<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 1, 1995
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 24, 1995)
(Cone Mills logo appears here)
CONE MILLS CORPORATION
$100,000,000
% DEBENTURES DUE MARCH , 2005
INTEREST PAYABLE MARCH AND SEPTEMBER
ISSUE PRICE: %
The Debentures will bear interest from March , 1995 at the rate of %
per annum, payable semiannually on March and September , commencing
September , 1995. The Debentures are not redeemable prior to maturity. The
Debentures will be represented by one or more global securities registered in
the name of a nominee of The Depository Trust Company, as Depositary. Beneficial
interests in the Debentures will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary and its
participants. Except as described herein, Debentures will not be issued in
definitive form. See "Description of Debentures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (3)
<S> <C> <C> <C>
Per Debenture % % %
Total $ $ $
</TABLE>
(1) Plus accrued interest, if any, from March , 1995.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
The Debentures are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by King &
Spalding, counsel for the Underwriters. It is expected that delivery of the
Debentures will be made on or about March , 1995, through the facilities of
the Depositary, against payment therefor in same-day funds.
J.P. MORGAN SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
PRUDENTIAL SECURITIES INCORPORATED
, 1995
(The redherring appears on the left-hand side of the page,
rotated 90 degrees. The text is as follows:
Information contained in this preliminary prospectus supplement
is subject to completion or amendment. A registration statement relating
to these securities has been declared effective by the Securities and
Exchange Commission pursuant to Rule 415 under the Securities Act of 1933.
A final prospectus supplement and accompanying prospectus will be delivered
to purchasers of these securities. This preliminary prospectus supplement
and the accompanying prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.)
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the Prospectus, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or the solicitation of an offer to
buy any securities other than the Debentures or an offer to sell or the
solicitation of an offer to buy the Debentures in any circumstances in which
such offer or solicitation is unlawful. Neither the delivery of this Prospectus
Supplement or the Prospectus nor any sale made hereunder and thereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Company............................................................................................................ S-3
Use of Proceeds........................................................................................................ S-4
Capitalization......................................................................................................... S-5
Selected Financial Data................................................................................................ S-6
Management's Discussion and Analysis of Results of Operations and Financial Condition.................................. S-7
Description of Debentures.............................................................................................. S-13
Underwriting........................................................................................................... S-13
Experts................................................................................................................ S-14
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Available Information.................................................................................................. 2
Incorporation of Certain Documents by Reference........................................................................ 2
The Company............................................................................................................ 3
Use of Proceeds........................................................................................................ 3
Ratio of Earnings to Fixed Charges..................................................................................... 3
Description of Debt Securities......................................................................................... 3
Plan of Distribution................................................................................................... 10
Experts................................................................................................................ 11
Legal Opinions......................................................................................................... 11
</TABLE>
S-2
<PAGE>
THE COMPANY
OVERVIEW
Founded in 1891, Cone Mills Corporation (the "Company" or "Cone") is a
leading textile manufacturer with net sales in 1994 of $806.2 million. The
Company conducts its business in two segments, apparel fabrics and home
furnishings products, representing 74% and 26% of 1994 net sales, respectively,
and operates 13 modern manufacturing facilities located in North Carolina, South
Carolina and Mississippi. Cone is the largest producer of denim fabrics in the
world, the largest domestic producer of yarn-dyed and chamois flannel shirtings
and the largest domestic commission printer of home furnishings fabrics. Sales
and marketing activities are conducted through a worldwide distribution network.
With export sales of $141.7 million in 1994, the Company is the largest domestic
exporter of denim fabrics and a major exporter of printed home furnishings
fabrics.
PRODUCTS
The Company is recognized internationally as a primary source of
high-quality fabrics for use in the production of upper-end, branded casual
apparel. The Company is a leader in denim styling and development, with denims
accounting for approximately 70% of the Company's apparel fabrics sales. Cone
believes that it has the largest and most versatile denim manufacturing capacity
in the world and that it produces a broader range of fashion denims than any of
its competitors. In 1994, Cone sold over 500 different styles of denim. The
Company's denim products are primarily designed for use in garments targeted for
the upper-end market, where styling and quality generally command premium fabric
prices. The Company is the largest supplier to Levi Strauss and is the sole
supplier of denim for Levi 501(Register mark) jeans. Other customers include
V.F. Corporation (Wrangler and Lee), OshKosh, H.I.S. (Chic), Calvin Klein, Rocky
Mountain Jeans, The Gap, Super Rifle, Ralph Lauren (Polo) and Donna Karan
(DKNY).
The Company has utilized its manufacturing versatility and styling
capabilities to position itself as a leader in other selected specialty apparel
fabric niches. These include yarn-dyed and chamois flannel shirtings,
specialty-dyed and printed fabrics and high-quality, polyester/rayon sportswear
fabrics. Customers for these specialty apparel fabrics include M. Fine, Oshkosh,
Woolrich and L.L. Bean.
The Company services the home furnishings markets through three divisions:
Cone Finishing, Cone Decorative Fabrics and Olympic Products. Cone Finishing
consists of the Company's Carlisle and Raytex plants and provides custom
printing services to leading home furnishings stylists and distributors. Cone
Decorative Fabrics is one of the country's leading designers and marketers of
printed and solid woven fabrics for use in upholstery, draperies and bedspreads.
Olympic Products is a diversified producer of polyurethane foam and related
products used in upholstered furniture, mattresses, quilted bedspreads, carpet
padding and automotive markets. The Company's home furnishings customers include
the Waverly Division of F. Schumacher & Co., P. Kaufmann, Collins & Aikman,
Bench Craft, Drexel Heritage and Henredon. The home furnishings segment also
includes Cornwallis Development Co., a wholly owned subsidiary that is
systematically developing previously acquired real estate not required for
manufacturing operations.
BUSINESS STRATEGY
Cone's business strategy is to focus on products and services that generate
attractive margins and in which it believes it is an efficient international
competitor. By utilizing its styling and development expertise and management
depth and experience, in combination with its versatile manufacturing facilities
and technical capabilities, the Company competes effectively in worldwide
markets. The Company has deemphasized labor-intensive commodity businesses and
in the first quarter of 1994 concluded an initiative to discontinue its corduroy
and other bottomweight continuous piece-dyed fabrics product line, the estimated
costs of which were fully provided for in its 1991 financial statements.
The Company seeks growth of its core businesses through expansion into new
markets and geographic areas, product differentiation and development, and
investment in value-added technology. A primary goal of this strategy is to
reduce the cyclical fluctuations inherent in its existing businesses through
improved market and product balance. As a means of new market penetration and
geographic expansion, Cone actively seeks acquisitions of and investments in
businesses in which it believes it can add value through its manufacturing and
marketing expertise. In 1993, the Company purchased a 20% ownership interest in
Compania Industrial de Parras, S.A. de C.V. ("CIPSA"), the largest denim
manufacturer in Mexico, for approximately $24 million and entered into a joint
venture with CIPSA to build and operate a modern denim manufacturing facility in
Mexico. The joint venture partners will invest approximately $50 million of
equity in the venture, with each
S-3
<PAGE>
partner providing one-half of the investment, and expect that the new facility
will begin operation in 1995. While the Company's domestic denim operations
focus on high-quality fabrics for use in upper-end, branded apparel, the joint
venture will produce high-quality basic denims at costs that the Company
believes will be competitive with manufacturers anywhere in the world.
Because Cone has committed extensive denim manufacturing expertise to its
joint venture with CIPSA, its current acquisition focus is in the home
furnishings segment of its business. To this end, on December 2, 1994, the
Company purchased substantially all of the assets of Golding Industries, Inc.,
consisting primarily of its Raytex commission printing facility located in South
Carolina, for a purchase price of $57.6 million in cash and the assumption of
$6.0 million of liabilities. Raytex primarily prints wide fabrics used in home
furnishings, including comforters and bedspreads. The Company believes that this
facility, which prints for many of the same customers as Cone's existing narrow
fabric print operations at its Carlisle facility, will allow it to realize
increased marketing, operating and administrative efficiencies. In early 1995,
Cone also acquired substantially all of the assets of Greeff Fabrics, Inc., a
small but well known designer and distributor of high-end decorative fabrics to
interior designers and specialty retailers in the U.S. and the United Kingdom.
In addition to its acquisition strategy, the Company has invested heavily
in machinery and equipment to improve productivity and product quality, expand
its product lines and increase customer satisfaction. Capital expenditures for
the last five fiscal years have totaled approximately $140 million. The Company
expects to spend approximately $62 million in 1995 for capital projects,
including approximately $15 million for a new jacquard fabric plant which will
further diversify its core product groups in the home furnishings segment of its
business.
The Company, a North Carolina corporation, maintains its principal
executive offices at 1201 Maple Street, Greensboro, North Carolina 27405, and
its telephone number is (910) 379-6220. Unless the context otherwise requires,
references to "Cone" or the "Company" include Cone Mills Corporation and its
subsidiaries.
USE OF PROCEEDS
The net proceeds from the sale of the Debentures offered hereby are
estimated to be $ . A portion of the net proceeds will be used to
repay all borrowings outstanding under the Company's Revolving Credit Facility,
which aggregated $72.0 million at February 24, 1995 and bear interest at annual
rates ranging from 6.21% to 6.63%. The Revolving Credit Facility is scheduled to
expire on August 13, 1997. The balance of the net proceeds will be used for
working capital and other general corporate purposes. Certain affiliates of J.P.
Morgan Securities Inc. and NationsBanc Capital Markets, Inc. that are lenders
under the Revolving Credit Facility expect to receive a portion of the repayment
of borrowings under such facility. See "Underwriting."
S-4
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 1, 1995 and as adjusted to reflect the sale of the Debentures offered
hereby and the application of net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
JANUARY 1, 1995
ACTUAL AS ADJUSTED
<S> <C> <C>
(IN MILLIONS)
Long-Term Debt:
8% Senior Note....................................................................................... $ 75.0 $ 75.0
Debentures due March , 2005......................................................................... -- 100.0
Revolving Credit Agreement........................................................................... 49.0 --
Capital Lease Obligation............................................................................. 1.6 1.6
Industrial Revenue Bonds............................................................................. 0.8 0.8
Other................................................................................................ 0.1 0.1
Total Long-Term Debt.............................................................................. 126.5 177.5
Stockholders' Equity:
Class A Preferred Stock.............................................................................. 38.4 38.4
Common Stock......................................................................................... 2.7 2.7
Capital in excess of par............................................................................. 71.4 71.4
Retained earnings.................................................................................... 125.8 125.8
Currency translation adjustment...................................................................... (1.4) (1.4)
Total Stockholders' Equity........................................................................ 236.9 236.9
Total Capitalization................................................................................... $363.4 $ 414.4
</TABLE>
S-5
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below should be read in conjunction
with "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and the consolidated historical financial statements of the
Company and related notes incorporated by reference herein. The selected
historical consolidated financial data for fiscal 1990 through 1994 are derived
from the consolidated financial statements of the Company, which have been
audited by McGladrey & Pullen, LLP, independent auditor.
<TABLE>
<CAPTION>
1994 1993 1992(1) 1991 1990
<S> <C> <C> <C> <C> <C>
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net Sales.............................................................. $806.2 $769.2 $705.4 $633.0 $594.8
Cost of Sales........................................................ 642.5 589.3 540.8 523.5 481.7
Depreciation......................................................... 23.3 21.0 18.5 17.1 16.3
Subtotal........................................................... 665.8 610.3 559.3 540.6 498.0
Gross Profit........................................................... 140.4 158.9 146.1 92.4 96.8
Selling and Administrative........................................... 77.8 73.3 67.6 56.8 56.8
Restructuring Charges/Plant Closing.................................. -- -- -- 0.8 3.9
Income from Operations................................................. 62.6 85.6 78.5 34.8 36.1
Other Expense -- Net................................................. 7.1 6.1 8.3 18.4 21.1
Income from Continuing Operations Before Income Tax.................... 55.5 79.5 70.2 16.4 15.0
Income Tax........................................................... 19.7 29.9 24.8 6.3 4.1
Income from Continuing Operations...................................... 35.8 49.6 45.4 10.1 10.9
Discontinued Operations.............................................. 0.4 -- -- (34.9) (14.1)
Income before Extraordinary Item and Cumulative Effect of Accounting
Change............................................................. 36.2 49.6 45.4 (24.8) (3.2)
Extraordinary Item................................................... -- -- (2.0 ) -- --
Cumulative Effect of Accounting Change............................... (1.2) -- -- -- --
Net Income (Loss)...................................................... $ 35.0 $ 49.6 $ 43.4 $(24.8) $ (3.2)
Per Share of Common Stock
Income from Continuing Operations.................................... $ 1.19 $ 1.68 $ 1.67 $ 0.22 $ 0.24
Net Income (Loss).................................................... 1.16 1.68 1.59 (1.58) (0.50)
SEGMENT DATA:
Net Sales
Apparel.............................................................. $600.5 $575.8 $520.0 $458.0 $421.4
Home Furnishings..................................................... 205.7 193.4 185.4 175.0 173.4
Total................................................................ $806.2 $769.2 $705.4 $633.0 $594.8
Operating Income
Apparel.............................................................. $ 47.5 $ 68.8 $ 67.4 $ 20.4 $ 25.5
Home Furnishings..................................................... 19.0 19.5 16.3 19.2 19.1
BALANCE SHEET DATA (AT YEAR END):
Current Ratio.......................................................... 1.8 1.9 1.8 1.9 2.1
Total Assets........................................................... $524.1 $431.6 $401.9 $432.7 $469.4
Long-Term Debt......................................................... 126.5 77.9 77.5 188.9 200.9
Stockholders' Equity................................................... 236.9 210.0 163.4 82.9 111.0
Long-Term Debt as a Percentage of Stockholders' Equity and Long-Term
Debt................................................................. 35% 27% 32% 69% 64%
Shares Outstanding (in millions) (2)(3)................................ 27.4 27.7 27.7 17.9 17.1
OTHER DATA:
Capital Expenditures -- Continuing Operations.......................... $ 37.5 $ 38.7 $ 25.4 $ 21.0 $ 17.8
Return on Average Common Stockholders' Equity (4)...................... 17.9% 31.6% 55.3% 11.9% 8.2%
Number of Employees at year end........................................ 8,100 7,800 7,600 7,600 8,400
Actual Ratio of Earnings to Fixed Charges.............................. 5.76 8.93 5.93 1.74 1.60
Pro Forma Ratio of Earnings to Fixed Charges (5)....................... 4.89 6.94
</TABLE>
(1) Fiscal 1992 represents a 53 week period.
(2) Includes Participating Preferred Shares for year-end 1991 and 1990.
(3) Includes 6.9 million shares of Common Stock issued in mid-1992 initial
public offering.
(4) Based on income from continuing operations.
(5) The pro forma ratios of earnings to fixed charges give effect to the
Company's acquisition of substantially all of the assets of the successor of
Golding Industries, Inc. on December 2, 1994 and the Company's related
borrowings and other transactions described in the pro forma financial
statements incorporated by reference herein, in each case as if such
transactions had occurred at the beginning of such periods.
S-6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The operating results and financial condition of Cone have been influenced
by a number of external factors and Company initiatives. The principal
influences have been domestic cotton costs, the general business cycle,
international apparel and fabric trade developments, and strategic changes in
the Company's business and capital structure.
COTTON COSTS. Management believes that the most significant factor
affecting operating margins has been the price of cotton, the Company's
principal raw material. Cotton prices fluctuate with the balance of supply and
demand and, since cotton is an agricultural product, its supply and quality are
subject to the forces of nature. World cotton prices began to rise in late 1993,
throughout 1994 and into 1995, primarily as a result of cotton crop declines in
Pakistan, India and China due to weather, disease and insects. Consequently,
mill delivered cotton prices per pound rose from the lower $.60's in 1992 and
1993 to the upper $.70's in 1994 and into the mid $.80's during early 1995.
The Company has purchased cotton from suppliers at fixed prices for
delivery throughout 1995. Although these fixed prices compare favorably with
those of the present spot market, the significant increase in the price of
cotton since late 1994 will cause a reduction in profit margins in 1995. While
the Company was unable to increase prices in its major product lines during the
first half of 1994, moderate price increases were effected for the second half
of 1994 and first quarter 1995. Margins will be affected by the strength of
demand for the Company's products and the resulting impact on improved pricing,
cotton and other raw material costs, and productivity improvement programs.
GENERAL BUSINESS CYCLE. The Company's operating results are closely related
to the general business cycle of the U.S. economy. Management believes the U.S.
economy is currently in the mature phase of the economic cycle, when the demand
for home furnishings and consumer durables typically grows at a higher rate than
demand for apparel products, which is usually strongest in the earlier phases of
a recovery. When apparel demand growth rates change during an economic cycle,
adjustments to inventories and production levels often occur. In early 1994,
despite continued strong demand at retail, denim inventories experienced an
inventory imbalance in the softgoods pipeline. The pipeline supply and demand
imbalance was corrected by the second half of 1994.
The external factors discussed above are reflected in the Company's recent
quarterly net sales. All quarters had 13 weeks except the fourth quarter of 1992
which had 14 weeks.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(IN MILLIONS)
Net Sales:
1st Quarter................................................ $195.9 $195.0 $174.2
2nd Quarter................................................ 201.7 202.5 182.6
3rd Quarter................................................ 203.5 192.7 170.5
4th Quarter................................................ 205.1 179.0 178.1
Total................................................... $806.2 $769.2 $705.4
</TABLE>
TRADE DEVELOPMENTS. The Company's operating results have been influenced by
U.S. trade policy, which has allowed gains in market share by foreign-produced,
labor-intensive garments over the past decade. This has caused U.S.
manufacturers of fabrics used in these labor-intensive garments to have excess
capacity, which has resulted in increased competition and reduced margins for
U.S. manufacturers of commodity-type goods. In December 1994, Congress approved
implementing legislation for the Uruguay Round world trade accord under the
General Agreement on Tariffs and Trade ("GATT"). As a result, quotas will be
phased out and tariffs outside of the U.S. on textile and apparel products will
be substantially reduced over a period of 10 years. U.S. tariffs on these
products will be reduced slightly. The passage of the North American Free Trade
Agreement ("NAFTA") has essentially eliminated all quotas and tariffs on the
Company's products throughout Canada and Mexico. In response to this
environment, the Company has focused on high-margin and low-labor content
businesses in which it believes it is internationally competitive.
S-7
<PAGE>
STRATEGIC INITIATIVES. The Company has adopted a growth strategy aimed at
entering new markets that utilize manufacturing technologies related to existing
Cone strengths. For example, in 1993, the Company positioned itself to supply
markets more efficiently and effectively with basic denim products through the
purchase of a 20% equity ownership interest in CIPSA for approximately $24
million and the formation of a joint venture with CIPSA to construct a modern
denim plant in Mexico. The joint venture partners will invest approximately $50
million in equity in the venture, with each partner providing one-half of the
investment. Capital requirements for the joint venture will primarily occur in
1995. The joint venture also obtained a $63 million credit facility from a
Mexican bank. This facility is not guaranteed by Cone or by CIPSA.
In 1994, the Company further implemented its growth strategy by acquiring
substantially all of the assets of Golding Industries, Inc., consisting
primarily of the Raytex division, for a purchase price of $57.6 million in cash
and the assumption of $6.0 million in liabilities. Raytex is a leading
commission printer of wide fabrics used primarily in home furnishings products
and uses technologies similar to Cone's Carlisle facility, which also prints and
finishes decorative fabrics.
As part of its strategy, the Company has made significant capital
expenditures in recent years and plans to spend a total of $62 million in fiscal
1995, including $15 million for a new plant to weave jacquard pattern fabrics
for home furnishings customers. In January 1995, the Company also purchased
substantially all of the assets of Greeff Fabrics, Inc., a small but well known
designer and distributor of high-end decorative fabrics to interior designers
and specialty retailers in the U.S. and the United Kingdom. The new jacquard
pattern fabrics plant and Greeff Fabrics, Inc. will be part of the Cone
Decorative Fabrics Division formed in January 1995.
SEGMENT INFORMATION
Cone 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 1994 and 1993, both of
which contained 52 weeks, and 1992, which contained 53 weeks.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
(DOLLAR AMOUNTS IN MILLIONS)
Net Sales
Apparel................................................. $600.5 74.5% $575.8 74.9% $520.0 73.7%
Home Furnishings........................................ 205.7 25.5 193.4 25.1 185.4 26.3
Total................................................ $806.2 100.0% $769.2 100.0% $705.4 100.0%
Operating Income (1)
Apparel................................................. $ 47.5 7.9% $ 68.8 12.0% $ 67.4 13.0%
Home Furnishings........................................ 19.0 9.2 19.5 10.1 16.3 8.8
</TABLE>
(1) Operating income excludes general corporate expenses. Percentages reflect
operating income as a percentage of segment net sales.
RESULTS OF OPERATIONS
FIFTY-TWO WEEKS ENDED JANUARY 1, 1995 COMPARED WITH FIFTY-TWO WEEKS ENDED
JANUARY 2, 1994
Net sales for 1994 were $806.2 million, up 4.8% from 1993 net sales of
$769.2 million. Income before the cumulative effect of adoption of SFAS No. 112
was $36.2 million, or $1.20 per share after preferred dividends, as compared
with $49.6 million, or $1.68 per share, for 1993. Included in the 1994 results
was a net gain of $.4 million, or $.01 per share, arising from the final
disposal of assets of the Company's discontinued operations. During the first
quarter of 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which resulted in an after-tax, non-cash charge of
$1.2 million, or $.04 per share, and reduced net income to $1.16 per share for
the year of 1994. Net income for 1994 was $35.0 million as compared with $49.6
million for 1993.
Gross profit (net sales less cost of sales and depreciation) as a
percentage of net sales was 17.4% in 1994 as compared with 20.7% for 1993. The
decline resulted primarily from the inability to raise denim prices to cover
higher cotton costs, higher unit production costs associated with operating
denim facilities at less than capacity during the first six months of 1994, and
a higher proportion of the mix in lower margin speciality sportswear fabrics and
polyurethane foam products as a result of stronger sales of those products.
S-8
<PAGE>
APPAREL FABRICS. Apparel fabrics net sales were $600.5 million for
1994, an increase of 4.3% from 1993. The higher sales were due to increased
sales volume. Overall, apparel fabric segment sales benefited from
increases in specialty sportswear sales, primarily flannel shirtings, and
to a lesser extent, increases in heavyweight denim sales. Average prices
adjusted for product mix changes were essentially unchanged. Apparel
fabrics export sales for 1994 were up 8.8% to $135.9 million from $124.9
million in 1993.
Operating margins in 1994 for the apparel fabrics segment were 7.9% of
net sales compared with 12.0% for 1993. Margins were lower in 1994 because
of the decline in denim earnings as discussed above.
HOME FURNISHINGS. Home furnishings net sales were $205.7 million in
1994, an increase of 6.3% from 1993. Operating income for 1994 was $19.0
million, a decrease of 2.6% from 1993. Sales and operating income for the
home furnishings fabrics product group were down in 1994 as the Company
continued to experience weak decorative print fabric markets. Olympic's
polyurethane product sales were up in 1994 as the division experienced
stronger sales in automotive markets, but operating income was down as
margins on commodity furniture foam and carpet underlay continued to be
weak and as the division absorbed start-up costs associated with new
product ventures.
Export sales of home furnishings products were $5.8 million in 1994 as
compared with $7.1 million in 1993. Export sales were impacted by poor
economic conditions in European markets.
Total Company selling and administrative expenses were $77.8 million, or
9.7% of net sales, for 1994 as compared with $73.3 million, or 9.5% of net
sales, for 1993. Expenses in 1994 were impacted by higher salary and benefit
costs and costs associated with expansion initiatives.
Interest expense for 1994 increased $1.0 million compared to 1993,
primarily the result of a $.4 million interest charge on the settlement of 1990
and 1991 income taxes by the Internal Revenue Service, higher interest rates and
additional borrowings associated with expansion initiatives.
Income taxes as a percentage of taxable income was 35.6% in 1994 compared
with 37.6% in 1993. The 1993 rate was higher primarily as the result of the one
time impact on deferred taxes of a federal tax rate increase. Both periods
reflect tax benefits resulting from operation of the Company's foreign sales
corporation.
FIFTY-TWO WEEKS ENDED JANUARY 2, 1994 COMPARED WITH FIFTY-THREE WEEKS ENDED
JANUARY 3, 1993
Following a U.S. cyclical recovery from mid-1991 through the end of 1992,
the rate of growth in the domestic softgoods sector began to decline and
retailers and softgoods manufacturers began to report mixed results during 1993.
Despite these general economic conditions, Cone had record sales and income from
continuing operations in 1993. In the apparel fabrics segment, sales were up
substantially, primarily as a result of growth in denims and flannel shirtings.
The Company also benefited from expanding apparel fabrics export sales. Home
furnishings segment sales increased because of sales growth at Carlisle
Finishing, arising primarily from market share gains, and the Company's real
estate division, Cornwallis Development Co.
Net sales for 1993 were $769.2 million, an increase of $63.8 million, or
9.0% from 1992 net sales of $705.4 million. Gross profit (net sales less cost of
sales and depreciation) as a percentage of net sales was 20.7% for both 1993 and
1992. Income from operations increased 9.0% to $85.6 million for 1993. The
Company's 1993 net income was $49.6 million, or $1.68 per share of Common Stock
after preferred dividends. Net income for 1993 included $2.4 million of
increased taxes resulting from the 1993 change in federal tax rates. The
per-share impact of those increased taxes was $.09.
For comparison, Cone reported net income of $43.4 million, or $1.59 per
share, for 1992, which included an after tax benefit of $2.2 million related to
an income tax refund, a $2.0 million extraordinary expense related to the early
extinguishment of debt, and for the first six months of 1992, outstanding shares
did not include 6.9 million shares issued in the Company's mid-1992 initial
public offering.
APPAREL FABRICS. Apparel fabrics net sales were $575.8 million for
1993, an increase of 10.7% from 1992. The improved sales resulted from
increased sales volume and, to a lesser extent, higher prices. Average
prices adjusted for product mix changes were up approximately three
percent. Apparel fabrics export sales for 1993 were up 18.8% to $124.9
million, as compared with $105.2 million for 1992.
Operating margins for the apparel fabrics segment were 12.0% of net
sales for 1993 as compared with 13.0% for 1992. Margins as a percent of
sales were down slightly as a result of a shift in mix to lower margin
specialty sportswear
S-9
<PAGE>
fabrics and, to a lesser extent, increased depreciation expense. Average
cotton costs were up by approximately two percent for 1993 as compared with
1992.
HOME FURNISHINGS. For 1993, net sales of $193.4 million for the home
furnishings segment increased $8.0 million, or 4.3%, and operating income
increased $3.2 million, or 19.3% , compared with 1992. All product groups
of the home furnishings segment had higher sales in 1993.
Export sales of home furnishings products were $7.1 million in 1993
compared with $8.6 million in 1992. These export sales were impacted by
poor economic conditions in European and Japanese markets.
In 1993, operating margins for the home furnishings segment improved
to 10.1% of net sales compared with 8.8% for 1992. The increase was
primarily the result of improved operating performance at Olympic Products
and higher sales and improved sales mix of real estate operations.
Total Company selling and administrative expenses increased from $67.6
million, or 9.6% of sales, for 1992 to $73.3 million, or 9.5% of sales, for
1993. The increase in expenses was primarily the result of the redeployment of
people previously charged to discontinued lines to support expanding sportswear
and denim businesses, increases in salaries and benefits costs and, to a lesser
extent, expenses associated with the secondary offering in early 1993 of common
stock held by certain institutional shareholders of the Company.
Interest expense for 1993 decreased $4.0 million as compared with 1992
because of reduced borrowing levels and, to a lesser extent, lower interest
rates. For 1993 interest income was $2.1 million lower than 1992 levels because
of the interest associated with an income tax refund in the first quarter of
1992. Other income in 1993 of $.3 million represented the income from the
Company's 20% investment in CIPSA.
Income taxes as a percentage of taxable income was 37.6% in 1993 compared
with 35.3% in 1992. The effective tax rate for 1993 was higher than the previous
year primarily because of the 1993 increase in federal statutory tax rates. Both
periods reflect tax benefits resulting from operations 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 America (the "Term Loan") and
stockholders' equity. Primary sources of liquidity are internally generated
funds, a $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. The Receivables Purchase Agreement was increased
from $40 million in the second quarter of 1994 and the Revolving Credit Facility
from $60 million in the fourth quarter of 1994. On January 1, 1995, the Company
had funds available of $31.0 million under its Revolving Credit Facility.
The Term Loan is unsecured and bears interest at a fixed annual rate of 8%,
with required principal payments beginning in August 1996 until final maturity
on August 13, 2002. The Revolving Credit Facility is unsecured and provides for
a floating rate of interest based, at the Company's election, on the agent's
base rate, the Certificate of Deposit rate or LIBOR plus a margin determined by
the Company's capital structure, or at a rate determined through a competitive
bid process. The Company intends to repay all borrowings outstanding under the
Revolving Credit Facility, which is scheduled to expire on August 13, 1997, with
a portion of the net proceeds from the sale of the Debentures offered hereby.
See "Use of Proceeds." Amounts repaid under the Revolving Credit Facility will
remain available. Under the Receivables Purchase Facility, which is extendable
to August 13, 1997, the cost of receivables sold by Cone is the commercial paper
rate plus 55 basis points calculated for the period of time from the sale of a
receivable until its payment date. The resulting cost on the sale of receivables
is included in cost of sales.
During 1994, the Company generated $55.3 million in funds from operating
activities, including $59.0 million from net income adjusted for noncash
depreciation and amortization expenses, partially offset by increased working
capital requirements, primarily increases in trade receivables. Major uses of
cash during this period included $37.5 million for capital expenditures, $57.6
million for the acquisition of the assets of the Raytex commission print
operation and $9.6 million for investment in CIPSA and the related joint
venture. Funding came primarily from operating cash flow, the Revolving Credit
Facility, and the additional sale of accounts receivable to support working
capital needs.
During 1993, Cone generated $57.2 million in funds from operating
activities, including $71.0 million from net income adjusted for noncash
depreciation and amortization expenses, partially offset by increased working
capital requirements,
S-10
<PAGE>
primarily resulting from reductions of accounts payable and accrued expenses.
Major uses of cash during this period included $38.7 million for capital
expenditures and $3.1 million for preferred stock dividends. Cone purchased 20%
of CIPSA for approximately $24 million and began construction of the joint
venture denim plant with CIPSA. The investment in the joint venture was $2.3
million for 1993. Funding for these cash uses came primarily from operating cash
flow and cash available at the beginning of the period.
On January 1, 1995, the Company's long-term capital structure consisted of
$126.1 million of long-term debt and $236.9 million of stockholders' equity. For
comparison, at January 2, 1994 the Company had $77.2 million of long-term debt
and $210.0 million of stockholders' equity. Long-term debt (including current
maturities of long-term debt) as a percentage of long-term debt and
stockholders' equity was 35% on January 1, 1995, compared with 27% at January 2,
1994. 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 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. If an exchange rate of 4.94 had been used in the Company's
financial statements, the currency translation adjustment would have been a $7.8
million (net of income tax benefit) reduction of stockholders' equity at the end
of 1994. The reduction in stockholders' equity is a noncash adjustment.
Accounts receivable on January 1, 1995 were $56.7 million, up from $44.2
million at year-end 1993. At the end of fiscal 1994, the Company had sold $50
million of accounts receivable, an increase of $15 million from the amount sold
at the end of fiscal 1993. Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 49 days of sales outstanding at
year-end 1994 compared with 41 days at year-end 1993, as fewer payments were
made in advance of due date.
Inventories on January 1, 1995, were $149.4 million, down $2.7 million from
year-end 1993 levels of $152.1 million.
Capital spending in 1994 was $37.5 million and included expansion and
upgrading of yarn preparation facilities, new weaving machines, and a new fiber
production line at Olympic Products.
Capital spending in 1995 is expected to be $62 million, including $15
million for the 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.
Approximately $3.1 million of the budgeted capital expenditures for 1995 had
been committed at year-end 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.
FINANCIAL OUTLOOK AND STRATEGY
Beginning in 1992, 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 operations experienced accelerated
growth, and the Company believes that demographic trends and other market
developments continue to present favorable long-term opportunities for growth.
Operating income was lower in 1994 than in 1993 and the Company does not
anticipate improvement in operating income in the first half of 1995. However,
based on apparel fabric order backlogs at the end of fiscal 1994, the Company
expects increased net sales in the first half of 1995.
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 in CIPSA, and signed agreements with CIPSA providing for the formation
of a joint venture as described above. 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 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 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
S-11
<PAGE>
open market transactions. As of February 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 that the net proceeds from the sale of the Debentures
offered hereby, together with 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 on the Company's competitive position, operating results or planned
capital expenditures. Cone 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 a judgment in the amount of $15.5 million (including an attorneys' fees
award) was entered against the Company with respect to an alleged promise to
make additional Company contributions to the 1983 ESOP and all claims unrelated
to the alleged promise were dismissed. The Company, the individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the Court of Appeals, sitting EN BANC, affirmed the prior
conclusion of a panel of three of its judges and unanimously reversed the $15.5
million judgment and unanimously affirmed all of the District Court's rulings in
favor of the Company. However, the Court of Appeals affirmed, by an equally
divided court, the District Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to proof of 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 can establish
detrimental reliance creating estoppel of the Company.
Additional proceedings are under way in the District Court on the issue of
detrimental reliance and other issues related to whether the Plaintiffs can
prevail on remand. For that reason, and because of the uncertainties inherent in
the litigation process, it is not possible to predict the ultimate outcome of
this lawsuit. However, the Company intends to continue to defend this matter
vigorously, and it is the opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse effect on the Company's
financial condition.
To secure the judgment on appeal from the District Court to the Court of
Appeals, the Company had deposited in escrow with the trustee of the 1983 ESOP
an $8 million letter of credit and 75,330 shares of Class A Preferred Stock
valued at $7.5 million which subsequently earned dividends of an additional
11,474 shares valued at $1.2 million. The letter of credit was substituted for
an $8 million cash deposit made in April 1992. To record this escrow
transaction, the Company increased outstanding Class A Preferred Stock by $8.7
million and established an offsetting contra stockholders' equity account.
Because the 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. Subsequent to the court's order, the stock was redeemed,
the offsetting contra account eliminated and letter of credit terminated. None
of these escrow transactions have had an effect on net income or stockholders'
equity.
The Company is a party to various other legal claims and actions incidental
to its business. Management believes that none of these claims or actions,
either individually or in the aggregate, will have a material adverse effect on
the financial condition of the Company.
S-12
<PAGE>
DESCRIPTION OF DEBENTURES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE DEBENTURES OFFERED
HEREBY (REFERRED TO IN THE ACCOMPANYING PROSPECTUS AS THE "DEBT SECURITIES")
SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION
OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES SET FORTH IN THE
ACCOMPANYING PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
GENERAL
The Debentures offered hereby will be limited to $100,000,000 in aggregate
principal amount and will mature on March , 2005. The Debentures will bear
interest from March , 1995, at the rate per annum set forth on the cover page
of this Prospectus Supplement, payable semiannually on March and September
of each year, commencing September , 1995, to the persons in whose names the
Debentures are registered at the close of business on the March and September
, as the case may be, immediately preceding such interest payment date.
The Debentures are not redeemable prior to maturity and are not subject to
any sinking fund.
The Debentures will be issued in the form of one or more registered global
securities and will be deposited with, or on behalf of, The Depository Trust
Company, as depositary (the "Depositary"), and registered in the name of the
Depositary's nominee. A description of the Depositary's procedures with respect
to the global securities is set forth in the accompanying Prospectus under
"Description of Debt Securities -- Book Entry System".
The Debentures are to be issued under an Indenture dated as of February 14,
1995, between the Company and Wachovia Bank of North Carolina, N.A., as Trustee,
which Indenture is more fully described under the heading "Description of Debt
Securities" in the accompanying Prospectus.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Debentures will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be made
in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the
Debentures will trade in the Depositary's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Debentures will therefore
be required by the Depositary to be settled in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in immediately
available funds on trading activity in the Debentures.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") dated the date hereof, the Company has agreed to
sell to each of the Underwriters named below, and each of the Underwriters has
severally agreed to purchase from the Company, the principal amount of
Debentures set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS DEBENTURES
<S> <C>
J.P. Morgan Securities Inc............................................................ $
NationsBanc Capital Markets, Inc......................................................
Prudential Securities Incorporated....................................................
Total............................................................................ $100,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to purchase all of the Debentures if any are
purchased.
The Underwriters propose to offer the Debentures to the public at the
initial public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in excess
of % of the principal amount of the Debentures. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of % of the
principal amount of the Debentures to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed
by the Underwriters.
S-13
<PAGE>
The Debentures are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Debentures but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debentures.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters and
certain of their affiliates have provided, and may in the future provide,
investment banking, commercial banking and lending services to the Company and
have received and will receive customary fees and compensation therefor.
Prudential Insurance Company of America, an affiliate of Prudential Securities
Inc., is a party to the Company's $75 million Term Loan. Morgan Guaranty, an
affiliate of J.P. Morgan Securities Inc., is Agent Bank under the Company's $80
million Revolving Credit Facility and NationsBank, N.A. (Carolinas), an
affiliate of NationsBanc Capital Markets, Inc., is a lender under such facility.
Delaware Funding Corporation, also an affiliate of J.P. Morgan Securities Inc.,
is a party to the Company's $50 million Receivables Purchase Agreement. Morgan
Guaranty and NationsBank, N.A. (Carolinas), as lenders under the Company's
Revolving Credit Facility, expect to receive approximately $20.0 million and
$13.0 million, respectively, of the repayment of borrowings outstanding under
the Revolving Credit Facility. See "Use of Proceeds."
EXPERTS
The consolidated balance sheets of the Company as of January 1, 1995 and
January 2, 1994 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended January 1,
1995 that appear in the Company's Form 8-K filed on March 1, 1995, have been
incorporated by reference herein in reliance upon the report dated February 10,
1995 of McGladrey & Pullen, LLP, independent accountants, incorporated by
reference herein, and upon the authority of such firm as experts in accounting
and auditing.
S-14
<PAGE>
(Cone Mills logo appears here)
CONE MILLS CORPORATION
DEBT SECURITIES
Cone Mills Corporation (the "Company") may offer from time to time, in one
or more series, debt securities consisting of debentures, notes, and/or other
unsecured evidences of indebtedness ("Debt Securities") with an aggregate
initial public offering price of up to $100,000,000 on terms to be determined at
the time of sale. The specific terms of the Debt Securities, including, where
applicable, the designation, aggregate principal amount, denominations, purchase
price, maturity, interest rate (which may be fixed or variable) and time of
payment of interest, if any, any terms for mandatory or optional redemption, any
terms for sinking fund payments, any listing on a securities exchange and any
other specific terms in connection with the sale of the Debt Securities in
respect of which this Prospectus is being delivered are set forth in the
accompanying Prospectus Supplement (the "Prospectus Supplement").
The Debt Securities may be offered directly or through agents, dealers or
underwriters designated from time to time. See "Plan of Distribution." The names
of any such agents, dealers or underwriters are set forth in the accompanying
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is February 24, 1995
<PAGE>
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus or
the accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any agent, dealer or underwriter. Neither the delivery of this
Prospectus or the accompanying Prospectus Supplement nor any sale made hereunder
or thereunder shall, under any circumstances, create any implication that the
information contained herein or in the accompanying Prospectus Supplement is
correct as of any date subsequent to the date hereof or thereof or that there
has been no change in the affairs of the Company since the date hereof or
thereof. Neither this Prospectus nor the accompanying Prospectus Supplement
constitutes an offer to sell or solicitation of an offer to buy Debt Securities
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10048. Copies of
such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Company's Common Stock is listed on the New York Stock
Exchange (the "Exchange") and similar information concerning the Company can be
inspected at the offices of the Exchange at 20 Broad Street, New York, New York
10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933 (the "Securities Act"). This Prospectus and the
accompanying Prospectus Supplement omit certain of the information contained in
the Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the Debt
Securities. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been previously filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus as of
their respective dates: (a) Annual Report on Form 10-K for the year ended
January 2, 1994, (b) Quarterly Report on Form 10-Q for the quarter ended April
3, 1994, (c) Quarterly report on Form 10-Q for the quarter ended July 3, 1994,
(d) Quarterly Report on Form 10-Q for the quarter ended October 2, 1994, (e)
Current Report on Form 8-K dated December 2, 1994, and (f) Amendment to Current
Report on Form 8-K/A dated February 13, 1995.
All reports and any definitive proxy or information statements filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of any such person, a copy of the documents incorporated by reference
herein (other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Written requests for such copies
should be directed to the Treasurer, Cone Mills Corporation, 1201 Maple Street,
Greensboro, North Carolina 27405. Telephone requests may be directed to (910)
379-6246.
2
<PAGE>
THE COMPANY
Cone Mills Corporation is the largest producer of denim fabrics in the
world and is the largest printer of home furnishings fabrics in North America.
The Company is a North Carolina corporation organized in 1948 to succeed a
business founded in 1891. The Company's principal executive offices are located
at 1201 Maple Street, Greensboro, North Carolina 27405, and its telephone number
is (910) 379-6220. The term the "Company" as used herein includes Cone Mills
Corporation and its subsidiaries.
USE OF PROCEEDS
Except as may be otherwise set forth in the Prospectus Supplement
accompanying this Prospectus, the net proceeds from the sale of the Debt
Securities will be used for general corporate purposes, which may include
financing capital expenditures and working capital requirements and repaying
short-term or long-term borrowings. Funds not required immediately for those
purposes may be invested temporarily in short-term marketable securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include pretax income from
continuing operations plus certain fixed charges. "Fixed charges" include
interest, whether expensed or capitalized, amortization of debt expense and the
portion of rental expense which is representative of the interest factor in
these rentals. The following table presents (i) the ratio of earnings to fixed
charges of the Company for each of the fiscal years 1989 through 1993 and for
the first nine months of fiscal years 1993 and 1994 and (ii) the pro forma ratio
of earnings to fixed charges for fiscal 1993 and for the first nine months of
fiscal 1994. The pro forma ratios of earnings to fixed charges give effect to
the Company's acquisition of substantially all of the assets of the successor of
Golding Industries, Inc. on December 2, 1994 and the Company's related
borrowings and other transactions described in the pro forma financial
statements incorporated by reference in this Prospectus, in each case as if such
transactions had occurred at the beginning of such periods.
<TABLE>
<CAPTION>
FIRST NINE
MONTHS FISCAL YEAR
1994 1993 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Actual ratio of earnings to fixed charges...................... 6.09 9.26 8.93 5.93 1.74 1.60 2.48
Pro Forma ratio of earnings to fixed charges................... 5.21 6.94
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture dated as of February
14, 1995 (hereinafter referred to as of the "Indenture"), between the Company
and Wachovia Bank of North Carolina, N.A., as Trustee (hereinafter referred to
as the "Trustee"). The following statements are subject to the detailed
provisions of the Indenture, a copy of which is filed as an exhibit to the
Registration Statement and which is also available for inspection at the office
of the Trustee. Section references are to the Indenture. The following summaries
of certain provisions of the Indenture do not purport to be complete, and
wherever particular provisions of the Indenture are referred to, such
provisions, including definitions of certain terms, are incorporated by
reference as part of such summaries or terms, which are qualified in their
entirety by such reference to the provisions of the Indenture.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that the Debt Securities
may be issued from time to time in one or more series. The Debt Securities will
be direct, unsecured and unsubordinated obligations of the Company and will rank
equally with any other unsecured and unsubordinated obligations of the Company
for borrowed money. Except as described under "Certain Covenants," the Indenture
does not limit other indebtedness or securities which may be incurred or issued
by the Company or any of its subsidiaries or contain financial or similar
restrictions on the Company or any of its subsidiaries. The Company's rights and
the rights of its creditors, including holders of Debt Securities, to
participate in any distribution of assets of any subsidiary upon the latter's
liquidation or reorganization or otherwise are effectively subordinated to the
claims of the subsidiary's creditors, except to the extent that the Company or
any of its creditors may itself be a creditor of that subsidiary.
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The Prospectus Supplement which accompanies this Prospectus sets forth
where applicable the following terms of and information relating to the Debt
Securities offered thereby: (i) the designation of the Debt Securities; (ii) the
aggregate principal amount of the Debt Securities; (iii) the date or dates on
which principal of, and premium, if any, on the Debt Securities is payable; (iv)
the rate or rates at which the Debt Securities shall bear interest, if any, or
the method by which such rate shall be determined, the date or dates from which
such interest will accrue and on which such interest will be payable and the
related record dates; (v) if other than the offices of the Trustee, the place
where the principal of and any premium or interest on the Debt Securities will
be payable; (vi) any redemption, repayment or sinking fund provisions; (vii) if
other than denominations of $1,000 or multiples thereof, the denominations in
which the Debt Securities will be issuable; (viii) if other than the principal
amount thereof, the portion of the principal amount due upon acceleration; (ix)
whether the Debt Securities shall be issued in the form of a global security or
securities; (x) any other specific terms of the Debt Securities; and (xi) if
other than the Trustee, the identity of any trustees, paying agents, transfer
agents or registrars with respect to the Debt Securities. (Section 2.3)
The Debt Securities will be issued either in certificated, fully registered
form, without coupons, or as global securities under a book-entry system, as
specified in the accompanying Prospectus Supplement.
Unless otherwise specified in the accompanying Prospectus Supplement,
principal and premium, if any, will be payable, and the Debt Securities will be
transferable and exchangeable without any service charge, at the office of the
Trustee. However, the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection with any such
transfer or exchange. (Section 2.8)
Interest on any series of Debt Securities will be payable on the interest
payment dates set forth in the accompanying Prospectus Supplement to the persons
in whose names the Debt Securities are registered at the close of business on
the related record date and will be paid by checks mailed to such persons.
(Sections 2.7 and 3.1)
If the Debt Securities are issued as Original Issue Discount Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below their stated
principal amount, the federal income tax consequences and other special
considerations applicable to such Original Issue Discount Securities will be
generally described in the Prospectus Supplement.
Unless otherwise described in the accompanying Prospectus Supplement, there
are no covenants or provisions contained in the Indenture which afford the
holders of the Debt Securities protection in the event of a highly leveraged
transaction involving the Company.
BOOK-ENTRY SYSTEM
If so specified in the accompanying Prospectus Supplement, Debt Securities
of any series may be issued under a book-entry system in the form of one or more
global securities. Each global security will be deposited with, or on behalf of,
a depositary, which, unless otherwise specified in the accompanying Prospectus
Supplement, will be The Depository Trust Company, New York, New York (the
"Depositary"). The global securities will be registered in the name of the
Depositary or its nominee.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York banking law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of section 17A of the Exchange Act. The Depositary
was created to hold securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Upon the issuance of a global security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such global security to
the accounts of participants. The accounts to be credited will be designated by
the underwriters, dealers or agents, if any, or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in the global security will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in the global security will be shown on, and the transfer of that
ownership interest will be effected only through,
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records maintained by the Depositary (with respect to participants' interests)
or its nominee and the participants (with respect to the owners of beneficial
interests in the global security). Ownership of beneficial interests in the
global security by persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participants will be
effected only through, records maintained by such participants. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in a global security.
So long as the Depositary or its nominee is the registered owner of a
global security, it will be considered the sole owner or holder of the Debt
Securities represented by such global security for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in such
global security will not be entitled to have the Debt Securities represented
thereby registered in their names, will not receive or be entitled to receive
physical delivery of certificates representing the Debt Securities and will not
be considered the owners or holders thereof under the Indenture. Accordingly,
each person owning a beneficial interest in such global security must rely on
the procedures of the Depositary and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the Indenture. The Company understands
that under existing practice, in the event that the Company requests any action
of the holders or a beneficial owner desires to take any action a holder is
entitled to take, the Depositary would act upon the instructions of, or
authorize, the participant to take such action.
Payment of principal of, premium, if any, and interest on Debt Securities
represented by a global security will be made to the Depositary or its nominee,
as the case may be, as the registered owner and holder of the global security
representing such Debt Securities. None of the Company, the Trustee, any paying
agent or registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the global security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal, premium, if any, or
interest on the payment date thereof in amounts proportionate to their
respective beneficial interests in the principal amount of the global security
as shown on the records of the Depositary. The Company expects that payments by
participants to owners of beneficial interests in the global security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.
A global security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A global security representing
all but not part of the Debt Securities being offered hereby is exchangeable for
Debt Securities in definitive form of like tenor and terms if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as depositary
for such global security or if at any time the Depositary is no longer eligible
to be or in good standing as a clearing agency registered under the Exchange
Act, and in either case, a successor depositary is not appointed by the Company
within 90 days of receipt by the Company of such notice or of the Company
becoming aware of such ineligibility, or (ii) the Company in its sole discretion
at any time determines not to have all of the Debt Securities represented by a
global security and notifies the Trustee thereof. A global security exchangeable
pursuant to the preceding sentence shall be exchangeable for Debt Securities
registered in such names and in such authorized denominations as the Depositary
for such global security shall direct. (Section 2.12)
CERTAIN COVENANTS
LIMITATIONS ON LIENS. So long as any Debt Securities remain outstanding
(but subject to defeasance as provided in the Indenture), the Company will not,
and will not permit any Subsidiary (as defined below) to, issue, assume or
guarantee any Indebtedness (as defined below) which is secured by a mortgage,
pledge, security interest, lien or encumbrance (each a "lien") upon any property
or assets of the Company or such Subsidiary or any shares of stock of or
Indebtedness issued by any Subsidiary (whether such property, assets, shares of
stock or Indebtedness are now owned or hereafter acquired) without effectively
providing that, for so long as such lien shall continue in existence with
respect to such secured Indebtedness, the Debt Securities (together with, if the
Company shall so determine, any other Indebtedness of the Company ranking
equally with the Debt Securities) shall be equally and ratably secured by a lien
ranking ratably with or equal to (or at the Company's option prior to) such
secured Indebtedness, except that the foregoing shall not apply to the
following:
(a) liens on the property, assets, shares of stock or Indebtedness of
any person existing at the same time such person becomes a Subsidiary;
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(b) liens on the property, assets, shares of stock or Indebtedness of
a person existing at the time such person is merged into or consolidated
with the Company or a Subsidiary or at the time all or substantially all of
such property, assets or shares of stock of such person are purchased,
leased or otherwise acquired by the Company or such Subsidiary;
(c) subject to certain conditions, liens existing at the time of
acquisition of the property or assets affected thereby by the Company or a
Subsidiary, or liens to secure the payment of all or any part of the
purchase price of such property or assets or to secure any Indebtedness
incurred, assumed or guaranteed by the Company or a Subsidiary prior to, at
the time of, or within one year after the acquisition of such property or
assets (or in the case of real property, the completion of construction
(including any improvements on an existing property or asset) or
commencement of full operation of such property or asset, whichever is
later) which Indebtedness is incurred, assumed or guaranteed for the
purpose of financing all or any part of the purchase price thereof or, in
the case of real property, construction or improvements thereon;
(d) liens to secure Indebtedness of a Subsidiary to the Company or
another Subsidiary;
(e) liens in favor of the United States or any State thereof, or any
department, agency or instrumentality or political subdivision of the
United States or any State thereof, or in favor of any other country, or
any political subdivision thereof, to secure partial, progress, advance or
other payments pursuant to any contract, statute, rule or regulation or to
secure any Indebtedness incurred or guaranteed for the purpose of financing
all or any part of the purchase price (or, in the case of real property,
the cost of construction or improvement) of the property or assets subject
to such liens (including, but not limited to, liens incurred in connection
with pollution control, industrial revenue or similar financing);
(f) pledges, liens or deposits under worker's compensation or similar
legislation and liens or judgments thereunder which are not currently
dischargeable, or in connection with bids, tenders, contracts (other than
for the payment of money) or leases to which the Company or any Subsidiary
is a party, or to secure the public or statutory obligations of the Company
or any Subsidiary, or in connection with obtaining or maintaining
self-insurance or to obtain the benefits of any law, regulation or
arrangement pertaining to unemployment insurance, old age pensions, social
security or similar matters, or to secure surety, performance, appeal or
customs bonds to which the Company or any Subsidiary is a party, or in
litigation or other proceedings such as, but not limited to, interpleader
proceedings, and other similar pledges, liens or deposits made or incurred
in the ordinary course of business;
(g) certain liens created by or resulting from certain litigation or
other proceedings, including certain liens arising out of certain judgments
or awards or liens incurred for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding;
(h) liens for certain taxes or assessments or governmental charges or
levies, landlord's liens, certain liens of carriers, mechanics and
materialman, certain statutory liens of banks and other financial
institutions, and liens and charges incidental to the conduct of the
business of the Company or any Subsidiary, or the ownership of their
property or assets, which were not incurred in connection with the
borrowing of money and which do not, in the opinion of the Board of
Directors of the Company, materially impair the use of such property or
assets in the operation of the business of the Company or such Subsidiary
or the value of such property or assets for the purposes thereof;
(i) liens not permitted by the foregoing clauses (a) to (h),
inclusive, if at the time of, and after giving effect to, the creation or
assumption of such lien, the aggregate amount of all outstanding
Indebtedness of the Company and its Subsidiaries (without duplication)
secured by all liens not so permitted by the foregoing clauses (a) through
(i), inclusive, together with the Attributable Debt (as defined below) in
respect of Sale and Lease-Back Transactions (as defined below) permitted by
paragraph (a) under "LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS" below
does not exceed 10% of Consolidated Net Tangible Assets (as defined below);
or
(j) subject to certain conditions, any extension, renewal or
replacement (or successive extensions, renewals or replacements), in whole
or in part, of any lien referred to in the foregoing clauses (a) to (e),
inclusive. (Section 3.9)
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The Company will not, and
will not permit any Subsidiary to, enter into any Sale and Lease-Back
Transaction unless (a) the Company or such Subsidiary would, at the time of
entering into a Sale and Lease-Back Transaction, be entitled to incur
Indebtedness secured by a lien on the property or assets to be leased in an
amount at least equal to the Attributable Debt in respect of such transaction,
without equally and ratably securing the Debt Securities pursuant to the
provisions described under "Limitations on Liens" above, or (b) the direct or
indirect proceeds of the sale of the property or assets to be leased are at
least equal to the fair value of such property or assets (as determined by the
Company's Board of Directors) and an amount equal to the net proceeds from the
sale of the property or assets so leased
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is applied, within 90 days of the effective date of such transaction, (i) to the
purchase or acquisition (or, in the case of real property, commencement of
construction) of property or assets or (ii) to the retirement or repayment
(other than at maturity or pursuant to a mandatory sinking fund or mandatory
redemption provision) of Debt Securities or of Funded Indebtedness (as defined
below) of the Company ranking on a parity with or senior to the Debt Securities
or of Funded Indebtedness of a consolidated Subsidiary (subject to credits for
certain voluntary retirement of Funded Indebtedness and certain delivery of Debt
Securities to the Trustee for retirement and cancellation). (Section 3.10)
DEFINITIONS. "ATTRIBUTABLE DEBT" means in connection with a Sale and
Lease-Back Transaction, as of any particular time, the aggregate of present
values (discounted at a rate per annum equal to the average interest borne by
all outstanding Debt Securities determined on a weighted average basis and
compounded semi-annually) of the obligations of the Company or any Subsidiary
for net rental payments during the remaining term of the applicable lease
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). The term "net rental payments" under any
lease of any period shall mean the sum of the rental and other payments required
to be paid in such period by the lessee thereunder, not including, however, any
amounts required to be paid by such lessee (whether or not designated as rental
or additional rental) on account of maintenance and repairs, reconstruction,
insurance, taxes, assessment, water rates or similar charges required to be paid
by such lessee thereunder or any amounts required to be paid by such lessee
thereunder contingent upon the amount of sales, maintenance and repairs,
reconstruction, insurance, taxes, assessments, water rates or similar charges.
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any date, the total assets
appearing on the most recently prepared consolidated balance sheet of the
Company and its Subsidiaries as of the end of a fiscal quarter of the Company,
prepared in accordance with generally accepted accounting principles, less (a)
all current liabilities as shown on such balance sheet and (b) all intangible
assets shown on such balance sheet. "Intangible assets" means the value (net of
any applicable reserves), as shown on or reflected in such balance sheet of: (i)
all trade names, trademarks, licenses, patents, copyrights and goodwill; (ii)
organizational costs; and (iii) deferred charges (other than prepaid items such
as insurance, taxes, interest, commissions, rents and similar items and tangible
assets being amortized); but in no event shall the term "intangible assets"
include product development costs.
"FUNDED INDEBTEDNESS" means any Indebtedness maturing by its terms more
than one year from the date of the determination thereof, including any
Indebtedness renewable or extendible at the option of the obligor to a date
later than one year from the date of the determination thereof.
"INDEBTEDNESS" means, without duplication, (a) all obligations for borrowed
money, (b) all obligations evidenced by debentures, notes or other similar
instruments, (c) all obligations in respect of letters of credit or bankers
acceptances or similar instruments (or reimbursement obligations with respect
thereto), (d) all obligations to pay the deferred purchase price of property of
services, except trade accounts payable arising in the ordinary course of
business, (e) all obligations as lessee which are capitalized in accordance with
generally accepted accounting principles, and (f) all Indebtedness of others
guaranteed by the Company or any of its Subsidiaries or for which the Company or
any of its Subsidiaries is legally responsible or liable (whether by agreement
to purchase indebtedness of, or to supply funds or to invest in, others).
"SALE AND LEASE-BACK TRANSACTION" means an arrangement with any person
providing for the leasing by the Company or a Subsidiary of any property or
asset whereby such property or asset has been or is to be sold or transferred by
the Company or a Subsidiary to such person; provided, however, that the
foregoing shall not apply to any such arrangement involving a lease for a term,
including renewal rights, for not more than three years.
"SUBSIDIARY" means any corporation, association, partnership, joint venture
or other business entity of which at least a majority of the total voting power
of outstanding securities or other interests entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time directly or indirectly owned or controlled by
the Company or by one or more Subsidiaries or by the Company and one or more
Subsidiaries; provided, however, that the term "Subsidiary" shall not include
the joint venture between Cone Mills (Mexico), S.A. de C.V. and Compania
Industrial de Parras, S.A. de C.V. or any other partnership or joint venture
substantially all the property of which is located, or substantially all of the
business of which is carried on, outside the United States of America.
MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE
The Indenture provides that the Company will not merge or consolidate with
any other person or sell, lease or convey all or substantially all of its assets
to any person unless (i) either the Company shall be the continuing corporation,
or the resulting, surviving or transferee person shall be a corporation
organized and existing under the laws of the United States or a State thereof or
the District of Columbia and shall expressly assume the payment of principal of,
premium, if any, and
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interest on the Debt Securities and the performance and observance of all of the
covenants and agreements under the Indenture to be performed or observed by the
Company, and (ii) immediately after such merger, consolidation, sale, lease or
conveyance, the Company or such resulting, surviving or transferee person shall
not be in default in the performance or observance of any covenant or agreement
contained in the Indenture to be performed or observed by the Company or such
resulting, surviving or transferee person.
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any series issued
under the Indenture is defined in the Indenture as being: default for 30 days in
payment of any interest upon any Debt Securities of such series; default in any
payment of principal or premium, if any, upon any Debt Securities of such series
(including any sinking fund payment); default by the Company in performance of
any other of the covenants or agreements in respect of the Debt Securities of
such series or the Indenture which shall not have been remedied for a period of
90 days after written notice to the Company by the Trustee or the holders of at
least 25% of the principal amount of all Debt Securities of all affected series,
specifying that such notice is a "Notice of Default" under the Indenture;
default by the Company in the payment at the final maturity thereof, after the
expiration of any applicable grace period, of principal of, premium, if any, or
interest on indebtedness for money borrowed in the principal amount then
outstanding of $15,000,000 or more, or acceleration of any indebtedness in such
principal amount so that it becomes due and payable prior to the date on which
it would otherwise have become due and payable and such acceleration is not
rescinded within ten business days after notice to the Company by the Trustee or
the holders of at least 25% of the principal amount of all of the Debt
Securities at the time outstanding (treated as one class); certain events
involving bankruptcy, insolvency or reorganization of the Company; or any other
Event of Default established for the Debt Securities of such series as set forth
in the accompanying Prospectus Supplement. (Section 4.1) The Indenture provides
that the Trustee shall transmit notice of any uncured default under the
Indenture with respect to any series, within 90 days after the occurrence of
such default, to the holders of Debt Securities of each affected series, except
that the Trustee may withhold notice to the holders of any series of the Debt
Securities of any default (except in payment of principal of, premium, if any,
or interest on, such series of Debt Securities or any sinking or purchase fund)
if the Trustee considers it in the interest of the holders of such series of
Debt Securities to do so. (Section 4.11)
The Indenture provides that (a) if an Event of Default due to the default
in payment of principal of, premium, if any, or interest on, any series of Debt
Securities issued under the Indenture or due to the default in the performance
or breach of any other covenant or agreement of the Company applicable to the
Debt Securities of such series but not applicable to all outstanding Debt
Securities issued under the Indenture shall have occurred and be continuing,
either the Trustee or the holders of not less than 25% in principal amount of
the Debt Securities of each affected series issued under the Indenture and then
outstanding (each such series voting as a separate class) may declare the
principal of all Debt Securities of such affected series and interest accrued
thereon to be due and payable immediately; and (b) if an Event of Default due to
a default in the performance of any other of the covenants or agreements in the
Indenture applicable to all outstanding Debt Securities issued thereunder and
then outstanding, or due to a default in payment at final maturity or upon
acceleration of indebtedness for money borrowed in the principal amount then
outstanding of $15,000,000 or more, or to certain events of bankruptcy,
insolvency and reorganization of the Company shall have occurred and be
continuing, either the Trustee or the holders of not less than 25% in principal
amount of all Debt Securities issued under the Indenture and then outstanding
(treated as one class) may declare the principal of all such Debt Securities and
interest accrued thereon to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except a continuing default in payment of principal of, premium, if any, or
interest on such Debt Securities) by the holders of a majority in principal
amount of the Debt Securities of all such affected series then outstanding (each
such series voting as a separate class or all such Debt Securities voting as a
single class, as the case may be). (Sections 4.1 and 4.10)
The holders of a majority in principal amount of the Debt Securities of
each series then outstanding and affected (with each series voting as a separate
class) shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee with respect to the Debt
Securities of such series under the Indenture, subject to certain limitations
specified in the Indenture, provided that the holders of such Debt Securities
shall have offered to the Trustee reasonable indemnity against expenses and
liabilities. (Sections 4.9 and 5.2(d))
The Indenture provides that no holder of Debt Securities of any series may
institute any action against the Company under the Indenture (except actions for
payment of overdue principal, premium, if any, or interest) unless such holder
previously shall have given to the Trustee written notice of default and
continuance thereof and unless the holders of not less than 25% in principal
amount of the Debt Securities of each affected series (with each series voting
as a separate class) issued under the Indenture and then outstanding shall have
requested the Trustee to institute such action and shall have offered the
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Trustee reasonable indemnity, and the Trustee shall not have instituted such
action within 60 days of such request, and the Trustee shall not have received
direction inconsistent with such written request by the holders of a majority in
principal amount of the Debt Securities of each affected series (with each
series voting as a separate class) issued under such Indenture and then
outstanding. (Sections 4.6 and 4.7)
The Indenture requires the annual filing by the Company with the Trustee of
a written statement as to compliance with the covenants and agreements contained
in the Indenture. (Section 3.5)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under the Indenture as
set forth below.
The Company may discharge the Indenture with respect to any series of Debt
Securities issued under the Indenture which have not already been delivered to
the Trustee for cancellation and which have either become due and payable or are
by the terms due and payable within one year (or which may be called for
redemption within one year) by irrevocably depositing with the Trustee cash
and/or direct obligations of the United States as trust funds in an amount
certified to be sufficient to pay at maturity (or upon redemption) the principal
of, premium, if any, and interest on such Debt Securities. However, the Company
may not thereby avoid its duty to register the transfer or exchange of such
series of Debt Securities, to replace any mutilated, destroyed, lost or stolen
Debt Securities of such series or to maintain an office or agency in respect of
such series of Debt Securities. (Section 9.1)
In the case of any series of Debt Securities in respect of which the exact
amounts of principal of, premium, if any, and interest due on such series can be
determined at the time of making the deposit referred to below, the Company at
its option at any time may also (i) discharge any and all of its obligations to
holders of such series of Debt Securities issued under the Indenture
("defeasance"), but may not thereby avoid its duty to register the transfer or
exchange of such series of Debt Securities, to replace any mutilated, destroyed,
lost, or stolen Debt Securities of such series or to maintain an office or
agency in respect of such series of Debt Securities or (ii) be released with
respect to any outstanding series of Debt Securities issued under the Indenture
from the obligations imposed by the covenants described under the captions
"Certain Covenants" and "Merger, Consolidation, Sale, Lease, or Conveyance"
above and omit to comply with such covenants without creating an Event of
Default ("covenant defeasance"). Defeasance or covenant defeasance may be
effected only if, among other things: (i) the Company irrevocably deposits with
the Trustee cash and/or direct obligations of the United States as trust funds
in an amount certified by a nationally recognized firm of independent public
accountants to be sufficient to pay each installment of principal of, premium,
if any, and interest on all outstanding Debt Securities of such series issued
under the Indenture on the dates such installments of principal, premium, if
any, and interest are due; (ii) no default or Event of Default shall have
occurred and be continuing on the date of the deposit referred to in clause (i)
or, in respect of certain events of bankruptcy, insolvency or reorganization,
during the period ending on the 91st day after the date of such deposit (or any
longer applicable preference period); and (iii) the Company delivers to the
Trustee an opinion of counsel to the effect that the holders of such series of
Debt Securities will not recognize income, gain or loss for United States
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must be based on a ruling of the Internal Revenue
Service or a change in the United States federal income tax law occurring after
the date of the Indenture). (Sections 9.2, 9.3, 9.4 and 9.5)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority of principal amount
of the Debt Securities at the time outstanding of all series affected (voting as
one class), to modify the Indenture or any supplemental indenture or the rights
of the holders of the Debt Securities except that no such modification shall (i)
extend the final maturity of any of the Debt Securities or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof, or reduce the
amount of any original issue discount security payable upon acceleration or
provable in bankruptcy or impair or affect the right or any holder of the Debt
Securities to institute suit for the payment thereof without the consent of the
holder of each of the Debt Securities so affected or (ii) reduce the aforesaid
percentage in principal amount of Debt Securities, the consent of the holders of
which is required for any such modification, without the consent of the holders
of all Debt Securities then outstanding. (Section 7.2)
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CONCERNING THE TRUSTEE
The Trustee may hold Debt Securities, act as a depository for funds of,
make loans to, or perform other services for, the Company and its subsidiaries
as if it were not the Trustee. (Section 5.4)
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities being offered hereby in four ways:
(i) directly to purchasers, (ii) through agents, (iii) through underwriters and
(iv) through dealers. Debt Securities may be sold from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Debt Securities may be solicited directly by the Company
or by agents designated by the Company from time to time. Any such agent, who
may be deemed to be an underwriter as that term is defined in the Securities
Act, involved in the offer or sale of the Debt Securities in respect of which
this Prospectus is delivered, will be named, and any commissions payable by the
Company to such agent will be set forth, in the accompanying Prospectus
Supplement. Unless otherwise indicated in the accompanying Prospectus
Supplement, any such agent will be acting on a reasonable efforts basis for the
period of its appointment. The Company shall have the sole right to accept
offers to purchase Debt Securities and may reject any proposed offer in whole or
in part. Agents shall have the right, in their sole discretion, to reject any
offer received by them to purchase the Debt Securities in whole or in part.
Agents may be entitled under agreements which may be entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act, and may be customers of, engage in
transactions with or perform services for the Company in the ordinary course of
business.
If an underwriter or underwriters are utilized in the offer or sale of the
Debt Securities in respect of which this Prospectus is delivered, the Company
will execute an underwriting agreement with such underwriters at the time of the
sale to them and the names of the underwriters and the terms of the transaction
will be set forth in the accompanying Prospectus Supplement, which will be used
by the underwriters to make resales of the Debt Securities in respect of which
the Prospectus is delivered to the public. The underwriters may be entitled,
under the relevant underwriting agreement, to indemnification by the Company
against certain liabilities, including liabilities under the Securities Act.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities to
the public at varying prices to be determined by such dealer at the time of
resale. Dealers may be entitled to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act.
The place and time of delivery of the Debt Securities in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
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EXPERTS
The consolidated balance sheets of the Company as of January 2, 1994 and
January 3, 1993 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended January 2, 1994, and the related financial statement schedules, which
appear in the Company's annual report on Form 10-K for the year ended January 2,
1994, have been incorporated by reference in this Prospectus in reliance upon
the reports, dated February 11, 1994 except for Note 17 as to which the date is
March 8, 1994, of McGladrey & Pullen, LLP, independent accountants, incorporated
by reference herein, and upon the authority of such firm as experts in
accounting and auditing.
The consolidated balance sheet of Golding Industries, Inc. and Subsidiary
as of December 31, 1993 and the consolidated statements of operations,
shareholder's deficit and cash flows for the year then ended, incorporated by
reference in this Prospectus, which appear in the Company's Current Report on
Form 8-K dated December 2, 1994 as amended by the Current Report on Form 8-K/A
dated February 13, 1995, have been incorporated in this Prospectus in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, incorporated
by reference herein, and given on the authority of that firm as experts in
accounting and auditing.
LEGAL OPINIONS
The validity of the Debt Securities offered hereby will be passed upon for
the Company by Neil W. Koonce, Esq., Vice President and General Counsel for the
Company. Certain legal matters relating to the Debt Securities offered hereby
will be passed upon for the Company by Schell Bray Aycock Abel & Livingston
L.L.P., Greensboro, North Carolina. Doris R. Bray, a partner of Schell Bray
Aycock Abel & Livingston L.L.P., is a director of the Company and beneficially
owns 16,000 shares of Common Stock of the Company.
The validity of the Debt Securities offered hereby will be passed upon for
any underwriters, dealers or agents by King & Spalding, Atlanta, Georgia. King &
Spalding will rely upon the opinion of Schell Bray Aycock Abel & Livingston
L.L.P. as to all matters involving North Carolina law.
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