Page 1 of 41
Index to Exhibits - Pages 22-33
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 October 1, 2000
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 October 27, 2000:
25,506,569 shares.
1
<PAGE>
CONE MILLS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Thirteen and thirty-nine weeks ended October 1,
2000 and October 3, 1999 (Unaudited) .......................3
Consolidated Condensed Balance Sheets
October 1, 2000 and October 3, 1999 (Unaudited)
and January 2, 2000.........................................4
Consolidated Condensed Statements of Cash Flows
Thirty-nine weeks ended October 1, 2000 and
October 3, 1999 (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 6. Exhibits and Reports on Form 8-K...........................21
2
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
October 1, 2000 October 3, 1999 October 1, 2000 October 3, 1999
----------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 165,273 $ 147,197 $ 468,499 $ 478,946
Cost of Goods Sold 147,726 136,521 414,259 438,684
---------------------------------------------------------------------
Gross Profit 17,547 10,676 54,240 40,262
Selling and Administrative 11,057 11,992 37,236 37,022
Restructuring and Impairment of Assets - 3,100 (332) 16,017
---------------------------------------------------------------------
Income (Loss) from Operations 6,490 (4,416) 17,336 (12,777)
---------------------------------------------------------------------
Other Income (Expense)
Interest income 250 400 892 1,276
Interest expense (4,701) (3,521) (14,198) (10,678)
Other expense (1,275) (264) (3,230) (264)
---------------------------------------------------------------------
(5,726) (3,385) (16,536) (9,666)
---------------------------------------------------------------------
Income (Loss) before Income Taxes (Benefit), Equity
in Earnings (Losses) of Unconsolidated Affiliate
and Cumulative Effect of Accounting Change 764 (7,801) 800 (22,443)
Income Taxes (Benefit) 260 (2,808) 272 (7,775)
---------------------------------------------------------------------
Income (Loss) before Equity in Earnings (Losses) of
Unconsolidated Affiliate and Cumulative Effect
of Accounting Change 504 (4,993) 528 (14,668)
Equity in Earnings (Losses) of Unconsolidated
Affiliate 932 (405) 2,157 1,552
---------------------------------------------------------------------
Income (Loss) before Cumulative Effect of Accounting
Change 1,436 (5,398) 2,685 (13,116)
Cumulative Effect of Accounting Change - - - (1,038)
---------------------------------------------------------------------
Net Income (Loss) $ 1,436 $ (5,398) $ 2,685 $ (14,154)
---------------------------------------------------------------------
Income (Loss) Available to Common Shareholders
Income (Loss) before Cumulative Effect of
Accounting Change $ 389 $ (6,188) $ (164) $ (15,416)
Cumulative Effect of Accounting Change - - - (1,038)
---------------------------------------------------------------------
Net Income (Loss) $ 389 $ (6,188) $ (164) $ (16,454)
---------------------------------------------------------------------
Earnings (Loss) Per Share - Basic and Diluted
Income (Loss) before Cumulative Effect of
Accounting Change $ 0.02 $ (0.24) $ (0.01) $ (0.61)
Cumulative Effect of Accounting Change - - - (0.04)
---------------------------------------------------------------------
Net Income (Loss) $ 0.02 $ (0.24) $ (0.01) $ (0.65)
---------------------------------------------------------------------
Weighted-Average Common Shares Outstanding
Basic 25,496 25,486 25,487 25,453
---------------------------------------------------------------------
Diluted 25,649 25,486 25,487 25,453
---------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
October 1, October 3, January 2,
2000 1999 2000
-----------------------------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 1,707 $ 3,925 $ 1,267
Accounts receivable, less allowance of $5,050 48,089 48,798 47,531
Inventories 109,849 118,393 110,613
Other current assets 9,925 10,504 6,149
---------------------------------
Total Current Assets 169,570 181,620 165,560
Investments in Unconsolidated Affiliates 54,203 46,003 46,815
Other Assets 37,393 36,158 38,964
Property, Plant and Equipment 206,703 222,543 221,458
---------------------------------
$ 467,869 $ 486,324 $ 472,797
---------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 72,495 $ 67,714 $ 79,714
Accounts payable 45,924 41,280 26,849
Sundry accounts payable and accrued liabilities 26,691 34,688 33,866
Deferred income taxes 15,112 15,158 9,894
---------------------------------
Total Current Liabilities 160,222 158,840 150,323
Long-Term Debt 108,734 119,004 119,115
Deferred Income Taxes 30,780 32,588 33,916
Other Liabilities 11,876 11,702 11,958
Stockholders' Equity
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 343,546 shares;
1999, 372,638 shares and 355,635 shares 34,355 37,264 35,564
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 25,497,459 shares;
1999, 25,485,717 shares and 25,479,717 shares 2,550 2,549 2,548
Capital in excess of par 57,514 57,522 57,435
Retained earnings 70,513 75,761 70,776
Deferred compensation - restricted stock (158) (448) (321)
Accumulated other comprehensive loss, currency
translation adjustment (8,517) (8,458) (8,517)
---------------------------------
Total Stockholders' Equity 156,257 164,190 157,485
---------------------------------
$ 467,869 $ 486,324 $ 472,797
---------------------------------
</TABLE>
Note: The balance sheet at January 2, 2000, 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>
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
October 1, 2000 October 3, 1999
---------------------------------
(Unaudited) (Unaudited)
CASH PROVIDED BY OPERATIONS $ 32,033 $ 1,327
------------------------------
INVESTING
Investments in unconsolidated affiliates (5,231) -
Proceeds from sale of property, plant and equipment 2,715 2,824
Capital expenditures (4,196) (8,040)
------------------------------
Cash used in investing (6,712) (5,216)
------------------------------
FINANCING
Net payments under line of credit agreements - (1,000)
Decrease in checks issued in excess of deposits (2,892) (2,377)
Proceeds from (payments on) long-term debt borrowings (17,933) 14,286
Proceeds from issuance of common stock 101 326
Purchase of outstanding common stock - (45)
Dividends paid - Class A Preferred (62) (87)
Redemption of Class A Preferred stock (4,095) (3,928)
------------------------------
Cash provided by (used in) financing (24,881) 7,175
------------------------------
Net change in cash 440 3,286
Cash at Beginning of Period 1,267 639
------------------------------
Cash at End of Period $ 1,707 $ 3,925
------------------------------
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 16,905 $ 13,588
------------------------------
Income taxes, net of refunds $ (211) $ 280
------------------------------
Supplemental Schedule of Noncash Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,845 $ 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 October 1, 2000 and
October 3, 1999 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 October 1, 2000,
October 3, 1999, and January 2, 2000, and the related
consolidated condensed statements of operations for the
respective thirteen and thirty-nine weeks ended October 1,
2000 and October 3, 1999 and cash flows for the thirty-nine
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
1999.
In December 1999, the staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" (SAB No.
101). SAB No. 101 summarizes some of the staff's
interpretations of the application of generally accepted
accounting principles to revenue recognition. The Company
will adopt SAB No. 101 when required in the fourth quarter
of 2000. Management believes the adoption of SAB No. 101
will not have a significant effect on its financial
statements.
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 October 1,
2000 and October 3, 1999 and related consolidated condensed
statements of operations for the thirteen and thirty-nine
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) 10/1/00 10/3/99 1/2/00
Greige and finished goods $ 70,686 $ 86,745 $ 78,973
Work in process 5,571 6,554 4,821
Raw materials 21,251 13,685 15,523
Supplies and other 12,341 11,409 11,296
$ 109,849 $ 118,393 $ 110,613
6
<PAGE>
Note 3. Long-Term Debt
(in thousands) 10/1/00 10/3/99 1/2/00
Senior Note $ 29,209 $ 32,143 $ 32,144
Revolving Credit Agreement 54,000 57,000 69,000
8-1/8% Debentures 98,020 97,575 97,685
181,229 186,718 198,829
Less current maturities 72,495 67,714 79,714
$ 108,734 $ 119,004 $ 119,115
</TABLE>
On July 14, 2000, the Company amended its Revolving Credit
Agreement to extend the maturity date to August 7, 2001, and
provided for the reduction of the availability under the
facility. The present Revolver commitment has been reduced
to $73 million. At the same time, the Company amended its
Senior Note debt repayment schedule to reduce the August 7,
2000, principal payment of $10.7 million to $2.9 million
with the resulting principal payment reduction of $7.8
million being rolled forward into the August 7, 2001,
payment. In addition, the interest rate on the Senior Note
was increased to 11.7% from 11.0%.
Note 4. Class A Preferred Stock
On February 11, 2000, the Company declared an 8.0% stock
dividend on its Class A Preferred Stock, which was paid on
March 31, 2000. The dividend was charged to retained
earnings in the amount of approximately $2.8 million. The
2001 dividend rate for Class A Preferred Stock is 11.75%,
payable March 31, 2001.
Note 5. Depreciation and Amortization
The following table presents depreciation and amortization
included in the consolidated condensed statements of
operations.
<TABLE>
<S> <C> <C> <C> <C>
(in thousands) Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
10/1/00 10/3/99 10/1/00 10/3/99
Depreciation $ 5,313 $ 5,709 $ 17,000 $ 18,801
Amortization 455 452 1,360 1,354
$ 5,768 $ 6,161 $ 18,360 $ 20,155
</TABLE>
7
<PAGE>
Note 6. Earnings (Loss) Per Share
The following table sets forth the computation of basic and
diluted earnings (loss) per common share ("EPS").
<TABLE>
<S> <C> <C>
(in thousands, except Thirteen Thirteen
per share data) Weeks Ended Weeks Ended
10/1/00 10/3/99
Net income (loss) $ 1,436 $ ( 5,398)
Preferred stock dividends (1,047) ( 790)
Basic EPS - income (loss) available to
common shareholders 389 ( 6,188)
Effect of dilutive securities - -
Diluted EPS - income (loss) available
to common shareholders after assumed
conversions $ 389 $ ( 6,188)
Determination of shares:
Basic EPS - weighted-average shares 25,496 25,486
Effect of dilutive securities 153 -
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,649 25,486
Earnings (loss) per share -
basic and diluted $ .02 $ ( .24)
8
</TABLE>
<PAGE>
Note 6. Earnings (Loss) Per Share (continued)
The following table sets forth the computation of basic and
diluted loss per common share ("EPS").
<TABLE>
<S> <C> <C>
(in thousands, except Thirty-nine Thirty-nine
per share data) Weeks Ended Weeks Ended
10/1/00 10/3/99
Income (loss) before cumulative effect
of accounting change $ 2,685 $ (13,116)
Preferred stock dividends (2,849) ( 2,300)
Loss before cumulative effect of accounting
change available to common shareholders ( 164) (15,416)
Cumulative effect of accounting change - ( 1,038)
Basic EPS - loss available to common
shareholders ( 164) (16,454)
Effect of dilutive securities - -
Diluted EPS - loss available to common
shareholders after assumed conversions $ ( 164) $ (16,454)
Determination of shares:
Basic EPS - weighted-average shares 25,487 25,453
Effect of dilutive securities - -
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,487 25,453
Loss per share - basic and diluted
Loss before cumulative effect of
accounting change $ ( .01) $ ( .61)
Cumulative effect of accounting change - ( .04)
Loss per share - basic and diluted $ ( .01) $ ( .65)
</TABLE>
Common stock options outstanding at October 1, 2000, were
not included in the computation of diluted loss per share
for the thirty-nine weeks period because to do so would have
been antidilutive. Common stock options at October 3, 1999,
were not included in the computation of diluted loss per
share because to do so would have been antidilutive.
Note 7. Segment Information
The Company has three principal business segments which are
based upon organizational structure: 1) denim and khaki; 2)
commission finishing; and 3) decorative fabrics. As part of
the 1999 comprehensive restructuring program, the Company
ceased manufacturing yarn-dyed products and exited the
business in 1999.
9
<PAGE>
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
10/1/00 10/3/99
Net Sales
Denim and Khaki $ 132,297 $ 108,493
Commission Finishing 17,556 20,453
Decorative Fabrics 19,673 19,689
Yarn-Dyed Products - 1,760
Other 83 348
169,609 150,743
Less Intersegment Sales 4,336 3,546
$ 165,273 $ 147,197
Income (Loss) from Operations
Denim and Khaki $ 10,090 $ 2,380
Commission Finishing ( 2,031) ( 1,993)
Decorative Fabrics ( 178) 422
Yarn-Dyed Products - ( 1,290)
Other ( 141) ( 153)
Unallocated Expenses ( 318) ( 1,087)
7,422 ( 1,721)
Restructuring and Impairment of Assets - ( 3,100)
7,422 ( 4,821)
Less Equity in Earnings (Losses) of
Unconsolidated Affiliate 932 ( 405)
6,490 ( 4,416)
Other Expense, Net ( 5,726) ( 3,385)
Income (Loss) before Income Taxes
(Benefit), Equity in Earnings (Losses)
of Unconsolidated Affiliate and
Cumulative Effect of Accounting Change $ 764 $ ( 7,801)
</TABLE>
10
<PAGE>
Note 7. Segment Information (continued)
<TABLE>
<S> <C> <C>
(in thousands) Thirty-nine Thirty-nine
Weeks Ended Weeks Ended
10/1/00 10/3/99
Net Sales
Denim and Khaki $ 358,554 $ 348,366
Commission Finishing 62,005 72,694
Decorative Fabrics 59,195 54,037
Yarn-Dyed Products 10 15,831
Other 727 1,248
480,491 492,176
Less Intersegment Sales 11,992 13,230
$ 468,499 $ 478,946
Income (Loss) from Operations
Denim and Khaki $ 24,107 $ 18,947
Commission Finishing ( 2,813) ( 5,665)
Decorative Fabrics ( 686) 1,295
Yarn-Dyed Products ( 60) ( 5,095)
Other 531 ( 411)
Unallocated Expenses ( 1,918) ( 4,279)
19,161 4,792
Restructuring and Impairment of Assets 332 (16,017)
19,493 (11,225)
Less Equity in Earnings of
Unconsolidated Affiliate 2,157 1,552
17,336 (12,777)
Other Expense, Net (16,536) ( 9,666)
Income (Loss) before Income Taxes
(Benefit), Equity in Earnings of
Unconsolidated Affiliate and
Cumulative Effect of Accounting Change $ 800 $ (22,443)
</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 distribution 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
10/1/00 10/3/99
Net income (loss) $ 1,436 $ (5,398)
Other comprehensive loss,
currency translation adjustment - 59
$ 1,436 $(5,339)
11
<PAGE>
Note 8. Comprehensive Income (Loss) (continued)
(in thousands) Thirty-nine Thirty-nine
Weeks Ended Weeks Ended
10/1/00 10/3/99
Net income (loss) $ 2,685 $ (14,154)
Other comprehensive loss,
currency translation adjustment - 40
$ 2,685 $ (14,114)
</TABLE>
Note 9. Securitization of Accounts Receivable
On April 24, 2000, the Company amended the securitization
agreements to include certain additional trade receivables
related to the ongoing purchase and subsequent resale by
Cone Receivables II LLC. Effective with this amendment,
purchases by Redwood Receivables Corporation may provide
proceeds of up to $60 million at any point in time. As of
October 1, 2000, the total amount outstanding under the
Accounts Receivable Facility was approximately $57.9
million.
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.
Note 11. Exchange Offer and Consent Solicitation for the 8-1/8%
Debentures
On August 4, 2000, the Company filed with the SEC an
offering to holders of its 8-1/8% Debentures due March 15,
2005, to exchange its common stock for up to $15 million of
the Debentures, which may be increased to $25 million at the
option of the Company, and its new secured subordinated
debentures and its common stock for up to $85 million of the
Debentures. The Company filed its response to SEC questions
on October 24, 2000, and is awaiting any further response
from the SEC prior to the exchange offer becoming effective.
12
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter Ended October 1, 2000 Compared with Third Quarter
Ended October 3, 1999
For the third quarter of 2000, Cone Mills had sales of
$165.3 million, up 12.3% from sales of $147.2 million for
the third quarter of 1999. Excluding sales of businesses
exited in 1999, sales for the third quarter of 2000 were up
14.8% from 1999 amounts. The increase in revenue over the
third quarter of 1999 was the result of a 21.9% increase in
sales of the denim and khaki segment partially offset by
weakness in demand for commission finishing services.
Gross profit for the third quarter of 2000 increased to
10.6% of sales, as compared with 7.3% for the previous year.
The improvement in operating results reflected the increase
in revenue and lower operating costs resulting from the 1999
comprehensive restructuring program. These savings include
the reconfiguration of overhead structures, restructuring at
Carlisle, yarn outsourcing and the exit from yarn-dyed and
piece-dyed shirting products.
Segment Information. The Company has three principal
business segments: 1) denim and khaki; 2) commission
finishing; and 3) decorative fabrics. The Company ceased
manufacturing yarn-dyed products in 1999. (See Note 7 to
Notes to Consolidated Condensed Financial Statements
included in Part I, Item 1.)
Denim and Khaki. Denim and khaki segment sales
revenues for the third quarter of 2000 were $132.3
million, up 21.9% from third-quarter 1999 sales of
$108.5 million. Sales volume increased by 25.8% as
both denim and khaki experienced strong sales gains.
Denim sales prices were down approximately 5%, as
compared with the prior year. Operating income for the
denim and khaki segment increased to $10.1 million, or
7.6% of sales for the most recent quarter, as compared
with $2.4 million, or 2.2% of sales for the third
quarter of 1999. The increased earnings resulted
primarily from increased denim volume, partially
offset by lower prices, and the reduction of losses in
khaki operations. Operating income for the segment
includes the equity in earnings from the Parras Cone
joint venture plant.
Commission Finishing. Outside sales of the commission
finishing segment were $13.2 million for the third
quarter of 2000, down 21.8% from sales of $16.9
million for the third quarter of 1999.
13
<PAGE>
Operating losses and lower sales were experienced at
both the Carlisle and Raytex plants, resulting from
weak demand for prints and manufacturing difficulties
associated with equipment.This segment had an operating
loss of $2.0 million in the third quarters of both 2000
and 1999.Carlisle losses were reduced from the prior year
as a result of overhead reductions and improved
quality and efficiency, the result of the
restructuring program.
Decorative Fabrics. For the third quarter of 2000,
sales of the decorative fabrics segment were $19.7
million, as compared with third-quarter 1999 sales of
$19.7 million. Increased sales in jacquards were
offset by lower sales at John Wolf. The decorative
fabrics segment had an operating loss of $.2 million
for the third quarter of 2000, as compared with a $.4
million operating profit for the previous year. John
Wolf sales were down as demand declined in 2000 for
strong products in 1999 and restyled products are just
now being introduced into the marketplace. Jacquards
sales increased 9.6%, but profits were effected by a
less profitable sales mix.
Yarn-Dyed Products. As part of the 1999 comprehensive
restructuring program, the Company ceased
manufacturing yarn-dyed products and exited the
business in 1999. For the third quarter of 1999, sales
of yarn-dyed products were $1.8 million and the
operating loss for the segment was $1.3 million.
Selling and administrative expenses for the third quarter of
2000 were $11.1 million, or 6.7% of sales, as compared with
$12.0 million, or 8.1% of sales, in third quarter 1999. The
Company continued to realize benefits from the 1999
restructuring program.
Interest expense for the third quarter of 2000 was $4.7
million, up 33.5% from $3.5 million for the third quarter of
1999. The increase in interest expense was primarily the
result of increases in rates under new lending agreements
and in market rates. Other expenses of $1.3 million
recognized in the third quarter of 2000 were the ongoing
expenses of the new accounts receivable securitization
program, which began in September 1999.
In the third quarter of 2000, income taxes as a percent of
taxable income were 34%. In the third quarter of 1999, the
income tax benefit as a percent of the taxable loss was 36%.
Equity in earnings of Parras Cone, the Company's joint
venture plant in Mexico, was $.9 million for the third
quarter of 2000, as compared with a loss of $.4 million for
the third quarter of 1999. The 1999 period had higher cotton
costs as a percentage of sales and additional marketing and
management fees paid to the joint venture partners.
For the third quarter of 2000, the Company had net income of
$1.4 million as compared to a net loss of $5.4 million in
third quarter 1999. After preferred dividends, the Company
reported earnings of $.02 per share in the 2000 period as
compared with a loss of $.24 per share in 1999. Included in
the 1999 quarter were pre-tax charges of $5.1 million for
restructuring and exit inventory charges, resulting
primarily from the implementation of the Company's
turnaround plan at Carlisle.
14
<PAGE>
Also, there was a loss of $0.8 million associated with the
liquidation of remaining yarn-dyed shirting inventories.
Excluding those charges, the loss for the third quarter of
1999 was $.09 per share.
The dividend rate on the preferred stock is 11.75% for 2000
as compared with 8.00% for 1999. This increase reflects
changes in the Company's credit rating and increases in
market interest rates.
Nine Months Ended October 1, 2000 Compared with Nine Months
Ended October 3, 1999
For the first nine months of 2000, Cone Mills had sales of
$468.5 million, down 2.2% from sales of $478.9 million for
the first nine months of 1999. Excluding sales of businesses
exited in 1999, sales for the first nine months of 2000 were
up 3.0% from 1999.
Gross profit for the first nine months of 2000 increased to
11.6% of sales, as compared with 8.4% for the previous year.
The improvement was primarily due to better operating
results in the denim and khaki and commission finishing
segments and the realization of savings from the 1999
comprehensive restructuring program.
The Company expected to achieve on an annual basis over $40
million of cost savings as a result of the 1999
comprehensive downsizing and reorganization program. These
savings include the reconfiguration of overhead structures,
restructuring at Carlisle, yarn outsourcing and the exit of
the yarn-dyed and piece-dyed shirting product line. The
Company estimates that it has realized approximately $30
million of cost savings through the third quarter, or
approximately $40 million of savings on an annualized basis.
Consequently, despite the lower prices for denims, the
Company has been able to improve gross profit.
Segment Information. The Company has three principal
business segments: 1) denim and khaki; 2) commission
finishing; and 3) decorative fabrics. The Company ceased
manufacturing yarn-dyed products in 1999. (See Note 7 to
Notes to Consolidated Condensed Financial Statements
included in Part I, Item 1.)
Denim and Khaki. Denim and khaki segment sales
revenues for the first nine months of 2000 were $358.6
million, up 2.9% from the first nine months of 1999
sales of $348.4 million. Increased sales volume of
8.4% was partially offset by lower prices of
approximately 5.3%, the result of industry
supply/demand imbalances in late 1999 that lowered
prices in 2000 and declining cotton costs which were
passed on to customers because of market conditions.
Operating income for the denim and khaki segment was
$24.1 million, or 6.7% of sales for the 2000 period,
as compared with $18.9 million, or 5.4% of sales for
the 1999 period. The increase resulted primarily from
increased denim sales volume, partially offset by
lower prices, and the reduction of losses in khaki
operations. Operating income for the segment includes
the equity in earnings from the Parras Cone joint
venture plant.
15
<PAGE>
Commission Finishing. Outside sales of the commission
finishing segment were $50.0 million for the first
nine months of 2000, down 15.9% from the first nine
months of 1999. Lower sales at the Raytex finishing
plant, resulting from weaker demand in top-of-bed
prints, accounted for the decline. Operating results
for the segment improved as the Carlisle plant had a
profit, as compared with a significant loss for the
previous year, mitigating the volume shortfall and
losses at Raytex. Losses for this segment were reduced
from $5.7 million for the first nine months of 1999 to
a loss of $2.8 million for the most recent period.
Decorative Fabrics. For the first nine months of 2000,
sales of the decorative fabrics segment rose by 9.5%
to $59.2 million, the result of continued growth in
jacquards. John Wolf sales were down as demand
declined in 2000 for strong products in 1999 and
restyled products are just now being introduced into
the marketplace. Due to the sales decline at John Wolf
and a less profitable mix for the 2000 period at
Jacquards along with manufacturing difficulties, the
segment reported an operating loss of $.7 million in
2000 as compared with an operating profit of $1.3
million in 1999.
Yarn-Dyed Products. As part of the 1999 comprehensive
restructuring program, the Company ceased
manufacturing yarn-dyed products and exited the
business in 1999. For the first nine months of 1999,
sales of yarn-dyed products were $15.8 million and the
operating loss for the segment was $5.1 million.
Selling and administrative expenses for the first nine
months of 2000 were $37.2 million, or 7.9% of sales, as
compared with $37.0 million, or 7.7% of sales in the first
nine months of 1999. Fees and expenses associated with the
Company's financial agreements, and certain
performance-based compensation accruals resulted in selling
and administrative expenses increasing as a percent of
sales, partially offset by the benefits realized from the
1999 restructuring program.
Interest expense for the first nine months of 2000 was $14.2
million, up 33.0% from $10.7 million for the first nine
months of 1999. The increase in interest expense was
primarily the result of increases in rates under new lending
agreements and in market rates. Other expenses of $3.2
million recognized in the first nine months of 2000 were the
ongoing expenses of the new accounts receivable
securitization program which began September 1999.
In the first nine months of 2000, income taxes as a percent
of taxable income were 34%. In the first nine months of
1999, the income tax benefit as a percent of the taxable
loss was approximately 35%.
Equity in earnings of Parras Cone, the Company's joint
venture plant in Mexico, was $2.2 million for the first nine
months of 2000, as compared with $1.6 million for the first
nine months of 1999 before the cumulative effect of an
accounting change.
16
<PAGE>
For the first nine months of 2000, the Company had net
income of $2.7 million, or a loss of $.01 per share after
preferred dividends. For comparison, for the first nine
months of 1999 the Company reported a net loss of $14.2
million, or $.65 per share after preferred dividends.
Excluding pre-tax restructuring and related expenses of
$16.0 million, losses associated with businesses exited of
$5.1 million, and exit inventory losses of $3.6 million,
plus the after-tax cumulative effect of a $1.0 million
accounting change, the Company had pro forma earnings of
$.02 per share for the first nine months of 1999.
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, a $73 million
Revolving Credit Facility ("Revolving Credit Facility") and
a $60 million Receivables Purchase and Servicing Agreement
(the "Receivables Agreement") entered into on September 1,
1999, and amended on April 24, 2000, with Cone Receivables
II LLC, Redwood Receivables Corporation ("Redwood"), and
General Electric Capital Corporation.
On January 28, 2000, the Company entered into a new $80
million Revolving Credit Facility with its existing banks
with Bank of America, N.A., as agent, ratably secured
together with the Senior Note and the 8-1/8% Debentures, by
substantially all of the Company assets. The Revolving
Credit Facility was amended on July 14, 2000 to extend the
maturity date from August 7, 2000 to August 7, 2001, and to
revise the covenants. The present Revolving Credit Facility
Agreement commitment has been reduced to $73 million,
including letters of credit, as a result of the August 7,
2000, Senior Note payment and the sale of the corporate
headquarters building. The Company may, at its option,
borrow from time to time under the Revolving Credit
Agreement at a Base Rate or a Eurodollar Rate, each based on
a formula set forth in the agreement.
On April 24, 2000, the Company amended the Receivables
Agreement increasing the facility from $50 million to $60
million. In addition to increasing the commitment, the
Company modified other provisions of the Agreement to allow
it to utilize more fully the entire facility.
On July 14, 2000 the Company amended its Senior Note debt
repayment schedule to reduce the August 7, 2000, principal
payment of $10.7 million to $2.9 million with the resulting
principal payment reduction of $7.8 million being rolled
forward into the August 7, 2001, payment. The interest rate
on the Senior Note was increased to 11.7% from 11.0%.
The following is a summary of the Company's primary
financing agreements as of October 1, 2000.
17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
($ Amounts in Millions) Facility Amount Interest/ Maturity
Financing Agreement Commitment Outstanding Discount Rate Date
8-1/8% Debenture $100.0 $100.0 8.125% Mar 15, 2005
Senior Note 29.2 29.2 11.700 Aug 13, 2002
Revolving Credit 73.0 54.0 11.250 Aug 7, 2001
Receivables Agreement 60.0 57.9 8.163 Sept 1, 2004
</TABLE>
In the third quarter of 2000, the Company completed the sale
of its corporate headquarters site to VF Corporation. Cone
Mills expects to vacate the site at the end of 2001 and move
into substantially smaller space, thus reducing its annual
occupancy costs. This transaction allowed the Company to
terminate a lease arrangement and related obligations of
approximately $15 million.
Financing agreements of the Company prohibit the Company
from paying dividends on its Common Stock.
During the first nine months of 2000, the Company generated
cash from operations, before changes in working capital, of
$20.3 million, as compared with $3.4 million during the
first nine months of 1999. In the 2000 period, working
capital decreased by $11.8 million. Uses of cash in the 2000
period included $9.4 million for domestic capital
expenditures and investments to develop the Company's joint
venture industrial park in Mexico, and $4.1 million for the
redemption of preferred stock.
The Company believes that internally generated operating
cash flow and funds available under its Revolving Credit
Facility will be sufficient to meet its needs for working
capital, capital spending permitted under the terms of the
Revolving Credit Facility and debt repayments until August
2001, when the Revolving Credit Facility expires. Liquidity
is predicated on the Company's meeting its operating targets
in 2000 and further reductions in inventories.
On August 4, 2000, the Company filed with the SEC a
registration statement relating to a proposed offering to
holders of its 8-1/8% Debentures due March 15, 2005, to
exchange its common stock for up to $15 million of the
debentures, which may be increased to $25 million at the
option of the Company, and its new secured subordinated
debentures and common stock for up to $85 million of the
debentures. In addition, the exchange includes a consent to
make certain changes in the indenture governing the 8-1/8%
Debentures and a release of the collateral currently
securing the debentures, which require acceptance of the
exchange offer by holders of more than 50% of the 8-1/8%
Debentures. The principal purpose of the proposed exchange
offer is to enable the Company to revise its debt structure
in a manner that should provide more flexibility and should
permit the Company to obtain financing necessary for its
proposed expansion into Mexico. The Company expects to
replace certain of its existing financing agreements with an
asset-based lending facility that will contain less
restrictive covenants and lower interest costs. This
facility should enable the Company to obtain project
financing for a portion of its proposed Mexican expansion.
18
<PAGE>
While management believes that it will be able to obtain the
asset-based facility and the Mexican project financing if
the exchange offer is successful, there is no assurance that
the Company will obtain financing on terms and conditions
acceptable to the Company. On October 24, 2000, the Company
amended the August 4, 2000 filing in response to SEC
comments regarding the original filing. The registration
statement relating to the proposed exchange offer has not
yet become effective and, therefore, the exchange offer has
not commenced.
On October 1, 2000, the Company's long-term capital
structure consisted of $181.2 million of long-term debt
(including current maturities) and $156.3 million of
stockholders' equity. For comparison, on October 3, 1999,
the Company had $186.7 million of long-term debt (including
current maturities) and $164.2 million of stockholders'
equity. Long-term debt (including current maturities) as a
percentage of long-term debt and stockholders' equity was
54% at October 1, 2000, as compared with 53% at October 3,
1999.
Accounts receivable on October 1, 2000, were $48.1 million,
as compared with $48.8 million at October 3, 1999.
Receivables, including those sold pursuant to the
Receivables Purchase Agreement, represented 61 days of sales
outstanding at October 1, 2000 and 63 days at October 3,
1999.
Inventories on October 1, 2000, were $109.8 million, as
compared with $118.4 million at October 3, 1999. The
decrease reflects lower finished goods inventories,
primarily denims, partially offset by increased raw
materials.
For the first nine months of 2000, domestic capital spending
was $4.2 million compared to $8.0 million for the 1999
period. Domestic capital spending in 2000 is expected to be
approximately $10 million. In addition to the 2000 domestic
capital spending budget, the Company expects to spend
approximately $8 million for investments in international
initiatives of which $5.2 million was invested in the first
nine months of 2000.
OTHER MATTERS
During the third quarter the Company reached a mutual
agreement with Ashima Ltd., a company located in India, to
terminate certain Commercial and Technical Services
Agreements between the parties. As a result of changes in
the marketplace relating to the Asian financial crisis and
the Company's refocus on the Western Hemisphere, the
alliance did not have the profit potential for both parties
that was initially envisioned. The Company will continue to
hold its equity investment in Ashima and maintain an active
relationship so as to keep a presence in that region of the
world and potentially benefit from a change in market
dynamics.
19
<PAGE>
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 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, (v) the Company's ability to attract and
maintain adequate capital to fund operations and
strategic initiatives, (vi) successful completion of
the Exchange Offer for the 8-1/8% Debentures, (vii)
increases in prevailing interest rates, and (viii) the
Company's inability to continue the cost savings
associated with its restructuring initiatives. For a
further description of these risks see the Company's
1999 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 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 interest 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 2, 2000.
20
<PAGE>
PART II
Item 1. Legal Proceedings
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 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
21
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit Sequential
No. Description Page No.
*2.1 Receivables Purchase and Servicing
Agreement dated as of September 1, 1999,
by and among Cone Receivables II LLC,
as Seller, Redwood Receivables
Corporation, as Purchaser, the Registrant,
as Servicer, and General Electric Capital
Corporation, as Operating Agent and
Collateral Agent, filed as Exhibit 2.1(h)
to Registrant's report on Form 10-Q
for the quarter ended October 3, 1999.
*2.2 Receivables Transfer Agreement dated as of
September 1, 1999, by and among the Registrant,
any other Originator Party hereto, and Cone
Receivables II LLC, filed as Exhibit 2.1(i) to
Registrant's report on Form 10-Q for the quarter
ended October 3, 1999.
*2.3.1 First Amendment and Waiver to Securitization
Agreements dated as of November 16, 1999, by
and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation
and General Electric Capital Corporation,
together with all exhibits thereto, filed as
Exhibit 2.1(c) to Registrant's report on Form
10-K for the fiscal year ending January 2, 2000.
*2.3.2 Second Amendment to Securitization Agreements
dated as of January 28, 2000, by and between
Cone Receivables II LLC, the Registrant, Redwood
Receivables Corporation, and General Electric
Capital Corporation, together will all exhibits
thereto, filed as Exhibit 2.1(d) to Registrant's
report on Form 10-K for the fiscal year ending
January 2, 2000.
*2.3.3 Third Amendment to Securitization Agreements
dated as of March 31, 2000, by and between
Cone Receivables II LLC, the Registrant,
Redwood Receivables Corporation, and General
Electric Capital Corporation, together with all
Exhibits thereto, filed as Exhibit 2.1(e) to
Registrant's report on Form 10-Q for the quarter
ended April 2, 2000.
*2.3.4 Fourth Amendment to Securitization Agreements
dated as of April 24, 2000 by and between Cone
Receivables II LLC, the Registrant, Redwood
22
<PAGE>
Exhibit Sequential
No. Description Page No.
Receivables Corporation, and General Electric
Capital Corporation, together with all exhibits
thereto, filed as Exhibit 2.1(f) to Registrant's
report on Form 10-Q for the quarter ended April
2, 2000.
*2.3.5 Fifth Amendment to Securitization Agreements
dated as of June 30, 2000 by and between Cone
Receivables II LLC, the Registrant, Redwood
Receivables Corporation, and General Electric
Capital Corporation, filed as Exhibit 2.3.5 to
Registrant's Registration statement on Form S-4
(File No. 333-43014).
*2.4 Investment Agreement dated as of June 18, 1993,
among Compania Industrial de Parras, S.A. de C.V.,
Sr. Rodolfo Garcia Muriel, and the Registrant,
filed as Exhibit 2.2(a) to Registrant's report
on Form 10-Q for the quarter ended July 4, 1993.
*2.5 Commercial Agreement dated as of July 1, 1999,
among Compania Industrial de Parras, S.A. de C.V.,
the Registrant, and Parras Cone de Mexico, S.A.,
filed as Exhibit 2.2(b) to Registrant's report on
Form 10-K for the fiscal year ending January 2,
2000.
*2.6 Guaranty Agreement dated as of June 25, 1993,
between the Registrant 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.
*2.7 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.
*2.7.1 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.
*2.8 Joint Venture Registration Rights Agreement dated
as of June 25, 1993, among Parras Cone de Mexico,
23
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*2.9 Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
the Registrant, filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.10 Support Agreement dated as of June 25, 1993,
among the Registrant, Sr. Rodolfo L. Garcia, Sr.
Rodolfo Garcia Muriel and certain other persons
listed therein ("private stockholders"), filed as
Exhibit 2.2(g) to Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*3.1 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.
*3.1.1 Articles of Amendment of the Articles of
Incorporation of the Registrant effective
October 22, 1999, to fix the designation,
preferences, limitations, and relative
rights of a series of its Class B Preferred
Stock, filed as Exhibit 4.1(a) to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1999.
*3.2 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).
*4.1 Rights Agreement dated as of October 14,
1999, between the Registrant and First
Union National Bank, as Rights Agent,
with Form of Articles of Amendment with
respect to the Class B Preferred Stock
(Series A), the Form of Rights Certificate,
and Summary of Rights attached, filed as
Exhibit 1 to the Registrant's report on Form
8-A dated October 29, 1999.
24
<PAGE>
Exhibit Sequential
No. Description Page No.
*4.2 Note Agreement dated as of August 13, 1992,
between the Registrant 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.
*4.2.1 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.
*4.2.2 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.
*4.2.3 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.
*4.2.4 Letter Agreement dated November 14, 1994,
amending the Note Agreement dated August 13,
1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit
4.5 to the Registrant's report on Form 8-K dated
March 1, 1995.
*4.2.5 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.
*4.2.6 Letter Agreement dated as of June 30,
1995, between the Registrant and
25
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*4.2.7 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.
*4.2.8 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.
*4.2.9 Letter Agreement dated as of July 31, 1997,
between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit
4.3(i) to the Registrant's report on Form 10-Q
for the quarter ended September 28, 1997.
*4.2.10 Modification to Note Agreement dated as of
February 14, 1998, between the Registrant and The
Prudential Insurance Company of America, filed as
Exhibit 4.3(j) to Registrant's report on Form
10-Q for the quarter ended March 29, 1998.
*4.2.11 Letter Agreement dated as of September 1, 1999,
amending the Note Agreement dated August 13,
1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit
4.3(i) on Form 10-Q for the quarter ended October
3, 1999.
*4.2.12 Amendment of 1992 Note Agreement dated as of
January 28, 2000, by and among the Registrant and
The Prudential Insurance Company of America,
together with all exhibits thereto, filed as
Exhibit 9 to the Registrant's report on Form 8-K
dated February 11, 2000.
26
<PAGE>
Exhibit Sequential
No. Description Page No.
*4.2.13 Waiver under Note Agreement dated as of July 3,
2000, by and among the Registrant and The
Prudential Insurance Company of America, filed as
Exhibit 4.2.13 to Registrant's Registration
Statement on Form S-4 (File 333-43014)
*4.2.14 Amendment of 1992 Note Agreement dated as of July
14, 2000, by and among the Registrant and The
Prudential Insurance Company of America, filed as
Exhibit 4.2.14 to Registrant's Registration
Statement on Form S-4 (File 333-43014)
*4.3 Credit Agreement dated as of January 28, 2000, by
and among the Registrant, as Borrower, Bank of
America, N.A., as Agent and as Lender and the
Lenders party thereto from time to time, together
with all exhibits thereto, filed as Exhibit 1 to
the Registrant's report on Form 8-K dated
February 11, 2000.
*4.3.1 Amendment No. 1 to Credit Agreement dated as
of July 14, 2000, by and among the Registrant,
as Borrower, Cone Global Finance Corp., CIPCO
S.C. Inc. and Cone Foreign Trading LLC, as
Guarantors, Bank of America, N.A., as Agent and
as Lender, and the Lenders party thereto from
time to time, filed as Exhibit 4.3.1 to
Registrant's Registration Statement on Form S-4
(File 333-43014)
*4.4 Guaranty Agreement dated as of January 28,
2000, made by Cone Global Finance Corporation,
CIPCO S.C., Inc. and Cone Foreign Trading
LLC in favor of Bank of America, N.A.
as Revolving Credit Agent for the Lenders,
The Prudential Insurance Company of America,
SunTrust Bank, Morgan Guaranty Trust
Company of New York, Wilmington Trust
Company, as General Collateral Agent,
Bank of America, N.A., as Priority
Collateral Agent, and Atlantic Financial
Group, Ltd., together with all exhibits
thereto, filed as Exhibit 2 to the
Registrant's report on Form 8-K dated
February 11, 2000.
*4.5 Priority Security Agreement dated as of
January 28, 2000, by the Registrant
27
<PAGE>
Exhibit Sequential
No. Description Page No.
and certain of its subsidiaries, as Grantors, and
Bank of America, N.A., as Priority Collateral
Agent, together with all exhibits thereto, filed
as Exhibit 3 to the Registrant's report on Form
8-K dated February 11, 2000.
*4.6 General Security Agreement dated as of January
28,2000, by the Registrant and certain of its
subsidiaries, as Grantors, and Wilmington Trust
Company, as General Collateral Agent, together
with all exhibits thereto, filed as Exhibit 4 to
the Registrant's report on Form 8-K dated
February 11, 2000.
*4.7 Securities Pledge Agreement dated as of January
28, 2000, by the Registrant in favor of
Wilmington Trust Company, as General Collateral
Agent, together with all exhibits thereto, filed
as Exhibit 5 to the Registrant's report on Form
8-K dated February 11, 2000.
*4.8 CMM Pledge Agreement dated as of January 28,
2000, by the Registrant in favor of Wilmington
Trust Company, as General Collateral Agent,
together with all exhibits thereto, filed as
Exhibit 6 to the Registrant's Report on Form 8-K
dated February 11, 2000.
*4.9 Deed of Trust, Security Agreement, Fixture
Filing, Assignment of Leases and Rents and
Financing Statement dated as of January 28,
2000, between the Registrant, as Grantor,
TIM, Inc., as Trustee, Wilmington Trust
Company, as General Collateral Agent, and
Bank of America, N.A., as Designated
Collateral Subagent, together with all
exhibits thereto, filed as Exhibit 7 to
the Registrant's report on Form 8-K dated
February 11, 2000.
*4.10 Deed of Trust, Security Agreement, Fixture
Filing, Assignment of Leases and Rents and
Financing Statement dated as of January 28,
2000, between the Registrant, as Grantor,
TIM, Inc., as Trustee, and Bank of America,
N.A., as Priority Collateral Agent, together
with all exhibits thereto, filed as Exhibit
8 to the Registrant's report on Form 8-K dated
February 11, 2000.
28
<PAGE>
Exhibit Sequential
No. Description Page No.
*4.11 Termination Agreement dated as of January 28,
2000, between the Registrant and Morgan Guaranty
Trust Company of New York, as Agent for various
banks terminating the Credit Agent dated August
7, 1997, filed as Exhibit 4.4(h) to Registrant's
report on Form 10-K for the fiscal year ending
January 2, 2000.
*4.12 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).
*4.13 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).
*4.14 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.
*4.14.1 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.
*4.14.2 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.
*4.14.3 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.
*4.14.4 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.
*4.15 Indenture dated as of February 14, 1995, between
the Registrant and Wachovia Bank of North Carolina,
N.A. as Trustee (The Bank of New York is successor
Trustee), filed as Exhibit 4.1 to Registrant's
29
<PAGE>
Exhibit Sequential
No. Description Page No.
Registration Statement on Form S-3 (File No.
33-57713).
*4.15.1 Form of First Supplemental Indenture to the
Indenture dated as of February 14, 1995,
Between the Registrant and Wachovia Bank of
North Carolina, N.A. as Trustee (The Bank of
New York is successor Trustee), with respect
to the 8-1/8% Debentures Due March 15, 2005,
filed as Exhibit 4.15.1 to Registrant's
Registration Statement on Form S-4
(File 333-43014).
*4.16 Form of Indenture between the Registrant and The
Bank of New York, as Trustee, with respect to the
11% Secured Subordinated Debentures Due March 15,
2005 being registered, filed as Exhibit 4.16 to
Registrant's Registration Statement on Form S-4
(File 333-43014).
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)
*10.1 Employees' Retirement Plan of Cone Mills
Corporation as amended and restated effective
December 1, 1994, filed as Exhibit 10.1 to the
Registrant's report on Form 10-K for the year
ended January 1, 1995.
*10.1.1 First Amendment to the Employees' Retirement Plan
of Cone Mills Corporation dated May 9,1995, filed
as Exhibit 10.1(a) to the Registrant's report on
Form 10-K for the year ended December 31, 1995.
*10.1.2 Second Amendment to the Employees' Retirement
Plan of Cone Mills Corporation dated December 5,
1995, filed as Exhibit 10.1(b) to the
Registrant's report on Form 10-K for the year
ended December 31, 1995.
*10.1.3 Third Amendment to the Employees' Retirement Plan
of Cone Mills Corporation dated August 16, 1996,
filed as Exhibit 10.1(c) to the Registrant's
report on Form 10-K
30
<PAGE>
Exhibit Sequential
No. Description Page No.
for the year ended December 29, 1996.
*10.1.4 Fourth Amendment to the Employees' Retirement
Plan of Cone Mills Corporation, filed as Exhibit
10 to the Registrant's report on Form 10-Q for
the quarter ended September 28, 1997.
*10.1.5 Fifth Amendment to Employees' Retirement Plan of
Cone Mills Corporation dated December 4, 1997,
filed as Exhibit 10.1(e) to the Registrant's
report on Form 10-K for the year ended December
28, 1997.
*10.7 Cone Mills Corporation SERP as amended and
restated as of December 5, 1995, filed as Exhibit
10.2 to the Registrant's report on Form 10-K for
the year ended December 31, 1995.
*10.8 Excess Benefit Plan of Cone Mills Corporation as
amended and restated as of December 5, 1995,
filed as Exhibit 10.3 to the Registrant's report
on Form 10-K for the year ended December 31,
1995.
*10.9 1984 Stock Option Plan of Registrant filed as
Exhibit 10.7 to the Registrant's Registration
Statement on Form S-1 (File No. 33-28040).
*10.10 Form of Nonqualified Stock Option Agreement under
1984 Stock Option Plan of Registrant, filed as
Exhibit 10.8 to the Registrant's Registration
Statement on Form S-1 (File No. 33-28040).
*10.11 Form of Incentive Stock Option Agreement under
1984 Stock Option Plan of Registrant, filed as
Exhibit 10.9 to the Registrant's Registration
Statement on Form S-1 (File No. 33-28040).
*10.12 1992 Stock Option Plan of Registrant, filed as
Exhibit 10.9 to the Registrant's report on Form
10-K for the year ended December 29, 1991.
*10.12.1 Amended and Restated 1992 Stock Plan, filed as
Exhibit 10.1 to Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
*10.13 Form of Incentive Stock Option Agreement under
1992 Stock Option Plan, filed as Exhibit 10.10 to
31
<PAGE>
Exhibit Sequential
No. Description Page No.
the Registrant's report on Form 10-K for the year
ended January 3, 1993.
*10.14 Form of Nonqualified Stock Option Agreement under
1992 Stock Option Plan, filed as Exhibit 10.8(a)
to the Registrant's report on Form 10-K for the
year ended December 29,1996.
*10.14.1 Form of Nonqualified Stock Option Agreement under
1992 Amended and Restated Stock Plan, filed as
Exhibit 10.8(b) to the Registrant's report on
Form 10-K for the year ended December 29, 1996.
*10.15 Form of Restricted Stock Award Agreement under
1992 Amended and Restated Stock Plan, filed as
Exhibit 10.8(c) to the Registrant's report on
Form 10-K for the year ended December 28, 1997.
*10.16 1994 Stock Option Plan for Non-Employee Directors
of Registrant, filed as Exhibit 10.9 to
Registrant's report on Form 10-K for the year
ended January 2, 1994.
*10.17 Form of Non-Qualified Stock Option Agreement
under 1994 Stock Option Plan for Non-Employee
Directors of Registrant, filed as Exhibit 10.10
To Registrant's report on Form 10-K for the year
Ended January 2, 1994.
*10.18 Management Incentive Plan of the Registrant,
filed as Exhibit 10.11(b) to Registrant's report
on Form 10-K for the year ended January 3, 1993.
*10.19 1997 Senior Management Incentive Compensation
Plan, filed as Exhibit 10.2 to Registrant's
report on Form 10-Q for the quarter ended March
31, 1996.
*10.20 1997 Senior Management Discretionary Bonus Plan,
filed as Exhibit 10.13 to the Registrant's report
on Form 10-K for the year ended December 29,
1996.
*10.21 2000 Stock Compensation Plan for Non-Employee
Directors of Registrant dated as of May 9, 2000,
filed as Exhibit 10.18 to Registrant's report on
Form 10-Q for the quarter ended April 7, 2000.
*10.22 Form of Agreement between the Registrant and
Levi Strauss dated as of March 30, 1992, filed as
32
</TABLE>
<PAGE>
Exhibit Sequential
No. Description Page No.
Exhibit 10.14 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
*10.23 First Amendment to Supply Agreement dated as of
April 15, 1992, between the Registrant and Levi
Strauss dated as of March 30, 1992, filed as
Exhibit 10.15 to Registrant's Registration
Statement on Form S-1 (No. 33-46907).
*10.24 Agreement dated January 1, 1999, between the
Registrant and Parkdale Mills, Inc., filed as
Exhibit 10.17 to Registrant's report on Form 10-K
for the year ended January 2, 2000.
*10.25 Tenth Amendment to Master Lease dated as of
January 28, 2000, between Atlantic Financial
Group, Ltd. and the Registrant, together with all
exhibits thereto, filed as Exhibit 10 to
Registrant's report on Form 8-K dated February
11, 2000.
*10.25.1 Eleventh Amendment to Master Lease dated as
of July 14, 2000 between Atlantic Financial
Group, Ltd. and the Registrant, filed as
Exhibit 10.25.1 to Registrant's Registration
Statement on Form S-4 (File No. 333-43014).
10.25.2 Assignment and Termination Agreement dated
as of August 31, 2000, among Atlantic
Financial Group, Ltd., Suntrust Bank, and
the Registrant. 35
27 Financial Data Schedule 41
------------------------------------------------------------------
*Incorporated by reference to the statement or report
indicated.
The Registrant will provide any Shareholder or
participant in the Company Stock Fund in the 401(k) Programs
copies of any of the foregoing exhibits upon written request
addressed to Corporate Secretary, Cone Mills Corporation,
3101 North Elm Street, Greensboro, NC 27408.
33
<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: November 14, 2000 /s/ Gary L. Smith
Gary L. Smith
Executive Vice President and
Chief Financial Officer
34
<PAGE>
