CONE MILLS CORPORATION
3101 North Elm Street
Greensboro, NC 27415-6540
June 23, 1998
VIA EDGAR
Securities and Exchange Commission
450 5th ST NW
Washington, D.C. 20001
RE: Cone Mills Corporation (the "Registrant") - Form 11K
Employee Equity Plan
Gentlemen:
On behalf of the Registrant and pursuant to Rule 15d of the Securities Exchange
Act of 1934. I hereby file the annual report on Form 11-K of the Cone Mills
Corporation Employee Equity Plan.
These reports are being transmitted by EDGAR pursuant to General Instruction E
of Form 11-K and Rule 101(b)(3) of Regulation S-T.
If there are any questions or comments regarding the contents of the materials
in this transmission, please contact the undersigned, telephone 336o 379o 6246.
Sincerely,
CONE MILLS CORPORATION
/s/ Terry L. Weatherford
Title: Vice President and Secretary
Enclosures
c: Schell Bray Aycock Abel & Livingston, LLP (w/enclosures)
McGladrey & Pullen, LLP (w/enclosures)
New York Stock Exchange (w/enclosures)
A:\FORM11K.LTR
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-3634
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
CONE MILLS CORPORATION EMPLOYEE EQUITY PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office.
CONE MILLS CORPORATION
3101 North Elm Street
Greensboro, NC 27415-6540
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CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
FINANCIAL REPORT
DECEMBER 31, 1997
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CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statements of financial condition 2
Statements of income and changes in plan equity 3
Notes to financial statements 4 - 6
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MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
To the Advisory Committee
Cone Mills Corporation
Employee Equity Plan
Greensboro, North Carolina
We have audited the accompanying statements of financial condition of the Cone
Mills Corporation Employee Equity Plan as of December 31, 1997 and 1996, and the
related statements of income and changes in plan equity for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial condition of the Cone Mills Corporation
Employee Equity Plan as of December 31, 1997 and 1996, and the changes in plan
equity for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/MCGLADREY & PULLEN, LLP
Greensboro, North Carolina
April 15, 1998
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CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
STATEMENTS OF FINANCIAL CONDITION
December 31, 1997 and 1996
<TABLE>
<S> <C> <C>
ASSETS 1997 1996
---- ----
Money Market Account, Crestar Bank $331,335 $122,086
Investment in Cone Mills Corporation
Common Stock at Market Value
(shares: 1997 2,222,096; 1996 2,267,269)
(cost: 1997 $14,228,069 1996 $14,338,432) 17,221,241 17,854,745
Accounts Receivable, Cone Mills Corporation 114,105 135,853
Accounts Receivable, participants 96,682 121,910
Accrued Income Receivable 1,367 3,007
----- -----
Total assets $17,764,730 $18,237,601
========== ==========
PLAN EQUITY
Amounts Allocated to Persons Who Have
Withdrawn From Participation in the
Earnings and Operations of the Plan $2,277,300 $1,598,338
Other 15,487,430 16,639,263
---------- ----------
$17,764,730 $18,237,601
</TABLE>
See Notes to Financial Statements.
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Page 6 of 11
CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
STATEMENTS OF INCOME AND CHANGES IN PLAN EQUITY Years Ended December 31, 1997,
1996 and 1995
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Additions:
Interest income $10,285 $16,081 $13,976
Cone Mills Corporation contributions 528,492 626,338 693,897
Participants' contributions 1,264,013 1,508,352 1,691,275
Gains realized on distributions
of Cone Mills Corporation common
stock to plan participants
(market value 1997 $842,820
1996 $2,479,771; 1995 $2,234,178)
(cost 1997 $663,657; 1996 $1,389,056;
1995 $1,073,150 179,163 1,090,715 1,161,028
Gains realized on sales of Cone Mills
Corporation common stock (proceeds
1997 $174,015; 1996 $1,422,921;
1995 $184,098) (cost 1997 $137,145;
1996 $788,548; 1995 $93,262) 36,870 634,373 90,836
Transfers from Cone Mills Corporation
Employee Equity Plan - Hourly 29,420 - 96,109
------ ------ ------
Total additions 2,048,243 3,875,859 3,747,121
Reductions:
Benefit payments 1,444,451 3,776,304 3,160,188
Transfers to Cone Mills Corporation
Supplemental Retirement Plan 598,148 1,511,159 983,182
Transfers to Cone Mills Corporation
Employee Equity Plan - Hourly - 123,933 -
Unrealized depreciation of
investments 478,515 9,176,348 2,716,615
------- --------- ---------
Total reductions 2,521,114 14,587,744 6,859,985
Decrease in plan equity (472,871) (10,711,885) (3,112,864)
Plan equity:
Beginning 18,237,601 28,949,486 32,062,350
---------- ---------- ----------
Ending $17,764,730 $18,237,601 $28,949,486
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
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Page 7 of 11
CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1. Accounting Principles and Practices The assets of the Plan are valued at
market. Market for Cone Mills Corporation common stock is based upon closing
quotations on the New York Stock Exchange Composite Tape. The accrual method of
accounting is used. Cost for dispositions of stock is determined by the average
cost method.
Note 2. Description of the Plan
The Plan is a defined contribution plan which became effective on May 1, 1989,
and was amended and restated on November 16, 1989. In 1990, the Plan was amended
effective January 1, 1989, to redefine "compensation" and "salary" as permitted
under Section 414(s) of the Internal Revenue Code of 1986 and to conform such
definitions to company practices. In 1991, the Plan was amended and restated
effective January 1, 1991, to continue compliance under applicable provisions of
the Internal Revenue Code of 1986 and the Employee Retirement Income Security
Act of 1974. In 1992, the Plan was amended effective January 1, 1993, to include
hourly employees as members in the Plan and to cause other changes which updated
and improved the Plan. In 1993, the Plan was amended effective January 1, 1994,
to allow members to contribute up to 15% of compensation on a before-tax
(Section 401(k) ) basis. A new plan, the "Employee Equity Plan - Hourly" was
adopted and all hourly employees transferred their account balances to that plan
on January 1, 1994. A general description of the provisions of the Plan follows:
Assets: Assets of the Plan are included with assets of the "Employee Equity Plan
- - Hourly" in a master trust ("Plans"). Assets are invested primarily in Cone
Mills Corporation common stock. A portion of the assets are held in an Other
Investments Fund which holds short-term cash or money market investments. The
portion held in the Other Investments Fund is to be used for cash distributions
to participants and to enable the Plans to purchase additional Cone Mills
Corporation common stock. Members with account balances less than $5,000 may
make a one-time transfer of their account balances to the Cone Mills Corporation
Supplemental Retirement Plans. Also, members who have attained 60 years of age
as of the last day of the prior plan year, may elect to transfer in two annual
installments their account balances in these Plans to the Cone Mills Corporation
Supplemental Retirement Plans. Other members may transfer their account balances
to the Cone Mills Corporation Supplemental Retirement Plans over a four-year
period. Otherwise, members of the Plans are not entitled to select the manner in
which their individual accounts are invested.
Market risk: The Plan invests primarily in Cone Mills Corporation common stock
("Cone stock"). Cone stock is traded on the New York Stock Exchange, and
therefore its value is subject to the effects of fluctuations in overall market
performance. The Plan is potentially subject to heightened levels of market risk
attributable to its investment concentration.
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Page 8 of 11
CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
NOTES TO FINANCIAL STATEMENTS
Note 2. Description of the Plan (Continued)
Eligibility: Salaried employees who have attained age 21 are eligible
after completing one year of service.
Member contributions: Members may contribute from 2% to 15% of compensation on a
before-tax (Section 401(k)) basis.
Company contributions: Matching contributions are required each year in an
amount equal to 50% of each member's contribution not in excess of 6% of his
compensation. Additional matching contributions may be made at the discretion of
Cone Mills Corporation.
Benefits: The accumulated value of a member's individual account is paid after
retirement or other separation from service. Distributions from the Plan must be
paid in cash, except that the receiving member may elect to receive his
distribution in the form of qualifying employer securities unless such a
distribution is restricted according to the Company's bylaws and articles of
incorporation. The valuation of Cone Mills Corporation common stock used for
cash distributions is the closing price of such stock as reported on the
sixtieth day following the applicable valuation date.
Member accounts: Individual accounts are maintained for each plan participant
which record the accumulated value of Company contributions allocated to such
participant, the participant's contributions and investment earnings thereon.
Vesting: All members' accounts are 100% vested.
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 3. Unrealized Appreciation of Investments
The unrealized appreciation of investments as of December 31 is as follows:
1997 1996 1995
$2,993,172 $3,516,313 $12,974,877
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Page 9 of 11
CONE MILLS CORPORATION
EMPLOYEE EQUITY PLAN
NOTES TO FINANCIAL STATEMENTS
Note 4. Priorities of Termination
If the Plan is terminated, each member would be entitled to the total amount in
his account, payable under the terms of the plan.
Note 5. Federal Income Taxes
The Plan is intended to meet the qualification requirements of Sections 401(a)
and 401(k) and related provisions of the Internal Revenue Code. As long as the
Plan meets these requirements, the Plan will not be subject to income taxes and
members will not recognize taxable income for federal income tax purposes upon
receipt to their individual accounts of contributions, dividends, interest or
investment gains. Taxation of the amounts credited to a member's individual
account is deferred until the member receives a distribution. A favorable
determination letter has been obtained as of December 31, 1997.
Note 6. Reconciliation of Differences Between These Financial Statements
and the Financial Information Required on Form 5500
<TABLE>
<S> <C> <C>
December 31, December 31,
1997 1996
Plan equity as presented in these
financial statements $17,764,730 $ 18,237,601
Adjustment of benefits payable (2,277,300) (1,598,338)
----------- -----------
Plan equity as presented in Form 5500 $15,487,430 $ 16,639,263
=========== ===========
Net increase (decrease) in plan equity
as presented in thesefinancial statements $ (472,871) $(10,711,885)
Adjustment of benefits paid (678,962) (1,308,284)
Net decrease in plan equity as presented
in Form 5500 $(1,151,833) $(12,020,169)
</TABLE>
Note 7. Subsequent Event
The Plan will be merged into the Cone Mills Corporation Supplemental Retirement
Plan during 1998. The Cone Mills Corporation Supplemental Retirement Plan will
be the surviving plan after this merger occurs.
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INDEX TO EXHIBITS
Exhibit 23 Consent of McGladrey & Pullen, LLP, independent auditor,
with respect to the incorporation by reference in the
Registrant's Registration Statements on Form S-8 (Nos.
33-31979, 33-51951 and 33-51953) of their report on the
financial statements filed herewith.
Sequential Page No. 11
SIGNATURES
THE PLAN. Pursuant to the requirement of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
CONE MILLS CORPORATION EMPLOYEE EQUITY PLAN
By: /s/ Terry L. Weatherford, Member of Advisory Committee
By: /s/ Gary L. Smith, Member of Advisory Committee
Date: June 23, 1998
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Page 11 of 11
MCGLADREY & PULLEN, LLP
Certified Public Accountants and Consultants
Exhibit 23
CONSENT OF MCGLADREY & PULLEN, LLP, INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in Cone Mills Corporation's
Registration Statements on Form S-8 (Nos. 33-31979; 33-51951; and 33-51951) of
our reports, dated April 15, 1998, with respect to the financial statements
included in the Forms 11-K of Cone Mills Corporation Employee Equity Plan and
Cone Mills Corporation Employee Equity Plan - Hourly for the years ended
December 31, 1997.
By: /s/MCGLADREY & PULLEN, LLP
Greensboro, North Carolina
June 19, 1998
