding long-term debt not assumed ($32,727) and increase in Cone long-
term debt that would habe been used to fund a portion of the purchase price at October 2, 1994
($54,629).
(6)Elimination of Golding stockholder's deficit.
</TABLE>
Page 23
<PAGE>
FORM 8-K
Item 7. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thirty-Nine Weeks Ended October 2,1994
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
CONE GOLDING ADJUSTMENTS PRO FORMA
Net Sales $ 601,056 $ 33,972 $ - $ 635,028
Operating Costs and Expenses:
Cost of sales 477,161 22,801 1,059 (1) 501,021
Selling and administrative 57,212 3,518 (913)(2) 59,817
Depreciation 17,405 1,293 499 (3) 19,197
Writedown of unamortized goodwill - 7,979 (7,979)(4) -
551,778 35,591 (7,334) 580,035
Income from Operations 49,278 (1,619) 7,334 54,993
Other income (Expense):
Interest income 416 - - 416
Interest expense (5,868) (3,502) 1,009 (5) (8,361)
Other income 321 - - 321
(5,131) (3,502) 1,009 (7,624)
Income from Continuing Operations before
Income Taxes 44,147 (5,121) 8,343 47,369
Income Taxes 15,716 (445) 1,592 (6) 16,863
Income from Continuing Operations $ 28,431 $ (4,676) $ 6,751 $ 30,506
Income from Continuing Operations $ 28,431 $ 30,506
Less: Class A Preferred dividends 2,016 2,016
Income from Continuing Operations available
to Common Stock $ 26,415 $ 28,490
Earnings Per Share from Continuing Operations $ 0.95 $ 1.02
Weighted Average Common Shares and
Common Share Equivalents Outstanding 27,859 27,859
Pro forma adjustments have been made to reflect the following:
(1)Elimination of amortization of Golding intangible assets ($240) and amortization of intangible
assets resulting from purchase price allocation with an estimated life of 20 years $1,299).
(2)Elimination of certain Golding administrative expenses including officer salaries and expenses
expenses associated with the Board of Directors (primarily fees and insurance) and reduction in
professional fees. These reductions will be realized by the operation of this business as a
division of a corporation rather than as a separate legal entity.
(3)Increase in depreciation expense as a result of the write-up of Golding property, plant and
equipment to appraised fair market value.
(4)Elimination of writedown of goodwill associated with certain assets of Golding's mattress ticking
operation that were sold in April 1994. No goodwill would have been attributed to such assets in
Cone's purchase price allocation.
(5)Net reduction in interest expense due to Cone having substantially lower borrowing costs than
Golding, partially offset by additional borrowings of Cone to finance a portion of the purchase
price.
(6)Adjustment of pro forma income tax expense to reflect the effective tax rate for the combined
entities.
</TABLE>
Page 24
<PAGE>
FORM 8-K
Item 7. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Year Ended January 2, 1994
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
CONE GOLDING ADJUSTMENTS PRO FORMA
Net Sales $ 769,230 $ 49,265 $ - $ 818,495
Operating Costs and Expenses:
Cost of sales 589,314 36,546 1,225 (1) 627,085
Selling and administrative 73,326 6,166 (1,113)(2) 78,379
Depreciation 20,991 1,585 804 (3) 23,380
Other - 529 (490)(4) 39
683,631 44,826 426 728,883
Income from Operations 85,599 4,439 (426) 89,612
Other income (Expense):
Interest income 521 - - 521
Interest expense (6,950) (5,247) 2,072 (5) (10,125)
Other income 317 - - 317
(6,112) (5,247) 2,072 (9,287)
Income from Continuing Operations before
Income Taxes 79,487 (808) 1,646 80,325
Income Taxes 29,884 27 288 (6) 30,199
Income from Continuing Operations $ 49,603 $ (835) $ 1,358 $ 50,126
Income from Continuing Operations $ 49,603 $ 50,126
Less: Class A Preferred dividends 2,795 2,795
Income from Continuing Operations available
to Common Stock $ 46,808 $ 47,331
Earnings Per Share from Continuing Operations $ 1.68 $ 1.70
Weighted Average Common Shares and
Common Share Equivalents Outstanding 27,894 27,894
Pro forma adjustments have been made to reflect the following:
(1)Elimination of amortization of Golding intangible assets ($508) and amortization of intangible
assets resulting from purchase price allocation with an estimated life of 20 years ($1,733).
(2)Elimination of certain Golding administrative expenses including officer salaries and expenses,
expenses associated with the Board of Directors (primarily fees and insurance) and reduction in
professional fees. These reductions will be realized by the operation of this business as a
division of a corporation rather than as a separate legal entity.
(3)Increase in depreciation expense as a result of the write-up of Golding property, plant and
equipment to appraised fair market value.
(4)Elimination of severance charge related to Golding's termination of its Chief Executive Officer.
Cone's operation of this business as a division rather than as a separate legal entity will
eliminate the need of a Chief Executive Officer for this business.
(5)Net reduction in interest expense due to Cone having substantially lower borrowing costs than
Golding, partially offset by additional borrowings of Cone to finance a portion of the purchase
price.
(6)Adjustment of pro forma income tax expense to reflect the effective tax rate for the combined
entities.
</TABLE>
Page 25
<PAGE>
FORM 8-K
SIGNATURE
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: February 13, 1995 By: JOHN L. BAKANE
John L. Bakane
Vice President and
Chief Financial Officer
Page 26
<PAGE>
FORM 8-K
INDEX TO EXHIBITS
Exhibit Sequential
No. Page No.
23 Consent of Coopers & Lybrand L.L.P. 28
Page 27
<PAGE>
FORM 8-K
Exhibit 23
CONSENT OF COOPERS & LYBRAND L.L.P.
We consent to the incorporation by reference in (1) regis-
tration statement No. 33-53705 on Form S-8, (2) registration
statement No. 33-67800 on Form S-8, (3) registration statement
No. 33-31977 on Form S-8, (4) registration statement No. 33-
31979 on Form S-8, (5) registration statement No. 33-51951 on
Form S-8, and (6) registration statement No. 33-51953 on Form
S-8 of Cone Mills Corporation, of our report dated February
25, 1994, except for Note 11 as to which the date is April 18,
1994 on our audit of the consolidated balance sheet of Golding
Industries, Inc. and Subsidiary, a wholly-owned subsidiary of
Lancer Industries, Inc., as of December 31, 1993, and the
related consolidated statements of operations, shareholder's
deficit, and cash flows for the year then ended, as included
in this Current Report on Form 8-K of Cone Mills Corporation.
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
February 13, 1995
Page 28
