Page 1 of 32
Index to Exhibits-Pages 24-30
UNITED STATES
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 July 4, 1999
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)
(336) 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 29, 1999:
25,485,517 shares.
1
<PAGE>
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 July 4, 1999
and June 28, 1998 (Unaudited).................................3
Consolidated Condensed Balance Sheets
July 4, 1999 and June 28, 1998 (Unaudited)
and January 3, 1999...........................................4
Consolidated Condensed Statements of Cash Flows
Twenty-six weeks ended July 4, 1999
and June 28, 1998 (Unaudited).................................5
Notes to Consolidated Condensed Financial Statements
(Unaudited)...................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................21
Item 4. Submission of Matters to a Vote of Security Holders................22
Item 5. Other Information..................................................22
Item 6. Exhibits and Reports on Form 8-K...................................23
2
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Item 1. Part I
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(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
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 174,492 $ 197,304 $ 331,749 $ 387,475
Cost of Goods Sold 160,249 177,148 302,163 350,192
------------- ------------ ------------- -------------
Gross Profit 14,243 20,156 29,586 37,283
Selling and Administrative 11,725 14,066 25,030 27,821
Restructuring and Impairment of Assets - - 12,917 -
------------- ------------ ------------- -------------
Income (Loss) from Operations 2,518 6,090 (8,361) 9,462
------------- ------------ ------------- -------------
Other Income (Expense)
Interest income 446 751 876 1,362
Interest expense (3,517) (4,174) (7,157) (7,721)
------------- ------------ ------------- -------------
(3,071) (3,423) (6,281) (6,359)
------------- ------------ ------------- -------------
Income (Loss) before Income Taxes (Benefit), Equity
in Earnings of Unconsolidated Affiliate and
Cumulative Effect of Accounting Change (553) 2,667 (14,642) 3,103
Income Taxes (Benefit) (177) 880 (4,967) 1,024
------------- ------------ ------------- -------------
Income (Loss) before Equity in Earnings of
Unconsolidated Affiliate and Cumulative Effect
of Accounting Change (376) 1,787 (9,675) 2,079
Equity in Earnings of Unconsolidated Affiliate 1,090 1,264 1,957 2,516
------------- ------------ ------------- -------------
Income (Loss) before Cumulative Effect of Accounting
Change 714 3,051 (7,718) 4,595
Cumulative Effect of Accounting Change - - (1,038) -
------------- ------------ ------------- -------------
Net Income (Loss) $ 714 $ 3,051 $ (8,756) $ 4,595
============= ============ ============= =============
Income (Loss) Available to Common Shareholders
Income (Loss) before Cumulative Effect of
Accounting Change $ (76) $ 2,331 $ (9,228) $ 3,122
Cumulative Effect of Accounting Change - - (1,038) -
============= ============ ============= =============
Net Income (Loss) $ (76) $ 2,331 $ (10,266) $ 3,122
============= ============ ============= =============
Earnings (Loss) Per Share - Basic and Diluted
Income (Loss) before Cumulative Effect of
Accounting Change $ - $ 0.09 $ (0.36) $ 0.12
Cumulative Effect of Accounting Change - - (0.04) -
============= ============ ============= =============
Net Income (Loss) $ - $ 0.09 $ (0.40) $ 0.12
============= ============ ============= =============
Weighted-Average Common Shares Outstanding
Basic 25,442 26,166 25,437 26,175
============= ============ ============= =============
Diluted 25,442 26,280 25,437 26,246
============= ============ ============= =============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
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CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
July 4, June 28, January 3,
1999 1998 1999
------------- -------------- --------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 3,992 $ 1,609 $ 639
Accounts receivable, less allowances of $3,300; 1998, $1,500 35,184 24,652 26,010
Subordinated note receivable 22,115 44,970 10,414
Inventories 113,718 123,618 120,430
Other current assets 14,774 23,947 10,253
------------- -------------- --------------
Total Current Assets 189,783 218,796 167,746
Investments in Unconsolidated Affiliates 46,408 39,297 45,489
Other Assets 36,556 36,354 36,616
Property, Plant and Equipment 225,194 251,821 238,666
------------- -------------- --------------
$ 497,941 $ 546,268 $ 488,517
============= ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ - $ 1,500 $ 1,000
Current maturities of long-term debt 10,714 10,714 10,714
Accounts payable 38,944 37,480 27,255
Sundry accounts payable and accrued liabilities 45,703 47,757 42,071
Deferred income taxes 16,979 20,938 22,670
------------- -------------- --------------
Total Current Liabilities 112,340 118,389 103,710
Long-Term Debt 171,608 176,878 161,385
Deferred Income Taxes 31,377 41,964 30,050
Other Liabilities 10,784 11,080 11,448
Stockholders' Equity
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 395,558 shares;
1998, 383,948 shares 39,556 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 25,485,517 shares;
1998, 26,165,933 shares and 25,432,233 shares 2,549 2,617 2,543
Capital in excess of par 57,522 62,049 57,264
Retained earnings 81,208 104,089 92,799
Deferred compensation - restricted stock (486) (655) (579)
Accumulated other comprehensive loss, currency translation
adjustment (8,517) (8,538) (8,498)
------------- -------------- --------------
Total Stockholders' Equity 171,832 197,957 181,924
------------- -------------- --------------
$ 497,941 $ 546,268 $ 488,517
============= ============== ==============
</TABLE>
Note: The balance sheet at January 3, 1999, has been derived from
the financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<S> <C> <C>
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
July 4, 1999 June 28, 1998
----------------- ------------------
(Unaudited) (Unaudited)
CASH USED IN OPERATIONS $ (5,699) $ (9,869)
----------------- ------------------
INVESTING
Proceeds from sale of property, plant and equipment 2,660 5,017
Capital expenditures (3,970) (16,706)
----------------- ------------------
Cash used in investing (1,310) (11,689)
---------------- ------------------
FINANCING
Net payments under line of credit agreements (1,000) (3,000)
Increase (decrease) in checks issued in excess of deposits 2,755 (8,488)
Proceeds from long-term debt borrowings 10,000 37,000
Proceeds from sale of common stock 326 -
Purchase of outstanding common stock (45) (246)
Dividends paid - Class A Preferred (38) (2,955)
Redemption of Class A Preferred stock (1,636) -
----------------- ------------------
Cash provided by financing 10,362 22,311
----------------- ------------------
Net change in cash 3,353 753
Cash at Beginning of Period 639 856
----------------- ------------------
Cash at End of Period $ 3,992 $ 1,609
================= ==================
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 7,281 $ 7,393
================= ==================
Income taxes, net of refunds $ 482 $ 522
================= ==================
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,797 $ -
================= ==================
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated condensed financial
statements for July 4, 1999 and June 28, 1998 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 July 4, 1999, June 28, 1998, and January 3, 1999, and the related
consolidated condensed statements of operations for the respective thirteen and
twenty-six weeks ended July 4, 1999 and June 28, 1998 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 year 1998.
Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
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 July 4, 1999 and June 28, 1998 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. Inventories
<TABLE>
<S> <C> <C> <C>
(in thousands) 7/4/99 6/28/98 1/3/99
Greige and finished goods $ 81,031 $ 79,589 $ 87,087
Work in process 6,993 10,602 9,810
Raw materials 14,331 20,664 11,508
Supplies and other 11,363 12,763 12,025
------- ------- -------
$ 113,718 $ 123,618 $ 120,430
======= ======= =======
Note 3. Long-Term Debt
(in thousands) 7/4/99 6/28/98 1/3/99
Senior Note $ 42,858 $ 53,572 $ 42,858
Revolving Credit Agreement 42,000 37,000 32,000
8 1/8% Debentures 97,464 97,020 97,241
------- ------- -------
182,322 187,592 172,099
Less current maturities 10,714 10,714 10,714
------- ------- -------
$ 171,608 $ 176,878 $ 161,385
======= ======= =======
</TABLE>
6
<PAGE>
Note 4. Class A Preferred Stock
On February 11, 1999, the Company declared a 7.5% stock dividend on the
Company's Class A Preferred Stock which was paid on March 31, 1999. The dividend
was charged to retained earnings in the amount of approximately $2.8 million.
The 2000 dividend rate for Class A Preferred Stock is 8.0%, payable March 31,
2000.
Note 5. Depreciation and Amortization
The following table presents depreciation and amortization included in the
statements of operations.
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
7/4/99 6/28/98 7/4/99 6/28/98
Depreciation $ 5,902 $ 7,049 $ 13,092 $ 14,223
Amortization 674 674 1,350 1,349
----- ----- ------ ------
$ 6,576 $ 7,723 $ 14,442 $ 15,572
===== ===== ====== ======
</TABLE>
7
<PAGE>
Note 6. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share ("EPS").
<TABLE>
<S> <C> <C>
(in thousands, except Thirteen Thirteen
per share data) Weeks Ended Weeks Ended
7/4/99 6/28/98
Net income $ 714 $ 3,051
Preferred stock dividends (790) (720)
----- -----
Basic EPS - income (loss) available
to common shareholders ( 76) 2,331
Effect of dilutive securities - -
------ -----
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $ ( 76) $ 2,331
====== =====
Determination of shares:
Basic EPS - weighted-average shares 25,442 26,166
Effect of dilutive securities - 114
------ ------
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,442 26,280
====== ======
Earnings (loss) per share - basic and diluted $ - $ 0.09
====== ======
8
<PAGE>
Note 6. Earnings (Loss) Per Share (continued)
The following table sets forth the computation of basic and diluted earnings
(loss) per share ("EPS").
(in thousands, except Twenty-Six Twenty-Six
per share data) Weeks Ended Weeks Ended
7/4/99 6/28/98
Income (loss) before cumulative $ (7,718) $ 4,595
effect of accounting change
Preferred stock dividends (1,510) (1,473)
------- ------
Income (loss) available to common
shareholders before cumulative
effect of accounting change (9,228) 3,122
Cumulative effect of accounting change (1,038) -
------ -----
Basic EPS - income (loss) available
to common shareholders (10,266) 3,122
Effect of dilutive securities - -
------ -----
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $(10,266) $ 3,122
====== =====
Determination of shares:
Basic EPS - weighted-average shares 25,437 26,175
Effect of dilutive securities - 71
------ ------
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,437 26,246
====== ======
Earnings (loss) per share - basic and diluted
Income (loss) before cumulative effect
of accounting change $ ( 0.36) $ 0.12
Cumulative effect of accounting change ( 0.04) -
------ ------
Net income (loss) $ ( 0.40) $ 0.12
====== ======
</TABLE>
Common stock options outstanding at July 4, 1999 were not included in the
computation of diluted earnings per share because to do so would have been
antidilutive.
9
<PAGE>
Note 7. Segment Information
The Company has four principal business segments which are based upon
organizational structure: 1) denim and khaki; 2) yarn-dyed products; 3)
commission finishing; and 4) decorative fabrics.
Operating income (loss) for each segment is total revenue less operating
expenses applicable to the segment. Intersegment revenue relates to the
commission finishing segment. Equity in earnings of unconsolidated affiliate is
included in the denim and khaki segment. Restructuring and impairment of asset
expenses, unallocated expenses, interest, income taxes and cumulative effect of
accounting change are not included in segment operating income (loss).
Net sales and income (loss) from operations for the Company's operating segments
are as follows:
<TABLE>
<S> <C> <C>
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
7/4/99 6/28/98
Net Sales
Denim and Khaki $ 127,238 $ 146,359
Yarn-Dyed Products 6,565 12,353
Commission Finishing 26,403 28,082
Decorative Fabrics 17,763 13,671
Other 428 1,753
------- -------
178,397 202,218
Less Intersegment Sales 3,905 4,914
------- -------
$ 174,492 $ 197,304
======= =======
Income (Loss) from Operations
Denim and Khaki $ 7,251 $ 14,880
Yarn-Dyed Products (528) (1,891)
Commission Finishing (1,716) (3,625)
Decorative Fabrics 369 (193)
Other (29) (26)
Unallocated Expenses (1,739) (1,791)
------- -------
3,608 7,354
Restructuring and Impairment of Assets - -
------- -------
3,608 7,354
Less Equity in Earnings of Unconsolidated
Affiliate 1,090 1,264
------- -------
2,518 6,090
Interest Expense - Net ( 3,071) ( 3,423)
------- -------
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of
Accounting Change $ (553) $ 2,667
======= =======
</TABLE>
10
<PAGE>
Note 7. Segment Information (continued)
<TABLE>
<S> <C> <C>
(in thousands) Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
7/4/99 6/28/98
Net Sales
Denim and Khaki $ 239,873 $ 288,113
Yarn-Dyed Products 14,071 24,033
Commission Finishing 52,241 55,209
Decorative Fabrics 34,348 25,659
Other 900 3,449
------- -------
341,433 396,463
Less Intersegment Sales 9,684 8,988
------- -------
$ 331,749 $ 387,475
======= =======
Income (Loss) from Operations
Denim and Khaki $ 16,567 $ 28,732
Yarn-Dyed Products (3,805) (3,332)
Commission Finishing (3,672) (8,607)
Decorative Fabrics 873 (721)
Other (258) (488)
Unallocated Expenses (3,192) (3,606)
------- -------
6,513 11,978
Restructuring and Impairment of Assets (12,917) -
------- -------
(6,404) 11,978
Less Equity in Earnings of Unconsolidated
Affiliate 1,957 2,516
------- -------
(8,361) 9,462
Interest Expense - Net (6,281) (6,359)
------- -------
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of
Accounting Change $ (14,642) $ 3,103
======= =======
</TABLE>
Note 8. Comprehensive Income (Loss)
Comprehensive income (loss) is the total of net income (loss) and other changes
in equity, except those resulting from investments by owners and distributions
to owners not reflected in net income (loss). Total comprehensive income (loss)
for the periods was as follows:
<TABLE>
<S> <C> <C>
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
7/4/99 6/28/98
Net income $ 714 $ 3,051
Other comprehensive loss,
currency translation adjustment (17) ( 7)
----- -----
$ 697 $ 3,044
===== =====
11
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Note 8. Comprehensive Income (Loss) (continued)
(in thousands) Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
7/4/99 6/28/98
Net income (loss) $ (8,756) $ 4,595
Other comprehensive loss,
currency translation adjustment (19) (34)
----- -----
$ (8,775) $ 4,561
===== =====
</TABLE>
Note 9. Reclassification of Selling and Administrative
In the first quarter of 1999 the Company changed the criteria for items to be
included in selling and administrative expenses to conform to prevailing
industry practices. The Company has restated its prior year Statement of
Operations to reflect the new classification criteria. This resulted in the
reclassification of $7.6 million and $14.6 million from selling and
administrative expenses to cost of goods sold for the thirteen and twenty-six
weeks ended June 28, 1998, respectively.
Note 10. Cumulative Effect of Accounting Change
Beginning in fiscal year 1999, the Company adopted Statement of Position ("SOP")
98-5, "Reporting on the Costs of Start-Up Activities," which requires future
start-up costs to be expensed as incurred and previously capitalized start-up
costs to be expensed when SOP 98-5 is adopted. The Company recognized a charge
of $1.0 million, the Company's 50% portion of Parras Cone's unamortized start-up
costs, as a cumulative effect of an accounting change in the first quarter of
1999. Had SOP 98-5 not been adopted during the first quarter of 1999, net loss
would have been reduced by $0.8 million, or $0.03 per share, for the twenty-six
weeks ended July 4, 1999.
12
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In response to 1998 business conditions for apparel products and commission
finishing, the Company announced in early 1999 and began to implement during the
first quarter a comprehensive downsizing and reorganization program which
included:
1) The streamlining of product offering of the sportswear division
including the closing in the second quarter of the Salisbury plant
which produced yarn-dyed shirting fabrics.
2) The downsizing and reorganization of the corporate administrative staff
to more efficiently match Cone's present sales base.
3) The merger of the denim and sportswear fabrics businesses into one unit
which will more efficiently serve the growing casual wear market.
4) The reduction of the manufacturing staff in order to simplify the
management structure and become more responsive to customer cycle
times.
5) The closing in the second quarter of the Florence and Cliffside yarn
manufacturing facilities, coupled with the outsourcing of yarn, to
reduce operating costs and conserve capital which would have been
required for equipment modernization.
6) The restructuring, downsizing and reorganization of the Carlisle
finishing plant to reduce costs and improve efficiency.
Most of the expense related to these initiatives was reflected in the last
quarter of 1998 ($19.3 million) and the first quarter of 1999 ($14.5 million).
Additional expenses will be incurred in the third quarter related to the
Carlisle restructuring. The Company began to achieve cost savings as a result of
these initiatives in the second quarter of 1999.
RESULTS OF OPERATIONS
Second Quarter Ended July 4, 1999 Compared with Second Quarter Ended June
28, 1998.
Cone Mills had sales for the second quarter of 1999 of $174.5 million, down
11.6%, as compared with the second quarter of 1998 sales of $197.3 million. For
the 1999 period, sales of denim and khaki and yarn-dyed products decreased,
partially offset by increased decorative fabric sales. In the fourth quarter of
1998, and continuing through into the first half of 1999, denim sales slowed
significantly, the result of weaker consumer interest in denims. International
sales represented 19% of total sales in the second quarter of 1999 compared to
24% of sales for the 1998 period. International sales were negatively impacted
by the Asian economic crisis,
13
<PAGE>
slowing European sales and the stronger U.S. dollar.
Gross profit for the second quarter of 1999 decreased to 8.2% of sales, as
compared with 10.2% for the previous year. Lower volume and pricing in denims
and the aggressive elimination of unprofitable lines and inventories more than
offset the improved operating results in commission finishing and decorative
fabrics. Deteriorating conditions in the off-goods market resulted in inventory
reserves being inadequate.
Segment Information. Cone operates in four principal business segments:
denim and khaki, yarn-dyed products, commission finishing and decorative
fabrics. See Note 7 to Notes to Consolidated Condensed Financial
Statements (unaudited) included in Part 1, Item 1.
Denim and Khaki. For the second quarter of 1999, denim and khaki
segment sales were $127.2 million, down 13.1% from second quarter 1998
sales of $146.4 million. Substantially all of the sales shortfall was
the result of lower sales volume and prices in denim which resulted
primarily from the negative impact of a weaker consumer interest in
denims and the resulting adjustments to retail and manufacturing
inventories.
Operating income for the denim and khaki segment for the second quarter
of 1999 was $7.3 million, or 5.7% of sales, compared with $14.9
million, or 10.2%, for the second quarter of 1998. The reduced margin
and income resulted primarily from lower sales volume, lower prices,
reduced plant operating schedules and closeouts on khaki inventories as
the Company refocused this product line. Operating income for the
segment includes the equity in earnings from the Parras Cone joint
venture plant.
Yarn-Dyed Products. As part of the restructuring program, the Company
ceased manufacturing yarn-dyed products in May 1999. For the second
quarter of 1999, sales of yarn-dyed products were $6.6 million, down
46.9% from $12.4 million in the 1998 period. Most of the operating
losses for this segment were previously reserved under the Company's
restructuring plan. However, a loss of $0.5 million was included in
segment data for the second quarter of 1999. For the 1998 period, the
yarn-dyed products segment had an operating loss of $1.9 million.
Commission Finishing. Outside sales of the commission finishing
segment, which consists of the Carlisle and Raytex plants, were $22.5
million for the second quarter of 1999, down 2.9% from $23.2 million
for the second quarter of 1998. For the second quarter of 1999, the
operating loss was $1.7 million, an improvement of 53% from the loss of
$3.6 million for the second quarter of 1998. While operating results at
the Carlisle Plant continue to improve year-over-year, the rate of
improvement has been slower than desired, which has resulted in a
reorganization of division management and the initiation of a review of
the operating structure during the
14
<PAGE>
second quarter of 1999. The Company will begin implementation of the
resulting restructuring plans in the third quarter.
Decorative Fabrics. For the second quarter of 1999, sales of the
decorative fabrics segment were $17.8 million, up 29.9% from sales of
$13.7 million for the second quarter of 1998. Cone Jacquards sales
improved as capacity expanded and John Wolf decorative fabrics sales
were up as the unit improved its product offerings and marketing
efforts. The decorative fabrics segment had earnings of $0.4 million
for the second quarter of 1999 compared with a loss of $0.2 million for
the second quarter of 1998. Second quarter 1999 results were impacted
by higher than expected start-up costs related to capacity additions at
the jacquard plant.
Selling and administrative expenses for the second quarter of 1999 were $11.7
million, or 6.7% of sales, as compared with $14.1 million, or 7.1% of sales in
the second quarter of 1998. The lower selling and administrative expenses
reflect the cost savings realized from restructuring initiatives. Selling and
administrative expenses for 1998 were restated to conform to industry practices.
Interest expense for the second quarter of 1999 was $3.5 million, down from $4.2
million for the second quarter of 1998, primarily the result of lower borrowing
levels.
For the second quarter of 1999, the income tax benefit as a percent of the
taxable loss was 32.0%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $1.1 million for the second quarter of 1999, as compared with $1.3 million
for the 1998 period.
For the second quarter of 1999, Cone Mills had net income of $0.7 million. After
preferred dividends, the Company essentially reported a break-even for common
shareholders. For comparison, in the second quarter of 1998, Cone Mills had net
income of $3.1 million, or $.09 per share after preferred dividends.
Six Months Ended July 4, 1999 Compared with Six Months Ended June 28, 1998
For the first six months of 1999, Cone Mills had sales of $331.7 million, down
14.4% from sales of $387.5 million for the first six months of 1998, primarily
due to a sales shortfall in denim. Lower denim sales resulted primarily from a
weaker consumer interest in jeans and the resulting adjustments to retail and
manufacturing inventories.
Gross profit for the first six months of 1999 decreased to 8.9% of sales, as
compared with 9.6% for the previous year. Lower volume and pricing in denims and
the aggressive elimination of unprofitable lines and inventories more than
offset the improved operating results in commission finishing and decorative
fabrics. Deteriorating conditions in the off-goods market resulted in inventory
15
<PAGE>
reserves being inadequate.
Segment Information. Cone operates in four principal business segments:
denim and khaki, yarn-dyed products, commission finishing and decorative
fabrics. See Note 7 to Notes to Consolidated Condensed Financial
Statements (unaudited) included in Part 1, Item 1.
Denim and Khaki. For the first six months of 1999, denim and khaki
segment sales were $239.9 million, down 16.7% from first half 1998
sales of $288.1 million. Almost all of the sales shortfall was lower
sales volume and prices for denims.
Operating income of the denim and khaki segment for the first six
months of 1999 was $16.6 million, or 6.9% of sales, compared with $28.7
million, or 10.0% for the first six months of 1998. The reduced margin
and income resulted primarily from lower sales volume, lower prices,
reduced plant operating schedules and closeouts on khaki inventories as
the company refocused this product line. Operating income for the
segment includes the equity in earnings from the Parras Cone joint
venture plant.
Yarn-Dyed Products. The Company ceased manufacturing yarn-dyed products
in May 1999. For the first six months of 1999, sales of yarn-dyed
products were $14.1 million, down 41.5% from $24.0 million in the 1998
period. For the first six months of 1999, the yarn-dyed products
segment had an operating loss of $3.8 million, as compared with a loss
of $3.3 million for the first six months of 1998.
Commission Finishing. Outside sales of the commission finishing
segment, which consists of the Carlisle and Raytex plants, were $42.6
million for the first six months of 1999, down 7.9% from $46.2 million
for the first six months of 1998. Anticipated recovery in print demand
in 1999 has not materialized. For the 1999 period, the operating loss
was $3.7 million, an improvement of 57% from the loss of $8.6 million
for the 1998 period. While operating results at the Carlisle Plant
continue to improve, the rate of improvement has been slower than
expected.
Decorative Fabrics. For the first six months of 1999, sales of the
decorative fabrics segment were $34.3 million, up 33.9% from sales of
$25.7 million for the 1998 period. Cone Jacquards sales improved as
capacity expanded and John Wolf decorative fabrics sales improved. The
decorative fabrics segment had earnings of $0.9 million for the 1999
period compared with a loss of $0.7 million for the first six months of
1998. 1999 results were negatively impacted by higher than expected
start-up costs related to capacity additions at the jacquard plant.
Selling and administrative expenses for the first six months of 1999 was $25.0
million, or 7.5% of sales, as compared with $27.8 million, or 7.2% of sales in
the 1998 period. The lower selling and administrative expenses
16
<PAGE>
reflect the cost savings realized from restructuring initiatives. Selling and
administrative expenses for 1998 were restated to conform to industry practices.
Interest expense for the first six months of 1999 was $7.2 million, down from
$7.7 million for the 1998 period.
For the first six months of 1999, the income tax benefit as a percent of the
taxable loss was 33.9%. In the 1998 period, income tax as a percent of income
was 33.0%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $2.0 million for the first six months of 1999, as compared with $2.5 million
for the 1998 period. In the 1999 period, the plant had lower capacity
utilization as compared to 1998.
For the first six months of 1999, the Company had a net loss of $8.8 million, or
$.40 per share after preferred dividends. This included a $1.0 million charge
from the cumulative effect of an accounting change related to capitalized
start-up costs at the Parras Cone plant. In the period, the Company also
incurred restructuring and related expenses of $14.5 million associated with its
restructuring program. Excluding the restructuring, related expenses and the
accounting change, the Company had earnings of $.01 per share after preferred
dividends. For comparison, in the first six months of 1998, Cone Mills had net
income of $4.6 million, or $.12 per share after preferred dividends.
Liquidity and Capital Resources
The Company's principal long-term capital components consist of debt outstanding
under its Senior Note, its 8 1/8% Debentures and stockholders' equity. Primary
sources of liquidity are internally generated funds, an $80 million Revolving
Credit Facility (under which $38 million was available on July 4, 1999) and a
$50 million Receivables Purchase Agreement. The Receivables Purchase Agreement
expires in November 1999, and the Company believes it can replace this facility
on comparable terms.
During the first six months of 1999, the Company generated cash from operations,
before changes in working capital, of $2.2 million, as compared with $16.3
million for the first six months of 1998. In the 1999 period, working capital
increased by $7.9 million. Uses of cash in the 1999 period included $4.0 million
for capital expenditures and $1.6 million for the redemption of preferred stock.
The Company believes that internally generated operating funds and funds
available under its credit facilities will be sufficient to meet its needs for
the foreseeable future. International investments, including the proposed denim
facility discussed below, will require additional long-term financing.
17
<PAGE>
On April 30, 1999, Guilford Mills, Inc. (Guilford) and the Company announced
plans to develop an innovative new textile and apparel industrial park in
Mexico. The park is believed to be the first large-scale industrial development
in Mexico in which textile plants, garment manufacturing, and laundering
facilities are planned to be located in proximity to each other.
In support of this project, the Mexican government has agreed to facilitate the
infrastructure including roads and rights of way, water resources,
telecommunications, municipal services, electricity, natural gas, wastewater
treatment and work force training.
The new park, to be built in several stages, will be located on over 500 acres
of land in Altamira, near Tampico, a northeast coast port city in the state of
Tamaulipas. In April, Guilford and Cone established a 50/50 joint venture to
develop and operate the park. It is expected that this investment for Cone will
range from $6 million to $10 million.
The plant to be built by Cone in the initial phase of the project will be a
ring-spun, value-added denim plant with a capacity of 20 million yards
expandable to 40 million yards. The Company expects to invest $40 million to $75
million in the initial denim facility depending upon whether it outsources yarn
manufacturing, forms a yarn alliance or produces its own yarn. The Company could
invest an additional $30 million to $45 million for the expansion to 40 million
yards. A portion of the funds required for this facility will require debt
financing, which the Company has not arranged at this date.
On July 4, 1999, the Company's long-term capital structure consisted of $171.6
million of long-term debt and $171.8 million of stockholders' equity. For
comparison, on June 28, 1998, the Company had $176.9 million of long-term debt
and $198.0 million of stockholders' equity. Long-term debt (including current
maturities of long-term debt) as a percentage of long-term debt and
stockholders' equity was 51% at July 4, 1999, as compared with 49% at June 28,
1998.
Accounts and note receivable on July 4, 1999, were $57.3 million, as compared
with $69.6 million at June 28, 1998. Receivables, including those sold pursuant
to the Receivables Purchase Agreement, represented 58 days of sales outstanding
at July 4, 1999 and 51 days at June 28, 1998. The increase in days of sales
outstanding primarily reflects a change in customer sales mix with fewer
customers paying in advance of due date.
Inventories on July 4, 1999, were $113.7 million, down $9.9 million from June
28, 1998. The decrease was primarily due to lower raw material and work in
process inventories.
For the first six months of 1999, capital spending was $4.0 million compared to
$16.7 million for the first six months of 1998. Domestic capital spending in
1999 is expected to be approximately $15 million. The reduced spending in 1999
is because the Company completed its relooming
18
<PAGE>
program of domestic denim facilities in 1998. In addition to the 1999 domestic
capital spending budget, the Company expects to spend up to $12 million for
investments in international initiatives.
Other Matters
The Company is implementing a comprehensive plan to address possible exposures
to Year 2000 issues. Critical financial, operational and manufacturing systems
have been inventoried and assessed by filing date and system modifications or
replacement have been completed or are in-process. Implementation of required
changes for all systems is targeted for completion during calendar year 1999.
Executive management continually reviews the status of the Company's Year 2000
compliance efforts. At present the Company estimates it is approximately 90%
complete with implementation of new systems or remediation of existing systems
related to core business systems. Although the Company has received written
vendor certification that all new core business systems are Year 2000 compliant,
the Company will test selected core business systems in third quarter 1999.
As previously disclosed, the Company's critical manufacturing, operating and
control systems are approximately 90% complete with respect to Year 2000
compliance efforts. Testing and certification are now targeted for completion in
the third quarter of 1999.
The Company is coordinating Year 2000 readiness with other entities with which
it interacts, both domestically and globally, including suppliers, customers and
financial service organizations. Coordination efforts involve communication with
major suppliers and customers to undertake testing of electronic interfaces and
obtaining written certifications of compliance where applicable. Risk
assessments and action plans have been substantially completed. All required
changes, including testing and certification, are targeted for completion during
third quarter 1999.
The Company has made significant investments to modernize its core business
systems over the past several years. With each system modification or
replacement, Cone has addressed the Year 2000 issue. Therefore, remediation
costs to address the Company's Year 2000 issues are presently expected to be
approximately $1.0 million.
The Company currently has contingency plans that address core business
system-related interruptions and will further develop such plans related to
manufacturing, operating and control systems to protect the business from
potential Year 2000 interruptions. These plans will be completed during calendar
year 1999 and will include, for example, as a worst case scenario, processing
certain significant business transactions manually. The Company is taking
reasonable steps to prevent major interruptions related to the Year 2000 issue;
however, the potential impact on the Company's financial position, results of
operations, or cash flows if the Company, its suppliers or its customers are not
fully Year 2000 compliant
19
<PAGE>
is not reasonably estimable.
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 that 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 1933, 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, (iv) the Company's
relationships with Levi Strauss as its major customer, and (v) the
risks associated with unforeseen technological difficulties arising
under the Company's Year 2000 compliance efforts and the potential for
increased costs associated therewith. For a further description of
these risks see the Company's 1998 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 1998 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks relating to fluctuations in
20
<PAGE>
interest rates, currency exchange rates and commodity prices. There has been no
material change in the Company's market risks that would significantly affect
the disclosures made in the Form 10-K for the year ended January 3, 1999.
PART II
Item 1. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the "Plaintiffs") former
employees of the Company, instituted a class action suit against the Company and
certain other defendants in which the Plaintiffs asserted a variety of claims
related to the Cone Mills Corporation 1983 ESOP (the "1983 ESOP") and certain
other employee benefit plans maintained by the Company. In March 1992, the
United States District Court in Greenville, South Carolina entered a judgment in
the amount of $15.5 million (including an attorneys' fee award) against the
Company with respect to an alleged promise to make additional Company
contributions to the 1983 ESOP and all claims unrelated to the alleged promise
were dismissed. The Company, certain individual defendants and the Plaintiffs
appealed.
On May 6, 1994, the United States Court of Appeals for the Fourth Circuit,
sitting en banc, affirmed the prior conclusion of a panel of three of its judges
and unanimously reversed the $15.5 million judgment and unanimously affirmed all
of the District Court's rulings in favor of the Company. However, the Court of
Appeals affirmed, by an equally divided court, the District Court's holding that
Plaintiffs should be allowed to proceed on an alternative theory whether,
subject to proof of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an enforceable
obligation that could allow recovery on a theory of equitable estoppel.
Accordingly, the case was remanded to the District Court for a determination of
whether the Plaintiffs could establish detrimental reliance creating estoppel of
the Company.
On April 19, 1995, the District Court granted a motion by the Company for
summary judgment on the issues of equitable estoppel and third-party beneficiary
of contract which had been remanded to it by the Court of Appeals. The Court
ruled that the Plaintiffs could not forecast necessary proof of detrimental
reliance. The District Court, however, granted Plaintiffs motion to amend the
complaint insofar as they 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 of
the 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
21
<PAGE>
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.
The Company and its subsidiaries are involved in legal proceedings and claims
arising in the ordinary course of business. Although there can be no assurance
as to the ultimate disposition of these matters, management believes that the
probable resolution of such contingencies will not have a material adverse
effect on the financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Cone Mills Corporation's Annual Meeting of Shareholders was held May 11, 1999.
The proposals voted upon and the results of the voting were as follows:
<TABLE>
<S> <C> <C> <C>
Abstentions
Against / (Includes Broker
For Withheld Non-Votes)
1. Election of three Class I directors for a three-year term:
John L. Bakane 18,945,181 2,426,178 0
Charles M. Reid 18,943,472 2,427,887 0
Nicholas Shreiber 18,957,573 2,413,786 0
2. Ratification of the appointment of McGladrey & Pullen, LLP, as independent
auditors for the Corporation for the current year:
20,688,975 646,045 36,339
3. Consideration of shareholder proposal for adoption of nonbinding resolution
urging the directors to take the necessary steps to declassify the board of
directors:
7,739,214 8,270,101 5,362,044
</TABLE>
Item 5. Other Information
Notice of a matter to be presented by a shareholder for consideration at the
2000 annual meeting other than pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received by the Company prior to February 16, 2000. Failure
to give timely notice will result in the proxy statement relating to the meeting
not including information on the matter or the manner in which management's
proxies will vote on the matter and the proxies received by management will have
discretionary authority to
22
<PAGE>
vote on such matter.
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
23
<PAGE>
Exhibit Sequential
No. Description Page No.
*2.1(a) Purchase Agreement between Registrant and
Cone Receivables LLC dated as of March 25,
1997, filed 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.
*2.1(c) Amendment to Receivables Purchase
Agreement dated March 24, 1998,
between the Registrant and Delaware
Funding Corporation, filed as Exhibit
2.1(c) to Registrant's report on
Form 10-Q for the quarter ending
March 29, 1998.
*2.1(d) Second Amendment to Receivables
Purchase Agreement dated as of
July 16, 1998, between the Registrant
and Delaware Funding Corporation, filed
as Exhibit 2.1(d) to Registrant's report
Form 10-Q for the quarter ending
September 27, 1998.
*2.1(e) Third Amendment to Receivables
Purchase Agreement dated as of
December 23, 1998, between the
Registrant and Delaware Funding
Corporation.
*2.1(f) Fourth Amendment to Receivables
Purchase Agreement dated as of
March 23, 1999, between the
Registrant and Delaware Funding
Corporation.
*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)
24
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*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.
25
<PAGE>
Exhibit Sequential
No. Description Page No.
*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.
*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
26
<PAGE>
Exhibit Sequential
No. Description Page No.
the Registrant's report on Form 10-K
for the year ended December 31, 1995.
*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.
*4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
27
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*4.3(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
Company of America, filed as Exhibit 4.3(j)
to Registrant's report on Form 10-Q
for the quarter ending March 29, 1998.
*4.4 Credit Agreement dated August 7, 1997,
among the Registrant, various banks and Morgan
Guaranty Trust Company of New York as agent,
filed as Exhibit 4.4 to the Registrant's
report on Form 10-Q for the quarter ended
September 28, 1997.
*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).
28
<PAGE>
Exhibit Sequential
No. Description Page No.
*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 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.
*4.7(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.
*4.7(b) Second Amendment to the Cone Mills Corporation
1983 ESOP dated December 5, 1995, filed as
Exhibit 4.9(b) to the Registrant' report on
Form 10-K for year ended December 31, 1995.
*4.7(c) Third Amendment to the Cone Mills Corporation
1983 ESOP dated August 7, 1997, filed as Exhibit
4.8(c) to the Registrant's report on Form 10-Q
for the quarter ended September 28, 1997.
*4.7(d) Fourth Amendment to the Cone Mills Corporation
1983 ESOP dated December 4, 1997, filed as Exhibit
4.8(d) to the Registrant's report on Form 10-K
for the year ended December 28, 1997.
*4.8 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee (Bank of New York is
successor Trustee), filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713).
29
<PAGE>
Exhibit Sequential
No. Description Page No.
27 Financial Data Schedule 32
* Incorporated by reference to the statement or report indicated.
30
<PAGE>
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 18, 1999 /s/ Anthony L. Furr
---------------- --------------------
Anthony L. Furr
Executive Vice President and
Chief Financial Officer
31
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Cone
Mills Corporation Consolidated Financial Statements dated July 4, 1999, and is
qualified in its entirety by reference to such financial statements.
(in thousands, except earnings per share data).
</LEGEND>
<CIK> 0000023304
<NAME> CONE MILLS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> JUL-04-1999
<CASH> 3,992
<SECURITIES> 0
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<PP&E> 467,423
<DEPRECIATION> 242,229
<TOTAL-ASSETS> 497,941
<CURRENT-LIABILITIES> 112,340
<BONDS> 171,608
0
39,556
<COMMON> 2,549
<OTHER-SE> 129,727
<TOTAL-LIABILITY-AND-EQUITY> 497,941
<SALES> 331,749
<TOTAL-REVENUES> 331,749
<CGS> 302,163
<TOTAL-COSTS> 325,393
<OTHER-EXPENSES> 12,917
<LOSS-PROVISION> 1,800
<INTEREST-EXPENSE> (6,281)
<INCOME-PRETAX> (14,642)
<INCOME-TAX> (4,967)
<INCOME-CONTINUING> (7,718)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,038)
<NET-INCOME> (8,756)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
