Page 1 of 36
Index to Exhibits-Pages 24-32
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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 29, 1997
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 July 31,
1997: 26,107,133 shares.
Page 1
<PAGE>
FORM 10-Q
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Thirteen and twenty-six weeks ended
June 29, 1997 and June 30, 1996
(Unaudited) . . . . . . . . . . . . . . . . . . . .3
Consolidated Condensed Balance Sheets
June 29, 1997 and June 30, 1996
(Unaudited) and December 29, 1996 . . . . . . . . .4 & 5
Consolidated Condensed Statements of
Stockholders' Equity
Twenty-six weeks ended June 29, 1997
and June 30, 1996 (Unaudited) . . . . . . . . . . .6
Consolidated Condensed Statements of
Cash Flows
Twenty-six weeks ended June 29, 1997
and June 30, 1996 (Unaudited) . . . . . . . . . . .7
Notes to Consolidated Condensed Financial
Statements (Unaudited). . . . . . . . . . . . . . . .8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . .13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . .21
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . .22
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . .23
Page 2
<PAGE>
FORM 10-Q
PART I
Item 1.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 185,792 $ 208,119 $ 360,506 $ 407,401
Operating Costs and Expenses:
Cost of sales 156,286 168,810 304,345 330,046
Selling and administrative 20,778 22,391 39,082 43,507
Depreciation 6,633 7,009 13,304 14,145
Restructuring 1,154 (9) 1,809 (4,684)
184,851 198,201 358,540 383,014
Income from Operations 941 9,918 1,966 24,387
Other Income (Expense):
Interest income 631 77 819 173
Interest expense (3,724) (4,115) (7,407) (7,952)
(3,093) (4,038) (6,588) (7,779)
Income (Loss) before Income Taxes (Benefit) and Equity
in Earnings (Losses) of Unconsolidated Affiliate (2,152) 5,880 (4,622) 16,608
Income Taxes (Benefit) (684) 1,764 (1,672) 5,519
Income (Loss) before Equity in Earnings (Losses)
of Unconsolidated Affiliate (1,468) 4,116 (2,950) 11,089
Equity in Earnings (Losses) of Unconsolidated Affiliate 397 (414) (116) (202)
Net Income (Loss) $ (1,071) $ 3,702 $ (3,066) $ 10,887
Income (Loss) Available to Common Shareholders:
Net Income (Loss) $ (1,826) $ 2,982 $ (4,541) $ 9,447
Earnings (Loss) Per Share - Fully Diluted:
Net Income (Loss) $ (.07) $ .11 $ (.17) $ .34
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 26,102 27,446 26,170 27,451
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 3
<PAGE>
FORM 10-Q
Item 1.(continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
June 29, June 30, December 29,
ASSETS 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 4,999 $ 5,250 $ 1,018
Accounts receivable - trade, less provision for
doubtful accounts $1,500; $3,000; $3,000 21,186 76,322 49,073
Subordinated note receivable 39,491 - -
Inventories:
Greige and finished goods 87,551 95,528 94,635
Work in process 12,405 11,848 10,793
Raw materials 16,972 12,126 7,231
Supplies and other 13,042 32,003 26,874
129,970 151,505 139,533
Other current assets 10,425 16,434 14,794
Total Current Assets 206,071 249,511 204,418
Investments in Unconsolidated Affiliates 34,028 36,656 34,144
Other Assets 38,982 41,721 40,746
Property, Plant and Equipment:
Land 11,883 18,398 17,880
Buildings 82,679 81,821 83,048
Machinery and equipment 315,305 307,497 319,271
Other 34,254 31,004 34,143
444,121 438,720 454,342
Less accumulated depreciation 204,488 195,315 203,664
Property, Plant and Equipment-Net 239,633 243,405 250,678
$ 518,714 $ 571,293 $ 529,986
</TABLE>
Note: The balance sheet at December 29, 1996 has been derived
from the audited financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
Page 4
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
June 29, June 30, December 29,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 1996
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ - $ 10,143 $ 5,267
Current maturities of long-term debt 10,714 11,105 10,754
Accounts payable - trade 32,292 34,802 27,113
Sundry accounts payable and accrued expenses 49,519 44,444 52,770
Deferred income taxes 24,421 27,235 23,667
Total Current Liabilities 116,946 127,729 119,571
Long-Term Debt 150,148 161,439 149,968
Deferred Items:
Deferred income taxes 38,300 40,041 40,066
Other deferred items 10,519 9,967 10,130
48,819 50,008 50,196
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 26,099,533 shares;
1996, 27,439,733 shares and 26,301,233 shares 2,610 2,744 2,630
Capital in excess of par 61,483 71,579 62,995
Retained earnings 108,811 127,861 114,706
Currency translation adjustment (8,498) (8,462) (8,475)
Total Stockholders' Equity 202,801 232,117 210,251
$ 518,714 $ 571,293 $ 529,986
</TABLE>
Note: The balance sheet at December 29, 1996 has been derived
from the audited financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
Page 5
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Class A Preferred
Stock Common Stock
Shares Amount Shares Amount
Balance, December 29, 1996 383,948 $ 38,395 26,301,233 $ 2,630
Net loss - - - -
Currency translation adjustment - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Common Stock:
Purchase of common shares - - (201,700) (20)
Balance, June 29, 1997 383,948 $ 38,395 26,099,533 $ 2,610
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
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(amounts in thousands, except share data)
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Capital in Currency
Excess Retained Translation
of Par Earnings Adjustment
Balance, December 29, 1996 $ 62,995 $ 114,706 $ (8,475)
Net loss - (3,066) -
Currency translation adjustment - - (23)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - (2,829) -
Common Stock:
Purchase of common shares (1,512) - -
Balance, June 29, 1997 $ 61,483 $ 108,811 $ (8,498)
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)
</TABLE>
See Notes to Consolidated Financial Statements.
Page 6a
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(amounts in thousands)
<TABLE>
<S> <C> <C>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 29, 1997 June 30, 1996
(Unaudited) (Unaudited)
Cash Flows Provided By (Used In) Operating Activities $ 2,316 $ (2,442)
Cash Flows from Investing Activities:
Proceeds from divestitures (a) 19,529 40,053
Capital expenditures (10,739) (12,072)
Other 2,064 2,561
Net cash provided by investing activities 10,854 30,542
Cash Flows from Financing Activities:
Net (payments) borrowings - short-term loans (5,267) 1,268
Increase (decrease) in checks issued in excess of deposits 522 (21,402)
Other (4,444) (3,052)
Net cash used in financing activities (9,189) (23,186)
Net increase in cash 3,981 4,914
Cash at Beginning of Period 1,018 336
Cash at End of Period $ 4,999 $ 5,250
(a)Divestitures:
Inventories $ 12,034 $ 14,926
Property, plant and equipment 6,262 21,516
Other 1,199 (1,073)
Gain on sale 34 4,684
Proceeds from sale $ 19,529 $ 40,053
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,489 $ 8,043
Income taxes, net of refunds $ (3,409) $ 4,872
Supplemental Schedule of Noncash Investing and Financing Activities:
Receivable recorded from divestitures $ 2,298 $ 4,449
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
Page 7
<PAGE>
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 29, 1997
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated
condensed financial statements for June 29, 1997 and June
30, 1996 are unaudited, but in the opinion of management
reflect all adjustments necessary to present fairly the
consolidated condensed balance sheets of Cone Mills
Corporation and Subsidiaries at June 29, 1997, June 30,
1996, and December 29, 1996, and the related consolidated
condensed statements of operations for the respective
thirteen and twenty-six weeks ended June 29, 1997 and
June 30, 1996, 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
1996.
Inventories are stated at the lower of cost or market.
The last-in, first-out (LIFO) method is used to value
inventories of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are
used to value all other inventories. 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 29, 1997 and June 30, 1996 and
related consolidated condensed statements of operations
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.
Note 2. Securitization of Accounts Receivable
On March 25, 1997, the Company entered into a one year
agreement with the subsidiary of a major financial
institution ("the purchaser") and Cone Receivables, LLC,
Page 8
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
a wholly owned subsidiary of Cone Mills Corporation,
which allows the sale of up to $40 million undivided
interest in eligible accounts receivable by Cone
Receivables, LLC. Cone Receivables, LLC, a qualifying
special-purpose entity, meets the requirements for
accounts receivable securitization in accordance with
SFAS 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", and
therefore is not a consolidated entity of Cone Mills.
Cone Mills accounts for the sale of receivables to Cone
Receivables, LLC, as a true sale in accordance with SFAS
125.
At June 29, 1997, the Company had sold accounts
receivable of $77 million, less a $2 million provision
for doubtful accounts receivable, to Cone Receivables,
LLC. The Company currently has a subordinated note
receivable from Cone Receivables, LLC of $39 million.
Note 3. Long-Term Debt
<TABLE>
<S> <C> <C> <C>
June 29, 1997
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 64,286 $ 10,714 $ 53,572
8-1/8% Debentures 96,576 - 96,576
Total $160,862 $ 10,714 $150,148
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
</TABLE>
Note 4. Class A Preferred Stock
The 1998 dividend rate for Class A Preferred Stock is
7.85%, payable March 31, 1998.
Page 9
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 5. Earnings (Loss) Per Share
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen
Weeks Ended Weeks Ended
June 29, 1997 June 30, 1996
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Net income (loss) $ (1,071) $(1,071) $ 3,702 $ 3,702
Less: Class A Preferred
dividends ( 755) ( 755) ( 720) ( 720)
Adjusted net income (loss) $ (1,826) $(1,826) $ 2,982 $ 2,982
Weighted average common
shares outstanding 26,102 26,102 27,407 27,407
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - 39 39
Weighted average common
shares and common share
equivalents outstanding 26,102 26,102 27,446 27,446
Earnings (loss) per common
share and common share
equivalent $( .07) $( .07) $ .11 $ .11
</TABLE>
Page 10
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 5. Earnings (Loss) Per Share (continued)
<TABLE>
<S> <C> <C> <C> <C>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
June 29,1997 June 30, 1996
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands,
except per share data)
Net income (loss) $ (3,066) $(3,066) $10,887 $10,887
Less: Class A Preferred
dividends (1,475) (1,475) (1,440) (1,440)
Adjusted net income (loss) $ (4,541) $(4,541) $ 9,447 $ 9,447
Weighted average common
shares outstanding 26,170 26,170 27,394 27,394
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - 57 57
Weighted average common
shares and common share
equivalents outstanding 26,170 26,170 27,451 27,451
Earnings (loss) per common
share and common share
equivalent $( .17) $( .17) $ .34 $ .34
</TABLE>
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. Common share
equivalents have been excluded when they would be
antidilutive.
Page 11
<PAGE>
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 6. Divestitures
In January 1996, the Company completed the sale of its
polyurethane products division. The Company sold all
inventory and substantially all of the property, plant,
and equipment of this division. Proceeds of $40.1 million
had been received at June 30, 1996. Gain of $4.7 million
from disposal of this division was recognized in the
first quarter 1996 financial statements as a
restructuring item.
In May 1997, the Company completed the sale of
substantially all the assets of its real estate
operations, including those of its subsidiary Cornwallis
Development Co. Proceeds of $19.5 million were received
in the second quarter of 1997. A reserve was established
in the Company's fourth quarter 1996 financial statements
to adjust the carrying value of these assets to estimated
net realizable value. The gain recognized upon the
disposition of these assets in the second quarter of 1997
was insignificant.
Note 7. Restructuring Activities
Restructuring costs of $1.8 million were incurred in the
first six months of 1997 related to the consolidation of
operations from Cone's Granite Finishing Plant to its
Carlisle facility. Additional restructuring costs will
be incurred during 1997 as the consolidation of
facilities continues and the Granite plant is eventually
closed.
Page 12
<PAGE>
FORM 10-Q
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter Ended June 29, 1997 Compared with Second
Quarter Ended June 30, 1996.
While U.S. consumer spending in apparel and home furnishings
has increased in 1997, Cone Mills continued to experience
value-added denim inventory adjustments in certain customer
segments and weak fashion demand for decorative prints.
Sales for the second quarter of 1997 were $185.8 million, down
10.7%, as compared with sales of $208.1 million for the second
quarter of 1996. After eliminating the sales of business units
included in the Company's restructuring plan, sales decreased
approximately 8%. Lower sales in denim products accounted for
the decrease. International sales, primarily denims, were
$43.0 million, or 23% of total sales, as compared with $53.2
million, or 26% of sales, for the second quarter of 1996.
Cone Mills had a net loss for the second quarter of 1997 of
$1.1 million, or $.07 per share after preferred dividends,
which included a pre-tax charge of $1.2 million associated
with the consolidation of Granite Finishing into Carlisle
Finishing operations. For comparison, second quarter 1996 net
income was $3.7 million, or $.11 per share.
Gross profit for the second quarter of 1997 (net sales less
cost of sales and depreciation) was 12.3% of sales, as
compared with 15.5% for the previous year. The decrease was
primarily the result of mix changes to more basic denim
products with lower margins, cost inefficiencies associated
with operating plants at less than capacity and pricing
pressures associated with temporary supply and demand
imbalances arising from excess inventories.
Business Segments. Cone operates in two principal business
segments, apparel fabrics and home furnishings products. The
following table sets forth certain net sales and operating
income (loss) information.
Page 13
<PAGE>
FORM 10-Q
Item 2. (continued)
<TABLE>
<S> <C> <C> <C> <C>
Second Quarter
1997 1996
(Dollar amounts in millions)
NET SALES
Apparel(1) $ 159.1 85.6% $ 180.8 86.9%
Home Furnishings(2) 26.7 14.4 27.3 13.1
Total $ 185.8 100.0% $ 208.1 100.0%
OPERATING INCOME (LOSS)(3)
Apparel $ 6.2 3.9% $ 13.0 7.2%
Home Furnishings (3.2) (12.1) (2.2) (8.0)
Restructuring (1.2) - - -
</TABLE>
(1) Apparel includes synthetic fabrics net sales of $3.6
million in 1996.
(2) Home furnishings includes real estate's net sales of $0.8
million in 1997, and Olympic's, Greeff's and real
estate's net sales of $3.2 million in 1996.
(3) Operating income (loss) excludes general corporate
expenses. Percentages reflect operating income (loss) as
a percentage of segment net sales.
Apparel Fabrics. Apparel fabric segment sales for the
second quarter of 1997 were $159.1 million, down 12.0% from
the second quarter of 1996. Excluding sales of the
synthetic fabrics business, which was sold in January of
1997, apparel fabric segment sales were down approximately
10%. Lower denim sales because of lower volume and prices
accounted for the decrease. Average denim prices were down
in the second quarter of 1997 as a result of a mix shift to
more basic denims and price pressure from temporary
industry supply and demand imbalances arising from excess
inventories. While unit sales of denim products continue to
be strong at retail, excessive inventory build-up in
certain segments are resulting in weak near-term sales of
denim fabrics. Sales of specialty sportswear were up as
compared with 1996.
For the second quarter of 1997, the apparel segment had
operating income of $6.2 million, or 3.9% of sales, as
compared with income of $13.0 million, or 7.2% of sales, in
the second quarter of 1996. All apparel manufacturing
facilities operated at less than capacity as the Company
attempted to control inventory levels.
Page 14
<PAGE>
FORM 10-Q
Item 2. (continued)
Home Furnishings. For the second quarter of 1997, home
furnishings segment sales were $25.9 million as compared
with $24.1 million in the second quarter of 1996, excluding
Olympic, Greeff and real estate. Higher sales of Cone
Jacquards accounted for the increase. The home furnishings
segment had an operating loss of $3.2 million compared with
a loss of $2.2 million for the second quarter of 1996. Home
furnishings results were negatively impacted by the
finishing division operating at less than capacity.
Total Company selling and administrative expenses declined
from $22.4 million for the second quarter of 1996 to $20.8
million in the second quarter of 1997, the result of the sale
of the real estate, Greeff and synthetic fabric operations as
well as a cost reduction program to reduce selling and
administrative expenses. Selling and administrative expenses
were 11.2% of sales in the second quarter of 1997 as compared
with 10.8% in the second quarter of 1996. The percentage
increase is primarily the result of the lower sales level in
1997.
Interest expense for the second quarter of 1997 was $3.7
million, down 10% from the second quarter of 1996, primarily
the result of lower borrowings.
Equity in the income of Parras Cone, the joint venture plant
in Mexico, was $0.4 million, as compared with a loss of $0.4
million in the second quarter of 1996. The increase in income
was primarily the result of 1997 improved operating levels and
efficiencies.
Even though the Company has seen some improvement in both
denim and specialty sportswear markets, third quarter results
will continue to be impacted by curtailed manufacturing
operating schedules, consolidation of finishing facilities,
lower denim sales and weak home furnishing print markets.
However, Cone continues to implement its five-point
profitability improvement program which includes focusing on
core businesses, aggressive marketing, cost reduction, the
reconfiguration of manufacturing operations and capital
conservation.
Six Months Ended June 29, 1997 Compared with Six Months Ended
June 30, 1996.
For the first six months of 1997, Cone Mills experienced
value-added denim inventory adjustments with certain customers
Page 15
<PAGE>
FORM 10-Q
Item 2. (continued)
and weak fashion demand for decorative prints. 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.
Sales for the first six months of 1997 were $360.5 million,
down 11.5%, as compared with sales of $407.4 million for the
first six months of 1996. After eliminating the sales of
business units included in the Company's restructuring plan,
sales were off approximately 8%. Lower sales in denim products
and decorative prints were partially offset by increased
specialty sportswear and jacquard sales. International sales,
primarily denims, were 24% of total sales, as compared with
26% for the first six months of 1996.
Cone Mills had a net loss for the first six months of 1997 of
$3.1 million, or $.17 per share after preferred dividends,
which included a pre-tax charge of $1.8 million associated
with the consolidation of the Granite operations into
Carlisle. For comparison, for the first six months of 1996 net
income was $10.9 million, or $.34 per share, including a pre-
tax gain of $4.7 million related to the sale of the Olympic
Products Division.
Gross profit for the first six months of 1997 (net sales less
cost of sales and depreciation) was 11.9% of sales, as
compared with 15.5% for the comparable 1996 period. The
decrease was primarily the result of lower average denim
prices including mix changes to more basic denim products with
lower prices and margins and cost inefficiencies associated
with operating plants at less than capacity.
Business Segments. Cone operates in two principal business
segments, apparel fabrics and home furnishings products. The
following table sets forth certain net sales and operating
income (loss) information.
<TABLE>
<S> <C> <C> <C> <C>
Six Months
1997 1996
(Dollar amounts in millions)
NET SALES
Apparel(1) $ 307.4 85.3% $ 346.5 85.1%
Home Furnishings(2) 53.1 14.7 60.9 14.9
Total $ 360.5 100.0% $ 407.4 100.0%
OPERATING INCOME (LOSS)(3)
Apparel $ 12.3 4.0% $ 26.0 7.5%
Home Furnishings (6.8) (12.7) (4.1) (6.7)
Restructuring (1.8) - 4.7 -
</TABLE>
Page 16
<PAGE>
FORM 10-Q
Item 2. (continued)
(1) Apparel includes synthetic fabrics net sales of $2.7
million and $9.6 million in 1997 and 1996, respectively.
(2) Home furnishings includes Greeff's and real estate's net
sales of $2.2 million in 1997, and Olympic's, Greeff's
and real estate's net sales of $11.0 million in 1996.
(3) Operating income (loss) excludes general corporate
expenses. Percentages reflect operating income (loss) as
a percentage of segment net sales.
Apparel Fabrics. Apparel fabric segment sales for the first
six months of 1997 were $307.4 million, down 11.3% from the
first six months of 1996. Excluding sales of the synthetic
fabrics business, which was sold in January of 1997,
apparel fabric segment sales were down approximately 10%.
Lower denim sales because of lower volume and prices
partially offset by higher specialty sportswear sales
accounted for the decrease. Average denim prices were down
in the first six months of 1997 as a result of a mix shift
to more basic denims and price pressure from temporary
industry supply and demand imbalances.
For the first six months of 1997, the apparel segment had
operating income of $12.3 million, or 4.0% of sales, as
compared with income of $26.0 million, or 7.5% of sales, in
the first six months of 1996.
Home Furnishings. For the first six months of 1997, home
furnishings segment sales were $50.9 million, excluding
Olympic, Greeff and real estate, as compared with $49.9
million in the first six months of 1996. Increased sales of
Cone Jacquards was partially offset by lower sales in Cone
Finishing and Cone Decorative Fabrics. The home furnishings
segment had an operating loss of $6.8 million compared with
a loss of $4.1 million for the first six months of 1996.
Home furnishings results were negatively impacted by weak
decorative fabrics markets.
Total Company selling and administrative expenses declined
from $43.5 million for the first six months of 1996 to $39.1
million in the first six months of 1997, the result of the
sale of the Olympic, Greeff, real estate and synthetic fabric
operations as well as a cost reduction program to reduce
selling and administrative expenses. Selling and
administrative expenses were 10.8% of sales in the first six
months of 1997 as compared with 10.7% in the first six months
of 1996.
Page 17
<PAGE>
FORM 10-Q
Item 2. (continued)
Interest expense for the first half of 1997 was $7.4 million,
down 7% from the first half of 1996.
For the first half of 1997, the income tax benefit as a
percent of the taxable loss was 36.2% for the first half of
1997 compared with income taxes of 33.2% for the first half of
1996. 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 components consist
of $64.3 million outstanding under a Note Agreement with The
Prudential Insurance Company of America (the "Term Loan"), its
8 1/8% Debentures issued on 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 the $40
million Receivables Purchase Agreement (the "Receivables
Purchase Agreement") with Delaware Funding Corporation, an
affiliate of Morgan Guaranty. The Receivables Purchase
Agreement is a one year agreement entered into on March 25,
1997 with Delaware Funding Corporation and Cone Receivables,
LLC, a wholly owned subsidiary of Cone Mills Corporation. On
June 29, 1997, the Company had funds available of $80 million
under its Revolving Credit Facility.
During the first half of 1997, the Company generated cash from
operating activities before changes in working capital of $9.5
million as compared with $22.4 million in the first half of
1996. Working capital uses in the first half of 1997 were $7.2
million, primarily increases in accounts receivable. Other
uses of cash in the first half of 1997 included $10.7 million
for capital expenditures, $1.5 million for the repurchase of
common stock and $2.8 million for preferred stock dividends.
During the second quarter of 1997, the Company completed the
sale of substantially all of the assets of its real estate
operation, including those of its subsidiary Cornwallis
Development Co., for approximately $20 million. Proceeds of
the sale were used to repay short-term borrowings and for
general corporate purposes.
Page 18
<PAGE>
FORM 10-Q
Item 2. (continued)
The Company believes that the proceeds from the sale of its
real estate business, together with Cone's internally
generated operating funds and funds available under its credit
facilities, will be sufficient to meet its working capital,
capital spending, potential stock repurchases, and financing
needs for the foreseeable future. The Company has Board
authorization to purchase up to an additional 0.8 million
shares of common stock. The Company's Revolving Credit
Facility matures in August of 1997. The Company has signed
commitments from its banks for a three year $80 million
successor facility with terms and conditions not materially
different from the existing facility.
On June 29, 1997, the Company's long-term capital structure
consisted of $150.1 million of long-term debt and $202.8
million of stockholders' equity. For comparison, on June 30,
1996, the Company had $161.4 million of long-term debt and
$232.1 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 44%
on June 29, 1997 and 43% on June 30, 1996.
Accounts and note receivables on June 29, 1997, were $60.7
million, down from $76.3 million at June 30, 1996. At June 29,
1997, the Company had sold accounts receivable of $77 million
to Cone Receivables, LLC, an unconsolidated subsidiary, which
subsequently sold $40 million of these accounts receivables to
an unrelated party. In addition to the $40 million received
for the sale of these receivables, the Company also has
received a $39 million subordinated note receivable from Cone
Receivables, LLC. At June 30, 1996, the Company had sold $38
million of accounts receivable to an unrelated party. The
decrease in accounts and note receivable was primarily due to
lower sales levels, the collection of receivables from
business units sold and the additional net amounts outstanding
under the Receivables Purchase Agreement. The Company adopted
SFAS 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" during the first
quarter of 1997 (See Note 2 of Notes to Consolidated Condensed
Financial Statements). Receivables, including those sold
pursuant to the Receivables Purchase Agreement, represented 50
days of sales outstanding at June 29, 1997 and 51 days at June
30, 1996.
Inventories on June 29, 1997, were $130.0 million, down $21.5
million from June 30, 1996 levels. The decrease was primarily
due to the sale of operating units partially offset by
increases in raw material levels.
Page 19
<PAGE>
FORM 10-Q
Item 2. (continued)
Capital spending in 1997 is budgeted at $44 million. Projects
include new weaving machines that replace 1970s vintage
weaving machines, link ring spinning, and additional looms for
the jacquard facility. Capital spending in the first half of
1997 was $10.7 million.
The Company has an agreement with CIPSA to purchase up to an
additional 33% of the existing outstanding common stock of
Parras Cone for an amount of $20 million 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.
"Safe Harbor" Statement under Section 27A of the Securities
Act of 1993, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.
Except for the historical information presented, the
matters disclosed in the foregoing discussion and
analysis and other parts of this report include forward-
looking statements. These statements represent the
Company's current judgment on the future and are subject
to risks and uncertainties that could cause actual
results to differ materially. Such factors include,
without limitation: (i) the demand for textile products,
including the Company's products, will vary with the U.S.
and world business cycles, imbalances between consumer
demand and inventories of retailers and manufacturers and
changes in fashion trends, (ii) the highly competitive
nature of the textile industry and the possible effects
of reduced import protection and free-trade initiatives,
(iii) the unpredictability of the cost and availability
of cotton, the Company's principal raw material, and (iv)
the Company's relationships with Levi Strauss as its
major customer. For a further description of these risks
Page 20
<PAGE>
FORM 10-Q
Item 2. (continued)
see the Company's 1996 Form 10-K, "Item 1. Business -
Competition, -Raw Materials and -Customers" and
"Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Overview" of the
Company's 1996 Annual Report to Shareholders incorporated
by reference into Item 7. of the Form 10-K. Other risks and
uncertainties may be described from time to time in the
Company's other reports and filings with the Securities and
Exchange Commission.
PART II
Item 1. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs") former employees of the Company, instituted a
class action suit against the Company and certain other
defendants in which the Plaintiffs asserted a variety of
claims related to the Cone Mills Corporation 1983 ESOP (the
"1983 ESOP") and certain other employee benefit plans
maintained by the Company. In March 1992, the United States
District Court in Greenville, South Carolina entered a
judgment in the amount of $15.5 million (including an
attorneys' fee award) against the Company with respect to an
alleged promise to make additional Company contributions to
the 1983 ESOP and all claims unrelated to the alleged promise
were dismissed. The Company, certain individual defendants
and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, sitting en banc, affirmed the prior conclusion
of a panel of three of its judges and unanimously reversed the
$15.5 million judgment and unanimously affirmed all of the
District Court's rulings in favor of the Company. However,
the Court of Appeals affirmed, by an equally divided court,
the District Court's holding that Plaintiffs should be allowed
to proceed on an alternative theory whether, subject to proof
of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an
enforceable obligation that could allow recovery on a theory
of equitable estoppel. Accordingly, the case was remanded to
the District Court for a determination of whether the
Plaintiffs could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by the
Company for summary judgment on the issues of equitable
Page 21
<PAGE>
FORM 10-Q
Item 1. (continued)
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.
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. Oral argument on Plaintiffs' appeal
was held in the Court of Appeals on October 31, 1996. 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 effect on the
Company's financial condition 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 13, 1997. The proposals voted upon and the results of
the voting were as follows:
1. Election of three Class II Directors for a three-year
term.
Broker
For Against Abstentions Withheld Non-Votes
J. Patrick Danahy 20,723,446 126,065 0 0 N/A
Jeanette C. Kimmel 20,694,212 155,299 0 0 N/A
John W. Rosenblum 20,699,162 150,349 0 0 N/A
2. Ratification of the appointment of McGladrey & Pullen as
independent auditors for the Corporation for the fiscal
year ending December 28, 1997.
Broker
For Against Abstentions Withheld Non-Votes
20,818,860 20,106 10,545 0 N/A
Page 22
<PAGE>
FORM 10-Q
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 23
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 2.1(a) Purchase Agreement between Registrant
and Cone Receivables LLC dated as of
March 25, 1997,field as Exhibit 2.1(l)
to Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
* 2.1(b) Receivables Purchase Agreement dated
as of March 25, 1997, among Cone
Receivables LLC, as Seller, the
Registrant, as Servicer, and
Delaware Funding Corporation, as
buyer, filed as Exhibit 2.1(m) to
Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
* 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 24
<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 25
<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 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 Acquisition
Agreement and related agreements were
filed as Exhibit 2.4 to the Registrant's
report on Form 10-K for the year ended
December 31, 1995. 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.
Exhibits
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow
Agreement
Page 26
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
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
* 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.
Page 27
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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.
* 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.
Page 28
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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.
* 4.3(h) Letter Agreement dated as of January
31, 1997, between the Registrant and
The Prudential Insurance Company of
America filed as Exhibit 4.3(h) to
the Registrant's report on Form 10-K
for the year ended December 29, 1996.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
* 4.4(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.
Page 29
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
* 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.
* 4.4(d) Amendment No. 3 to Credit Agreement
dated as of June 30, 1996 to the
Amended and Restated Credit
Agreement dated as of November 18,
1994, among the Registrant, various
banks and Morgan Guaranty Trust
Company of New York, as Agent, filed
as Exhibit 4.4(d) to the Registrant's
report on Form 10-Q for the quarter
ended September 29, 1996.
* 4.4(e) Amendment No. 4 to Credit Agreement
dated as of September 29, 1996 to
the Amended and Restated Credit
Agreement dated as of November 18,
1994, among the Registrant, various
banks and Morgan Guaranty Trust
Company of New York, as Agent, filed
as Exhibit 4.4(e) to the Registrant's
report on Form 10-Q for the quarter
ended September 29, 1996.
* 4.4(f) Amendment No. 5 to Credit Agreement
dated as of March 30, 1997, to the
Amended and Restated Credit Agreement
dated as of November 18, 1994, among
the Registrant, various banks and
Morgan Guaranty Trust Company of
New York, as Agent, filed as Exhibit
4.4(f) to the Registrant's report on
Form 10-Q for the quarter ended
March 30, 1997.
4.4(g) Amendment No. 6 to Credit Agreement
dated as of June 27, 1997 to the
Page 30
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
Amended and Restated Credit Agreement
dated as of November 18, 1994, among
the Registrant, various banks and
Morgan Guaranty Trust Company of
New York as agent. 34
* 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 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994, filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
* 4.7(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.
* 4.7(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.
* 4.8 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.
* 4.8(a) First Amendment to the Cone Mills
Corporation 1983 ESOP dated
May 9, 1995, filed as Exhibit 4.9(a)
Page 31
<PAGE>
FORM 10-Q INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
to the Registrant's report on Form 10-K
for year ended December 31, 1995.
* 4.8(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.
* 4.9 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).
27 Financial Data Schedule 36
* Incorporated by reference to the statement or report
indicated.
Page 32
<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 11, 1997 /s/ Anthony L. Furr
Anthony L. Furr
Vice President and
Chief Financial Officer
Page 33
FORM 10-Q
Exhibit 4.4(g)
AMENDMENT NO. 6 TO CREDIT AGREEMENT
AMENDMENT dated as of June 27, 1997 to the Amended and
Restated Credit Agreement dated as of November 18, 1994 (as
heretofore amended, the "Agreement") among Cone Mills
Corporation, the banks listed on the signature pages thereof
(the "Banks") and Morgan Guaranty Trust Company of New York,
as Agent (the "Agent").
The parties hereto agree as follows with respect to the
Agreement:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Agreement shall have the meaning assigned to
such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each
other similar reference contained in the Agreement shall from
and after the date hereof refer to the Agreement as amended
hereby.
SECTION 2. Amendment of Section 5.10 of the Agreement.
Section 5.10 of the Agreement is amended to read in full as
follows:
SECTION 5.10. Debt Ratio. As of the last day of each
fiscal quarter ended after June 29, 1997, the percentage of
Adjusted Cash Flow for the period of four consecutive fiscal
quarters then ended to Total Consolidated Debt as of such day
will not be less than 26%.
SECTION 3. Amendment of Section 5.11 of the Agreement.
Section 5.11 of the Agreement is amended to read in full as
follows:
SECTION 5.11. Interest Coverage Ratio. As of the last day
of the following fiscal quarters, the ratio of EBIT to
Consolidated Interest Expense in each case for the period of
four consecutive fiscal quarters then ended, will not be less
than the following amounts (provided that this Section 5.11
shall not apply with respect to the last day of the fiscal
quarter ending June 29, 1997):
Fiscal Quarter Ending Ratio
Prior to June 30, 1996 2.3:1
June 30, 1996 1.8:1
Page 34
<PAGE>
FORM 10-Q
Exhibit 4.4(g) (continued)
September 29, 1996 1.4:1
December 29, 1996 1.0:1
March 30, 1997 0.1:1
June 29, 1997 [Not applicable]
After June 29, 1997 2.3:1
SECTION 4. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 5. Counterparts: Effectiveness. This Amendment
may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Amendment shall become effective as of the date first
written above when the Agent shall have received duly executed
counterparts hereof signed by the Borrower and the Required
Banks.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above
written.
CONE MILLS CORPORATION
By: /s/David E. Bray
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/John H. Chaplin
Title: Associate
FIRST UNION NATIONAL BANK
By: /s/David Silander
Title: Vice President
NATIONSBANK, N.A.
By: /s/E. Phifer Helms
Title: Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By: /s/W. Stanton Laight
Title: Sr. Vice President
Page 35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone Mills
Corporation Consolidated Condensed Financial Statements dated June 29, 1997, 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-28-1997
<PERIOD-END> JUN-29-1997
<CASH> 4,999
<SECURITIES> 0
<RECEIVABLES> 62,177
<ALLOWANCES> 1,500
<INVENTORY> 129,970
<CURRENT-ASSETS> 206,071
<PP&E> 444,121
<DEPRECIATION> 204,488
<TOTAL-ASSETS> 518,714
<CURRENT-LIABILITIES> 116,946
<BONDS> 150,148
0
38,395
<COMMON> 2,610
<OTHER-SE> 161,796
<TOTAL-LIABILITY-AND-EQUITY> 518,714
<SALES> 360,506
<TOTAL-REVENUES> 360,506
<CGS> 317,649
<TOTAL-COSTS> 317,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,588)
<INCOME-PRETAX> (4,622)
<INCOME-TAX> (1,672)
<INCOME-CONTINUING> (3,066)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,066)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
