Page 1 of 39
Index to Exhibits-Pages 25-34
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission file number 1-3634
CONE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 North Elm Street, Greensboro, North Carolina 27408
(Address of principal executive offices) (Zip Code)
(910) 379-6220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding as of August 1,
1996: 27,439,733 shares.
Page 1
<PAGE>
FORM 10-Q
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and twenty-six weeks ended
June 30, 1996 and July 2, 1995 (Unaudited) . 3
Consolidated Balance Sheets
June 30, 1996 and July 2, 1995
(Unaudited) and December 31, 1995. . . . . . 4 & 5
Consolidated Statements of Stockholders' Equity
Twenty-six weeks ended June 30, 1996
and July 2, 1995 (Unaudited) . . . . . . . . 6
Consolidated Statements of Cash Flows
Twenty-six weeks ended June 30, 1996
and July 2, 1995 (Unaudited) . . . . . . . . 7
Notes to Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 22
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 24
Page 2
<PAGE>
FORM 10-Q
PART I
<TABLE>
Item 1.
<S> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 208,119 $ 232,952 $ 407,401 $ 459,157
Operating Costs and Expenses:
Cost of sales 168,810 191,305 330,046 377,253
Selling and administrative 22,391 21,950 43,507 42,777
Depreciation 7,009 7,201 14,145 14,402
Gain on sale of division (9) - (4,684) -
198,201 220,456 383,014 434,432
Income from Operations 9,918 12,496 24,387 24,725
Other Income (Expense):
Interest income 77 160 173 385
Interest expense (4,115) (4,109) (7,952) (7,110)
(4,038) (3,949) (7,779) (6,725)
Income before Income Taxes and Equity in
Losses of Unconsolidated Affiliates 5,880 8,547 16,608 18,000
Income Taxes 1,764 2,996 5,519 6,300
Income before Equity in Losses of
Unconsolidated Affiliates 4,116 5,551 11,089 11,700
Equity in Losses of Unconsolidated Affiliates (414) (6,423) (202) (8,938)
Net Income (Loss) $ 3,702 $ (872) $ 10,887 $ 2,762
Income (Loss) Available to Common Shareholders:
Net Income (Loss) $ 2,982 $ (1,592) $ 9,447 $ 1,370
Earnings (Loss) Per Share - Fully Diluted:
Net Income (Loss) $ .11 $ (.06) $ .34 $ .05
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 27,446 27,380 27,451 27,489
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
FORM 10-Q
<TABLE>
<S> <C> <C> <C>
Item 1.(continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
June 30, July 2, December 31,
ASSETS 1996 1995 1995
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 5,250 $ 2,284 $ 336
Accounts receivable - trade, less provision for
doubtful accounts $3,000; $3,000; $3,200 76,322 89,708 60,955
Inventories:
Greige and finished goods 95,528 80,937 84,822
Work in process 11,848 16,122 14,786
Raw materials 12,126 23,383 29,274
Supplies and other 32,003 33,212 33,492
151,505 153,654 162,374
Other current assets 16,434 7,778 10,227
Total Current Assets 249,511 253,424 233,892
Investments in Unconsolidated Affiliates 36,656 32,392 37,680
Other Assets 41,721 39,150 45,540
Property, Plant and Equipment:
Land 18,398 19,766 19,615
Buildings 81,821 79,452 89,128
Machinery and equipment 307,497 302,580 322,361
Other 31,004 32,073 34,292
438,720 433,871 465,396
Less accumulated depreciation 195,315 189,471 198,188
Property, Plant and Equipment-Net 243,405 244,400 267,208
$ 571,293 $ 569,366 $ 584,320
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<PAGE>
FORM 10-Q
<TABLE>
<S> <C> <C> <C>
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
June 30, July 2, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 1995
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ 10,143 $ 10,541 $ 8,875
Current maturities of long-term debt 11,105 389 11,236
Accounts payable - trade 34,802 39,770 40,023
Sundry accounts payable and accrued expenses 43,253 44,398 64,800
Income taxes payable 1,191 - -
Deferred income taxes 27,235 28,254 25,938
Total Current Liabilities 127,729 123,352 150,872
Long-Term Debt 161,439 172,632 161,782
Deferred Items:
Deferred income taxes 40,041 39,343 40,836
Other deferred items 9,967 6,438 8,705
50,008 45,781 49,541
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares - Employee Stock Ownership Plan 38,395 38,395 38,395
Class B Preferred Stock - no par value; authorized
5,000,000 shares - - -
Common Stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 27,439,733 shares;
1995, 27,380,409 shares 2,744 2,738 2,738
Capital in excess of par 71,579 71,090 71,090
Retained earnings 127,861 125,872 119,825
Currency translation adjustment (8,462) (10,494) (9,923)
Total Stockholders' Equity 232,117 227,601 222,125
$ 571,293 $ 569,366 $ 584,320
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at th
</TABLE>
See Notes to Consolidated Financial Statements.
Page 5
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JUNE 30, 1996 AND JULY 2, 1995
(amounts in thousands, except share data)
(Unaudited)
Class A Preferred
Stock Common Stock
Shares Amount Shares Amount
Balance, December 31, 1995 383,948 $ 38,395 27,380,409 $ 2,738
Net income - - - -
Currency translation adjustment -
Sale of stock of affiliate - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 61,800 6
Purchase of common shares - - (2,476) -
Balance, June 30, 1996 383,948 $ 38,395 27,439,733 $ 2,744
Class A Preferred
Stock Common Stock
Shares Amount Shares Amount
Balance, January 1, 1995 383,948 $ 38,395 27,403,621 $ 2,740
Net income - - - -
Currency translation loss (net
of income tax benefit of $3,630) - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Options exercised - - 4,000 1
Purchase of common shares - - (27,212) (3)
Balance, July 2, 1995 383,948 $ 38,395 27,380,409 $ 2,738
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JUNE 30, 1996 AND JULY 2, 1995
(amounts in thousands, except share data)
(Unaudited)
Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment
Balance, December 31, 1995 $ 71,090 $ 119,825 $ (9,923)
Net income - 10,887 -
Currency translation adjustment -
Sale of stock of affiliate - - 1,461
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,851) -
Common Stock:
Options exercised 515 - -
Purchase of common shares (26) - -
Balance, June 30, 1996 $ 71,579 $ 127,861 $ (8,462)
Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment
Balance, January 1, 1995 $ 71,354 $ 125,771 $ (1,380)
Net income - 2,762 -
Currency translation loss (net
of income tax benefit of $3,630) - - (9,114)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,661) -
Common Stock:
Options exercised 25 - -
Purchase of common shares (289) - -
Balance, July 2, 1995 $ 71,090 $ 125,872 $ (10,494)
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6a
<PAGE>
FORM 10-Q
Item 1. (continued)
<TABLE>
<S> <C> <C>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 30, 1996 July 2, 1995
(Unaudited) (Unaudited)
Cash Flows Used In Operating Activities $ (2,442) $ (3,910)
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates - (16,150)
Proceeds from sale of division (a) 40,053 -
Capital expenditures (12,072) (21,943)
Other 2,561 760
Net cash provided by (used in) investing activities 30,542 (37,333)
Cash Flows from Financing Activities:
Decrease in checks issued in excess of deposits (21,402) (859)
Principal payments - long-term debt (696) (97,189)
Proceeds from long-term debt borrowings - 48,000
Proceeds from debentures issued - 99,831
Other (1,088) (7,414)
Net cash (used in) provided by financing activities (23,186) 42,369
Net increase in cash 4,914 1,126
Cash at Beginning of Period 336 1,158
Cash at End of Period $ 5,250 $ 2,284
(a)Divestiture:
Inventories $ 14,926
Property, plant and equipment 21,516
Other (1,073)
Gain on sale 4,684
Proceeds from sale $ 40,053
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 8,043 $ 7,417
Income taxes, net of refunds $ 4,872 $ 4,032
Supplemental Schedule of Noncash Investing and Financing Activities:
Receivable recorded from sale of division $ 4,449 $ -
</TABLE>
See Notes to Consolidated Financial Statements.
Page 7
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") condensed
consolidated financial statements for June 30, 1996 and
July 2, 1995 are unaudited, but in the opinion of
management reflect all adjustments necessary to present
fairly the consolidated balance sheets of Cone Mills
Corporation and Subsidiaries at June 30, 1996, July 2,
1995, and December 31, 1995 and the related consolidated
statements of income for the respective thirteen and
twenty-six weeks ended June 30, 1996 and July 2, 1995,
and stockholders' equity and cash flows for the twenty-
six weeks then ended. All adjustments are of a normal
recurring nature. The results are not necessarily
indicative of the results to be expected for the full
year.
These statements should be read in conjunction with the
audited financial statements and related notes included
in the Company's annual report on Form 10-K for fiscal
1995.
Substantially all components of textile inventories are
valued at the lower of cost or market using the last-in,
first-out (LIFO) method. Nontextile inventories are
valued at the lower of average cost or market. Because
amounts for inventories under the LIFO method are based
on an annual determination of quantities as of the year-
end, the inventories at June 30, 1996 and July 2, 1995
and related consolidated statements of income for the
thirteen and twenty-six weeks then ended are based on
certain estimates relating to quantities and cost as of
the end of the fiscal year.
Page 8
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Sale of Accounts Receivable
The Company has an agreement with the subsidiary of a
major financial institution which allows the sale without
recourse of up to $50 million of an undivided interest in
eligible trade receivables. This agreement has been
extended to June 1997. Accounts receivable is shown net
of $38 million sold at June 30, 1996, net of $31 million
sold at July 2, 1995, and net of $40 million sold at
December 31, 1995. As a result of the sale of the
interest in these receivables, cash flows provided by
operating activities include decreases of $2 million and
$19 million for the twenty-six weeks ended June 30, 1996
and July 2, 1995, respectively.
Note 3. Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliated companies are
accounted for by the equity or cost method depending upon
ownership and the Company's ability to exert influence.
In 1995, the Company accounted for the results of CIPSA
by the equity method. Based upon a reduction in
ownership to 18% and certain other factors, the Company
will account for its investment in CIPSA by the cost
method in 1996 and future periods.
In December 1994, the Mexican government devalued the
peso and allowed it to freely trade against the U.S.
dollar resulting in a substantial decline in value of the
peso versus the U.S. dollar. On January 1, 1995, the
peso was trading at 4.94 pesos per U.S. dollar versus an
exchange rate of approximately 3.45 prior to the
devaluation. The peso continued to devalue versus the
U.S. dollar in the first quarter of 1995 and was trading
at an exchange rate of 6.78 pesos per U.S. dollar on
April 2, 1995. The devaluation of the peso created
foreign currency transaction losses for the Company's
Mexican affiliates, primarily related to debt denominated
in U.S. dollars for Compania Industrial de Parras S.A.,
("CIPSA"). Primarily due to the devaluation of the peso,
the Company recognized a $6.4 million loss as its pro
rata share of these losses in its second quarter 1995
income statement and an $8.9 million loss as its pro rata
share of these losses in its twenty-six weeks 1995 income
statement.
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Long-Term Debt
<TABLE>
<S> <C> <C> <C>
June 30, 1996
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $10,714 $ 64,286
8-1/8% Debentures 96,132 - 96,132
Capital Lease Obligation 1,291 353 938
Other 121 38 83
Total $172,544 $11,105 $161,439
July 2, 1995
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
8-1/8% Debentures 95,688 - 95,688
Capital Lease Obligation 1,533 155 1,378
Industrial Revenue Bonds 645 199 446
Other 155 35 120
Total $173,021 $ 389 $172,632
</TABLE>
Note 5. Class A Preferred Stock
The dividend rate for Class A Preferred Stock is 7.50%,
which is payable March 31, 1997.
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
Note 6. Stock Option Plans
<TABLE>
<S> <C> <C> <C> <C>
1995 Exercise 1996 Exercise
Number Price Number Price
Of Weighted Of Weighted
Options Average Options Average
Outstanding -
beginning
of year 1,086,000 $ 12.66 1,047,000 $12.55
Granted 7,000 11.63 6,000 12.00
Exercised (4,000) 6.50 (61,800) 6.46
Forfeited (37,000) 15.63 (68,000) 13.97
Outstanding -
end of period 1,052,000 $ 12.57 923,200 $12.85
Exercisable at
end of period 424,050 530,600
</TABLE>
The following table summarizes information about stock options
outstanding at June 30, 1996:
<TABLE>
<S> <C> <C> <C>
Number Number
Exercise Outstanding Exercisable Expiration
Price at 6/30/96 at 6/30/96 Date
$ 5.250 76,200 76,200 June, 1999
$ 6.500 36,000 36,000 February, 2002
$11.625 7,000 7,000 May, 2002
$12.000 379,000 151,600 November, 2004
$12.000 6,000 6,000 May, 2003
$12.875 6,000 6,000 May, 2001
$15.625 413,000 247,800 February, 2003
923,200 530,600
</TABLE>
Page 11
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Earnings (Loss) Per Share
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
June 30, 1996 July 2, 1995
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Income (loss) from
continuing operations $ 3,702 $ 3,702 $( 872) $( 872)
Less: Class A Preferred
dividends (720) (720) ( 720) ( 720)
Adjusted net income (loss) $ 2,982 $ 2,982 $(1,592) $(1,592)
Weighted average common
shares outstanding 27,407 27,407 27,380 27,380
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased 39 39 - -
Weighted average common
shares and common share
equivalents outstanding 27,446 27,446 27,380 27,380
Earnings (loss) per common
share and common share
equivalent $ .11 $ .11 $ (.06) $ (.06)
</TABLE>
Page 12
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Earnings (Loss) Per Share (continued)
<TABLE>
<S> <C> <C> <C> <C>
Twenty-six Twenty-six
Weeks Ended Weeks Ended
June 30, 1996 July 2, 1995
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Income from
continuing operations $10,887 $10,887 $ 2,762 $ 2,762
Less: Class A Preferred
dividends (1,440) (1,440) (1,392) (1,392)
Adjusted net income $ 9,447 $ 9,447 $ 1,370 $ 1,370
Weighted average common
shares outstanding 27,394 27,394 27,380 27,380
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased 57 57 84 109
Weighted average common
shares and common share
equivalents outstanding 27,451 27,451 27,464 27,489
Earnings per common
share and common share
equivalent $ .34 $ .34 $ .05 $ .05
Primary and fully diluted earnings (loss) per share have been
computed by dividing the net earnings (loss) available to
common stockholders by the sum of the weighted average common
shares and common share equivalents outstanding.
</TABLE>
Page 13
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Sale of Division
On January 22, 1996, the Company completed the sale of
its Olympic Products Division to British Vita PLC. The
Company sold all inventory and substantially all of the
property, plant and equipment of this division. Proceeds
of $40,053,000 had been realized at June 30, 1996. Gain
from disposal of this division was recognized in the
Company's first quarter 1996 financial statements.
Sales revenues of the Olympic Products Division for 1995
were $94.7 million.
Page 14
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter Ended June 30, 1996 Compared with Second
Quarter Ended July 2, 1995.
U.S. consumer spending in apparel and home furnishings
continued to grow in the second quarter of 1996; however,
manufacturers were adversely affected by reductions in
softgoods inventories, which were disruptive to textile
industry operating schedules and pricing particularly in the
apparel fabrics industry. In addition, weak consumer
preference for printed home furnishings fabrics adversely
affected the decorative print business.
Cone Mills had second quarter 1996 sales of $208.1 million,
down 10.7%, as compared with sales of $233.0 million for the
second quarter of 1995. After eliminating the sales of the
Olympic Products Division, which was sold in January 1996,
second quarter 1995 sales were $209.1 million, similar to 1996
amounts. Increased denim and export sales were offset by lower
sales in specialty sportswear products and decorative prints.
Export sales were $53.2 million, or 26% of total sales, as
compared with $41.8 million, or 18% of sales, for the second
quarter of 1995.
The Company had net income of $3.7 million, or $.11 per share
after preferred dividends, for the second quarter of 1996,
including an after-tax charge of $.4 million, from equity in
losses of unconsolidated Mexican affiliate. For comparison,
second quarter 1995 had a net loss of $.9 million or $.06 loss
per share, which included a $6.4 million after-tax charge,
from equity in losses of unconsolidated Mexican affiliates,
arising primarily from the effect of the peso devaluation on
Cone's minority investment in Compania Industrial de Parras
S.A. de C.V. (CIPSA). Income before equity in losses of
unconsolidated affiliates was $4.1 million for the most recent
quarter as compared with $5.6 million for the second quarter
of 1995.
Gross profit for second quarter of 1996 (net sales less cost
of sales and depreciation) was 15.5% of sales as compared with
14.8% for the previous year. The increase was primarily the
result of improved margins in denims and the elimination of
Olympic operations which had low gross profit margins.
Page 15
<PAGE>
FORM 10-Q
Item 2. (continued)
Business Segment. Cone Mills operates in two principal
business segments, apparel fabrics and home furnishings
products. The following table sets forth certain net sales and
operating income information.
<TABLE>
<S> <C> <C> <C> <C>
Second Quarter
1996 1995
(Dollar amounts in millions)
NET SALES (1)
Apparel $ 180.8 86.9% $ 178.1 76.5%
Home Furnishings 27.3 13.1 54.9 23.5
Total $ 208.1 100.0% $ 233.0 100.0%
OPERATING INCOME (LOSS)(2)
Apparel $ 13.0 7.2% $ 11.4 6.4%
Home Furnishings(3) (2.2) (8.0) 1.7 3.0
</TABLE>
(1) Net sales include Olympic's net sales of $23.9 million in
1995.
(2) Operating income (loss) excludes general corporate
expenses. Percentages reflect operating income (loss) as
a percentage of segment net sales.
(3) Operating income (loss) includes Olympic's operating
income of $.3 million in 1995.
Apparel Fabrics. Apparel fabric segment sales for the
second quarter of 1996 were $180.8 million, up 1.5% from
1995 amounts. Higher denim sales, which resulted from price
increases on slightly lower volume and improved mix, were
offset by lower specialty sportswear sales. Second quarter
1996 operating margins for the apparel segment were 7.2% of
sales, as compared with 6.4% in 1995. The cost per pound
paid by the Company for cotton increased slightly as
compared with 1995 amounts, but was offset by price
increases. Improved denim margins were partially offset by
lower operating results in specialty sportswear fabrics
product lines. Export sales, primarily denims, were up
28.4% compared with the previous year amounts. The
Company's U.S. denim manufacturing operations have
benefited from strong demand for value-added denims while
the Company's Mexican affiliates have not performed as well
due to the continued supply and demand imbalance in basic
denims.
Page 16
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. For the second quarter of 1996, home
furnishings segment sales were $27.3 million, down 11.7%
from 1995, excluding Olympic. Both the Cone Finishing and
Cone Decorative Fabrics Divisions had lower sales in 1996
resulting from weak furniture markets and customer
preference for fabrics other than prints. The home
furnishings segment, excluding Olympic, had an operating
loss of $2.2 million compared with operating income of $1.4
million for the 1995 period. The loss was primarily the
result of the lower sales volume and operating at levels
substantially less than capacity.
Total Company selling and administrative expenses were $22.4
million, as compared with $22.0 million for second quarter of
1995. Selling and administrative expense increased to 10.8% of
1996 sales as compared with 9.4% for the previous year because
of a decline in sales arising primarily from the sale of
Olympic and lower than expected sales in remaining operations.
Current selling and administrative expenses support an
infrastructure for higher levels of business activity and
strategic growth initiatives including the new decorative
fabrics product lines, international and information
technology initiatives. Interest expense was $4.1 million in
both the 1996 and 1995 periods.
Income taxes as a percent of income before income taxes and
equity in losses of unconsolidated affiliates were 30% in the
second quarter of 1996, as compared with 35% for the second
quarter of 1995. The increase in export sales, where the
company continues to enjoy tax benefits from its foreign sales
corporation, together with lower earnings combined to produce
the lower overall tax rate in the current quarter.
The traditional seasonal slow-down in third quarter activity,
lack of strong fashion direction in decorative print markets,
and pipeline imbalances in specialty sportswear fabrics and
basic denims are expected to depress operating results for the
near term.
Six Months Ended June 30, 1996 Compared with Six Months Ended
July 2, 1995.
For the first six months of 1996, the Company experienced
strong demand for value-added denim apparel fabrics and weak
markets for specialty sportswear and home furnishings fabrics.
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
For the 1996 period, net sales were $407.4 million as compared
with $459.2 million for the first half of 1995. Excluding the
sales of Olympic, sales were $402.6 million and $411.8 million
respectively. Export sales, primarily denims, accounted for
26% of sales in 1996 compared with 17% for 1995.
Net income for six months 1996 was $10.9 million, or $.34 per
share after preferred dividends, including an after-tax gain
on the sale of Olympic of $3.0 million or $.11 per share. Net
income for the first half of 1995 was $2.8 million, or $.05
per share including an after-tax charge of $8.9 million, from
equity in losses of unconsolidated Mexican affiliates related
primarily to peso devaluations.
Gross profit for first half of 1996 (net sales less cost of
sales and depreciation) was 15.5% of sales, as compared with
14.7% for the previous year. The increase was primarily the
result of improved margins in denims and the elimination of
Olympic operations which had low gross profit margins.
Business Segment. Cone Mills operates in two principal
business segments, apparel fabrics and home furnishings
products. The following table sets forth certain net sales and
operating income information.
<TABLE>
<S> <C> <C> <C> <C>
First Six Months
1996 1995
(Dollar amounts in millions)
NET SALES (1)
Apparel $346.5 85.1% $348.4 75.9%
Home Furnishings 60.9 14.9 110.8 24.1
Total $407.4 100.0% $459.2 100.0%
OPERATING INCOME (2)
Apparel $ 26.0 7.5% $ 20.3 5.8%
Home Furnishings(3) .6 1.0 5.4 4.9
</TABLE>
(1) Net sales include Olympic's net sales of $4.8 million and
$47.3 million in 1996 and 1995, respectively.
(2) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
(3) Operating income includes Olympic's operating income of
$4.7 million and $.3 million in 1996 and 1995,
respectively.
Page 18
<PAGE>
FORM 10-Q
Item 2. (continued)
Apparel Fabrics. Apparel fabric segment sales for the first
half of 1996 were $346.5 million, similar to the 1995 amount
of $348.4 million. Higher denim sales, which resulted from
price increases on slightly lower volume and improved mix,
were more than offset by lower specialty sportswear sales.
First half 1996 operating margins for the apparel segment were
7.5% of sales as compared with 5.8% in 1995. Cotton cost
increased marginally from 1995 amounts but were offset by
price increases. Improved denim margins were partially offset
by lower operating results in specialty sportswear fabrics
product lines. Export sales, primarily denims, were up 32.8%
compared with the previous year amounts.
Home Furnishings. Excluding Olympic, first half 1996 home
furnishings segment sales were $56.1 million, down 11.5% from
1995. Both the Cone Finishing and Cone Decorative Fabrics
Divisions had lower sales in 1996 resulting from weak
furniture markets and customer preference for fabrics other
than prints. The home furnishings segment, excluding Olympic,
had an operating loss of $4.1 million compared with income of
$5.1 million for the 1995 period. The loss was primarily the
result of the lower sales volume and operating at levels
substantially less than capacity.
Total Company selling and administrative expenses were up
slightly to $43.5 million as compared with $42.8 million, but
increased from 9.3% of sales to 10.7% of sales for the most
recent period as discussed above.
Interest expense was up $.8 million in the period resulting
primarily from the Company's issuing $100 million of
investment grade bonds in the last month of the first quarter
of 1995.
Income taxes as a percent of taxable income were 33.2% for
first half 1996 compared with 35.0% for the first half of
1995. Both periods reflect tax benefits resulting from
operation of the Company's foreign sales corporation.
Liquidity and Capital Resources
The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of America (the "Term Loan"), its 8 1/8% Debentures issued on
Page 19
<PAGE>
FORM 10-Q
Item 2. (continued)
March 15, 1995 and due March 15, 2005 (the "Debentures"), and
stockholders' equity. Primary sources of liquidity are
internally generated funds, an $80 million Credit Agreement
with a group of banks with Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") as Agent Bank (the "Revolving
Credit Facility"), and a $50 million Receivables Purchase
Agreement (the "Receivables Purchase Agreement") with Delaware
Funding Corporation, an affiliate of Morgan Guaranty. On June
30, 1996, the Company had funds available of $92.0 million
under its Revolving Credit Facility and Receivables Purchase
Agreement.
For the first half of 1996, the Company generated $26.7
million from earnings before depreciation, amortization and
unconsolidated Mexican affiliate results, as compared with
$27.6 million for the first half of 1995. For the 1996 period,
the Company increased its investments in working capital which
resulted in net cash used in operations of $2.4 million.
During the first quarter of 1996, the Company sold Olympic
which provided in excess of $50 million of cash proceeds
including the collection of accounts receivable. Additional
uses of cash during the first half of 1996 included capital
spending of $12.1 million and the preferred stock dividend of
$2.9 million.
The Company believes that the proceeds from the sale of the
Olympic Products Division, together with Cone's 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.
On June 30, 1996, the Company's long-term capital structure
consisted of $161.4 million of long-term debt and $232.1
million of stockholders' equity. For comparison, at July 2,
1995, the Company had $172.6 million of long-term debt and
$227.6 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 43%
at the end of both the second quarters of 1996 and 1995.
Accounts receivable on June 30, 1996, were $76.3 million, down
from $89.7 million at July 2, 1995. At the end of the second
quarter of 1996, the Company had sold $38 million of accounts
receivable, an increase of $7 million from the amount sold at
the end of the first half of 1995. The decrease in accounts
receivable was primarily due to lower sales levels and the
Page 20
<PAGE>
FORM 10-Q
Item 2. (continued)
additional amount sold under the receivables purchase
agreement partially offset by an increase in average days
outstanding. Receivables, including those sold pursuant to
the Receivables Purchase Agreement, represented 51 days of
sales outstanding at June 30, 1996 compared with 48 days at
July 2, 1995.
Inventories on June 30, 1996, were $151.5 million, up
approximately $13 million from second quarter 1995 levels when
adjusted for the sale of Olympic inventories. The Company's
additional finished goods inventories were the result of lower
unit sales than anticipated.
Capital spending in 1996 was originally budgeted at $52
million with projects for new weaving machines, approximately
$4 million for computers, software and information systems and
the expansion of the jacquard weaving facility. First half
1996 expenditures were $12.1 million. Subsequently, at its
August 1996 meeting, the Board of Directors approved a
reduction in the 1996 capital budget to $42 million. This
reduction of $10 million reflects the recent adoption of new
weaving technology in the Company's relooming program that
will allow the Company to achieve modernization results at
lower levels of capital investment. Cone will redeploy savings
from the reduction of the capital budget to support general
corporate initiatives including global expansion, reduction of
debt and potential common stock repurchases pursuant to its
existing stock repurchase program.
The Company has agreements with CIPSA to purchase up to an
additional 33% of the outstanding common stock of Parras Cone
for an amount of $20 million or the August 1995 book value, if
CIPSA does not meet certain financial obligations.
Federal, state and local regulations relating to the workplace
and the discharge of materials into the environment continue
to change and, consequently, it is difficult to gauge the
total future impact of such regulations on the Company.
Existing government regulations are not expected to cause a
material change in the Company's competitive position,
operating results or planned capital expenditures. The Company
has an active environmental committee which fosters protection
of the environment and compliance with laws.
The Company is a party to various legal claims and actions.
Management believes that none of these claims or actions,
either individually or in the aggregate, will have a material
adverse effect on the financial condition of the Company.
Page 21
<PAGE>
FORM 10-Q
PART II
Item 3. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs") former employees of the Company, instituted a
class action suit against the Company and certain other
defendants in which the Plaintiffs asserted a variety of
claims related to the Cone Mills Corporation 1983 ESOP (the
"1983 ESOP") and certain other employee benefit plans
maintained by the Company. In March 1992, the United States
District Court in Greenville, South Carolina entered a
judgment in the amount of $15.5 million (including an
attorneys' fee award) against the Company with respect to an
alleged promise to make additional Company contributions to
the 1983 ESOP and all claims unrelated to the alleged promise
were dismissed. The Company, certain individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, sitting en banc, affirmed the prior conclusion
of a panel of three of its judges and unanimously reversed the
$15.5 million judgment and unanimously affirmed all of the
District Court's rulings in favor of the Company. However,
the Court of Appeals affirmed, by an equally divided court,
the District Court's holding that Plaintiffs should be allowed
to proceed on an alternative theory whether, subject to proof
of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an
enforceable obligation that could allow recovery on a theory
of equitable estoppel. Accordingly, the case was remanded to
the District Court for a determination of whether the
Plaintiffs could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by the
Company for summary judgment on the issues of equitable
estoppel and third-party beneficiary of contract which had
been remanded to it by the Court of Appeals. The court ruled
that the Plaintiffs could not forecast necessary proof of
detrimental reliance. The District Court, however, granted
Plaintiffs motion to amend the complaint insofar as they
sought to pursue a "new" claim for unjust enrichment, but
denied their motion to amend so far as they sought to add
claims for promissory estoppel and unilateral contract. The
court further denied the Company's motion to decertify the
class.
Page 22
<PAGE>
FORM 10-Q
Item 1. (continued)
The District Court held a hearing on July 24, 1995 to decide
on the merits Plaintiffs' lone remaining claim of unjust
enrichment, and in an order entered September 25, 1995, the
District Court dismissed that claim with prejudice. On
October 20, 1995, the Plaintiffs appealed to the Court of
Appeals from the April 19, 1995 and September 25, 1995 orders
of the District Court. Due to the uncertainties inherent in
the litigation process, it is not possible to predict the
ultimate outcome of this lawsuit. However, the Company has
defended this matter vigorously, and it is the opinion of the
Company's management that the probability is remote that this
lawsuit, when finally concluded, will have a material adverse
affect on the Company's financial condition or results of
operations.
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 or results of operations.
Item 4. Submission of Matters To A Vote Of Security Holders
Cone Mills Corporation's Annual Meeting of Shareholders
was held May 14, 1996. The proposals voted upon and the
results of the voting were as follows:
1. Election of two Class I Directors for a three-year term.
<TABLE>
<S> <C> <C> <C> <C> <C>
Broker
For Against Abstentions Withheld Non-Votes
John L. Bakane 22,417,475 183,680 0 0 N/A
Charles M. Reid 22,415,134 186,021 0 0 N/A
2. To approve the Amended and Restated 1992 Stock Plan.
Broker
For Against Abstentions Withheld Non-Votes
22,293,261 234,917 72,977 0 N/A
3. To approve the 1997 Senior Management Incentive Compensation Plan.
Broker
For Against Abstentions Withheld Non-Votes
22,309,484 207,567 84,104 0 N/A
Page 23
<PAGE>
FORM 10-Q
Item 4. (continued)
4. Ratification of the appointment of McGladrey & Pullen, LLP
as independent auditors for the Corporation for the fiscal
year ending December 29,1996.
Broker
For Against Abstentions Withheld Non-Votes
22,428,331 135,811 37,013 0 N/A
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this Form 10-Q are listed in the
accompanying Index to Exhibits.
(b) Reports on Form 8-K
None
Page 24
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between the
Registrant and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.1(a) Amendment to Receivables Purchase
Agreement dated April 4, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.1 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(b) Amendment to Receivables Purchase
Agreement dated June 7, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.2 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(c) Amendment to Receivables Purchase
Agreement dated as of June 30, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1 to the Registrant's report on
Form 10-Q for the quarter ended
July 3, 1994.
* 2.1(d) Amendment to Receivables Purchase
Agreement dated as of November 15, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.4 to the Registrant's report on
Form 8-K dated March 1, 1995.
* 2.1(e) Amendment to Receivables Purchase
Agreement dated as of June 30, 1995,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1(e) to the Registrant's report on
Form 10-Q for the quarter ended
July 2, 1995.
Page 25
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1(f) Amendment to Receivables Purchase
Agreement dated as of December 31,
1995, between the Registrant and
Delaware Funding Corporation,
filed as Exhibit 2.1(f) to the
Registrant's report on Form 10-K
for the year ended December 31, 1995.
2.1(g) Amendment to Receivables Purchase
Agreement and Letter Agreement
referred to therein dated as of
June 24, 1996, between the Registrant
and Delaware Funding Corporation. 36
* 2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993, with
exhibits herein numbered 2.2(b),(c),
(d), (f), (g), and (j) attached.
* 2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation and
Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and
Cone Mills (Mexico), S.A. de C.V. filed as
Exhibit 2.2(d) to Registrant's report on
Form 10-Q for the quarter ended
July 4, 1993.
Page 26
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.2(e) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V., filed as Exhibit 2.2(e)
to the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
* 2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
* 2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation filed as Exhibit 2.2(h) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(i) Guaranty Agreement dated as of June 15,
1995, between Cone Mills Corporation
and Morgan Guaranty Trust Company of
New York filed as Exhibit 2.2(I) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 2.2(j) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
Page 27
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.2(k) Call Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(k) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
* 2.2(l) Put Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(l) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
* 2.2(m) Letter Agreement dated January 11, 1996
among Registrant, Rodolfo Garcia Muriel,
and Compania Industrial de Parras,
S.A. de C.V., filed as Exhibit 2.2(m) to
the Registrant's report on Form 10-K
for the year ended December 31, 1995.
* 2.3 Asset Purchase Agreement dated as
of December 2, 1994 between the
Registrant, Lancer Industries, Inc.
and M.P.M. Transportation, Inc.,
filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated
December 2, 1994.
* 2.4 Olympic Division Acquisition Agreement
by and among Vitafoam Incorporated,
British Vita PLC, and Registrant
dated January 19, 1996 with related
Lease Agreement, Lease Agreement and
Option to Purchase, Sublease Agreement,
Services Agreement, License Agreement
And Hold Back Escrow Agreement, each
dated January 22, 1996. The following
exhibits and schedules to the
Acquisition Agreement have been
omitted. The Registrant hereby
undertakes to furnish supplementally
a copy of such omitted exhibit or
schedule to the Commission upon
request, filed as Exhibit 2.4 to the
Registrant's report on Form 10-K for
year ended December 31, 1995.
Page 28
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
Exhibits
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow
Agreement
Exhibit C1 Facility 1
Exhibit C2 Facility 2
Exhibit C3 Facility 3
Exhibit C4 Facility 4
Exhibit C5 Facility 5
Exhibit C6 Facility 6
Exhibit D Form of Sublease Agreement
Exhibit E Form of Opinion of Buyer's
Counsel
Exhibit F Form of Opinion of Seller's
Counsel
Exhibit G Form of Assumption Agreement
Exhibit H Form of Services Agreement
Exhibit I Inventory Valuation Principles
Exhibit J Form of License Agreement
Schedules
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Tangible Fixed Assets
Schedule 2.8 Assigned Contracts
Schedule 2.10 Allocation of Purchase Price
Schedule 4.3 Consents and Authorizations
Schedule 4.7 Contracts by Category
Schedule 4.9 Litigation
Schedule 4.11 Tax Matters
Schedule 4.12 Licenses and Permits
Schedule 4.14 Tangible Personal Property
Schedule 4.15 Employees and Wage Rates
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.18 Licenses to Intellectual
Property; Third-party
Patents
Schedule 4.19 Purchases from One Party
Schedule 4.22 Real Property
Schedule 4.23 Business Names
Schedule 4.24 Environmental Matters
Schedule 9.4 Facility 5 Remediation Plan
Page 29
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1993.
* 4.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
* 4.3 Note Agreement dated as of August 13, 1992,
between Cone Mills Corporation and The
Prudential Insurance Company of America,
with form of 8% promissory note attached,
filed as Exhibit 4.01 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.3(a) Letter Agreement dated September 11, 1992,
amending the Note Agreement dated August 13,
1992, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.2 to the Registrant's
report on Form 8-K dated March 1, 1995.
* 4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
Page 30
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(e) Letter Agreement dated as of June 30,
1995, amending the Note Agreement dated
August 13, 1992, between the Registrant
and the Prudential Insurance Company
of America filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 4.3(f) Letter Agreement dated as of June 30,
1995, between the Registrant and
The Prudential Insurance Company
of America superseding Letter Agreement
filed as Exhibit 4.3(e) to the
Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
* 4.3(g) Letter Agreement dated as of March 30,
1996, between the Registrant and The
Prudential Insurance Company of
America filed as Exhibit 4.3(g) to the
Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
* 4.4 Credit Agreement dated as of August 13,
1992, among Cone Mills Corporation,
the banks listed therein and Morgan
Guaranty Trust Company of New York,
as Agent, with form of note attached
filed as Exhibit 4.02 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
Page 31
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.4(b) Amendment to Credit Agreement dated as of
June 30, 1995, amending the Amended and
Restated Credit Agreement dated
November 18, 1994, among the Registrant,
various banks and Morgan Guaranty Trust
Company of New York, as Agent filed as
Exhibit 4.4(b) to the Registrant's
report on Form 10-Q for the quarter
ended July 2, 1995.
* 4.4(c) Amendment No. 2 to Credit Agreement
dated as of December 31, 1995, amending
the Amended and Restated Credit
Agreement dated November 18, 1994,
among the Registrant, various banks
and Morgan Guaranty Trust Company
of New York, as Agent, filed as
Exhibit 4.4(c) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 Registration rights agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
* 4.8 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994, filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
Page 32
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 4.8(a) First Amendment to the 401(k)
Program of Cone Mills Corporation
dated May 9, 1995, filed as
Exhibit 4.8(a) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.8(b) Second Amendment to the 401(k)
Program of Cone Mills Corporation
dated December 5, 1995, filed as
Exhibit 4.8(b) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.9 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994, filed as Exhibit 4.9
to the Registrant's report on Form 10-K
for year ended January 1, 1995.
* 4.9(a) First Amendment to the Cone Mills
Corporation 1983 ESOP dated
May 9, 1995, filed as Exhibit 4.9(a)
to the Registrant's report on Form 10-K
for year ended December 31, 1995.
* 4.9(b) Second Amendment to the Cone Mills
Corporation 1983 ESOP dated
December 5, 1995, filed as
Exhibit 4.9(b) to the Registrant's
report on Form 10-K for year ended
December 31, 1995.
* 4.10 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713).
* 4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005, filed as Exhibit 4.11
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.
Page 33
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.2)
*10.1 Amended and Restated 1992 Stock Plan
filed as Exhibit 10.7(a) to
Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
*10.2 1997 Senior Management Incentive
Compensation Plan filed as Exhibit 10.2
to Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
27 Financial Data Schedule 39
* Incorporated by reference to the statement or report
indicated.
Page 34
<PAGE>
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CONE MILLS CORPORATION
(Registrant)
Date August 12, 1996 /s/ JOHN L. BAKANE
John L. Bakane
Executive Vice President and
Chief Financial Officer
Page 35
FORM 10-Q
Exhibit 2.1(g)
DELAWARE FUNDING CORPORATION
c/o JH Holdings Corporation
c/o Ropes & Gray
One International Place
Boston, Massachusetts 02110
June 24, 1996
Cone Mills Corporation
3101 North Elm Street
Greensboro, North Carolina 27415-6540
Attention: David E. Bray, Treasurer
Ladies and Gentlemen:
For purposes of the Receivables Purchase Agreement dated as of
August 11, 1992, as amended (as amended, the "Receivables
Purchase Agreement"), and the Letter Agreement (as defined in
the Receivables Purchase Agreement), the Letter Agreement is
hereby amended by deleting ".45%" in clause (i) of the
definition of "Program Fee" and replacing such percentage with
".35%".
If you are in agreement with the foregoing, please sign and
return a counterpart of this letter.
Very truly yours,
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York (as successor to
J.P. Morgan Delaware), as
attorney-in-fact for Delaware
Funding Corporation
By: /s/ Robert J. Henchey
Authorized Signatory
AGREED AND ACCEPTED
CONE MILLS CORPORATION
By: /s/ David E. Bray
Authorized Signatory
Date: June 24, 1996
Page 36
<PAGE>
FORM 10-Q
Exhibit 2.1(g) (continued)
AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
AMENDMENT dated as of June 24, 1996 (this
"Amendment") of a Receivables Purchase Agreement dated as of
August 11, 1992, as amended (as amended, the "Receivables
Purchase Aqreement"), between CONE MILLS CORPORATION (the
"Seller") and DELAWARE FUNDING CORPORATION (the "Buyer").
Terms defined in the Receivables Purchase Agreement and not
otherwise defined herein have the same meaning when used
herein.
WITNESSETH:
WHEREAS, the Seller and the Buyer are parties to the
Receivables Purchase Agreement; and
WHEREAS, the Seller and the Buyer desire to amend
the Receivables Purchase Agreement (i) to extend the
Expiration Date, (ii) to amend the definition of Letter
Agreement and (iii) to amend the definition of Purchase
Availability Fee.
NOW, THEREFORE, the parties hereto, in consideration
of their mutual covenants hereinafter set forth and intending
to be legally bound hereby, agree as follows:
ARTICLE I. Amendment to the Receivables
Purchase Agreement.
Subject to the satisfaction of the conditions
precedent specified in Article IV hereof, the Receivables
Purchase Agreement and the exhibits thereto shall be amended
as follows:
(a) The definition "Expiration Date" in Section
1.01 of the Receivables Purchase Agreement is amended by
replacing clause (i) of the definition with "(i) June 23,
1997,".
(b) The definition "Letter Agreement" in Section
1.01 of the Receivables Purchase Agreement is hereby amended
in its entirety to read as follows:
Page 37
<PAGE>
FORM 10-Q
Exhibit 2.1(g) (continued)
"Letter Agreement" shall mean the agreement dated as
of August 11, 1992, as amended from time to time, between the
Seller and the Buyer setting forth, among other things, the
fees payable to the Buyer by the Seller in connection with the
Buyer's investment in the Seller's Receivables.
(c) The definition of "Purchase Availability Fee"
in Section 1.01 of the Receivables Purchase Agreement is
amended by deleting the number ".30%" and replacing such
number with the number ".20%".
(d) Section 2.15 of the Receivables Purchase
Agreement is amended by deleting the date "June 24, 1996"
therein and replacing such date with the date "June 23, 1997".
ARTICLE V. Governing Law.
This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
ARTICLE VI. Counterparts.
This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this
Amendment by signing such counterpart.
IN WITNESS WHEREOF, each of the parties hereto have
caused a counterpart of this Amendment to be duly executed as
of the date first above written.
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company
of New York (as successor to
J.P. Morgan Delaware), as
attorney-in-fact for Delaware
Funding Corporation
By: /s/ Robert J. Henchey
Authorized Signatory
Title: Vice President
CONE MILLS CORPORATION
By: /s/ David E. Bray
Authorized Signatory
Title: Treasurer
Page 38
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Financial Statements dated June 30, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,250
<SECURITIES> 0
<RECEIVABLES> 79,322
<ALLOWANCES> 3,000
<INVENTORY> 151,505
<CURRENT-ASSETS> 249,511
<PP&E> 438,720
<DEPRECIATION> 195,315
<TOTAL-ASSETS> 571,293
<CURRENT-LIABILITIES> 127,729
<BONDS> 161,439
0
38,395
<COMMON> 2,744
<OTHER-SE> 190,978
<TOTAL-LIABILITY-AND-EQUITY> 571,293
<SALES> 407,401
<TOTAL-REVENUES> 407,401
<CGS> 344,191
<TOTAL-COSTS> 383,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,779
<INCOME-PRETAX> 16,406
<INCOME-TAX> 5,519
<INCOME-CONTINUING> 10,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,887
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
