Page 1 of 36
Index to Exhibits-Pages 28-34
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 April 2, 1995
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 May 1,
1995: 27,380,409 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 weeks ended April 2, 1995
and April 3, 1994 (Unaudited) . . . . . . . . . . . . . . .3
Consolidated Balance Sheets
April 2, 1995 and April 3, 1994
(Unaudited) and January 1, 1995 . . . . . . . . . . . .4 & 5
Consolidated Statements of Stockholders' Equity
Thirteen weeks ended April 2, 1995
and April 3, 1994 (Unaudited) . . . . . . . . . . . . . . .6
Consolidated Statements of Cash Flows
Thirteen weeks ended April 2, 1995
and April 3, 1994 (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. . . . . . . . . . . . . . . . . . . . . . . 25
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 26
Page 2
<PAGE>
FORM 10-Q
PART I
Item 1.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
April 2, 1995 April 3, 1994
(Unaudited) (Unaudited)
Net Sales $ 226,205 $ 195,919
Operating Costs and Expenses:
Cost of sales 185,948 153,581
Selling and administrative 20,827 18,953
Depreciation 7,201 5,802
213,976 178,336
Income from Operations 12,229 17,583
Other Income (Expense):
Interest income 225 88
Interest expense (3,001) (2,205)
(2,776) (2,117)
Income from Continuing Operations before Income Taxes and
Equity in Earnings (Loss) of Unconsolidated Affiliates 9,453 15,466
Income Taxes 3,304 5,540
Income from Continuing Operations before Equity in
Earnings (Loss) of Unconsolidated Affiliates 6,149 9,926
Equity in Earnings (Loss) of Unconsolidated Affiliates (2,515) 99
Income from Continuing Operations 3,634 10,025
Gain on Disposal - Discontinued Operations - (Net of
income tax of $276) - 439
Income before Cumulative Effect of Accounting Change 3,634 10,464
Cumulative Effect of Accounting Change for Postemployment
Benefits - (Net of income tax benefit of $772) - (1,228)
Net Income $ 3,634 $ 9,236
Income Available to Common Shareholders:
Income from Continuing Operations $ 2,962 $ 9,353
Income before Cumulative Effect of Accounting Change $ 2,962 $ 9,792
Cumulative Effect of Accounting Change - (1,228)
Net Income $ 2,962 $ 8,564
Earnings Per Share - Fully Diluted:
Income from Continuing Operations $ .11 $ .34
Income before Cumulative Effect of Accounting Change $ .11 $ .35
Cumulative Effect of Accounting Change - (.04)
Net Income $ .11 $ .31
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 27,465 27,866
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
April 2, April 3, January 1,
ASSETS 1995 1994 1995
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 912 $ 1,880 $ 1,158
Accounts receivable - trade, less
provision for doubtful accounts $3,000 95,833 53,388 56,654
Inventories:
Greige and finished goods 82,684 79,790 83,377
Work in process 15,995 16,098 15,796
Raw materials 23,026 20,914 19,973
Supplies and other 31,151 29,639 30,274
152,856 146,441 149,420
Other current assets 7,558 7,719 6,007
Total Current Assets 257,159 209,428 213,239
Investments in Unconsolidated Affiliates 32,148 27,919 34,294
Other Assets 39,718 5,232 38,803
Property, Plant and Equipment:
Land 20,090 20,559 20,662
Buildings 79,253 72,306 79,418
Machinery and equipment 293,101 245,342 284,401
Other 31,435 26,744 30,581
423,879 364,951 415,062
Less accumulated depreciation 184,073 163,905 177,321
Property, Plant and Equipment-Net 239,806 201,046 237,741
$ 568,831 $ 443,625 $ 524,077
Note: The balance sheet at January 1, 1995 has been derived from the audited financial
statements at that date.
See Notes to Consolidated Financial Statements.
</TABLE>
Page 4
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
April 2, April 3, January 1,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 1995
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ 8,210 $ - $ 10,700
Current maturities of long-term debt 414 482 414
Accounts payable - trade 37,380 27,285 38,430
Sundry accounts payable and accrued expenses 41,891 36,810 39,881
Income taxes payable 3,756 5,176 -
Deferred income taxes 28,188 28,224 28,148
Total Current Liabilities 119,839 97,977 117,573
Long-Term Debt 172,629 87,433 126,108
Deferred Items:
Deferred income taxes 37,753 35,883 36,789
Other deferred items 6,215 5,695 6,727
43,968 41,578 43,516
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares; 1994, 470,756 shares and 383,948 shares
- Employee Stock Ownership Plan 38,395 47,075 38,395
Class A Preferred Stock held in escrow (1994, 86,804 shares - (8,680) -
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 27,380,409 shares;
1994, 27,747,021 shares and 27,403,621 shares 2,738 2,775 2,740
Capital in excess of par 71,090 75,397 71,354
Retained earnings 126,743 100,070 125,771
Currency translation adjustment (6,571) - (1,380)
Total Stockholders' Equity 232,395 216,637 236,880
$ 568,831 $ 443,625 $ 524,077
Note: The balance sheet at January 1, 1995 has been derived from the audited financial
statements at that date.
See Notes to Consolidated Financial Statements.
</TABLE>
Page 5
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED APRIL 2, 1995 AND APRIL 3, 1994
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Class A Preferred Class A Preferred
Stock Stock - Escrow
Shares Amount Shares Amount
Balance, January 1, 1995 383,948 $ 38,395 - $ -
Net income - - - -
Currency translation loss (net
of income tax benefit of $3,262) - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Shares Redeemed - - - -
Common Stock:
Options exercised - - - -
Purchase of common shares - - - -
Balance, April 2, 1995 383,948 $ 38,395 - $ -
Class A Preferred Class A Preferred
Stock Stock - Escrow
Shares Amount Shares Amount
Balance, January 2, 1994 465,077 $ 46,508 (81,125) $ (8,113)
Net income - - - -
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)
Common Stock:
Options exercised - - - -
Purchase of common shares - - - -
Balance, April 3, 1994 470,756 $ 47,075 (86,804) $ (8,680)
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THIRTEEN WEEKS ENDED APRIL 2, 1995 AND APRIL 3, 1994
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Capital in Currency
Common Stock Excess Retained Translation
Shares Amount of Par Earnings Adjustment
Balance, January 1, 1995 27,403,621 $ 2,740 $ 71,354 $ 125,771 $ (1,380)
Net income - - - 3,634 -
Currency translation loss (net
of income tax benefit of $3,262) - - - - (5,191)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - (2,662) -
Shares Redeemed - - - - -
Common Stock:
Options exercised 4,000 1 25 - -
Purchase of common shares (27,212) (3) (289) - -
Balance, April 2, 1995 27,380,409 $ 2,738 $ 71,090 $ 126,743 $ (6,571)
Capital in
Common Stock Excess Retained
Shares Amount of Par Earnings
Balance, January 2, 1994 27,744,783 $ 2,774 $ 75,397 $ 93,468
Net income - - - 9,236
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - (2,634)
Shares issued (7.0% dividend on shares
held in Cone Mills escrow account) - - - -
Common Stock:
Options exercised 4,000 1 26 -
Purchase of common shares (1,762) - (26) -
Balance, April 3, 1994 27,747,021 $ 2,775 $ 75,397 $ 100,070
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6a
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<S> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
April 2, 1995 April 3, 1994
(Unaudited) (Unaudited)
Cash Flows (Used In) Provided By Operating Activities $ (24,312) $ 6,801
Cash Flows from Investing Activities:
Capital expenditures (9,640) (6,937)
Other (6,464) (730)
Net cash used in investing activities (16,104) (7,667)
Cash Flows from Financing Activities:
Principal payments - long-term debt (97,056) (20,602)
Proceeds from long-term debt borrowings 48,000 30,578
Proceeds from debentures issued 99,831 -
Other (10,605) (7,733)
Net cash provided by financing activities 40,170 2,243
Net (decrease) increase in cash (246) 1,377
Cash at Beginning of Period 1,158 503
Cash at End of Period $ 912 $ 1,880
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 4,817 $ 3,542
Income taxes, net of refunds $ (1,338) $ (798)
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid to ESOP trustee for Cone escrow account $ - $ 567
Class A Preferred Stock issued $ - $ 567
</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
April 2, 1995
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") condensed
consolidated financial statements for April 2, 1995
and April 3, 1994 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 April 2,
1995, January 1, 1995 and April 3, 1994 and the
related consolidated statements of income,
stockholders' equity and cash flows for the thirteen
weeks ended April 2, 1995 and April 3, 1994. 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 1994.
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
April 2, 1995 and April 3, 1994 and related
consolidated statements of income for the thirteen
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
The Company has an agreement with the subsidiary of
a major financial institution which allows the sale
without recourse of up to $50 million of an undivided
interest in eligible trade receivables. This
agreement, dated August 11, 1992, and amended June
30, 1994, is extendable to August 1997. Accounts
receivable is shown net of $26 million sold at April
2, 1995, net of $40 million sold at April 3, 1994,
and net of $50 million sold at January 1, 1995. As a
result of the sale of the interest in these
receivables, cash flows provided by operating
activities include a decrease of $24 million and an
increase of $5 million for the thirteen weeks ended
April 2, 1995 and April 3, 1994, respectively.
Note 3. Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliated companies
are accounted for by the equity method. The
Company's equity in earnings (including foreign
currency transaction losses) and currency translation
adjustments are recorded on a one quarter delay
basis.
In December 1994, the Mexican government devalued the
peso and allowed it to freely trade against the U.S.
dollar resulting in a substantial decline in value of
the peso versus the U.S. dollar. On January 1, 1995,
the peso was trading at 4.94 pesos per U.S. dollar
versus an exchange rate of approximately 3.45 prior
to the devaluation. The devaluation of the peso
created foreign currency transaction losses, related
to debt denominated in U.S. dollars, for Compania
Industrial de Parras S.A., ("CIPSA"). The Company
recognized a $2.4 million loss as its pro rata share
in its first quarter 1995 income statement.
During the first quarter of 1995 the peso continued
to devalue versus the U.S. dollar creating additional
foreign currency transaction losses related to
CIPSA's U.S. dollar denominated debt. These losses
will be recognized on a pro-rata basis in the
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company's second quarter 1995 income statement. The
specific dollar effect on income that these U.S.
dollar denominated debt transactions will have on the
Company's second quarter earnings will not be known
until CIPSA releases first quarter U.S. GAAP
operating results. On April 2, 1995, the peso was
trading at 6.78 pesos per U.S. dollar.
If an exchange rate of 6.78 had been used in the
Company's financial statements, the currency
translation adjustment would have been a $12.4
million (net of income tax benefit) reduction (rather
than $6.6 million at April 2, 1995) of stockholders'
equity at the end of the first quarter of 1995.
Note 4. Long-Term Debt
On March 15, 1995 the Company completed the sale of
$100 million 8-1/8% Debentures through an
underwritten public offering. The unsecured
debentures are due March 15, 2005, and are not
redeemable prior to maturity. Interest is payable
semiannually each March 15 and September 15.
Proceeds were used to repay all outstanding
borrowings under the Revolving Credit Facility and
for general corporate purposes. In early 1995,
considering the uncertainty in the bond market, the
Company entered into an interest rate hedge contract
to fix the interest rate on the debentures. The
contract was terminated in conjunction with the
pricing of the debentures at a cost of $4.3 million.
Amortization of the loss on the interest rate hedge
and original issue discount, both over a 10-year
life, will result in an 8.57% effective rate for the
issue.
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total Revolving Credit Facility of $80 million
remains available for future working capital
requirements. At April 2, 1995 and April 3, 1994,
long-term debt consisted of the following:
<TABLE>
<S> <C> <C> <C>
April 2, 1995
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
8-1/8% Debentures 95,577 - 95,577
Capital Lease Obligation 1,610 155 1,455
Industrial Revenue Bonds 701 224 477
Other 155 35 120
Total $ 173,043 $ 414 $ 172,629
April 3, 1994
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
Real Estate Credit Facility 11,578 - 11,578
Industrial Revenue Bonds 1,150 449 701
Other 187 33 154
Total $ 87,915 $ 482 $ 87,433
</TABLE>
Note 5. Class A Preferred Stock
The dividend rate for Class A Preferred Stock is 7.50%,
which is payable March 31, 1996.
Page 11
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Stock Option Plans
<TABLE>
<S> <C> <C> <C> <C> <C>
1984 Stock Option Plan:
Option price per share $ 5.25 $ 6.50
Outstanding at 1/2/94 95,200 103,800
Exercised - (4,000)
Outstanding at 4/3/94 95,200 99,800
Exercised (17,000) -
Outstanding at 1/1/95 78,200 99,800
Exercised - (4,000)
Outstanding at 4/2/95 78,200 95,800
1992 Stock Option Plan:
Option price per share $15.625 $12.00
Outstanding 1/2/94 500,000
Outstanding 4/3/94 500,000
Canceled (8,000)
Granted 11/9/94 - 410,000
Outstanding at 1/1/95 492,000 410,000
Canceled (35,000) -
Outstanding at 4/2/95 457,000 410,000
1994 Stock Option Plan:
Option price per share $12.875
Granted 5/17/94 6,000
Outstanding at 4/2/95 6,000
Options exercisable
at 4/2/95 78,200 68,850 182,800 - 6,000
</TABLE>
Page 12
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Earnings Per Share
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
April 2, 1995 April 3, 1994
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands, except per share data)
Income from continuing
operations $ 3,634 $ 3,634 $ 10,025 $ 10,025
Less: Class A Preferred
dividends (672) (672) ( 672) ( 672)
Adjusted income from
continuing operations $ 2,962 $ 2,962 $ 9,353 $ 9,353
Gain on disposal -
discontinued operations - - 439 439
Adjusted income before
cumulative effect of
accounting change 2,962 2,962 9,792 9,792
Cumulative effect of
accounting change - - (1,228) (1,228)
Adjusted net income $ 2,962 $ 2,962 $ 8,564 $ 8,564
Weighted average common
shares outstanding 27,380 27,380 27,746 27,746
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased 85 85 120 120
Weighted average common
shares and common share
equivalents outstanding 27,465 27,465 27,866 27,866
Earnings per common
share and common share
equivalent:
Income from continuing
operations $ .11 $ .11 $ .34 $ .34
Income before cumulative
effect of accounting
change $ .11 $ .11 $ .35 $ .35
Cumulative effect of
accounting change - - (.04) (.04)
Net income $ .11 $ .11 $ .31 $ .31
</TABLE>
Page 13
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Primary and fully diluted earnings per share have been
computed by dividing the net earnings available to common
stockholders by the sum of the weighted average number of
common shares outstanding, plus common share equivalents
resulting from the assumed exercise of stock options
using the treasury stock method.
Note 8. 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 could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by
the Company for summary judgment on the issues of
equitable estoppel and third-party beneficiary of
contract which had been remanded to it by the Court of
Appeals. The court ruled that the Plaintiffs could not
forecast necessary proof of detrimental reliance. The
Page 15
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
District Court, however, granted Plaintiffs motion to
amend the complaint insofar as they seek to pursue a
"new" claim for unjust enrichment, but denied their
motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court
further denied the Company's motion to decertify the
class.
On May 3, 1995, Plaintiffs filed their amended complaint.
The Company will file its answer together with a motion
for summary judgment in its favor on the basis that there
is no genuine issue of material fact to be tried.
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.
Because the original 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.
Page 16
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENTS' DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
First Quarter Ended April 2, 1995 Compared with First Quarter
Ended April 3, 1994.
For the first quarter of 1995, the Company experienced strong
demand for basic apparel fabrics which was partially offset by
weaker markets in home decorative fabrics. Net sales for the
first quarter of 1995 were $226.2 million, up 15.5% as
compared with first quarter 1994 net sales of $195.9 million.
Excluding the results of the recently acquired Raytex and
Greeff operations, net sales were up 11.0%. Export sales for
both periods accounted for approximately 17% of total sales.
General economic conditions during the first quarter of 1995
were mixed as retail sales of consumer durables weakened and
demand for apparel products was lower than expected except for
jeanswear which experienced strong retail offtake. The denim
industry operated at full capacity during first quarter 1995.
For comparison, during the later half of 1993 and first
quarter of 1994, the denim industry operated at less than
capacity as excess inventories in the softgoods pipeline were
reduced.
Net income for the first quarter of 1995 was $3.6 million
compared with $9.2 million for the first quarter of 1994.
However, 1995 earnings were negatively affected by a $2.5
million non-cash after tax charge on Mexican affiliates
related primarily to the peso devaluation. The devaluation of
the peso created foreign currency transaction losses, related
to debt denominated in U.S. dollars, for Compania Industrial
de Parras S.A., ("CIPSA"). Income for the first quarter of
1994 was increased by a gain of $.4 million, arising from the
final disposal of assets of the Company's discontinued
operations, and reduced by $1.2 million from the cumulative
effect of adoption of SFAS NO. 112. Net income after preferred
dividends was $.11 per share, or $.20 per share, excluding
Mexican affiliates' losses, as compared with net income of
$.31 per share last year or $.35 per share before SFAS No.
112.
Gross profit (net sales less cost of sales and depreciation)
declined to 14.6 percent of sales as compared with 18.6
percent of sales for the first quarter of 1994. This decline
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
resulted from the inability to pass on higher cotton costs
through increased pricing, lower margins in home furnishings
operations and, to a much lesser extent, higher depreciation
and amortization costs associated with the Company's growth
initiatives.
Business Segment. Cone Mills 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
first quarters of 1995 and 1994.
<TABLE>
<S> <C> <C> <C> <C>
First Quarter
1995 1994
(Dollar amounts in millions)
NET SALES
Apparel $ 170.3 75.3% $ 146.0 74.5%
Home Furnishings 55.9 24.7 49.9 25.5
Total $ 226.2 100.0% $ 195.9 100.0%
OPERATING INCOME (1)
Apparel $ 8.9 5.3% $ 12.8 8.7%
Home Furnishings 3.8 6.8 5.5 11.0
</TABLE>
(1) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
Apparel Fabrics. Sales of apparel fabrics were $170.3
million, up 16.6% as compared with year-ago levels. The
increase came from stronger sales of both basic denims and
specialty sportswear fabrics. Sales increases resulted
from higher unit volume. Average prices for basic denim
and shirtings increased only slightly as mix changes
offset price increases. Apparel segment profit margins
declined to 5.3% of sales as compared with 8.7% of sales
for the first quarter of 1994. The decrease was caused
primarily by the large unrecovered increase in cotton
costs, partially offset by increased volume and improved
capacity utilization as denim plants operated at full
capacity.
Export sales for the apparel segment, primarily denims,
were $37.3 million for first quarter 1995, up 16.7% as
compared with first quarter 1994.
Page 18
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. Sales of the home furnishings segment
increased by 12.0% to $55.9 million as the effect of the
Raytex, Greeff and David and Dash acquisitions were
partially offset by fashion weaknesses in demand for the
Company's decorative print products.
Home furnishings profit margins declined to 6.8 percent as
compared with 11.0 percent for the first quarter of 1994.
This decline resulted from a combination of lower sales
volume at John Wolf, lower levels of capacity utilization
and less favorable mix at Cone Finishing, and higher
chemical and start-up costs associated with growth
initiatives at the Olympic Products division.
Total Company selling and administrative expenses decreased as
a percent of sales from 9.7% for the first quarter 1994 to
9.2% for the most recent quarter as the Company benefited from
the leverage on sales growth. Selling and administrative
expenses for the first quarter of 1995 were $20.8 million, up
9.9% from the first quarter of 1994.
Interest expense for the first quarter of 1995 increased $.8
million compared with the first quarter of 1994, primarily the
result of higher borrowing levels associated with
acquisitions.
Income taxes as a percent of taxable income were 35.0% in the
first quarter of 1995 compared with 35.8% for the 1994 period.
Both periods reflect tax benefits resulting from operation of
the Company's foreign sales corporation.
Liquidity and Capital Resources
The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of American (the "Term Loan"), its 8 1/8% Debentures due March
15, 2005 (the "Debentures"), issued on March 15, 1995 as
described below, and stockholders' equity. Primary sources of
liquidity are internally generated funds, an $80 million
Credit Agreement with a group of banks 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.
Page 19
<PAGE>
FORM 10-Q
Item 2. (continued)
On March 15, 1995, the Company completed the sale of
$100,000,000 of Debentures through an underwritten public
offering. A portion of the proceeds were used to repay all
outstanding borrowings under the Revolving Credit Facility.
Amounts repaid under the Revolving Credit Facility will remain
available for future borrowings. On April 2, 1995, the Company
had funds available of $104.0 million under its Revolving
Credit Facility and Receivables Purchase Agreement.
During the first quarter of 1995, the Company used $24.3
million of funds in its operating activities as $14.0 million
of cash provided by net income before non-cash losses in
Mexican affiliates, depreciation and amortization charges, was
more than offset by increases of $38.0 million in working
capital requirements, primarily accounts receivable as
discussed below. During the period amounts sold under the
Receivables Purchase Agreement were reduced by $24.0 million.
Additional uses of cash include capital spending of $9.6
million, investment of $7.2 million to support growth
initiatives, primarily the joint venture in Mexico, and the
preferred stock dividend of $2.7 million. Funding came
primarily from the $100,000,000 of debentures sold in March of
1995.
During the first quarter of 1994, the Company generated $6.8
million in funds from operating activities including $15.0
million from net income adjusted for depreciation,
amortization and earnings in Mexican affiliates, partially
offset by increased working capital requirements, primarily
reductions of accounts payable and accrued expenses and
increases in trade receivables. Major uses of cash during this
period included $6.9 million for capital expenditures, $2.6
million for preferred stock dividends and $1.4 million for its
Mexican joint venture. Funding came primarily from operating
cash flow and short term borrowings to support working capital
needs.
On April 2, 1995, the Company's long-term capital structure
consisted of $172.6 million of long-term debt, including the
Term Loan and Debentures, and $232.4 million of stockholders'
equity. For comparison, on April 3, 1994 the Company had $87.4
million of long-term debt and $216.6 million of stockholders'
equity. Long-term debt as a percent of long-term debt and
stockholders' equity was 43% on April 2, 1995, compared with
29% on April 3, 1994.
Page 20
<PAGE>
FORM 10-Q
Item 2. (continued)
The Company accounts for investments in unconsolidated
affiliated companies using the equity method on a one quarter
delay basis. In December 1994, the Mexican government devalued
the peso and allowed it to trade freely against the U.S.
dollar resulting in a substantial decline in the value of the
peso versus the U.S. dollar. On January 1, 1995, the peso was
trading at 4.94 pesos per U.S. dollar versus an exchange rate
of approximately 3.45 prior to the devaluation. Based on the
change in exchange rates, the Company's stockholder equity was
reduced by $5.2 million as a currency translation adjustment
in the first quarter of 1995. On April 2, 1995, the peso was
trading at 6.78 pesos per U.S. dollar. If an exchange rate of
6.78 had been used in the Company's financial statements, the
currency translation adjustment would have been an additional
$5.8 million (net of income tax benefit) reduction of
stockholders' equity at the end of the first quarter of 1995.
Accounts receivable on April 2, 1995, were $95.8 million, up
$42.4 million from $53.4 million at April 3, 1994. At the end
of the 1995 period, the Company had sold $26 million of
accounts receivable, compared with $40 million at April 3,
1994. In addition, the increase in receivables was a result of
the increased sales level in the 1995 period and fewer
payments from customers in advance of due date. Receivables,
including those sold pursuant to the Receivables Purchase
Agreement, represented 50 days of sales outstanding at April
2, 1995 and 45 days at April 3, 1994.
Inventories on April 2, 1995, were $152.9 million, up 4.4%
from the April 3, 1994 amount of $146.4 million.
Capital spending in 1995 is expected to be $62 million,
including $15 million for a new jacquard plant. Other projects
include new weaving machines that replace 1970's vintage
weaving machines, additional dyeing capacity to increase
production flexibility, an additional screen printing machine
and approximately $6 million for computers, software and
information systems. Capital spending for the first quarter of
1995 was $9.6 million compared with $6.9 million for the first
quarter of 1994. In addition to capital expenditures, the
Company expects to spend approximately $22 million for
completion of its investment in the Mexican joint venture
plant of which $5.2 million was spent in the first quarter of
1995.
Page 21
<PAGE>
FORM 10-Q
Item 2. (continued)
Financial Outlook and Strategy
Beginning in 1992 and through late 1993, Cone 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, second
half 1994 and first quarter 1995 operations experienced
accelerated growth. In addition to this cyclical improvement,
Company management believes that demographic trends and other
market developments continue to present favorable long-term
opportunities for sales growth.
Net income was lower in the first quarter of 1995 than in the
first quarter of 1994 as a result of the sharp increase in
cotton costs not recovered in pricing, the peso devaluation
and weak fashion demand for decorative prints. Second quarter
1995 results are expected to be affected by high cotton costs,
additional peso devaluation and the weak decorative print
markets. However, management believes there is opportunity
for price improvement in the second half of 1995. The
currency transaction losses related to the decline of the peso
in the first quarter of 1995 and CIPSA dollar denominated debt
will be recognized on a pro rata basis in the Company's second
quarter 1995 income statement. The specific dollar effect on
income that these U.S. dollar denominated debt transactions
will have on the Company's second quarter earnings will not be
known until CIPSA releases first quarter U.S. GAAP operating
results.
In addition to the Company's plans to maintain modern
manufacturing facilities through capital reinvestment, the
Company has set priorities for the use of cash flow and debt
capacity. Cone's first priority is international denim
manufacturing and marketing opportunities. In 1993, the
Company purchased a 20% ownership of CIPSA, and signed
agreements with CIPSA providing for the formation of a joint
venture denim manufacturing facility. Cone's second priority
for cash flow and debt capacity is acquisitions in related
home furnishings product lines. The acquisition of Raytex and
Greeff are results of this strategy. The Company also from
time to time reviews and will continue to review acquisitions
and other investment opportunities (some of which may be
material to the Company) that permit Cone to add value through
Page 22
<PAGE>
FORM 10-Q
Item 2. (continued)
its manufacturing and marketing expertise. However, the
Company currently has no agreement, arrangement or
understanding to make any such acquisition or investment.
Other potential uses of cash include additional common stock
repurchases, the reduction of outstanding preferred stock, or
cash dividends, depending on the expected benefits to
shareholders. On February 17, 1994, the Board of Directors of
the Company authorized the repurchase, from time to time, of
up to 2.5 million shares of the Company's outstanding common
stock in market transactions. As of May 1, 1995, 385,400
shares had 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 its internally generated operating funds
and funds available under its existing credit facilities, will
be sufficient to meet its working capital, capital spending,
possible stock repurchases, and financing commitment needs for
the foreseeable future.
Regulatory Matters
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.
Legal Proceedings
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 the United States District Court in
Greenville, South Carolina entered a judgment in the amount of
$15.5 million (including an attorneys' fees award) 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,
Page 23
<PAGE>
FORM 10-Q
Item 2. (continued)
certain individual defendants and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, 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
detrimental reliance, Plaintiffs could establish that a letter
to salaried employees on December 15, 1983 created an
enforceable obligation that 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 could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District court granted a motion by the
Company for summary judgement on the issues of equitable
estoppel and third-party beneficiary of contract which had
been remanded to it by the Court of Appeals. The court ruled
that the Plaintiffs could not forecast necessary proof of
detrimental reliance. The District Court, however, granted
Plaintiffs motion to amend the complaint insofar as they seek
to pursue a "new" claim for unjust enrichment, but denied
their motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court further
denied the Company's motion to decertify the class.
On May 3, 1995, Plaintiffs filed their amended complaint. The
Company will file its answer together with a motion for
summary judgement in its favor on the basis that there is no
genuine issue of material fact to be tried. 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.
Page 24
<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 certain other
defendants in which the Plaintiffs asserted a variety of
claims related to the Cone Mills Corporation 1983 ESOP
(the "1983 ESOP") and certain other employee benefit
plans maintained by the Company. In March 1992, the
United States District Court in Greenville, South
Carolina entered a judgment in the amount of $15.5
million (including an attorneys' fee award) 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, certain individual defendants and the
Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for
the Fourth Circuit, 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 detrimental reliance, Plaintiffs could establish
that a letter to salaried employees on December 15, 1983
created an enforceable obligation that 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 could establish
detrimental reliance creating estoppel of the Company.
On April 19, 1995, the District Court granted a motion by
the Company for summary judgment on the issues of
equitable estoppel and third-party beneficiary of
contract which had been remanded to it by the Court of
Appeals. The court ruled that the Plaintiffs could not
forecast necessary proof of detrimental reliance. The
District Court, however, granted Plaintiffs motion to
amend the complaint insofar as they seek to pursue a
"new" claim for unjust enrichment, but denied their
motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court
further denied the Company's motion to decertify the
class.
Page 25
<PAGE>
FORM 10-Q
Item 1. (continued)
On May 3, 1995, Plaintiffs filed their amended complaint.
The Company will file its answer together with a motion
for summary judgment in its favor on the basis that there
is no genuine issue of material fact to be tried.
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) Report on Form 8-K
(1) On December 19, 1994, the Registrant filed a
Current Report on Form 8-K, dated December 2, 1994,
with respect to the acquisition of substantially
all of the assets of M.P.M. Transportation, Inc., a
wholly owned subsidiary of Lancer Industries, Inc .
and successor by merger with Golding Industries,
Inc. ("Golding").
(2) On February 13, 1995, the Registrant filed a
Current Report on Form 8-K/A, Amendment No. 1 to
Current Report of Form 8-K, dated December 2, 1994.
The Form 8-K/A included: (i) Golding's unaudited
consolidated financial statements as of September
30, 1994 and for the nine months ended September
30, 1994 and September 30, 1993, (ii) Golding's
audited consolidated financial statements as of
December 31, 1993 and for the year ended December
31, 1993 and (iii) pro forma consolidated financial
information as of October 2, 1994, for the thirty-
nine weeks ended October 2, 1994 and for the year
ended January 2, 1994.
Page 26
<PAGE>
FORM 10-Q
Item 14. (continued)
(3) On March 1, 1995, the Registrant filed a Current
Report on Form 8-K dated March 1, 1995, in
connection with its underwritten public offering of
8-1/8% Debentures due March 15, 2005 ("Debentures")
to provide the information subsequently included in
Items 7 and 8 of the Registrant's Form 10-K for the
fiscal year ended January 1, 1995, as well as
certain exhibits.
(4) On March 8, 1995, the Registrant filed a Current
Report on Form 8-K, dated March 8, 1995, to provide
certain exhibits in connection with its
underwritten public offering of Debentures.
Page 27
<PAGE>
FORM 10-Q
INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between the
Registrant and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.1(a) Amendment to Receivables Purchase
Agreement dated April 4, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.1 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(b) Amendment to Receivables Purchase
Agreement dated June 7, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.2 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(c) Amendment to Receivables Purchase
Agreement dated as of June 30, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1 to the Registrant's report on
Form 10-Q for the quarter ended
July 3, 1994.
* 2.1(d) Amendment to Receivables Purchase
Agreement dated as of November 15, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.4 to the Registrant's report on
Form 8-K dated March 1, 1995.
* 2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, with following exhibits
thereto attached, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993:
Page 28
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation and
Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and
Cone Mills (Mexico), S.A. de C.V. filed as
Exhibit 2.2(d) to Registrant's report on
Form 10-Q for the quarter ended
July 4, 1993.
* 2.2(e) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
* 2.2(f) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
* 2.2(g) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
Page 29
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.3 Asset Purchase Agreement dated as
of December 2, 1994 between the
Registrant, Lancer Industries, Inc.
and M.P.M. Transportation, Inc.,
filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated
December 2, 1994.
* 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.
* 4.3(a) Letter Agreement dated September 11, 1992,
amending the Note Agreement dated August 13,
1992, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.2 to the Registrant's
report on Form 8-K dated March 1, 1995.
* 4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
Page 30
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 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.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
* 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).
Page 31
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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).
* 4.8 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994,filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
* 4.9 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994, filed as Exhibit 4.9
to the Registrant's report on Form 10-K
for year ended January 1, 1995.
* 4.10 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713)
* 4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005, filed as Exhibit 4.11
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.
*10.1 Employees' Retirement Plan of Cone
Mills Corporation as amended and
restated effective December 1, 1994,
filed as Exhibit 10.1 to the Registrant's
report on Form 10-K for the year ended
January 1, 1995.
*10.2 Supplemental Executive Retirement Plan
of Registrant filed as Exhibit 10.5 to
the Registrant's Registration
Statement on Form S-1
(File No. 33-28040).
Page 32
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
*10.3 Excess Benefit Plan of Registrant filed
as Exhibit 10.6 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
*10.4 1984 Stock Option Plan of Registrant
filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
*10.5 Form of Nonqualified Stock Option
Agreement under 1984 Stock Option Plan
of Registrant filed as Exhibit 10.8 to
the Registrant's Registration Statement
on Form S-1 (File No. 33-28040).
*10.6 Form of Incentive Stock Option Agreement
under 1984 Stock Option Plan of
Registrant filed as Exhibit 10.9 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-28040).
*10.7 1992 Stock Option Plan of Registrant
filed as Exhibit 10.9 to the Registrant's
Report on Form 10-K for the year ended
December 29, 1991.
*10.8 Form of Incentive Stock Option Agreement
under 1992 Stock Option Plan filed as
Exhibit 10.10 to the Registrant's report
on Form 10-K for the year ended
January 3, 1993.
*10.9 1994 Stock Option Plan for Non-
Employee Directors of Registrant filed
as Exhibit 10.9 to Registrant's report
on Form 10-K for the year ended
January 2, 1994.
*10.10 Form of Non-Qualified Stock Option
Agreement under 1994 Stock Option
Plan for Non-Employee Directors of
Registrant filed as Exhibit 10.10 to
Registrant's report on Form 10-K for
the year ended January 2, 1994.
Page 33
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
*10.11 Management Incentive Plan of the
Registrant filed as Exhibit 10.11(b) to
Registrant's report on Form 10-K for the
year ended January 3, 1993.
*10.12 Consulting Agreement between Dewey L.
Trogdon and the Registrant dated
November 10, 1994, filed as Exhibit 10.12
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.
*10.13 Form of Agreement between the Registrant
and Levi Strauss dated as of March 30,
1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
*10.14 First Amendment to Supply Agreement
dated as of April 15, 1992, between the
Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.15
to Registrant's Registration Statement
on Form S-1 (No. 33-46907).
*10.15 Underwriting Agreement dated March 8,
1995 between the Registrant and J. P.
Morgan Securities, Inc., NationsBanc
Capital Markets, Inc. and Prudential
Securities Incorporated filed as
Exhibit 10.15 to the Registrant's
report on Form 10-K for the year ended
January 1, 1995.
27 Financial Data Schedule 36
* Incorporated by reference to the statement or report
indicated.
Page 34
<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 May 15, 1995 JOHN L. BAKANE
John L. Bakane
Executive Vice President and
Chief Financial Officer
Page 35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Financial Statements dated April 2, 1995, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-02-1995
<CASH> 912
<SECURITIES> 0
<RECEIVABLES> 98,833
<ALLOWANCES> 3,000
<INVENTORY> 152,856
<CURRENT-ASSETS> 257,159
<PP&E> 423,879
<DEPRECIATION> 184,073
<TOTAL-ASSETS> 568,831
<CURRENT-LIABILITIES> 119,839
<BONDS> 172,629
<COMMON> 2,738
0
38,395
<OTHER-SE> 191,262
<TOTAL-LIABILITY-AND-EQUITY> 568,831
<SALES> 226,205
<TOTAL-REVENUES> 226,205
<CGS> 193,149
<TOTAL-COSTS> 213,976
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,776
<INCOME-PRETAX> 6,938
<INCOME-TAX> 3,304
<INCOME-CONTINUING> 3,634
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,634
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
