Page 1 of 33
Index to Exhibits - Pages 20-31
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 2, 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 July 28, 2000:
25,496,859 shares.
<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 2, 2000 and
July 4, 1999 (Unaudited)........................................3
Consolidated Condensed Balance Sheets
July 2, 2000 and July 4, 1999 (Unaudited)
and January 2, 2000.............................................4
Consolidated Condensed Statements of Cash Flows
Twenty-six weeks ended July 2, 2000 and July 4, 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..................12
Item 3. Quantitative and Qualitative Disclosures about Market
Risk .........................................................19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................19
Item 6. Exhibits and Reports on Form 8-K...............................19
<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 Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 161,549 $ 174,492 $ 303,226 $ 331,749
Cost of Goods Sold 141,957 160,249 266,533 302,163
-------------------------------------------------------
Gross Profit 19,592 14,243 36,693 29,586
Selling and Administrative 12,753 11,725 26,179 25,030
Restructuring and Impairment of Assets - - (332) 12,917
-------------------------------------------------------
Income (Loss) from Operations 6,839 2,518 10,846 (8,361)
-------------------------------------------------------
Other Income (Expense)
Interest income 272 446 642 876
Interest expense (4,826 (3,517) (9,497) (7,157)
Other expense (1,148) - (1,955) -
-------------------------------------------------------
(5,702) (3,071) (10,810) (6,281)
-------------------------------------------------------
Income (Loss) before Income Taxes (Benefit), Equity in
Earnings of Unconsolidated Affiliate and Cumulative
Effect of Accounting Change 1,137 (553) 36 (14,642)
Income Taxes (Benefit) 386 (177) 12 (4,967)
-------------------------------------------------------
Income (Loss) before Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of Accounting Change 751 (376) 24 (9,675)
Equity in Earnings of Unconsolidated Affiliate 775 1,090 1,225 1,957
-------------------------------------------------------
Income (Loss) before Cumulative Effect of Accounting Change 1,526 714 1,249 (7,718)
Cumulative Effect of Accounting Change - - - (1,038)
-------------------------------------------------------
Net Income (Loss) $ 1,526 $ 714 $ 1,249 $ (8,756)
-------------------------------------------------------
Income (Loss) Available to Common Shareholders
Income (Loss) before Cumulative Effect of Accounting
Change $ 431 $ (76) $ (553) $ (9,228)
Cumulative Effect of Accounting Change - - - (1,038)
-------------------------------------------------------
Net Income (Loss) $ 431 $ (76) $ (553) $ (10,266)
-------------------------------------------------------
Earnings (Loss) Per Share - Basic and Diluted
Income (Loss) before Cumulative Effect of Accounting
Change $ 0.02 $ - $ (0.02) $ (0.36)
Cumulative Effect of Accounting Change - - - (0.04)
-------------------------------------------------------
Net Income (Loss) $ 0.02 $ - $ (0.02) $ (0.40)
-------------------------------------------------------
Weighted-Average Common Shares Outstanding
Basic 25,487 25,442 25,483 25,437
-------------------------------------------------------
Diluted 25,648 25,442 25,483 25,437
-------------------------------------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value data)
<TABLE>
<S> <C> <C> <C>
July 2, July 4, January 2,
2000 1999 2000
------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 2,681 $ 3,992 $ 1,267
Accounts receivable, less allowance of $5,050; 1999, $3,300
and $5,050 55,193 35,184 47,531
Subordinated note receivable - 22,115 -
Inventories 115,783 113,718 110,613
Other current assets 9,996 14,774 6,149
-----------------------------------------
Total Current Assets 183,653 189,783 165,560
Investments in Unconsolidated Affiliates 50,277 46,408 46,815
Other Assets 37,816 36,556 38,964
Property, Plant and Equipment 210,483 225,194 221,458
-----------------------------------------
$ 482,229 $ 497,941 $ 472,797
-----------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 2,932 $ 10,714 $ 79,714
Accounts payable 53,114 38,944 26,849
Sundry accounts payable and accrued liabilities 27,602 45,703 33,866
Deferred income taxes 12,406 16,979 9,894
-----------------------------------------
Total Current Liabilities 96,054 112,340 150,323
Long-Term Debt 185,120 171,608 119,115
Deferred Income Taxes 33,042 31,377 33,916
Other Liabilities 11,772 10,784 11,958
Stockholders' Equity
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 357,700 shares;
1999, 395,558 shares and 355,635 shares 35,770 39,556 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 25,490,660 shares;
1999, 25,485,517 shares and 25,479,717 shares 2,549 2,549 2,548
Capital in excess of par 57,492 57,522 57,435
Retained earnings 69,118 81,208 70,776
Deferred compensation - restricted stock (171) (486) (321)
Accumulated other comprehensive loss, currency translation adjustment (8,517) (8,517) (8,517)
-----------------------------------------
Total Stockholders' Equity 156,241 171,832 157,485
-----------------------------------------
$ 482,229 $ 497,941 $ 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.
<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 2, 2000 July 4, 1999
------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
CASH PROVIDED BY (USED IN) OPERATIONS $ 21,487 $ (5,699)
---------------------------
INVESTING
Investments in unconsolidated affiliates (2,237) -
Proceeds from sale of property, plant and equipment 2,306 2,660
Capital expenditures (2,128) (3,970)
---------------------------
Cash used in investing (2,059) (1,310)
---------------------------
FINANCING
Net payments under line of credit agreements - (1,000)
Increase (decrease) in checks issued in excess of deposits (4,391) 2,755
Proceeds from (payments on) long-term debt borrowings (11,000) 10,000
Proceeds from issuance of common stock 78 326
Purchase of outstanding common stock - (45)
Dividends paid - Class A Preferred (62) (38)
Redemption of Class A Preferred stock (2,639) (1,636)
---------------------------
Cash provided by (used in) financing (18,014) 10,362
---------------------------
Net change in cash 1,414 3,353
Cash at Beginning of Period 1,267 639
---------------------------
Cash at End of Period $ 2,681 $ 3,992
---------------------------
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 9,514 $ 7,281
---------------------------
Income taxes, net of refunds $ (220) $ 482
---------------------------
Supplemental Schedule of Noncash Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,845 $ 2,797
---------------------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<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 2, 2000 and July 4, 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 July 2, 2000, July 4, 1999, and January 2, 2000, and the related consolidated
condensed statements of operations for the respective thirteen and twenty-six
weeks ended July 2, 2000 and July 4, 1999 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 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 July 2, 2000 and July 4, 1999 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
(in thousands) 7/2/00 7/4/99 1/2/00
Greige and finished goods $ 77,120 $ 81,031 $ 78,973
Work in process 4,371 6,993 4,821
Raw materials 22,199 14,331 15,523
Supplies and other 12,093 11,363 11,296
$ 115,783 $ 113,718 $ 110,613
<PAGE>
Note 3. Long-Term Debt
(in thousands) 7/2/00 7/4/99 1/2/00
Senior Note $ 32,144 $ 42,858 $ 32,144
Revolving Credit Agreement 58,000 42,000 69,000
8-1/8% Debentures 97,908 97,464 97,685
188,052 182,322 198,829
Less current maturities 2,932 10,714 79,714
$ 185,120 $ 171,608 $ 119,115
On July 14, 2000, the Company amended its Revolving Credit Agreement to extend
the maturity date to August 7, 2001. At the same time, the Company amended its
Senior Note debt payment 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 the
Company's 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.
(in thousands) Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
7/2/00 7/4/99 7/2/00 7/4/99
Depreciation $ 5,721 $ 5,902 $ 11,687 $ 13,092
Amortization 451 450 905 902
$ 6,172 $ 6,352 $ 12,592 $ 13,994
<PAGE>
Note 6. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per common share ("EPS").
(in thousands, except Thirteen Thirteen
per share data) Weeks Ended Weeks Ended
7/2/00 7/4/99
Income before cumulative effect of
accounting change $ 1,526 $ 714
Preferred stock dividends (1,095) ( 790)
Basic EPS - income (loss) available to
common shareholders 431 ( 76)
Effect of dilutive securities - -
Diluted EPS - income (loss) available
to common shareholders after assumed
conversions $ 431 $( 76)
Determination of shares:
Basic EPS - weighted-average shares 25,487 25,442
Effect of dilutive securities 161 -
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,648 25,442
Earnings per share - basic and diluted $ .02 $ -
<PAGE>
Note 6. Earnings (Loss) Per Share (continued)
The following table sets forth the computation of basic and diluted loss per
common share ("EPS").
(in thousands, except Twenty-Six Twenty-Six
per share data) Weeks Ended Weeks Ended
7/2/00 7/4/99
Income (loss) before cumulative effect
of accounting change $ 1,249 $( 7,718)
Preferred stock dividends (1,802) ( 1,510)
Loss before cumulative effect of accounting
change available to common shareholders ( 553) ( 9,228)
Cumulative effect of accounting change - ( 1,038)
Basic EPS - loss available to common
shareholders ( 553) (10,266)
Effect of dilutive securities - -
Diluted EPS - loss available to common
shareholders after assumed conversions $ ( 553) $(10,266)
Determination of shares:
Basic EPS - weighted-average shares 25,483 25,437
Effect of dilutive securities - -
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,483 25,437
Loss per share - basic and diluted
Loss before cumulative effect of
accounting change $ ( .02) $( .36)
Cumulative effect of accounting change - ( .04)
Net loss $ ( .02) $( .40)
Common stock options outstanding at July 2, 2000, were not included in the
computation of diluted loss per share for the twenty-six weeks period because to
do so would have been antidilutive. Common stock options at July 4, 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. The Company ceased manufacturing yarn-dyed products in 1999.
<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 assets,
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:
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
7/2/00 7/4/99
Net Sales
Denim and Khaki $121,995 $127,238
Commission Finishing 23,646 26,403
Decorative Fabrics 19,973 17,763
Yarn-Dyed Products - 6,565
Other 361 428
165,975 178,397
Less Intersegment Sales 4,426 3,905
$161,549 $174,492
Income (Loss) from Operations
Denim and Khaki $ 8,681 $ 7,251
Commission Finishing 57 ( 1,716)
Decorative Fabrics ( 292) 369
Yarn-Dyed Products - ( 528)
Other ( 20) ( 29)
Unallocated Expenses ( 812) ( 1,739)
7,614 3,608
Restructuring and Impairment of Assets - -
7,614 3,608
Less Equity in Earnings of
Unconsolidated Affiliate 775 1,090
6,839 2,518
Other Expense, Net ( 5,702) ( 3,071)
Income (Loss) before Income Taxes
(Benefit), Equity in Earnings of
Unconsolidated Affiliate and
Cumulative Effect of Accounting Change $ 1,137 $( 553)
<PAGE>
Note 7. Segment Information (continued)
(in thousands) Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
7/2/00 7/4/99
Net Sales
Denim and Khaki $226,257 $239,873
Commission Finishing 44,449 52,241
Decorative Fabrics 39,522 34,348
Yarn-Dyed Products 10 14,071
Other 644 900
310,882 341,433
Less Intersegment Sales 7,656 9,684
$303,226 $331,749
Income (Loss) from Operations
Denim and Khaki $ 14,017 $ 16,567
Commission Finishing ( 782) ( 3,672)
Decorative Fabrics ( 508) 873
Yarn-Dyed Products ( 60) ( 3,805)
Other 672 ( 258)
Unallocated Expenses ( 1,600) ( 3,192)
11,739 6,513
Restructuring and Impairment of Assets 332 (12,917)
12,071 ( 6,404)
Less Equity in Earnings of
Unconsolidated Affiliate 1,225 1,957
10,846 ( 8,361)
Other Expense, Net (10,810) ( 6,281)
Income (Loss) before Income Taxes
(Benefit), Equity in Earnings of
Unconsolidated Affiliate and
Cumulative Effect of Accounting Change $ 36 $(14,642)
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:
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
7/2/00 7/4/99
Net income (loss) $ 1,526 $ 714
Other comprehensive loss,
currency translation adjustment - ( 17)
$ 1,526 $ 697
<PAGE>
Note 8. Comprehensive Income (Loss) (continued)
(in thousands) Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
7/2/00 7/4/99
Net income (loss) $ 1,249 $ (8,756)
Other comprehensive loss,
currency translation adjustment - ( 19)
$ 1,249 $ (8,775)
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 July 2, 2000, the total amount outstanding
under the Accounts Receivable Facility was $60 million.
Note 10. 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 and its new secured subordinated debentures and its
common stock for up to $85 million of the Debentures.
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Second Quarter Ended July 2, 2000 Compared with Second Quarter Ended July 4,
1999
For the second quarter of 2000, Cone Mills had sales of $161.5 million, down 7%
from sales of $174.5 million for the second quarter of 1999. Excluding sales of
businesses exited in 1999, sales for the second quarter of 2000 were down less
than 2% from 1999 amounts. Lower denim prices and weak sales at the Raytex
finishing plant, partially offset by improved jacquard sales, account for the
sales decrease.
Gross profit for the second quarter of 2000 increased to 12.1% of sales, as
compared with 8.2% for the previous year. The improvement was primarily the
result of better operating results in the denim and khaki segment and in
commission finishing and the realization of savings from the 1999 comprehensive
restructuring program. These savings include the reconfiguration of overhead
<PAGE>
structures, restructuring at Carlisle, yarn outsourcing and the exit from the
yarn-dyed shirtings product line.
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 second
quarter of 2000 were $122.0 million, down 4.1% from second-quarter 1999
sales of $127.2 million. While sales volume returned to levels
equivalent to second-quarter 1999, revenues were adversely affected by
lower denim prices, the result of the industry downturn in the second
half of 1999. Operating income for the denim and khaki segment
increased to $8.7 million, or 7.1% of sales for the most recent
quarter, as compared with $7.3 million, or 5.7% of sales for the second
quarter of 1999. The increased earnings resulted primarily from the
reduction of losses in khaki operations and improved operating
performance in denim manufacturing in 2000. 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 $19.2 million for the second quarter of 2000, down 14.6% from
sales of $22.5 million for the second quarter of 1999. Operating losses
and lower sales were experienced at Raytex, resulting from weaker
demand for top-of-bed prints and manufacturing difficulties associated
with new equipment. Despite the sales shortfall, the segment had an
operating profit of $.1 million for the second quarter of 2000, as
compared with a loss of $1.7 million for the second quarter of 1999.
The entire profit was attributable to the Carlisle finishing plant,
which had much improved operating results for the most recent quarter,
the result of cost reduction and improved efficiency and quality. The
Carlisle profit was partially offset by losses at Raytex.
Decorative Fabrics. For the second quarter of 2000, sales of the
decorative fabrics segment were $20.0 million, up 12.4%, as compared
with second-quarter 1999 sales of $17.8 million. The increase was the
result of continued growth in jacquards. The decorative fabrics segment
had an operating loss of $.3 million for the second quarter of 2000, as
compared with a $.4 million operating profit for the previous year.
John Wolf sales were down as strong products in 1999 have moved late in
their product life cycles and restyling efforts have not had an
opportunity to be introduced into the marketplace. Jacquards had a less
profitable sales mix and difficulties associated with outside weaving
and finishing.
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 second quarter of 1999, sales of
<PAGE>
yarn-dyed products were $6.6 million and the operating loss for the
segment was $.5 million.
Selling and administrative expenses for the second quarter of 2000 were $12.8
million, or 7.9% of sales, as compared with $11.7 million, or 6.7% of sales, in
second quarter 1999. Expenses associated with the Company's financial agreements
and lower denim prices on essentially the same sales yards resulted in selling
and administrative expenses increasing as a percent of sales.
For the second quarter of 2000, EBITDA, defined as income (loss) from operations
before depreciation and amortization, was $13.0 million. For comparison, EBITDA
for the second quarter of 1999 was $8.9 million. However, excluding
restructuring charges, related expenses, inventory writedowns and operating
losses associated with businesses exited, the Company had a pro forma EBITDA in
the second quarter of 1999 of $11.6 million.
Interest expense for the second quarter of 2000 was $4.8 million, up 37% from
$3.5 million for the second quarter of 1999. The increase in interest expense
was primarily the result of increases in rates under new lending agreements and
market rates. Other expenses of $1.1 million recognized in the second quarter of
2000 were the ongoing expenses of the new accounts receivable securitization
program, which began September 1999.
In the second quarter of 2000, income taxes as a percent of taxable income were
34%. In the second quarter of 1999, the income tax benefit as a percent of the
taxable loss was 34%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $.8 million for the second quarter of 2000, as compared with $1.1 million
for the second quarter of 1999.
For the second quarter of 2000, the Company had net income of $1.5 million
before preferred dividends as compared to net income of $.7 million in second
quarter 1999. After preferred dividends, the Company reported earnings of $.02
per share in the 2000 period as compared with breakeven per share results in
1999.
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.
Six Months Ended July 2, 2000 Compared with Six Months Ended July 4, 1999
For the first six months of 2000, Cone Mills had sales of $303.2 million, down
9% from sales of $331.7 million for the first six months of 1999. Excluding
sales of businesses exited in 1999, sales for the first six months of 2000 were
down 2.0% from 1999 amounts. Lower denim prices and weak sales at our Raytex
finishing plant, partially offset by improved jacquard sales, account for the
sales decrease.
<PAGE>
Gross profit for the first six months of 2000 increased to 12.1% of sales, as
compared with 8.9% for the previous year. The improvement was primarily due to
better operating results in commission finishing and the realization of savings
from the 1999 comprehensive restructuring program. These savings include the
reconfiguration of overhead structures, restructuring at Carlisle, yarn
outsourcing and the exit of the yarn-dyed shirtings product line.
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
six months of 2000 were $226.3 million, down 5.7% from the first six
months of 1999 sales of $239.9 million. While sales yards were
essentially flat year-over-year, revenues were adversely affected by
lower denim prices, the result of industry supply/demand imbalances and
declining cotton costs which were passed on to customers because of
market conditions. Operating income for the denim and khaki segment was
$14.0 million, or 6.2% of sales for the 2000 period, as compared with
$16.6 million, or 6.9% of sales for the 1999 period. The decline
resulted primarily from lower denim prices, partially offset by 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 $36.8 million for the first six months of 2000, down 13.5% from
the first six months of 1999. Lower sales at the Raytex finishing
plant, resulting from weaker demand in top-of-bed prints, accounted for
the decline. Carlisle sales to outside customers increased by
approximately 4% in the first six months of 2000, as compared with the
1999 period. 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 $3.7 million for the first
six months of 1999 to a loss of $.8 million for the most recent period.
Decorative Fabrics. For the first six months of 2000, sales of the
decorative fabrics segment rose by 15.1% to $39.5 million, the result
of continued growth in jacquards. John Wolf sales were down as strong
products in 1999 have moved late in their product life cycles and
restyling efforts have not had an opportunity to be introduced into the
marketplace. Due to the sales decline at John Wolf and a less
profitable mix at Jacquards along with difficulties associated with
outside weaving and finishing the segment reported an operating loss of
$.5 million in 2000 as compared with an operating profit of $.9 million
in 1999.
<PAGE>
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 six months of 1999, sales of
yarn-dyed products were $14.1 million and the operating loss for the
segment was $3.8 million.
Selling and administrative expenses for the first six months of 2000 were $26.2
million, or 8.6% of sales, as compared with $25.0 million, or 7.5% of sales in
the first six months of 1999. Expenses associated with the Company's financial
agreements, certain performance-based compensation accruals and lower denim
prices on essentially the same sales yards resulted in selling and
administrative expenses increasing as a percent of sales.
For the first six months of 2000, EBITDA, defined as income (loss) from
operations before depreciation and amortization, was $23.4 million. For
comparison, EBITDA for the first six months of 1999 was $5.6 million. However,
excluding restructuring charges, related expenses, inventory writedowns and
operating losses associated with businesses exited, the Company had a pro forma
EBITDA in the first six months of 1999 of $ 25.9 million.
Interest expense for the first six months of 2000 was $9.5 million, up 33% from
$7.2 million for the first six months of 1999. The increase in interest expense
was primarily the result of increases in rates under new lending agreements and
market rates. Other expenses of $2.0 million recognized in the first six months
of 2000 were the ongoing expenses of the new accounts receivable securitization
program, which began September 1999.
In the first six months of 2000, income taxes as a percent of taxable income
were 34%. In the first six months of 1999, the income tax benefit as a percent
of the taxable loss was 34%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $1.2 million for the first six months of 2000, as compared with $2.0 million
for the first six months of 1999 before the cumulative effect of an accounting
change.
For the first six months of 2000, the Company had net income of $1.2 million, or
a loss of $.02 per share after preferred dividends. For comparison, for the
first six months of 1999 the Company reported a net loss of $8.8 million, or
$.40 per share after preferred dividends. Excluding restructuring and related
expenses, and the cumulative effect of an accounting change, the Company had pro
forma earnings of $.10 per share for the first six 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, an $80 million Revolving
<PAGE>
Credit Facility ("Revolving Credit Facility") of which approximately $20 million
was available on July 2, 2000, 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. The
Revolving Credit Facility was secured by Company assets and was to mature on
August 7, 2000. This date was subsequently extended to August 7, 2001. Interest
rates were increased to market levels and new covenants were set.
At the same time the Company entered into the new Revolving Credit Facility, its
Senior Notes and 8-1/8% Debentures were ratably secured with the bank facility.
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 Revolving Credit Facility to extend
the maturity date to August 7, 2001. 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 commitment on the Revolving Credit Facility was reduced to
$73.5 million on August 7, 2000. The interest rate on the Senior Note was
increased to 11.7% from 11.0%.
Financing agreements of the Company prohibit the Company from paying dividends
on its Common Stock.
During the first six months of 2000, the Company generated cash from operations,
before changes in working capital, of $13.5 million, as compared with $1.3
million during the first six months of 1999. In the 2000 period, working capital
decreased by $8.0 million. Uses of cash in the 2000 period included $4.4 million
for domestic capital expenditures and investment to develop the Company's joint
venture industrial park in Mexico, and $2.6 million for the redemption of
preferred stock.
The Company believes that internally generated operating cash flow and funds
available under its credit facilities will be sufficient to meet its needs for
working capital, capital spending permitted under the terms of the Revolving
Credit Facility and debt repayments. Liquidity is predicated on the Company
meeting its operating targets in 2000 and further reductions in inventories.
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
<PAGE>
million of the debentures 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 modification of the collateral currently securing the
debentures. The principal purpose of the transaction 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. While management believes that it will be able to obtain
the appropriate financing for its Mexican initiative, there is no assurance that
the Company will obtain financing on terms and conditions acceptable to the
Company.
On July 2, 2000, the Company's long-term capital structure consisted of $188.1
million of long-term debt (including current maturities) and $156.2 million of
stockholders' equity. For comparison, on July 4, 1999, the Company had $182.3
million of long-term debt (including current maturities) and $171.8 million of
stockholders' equity. Long-term debt (including current maturities) as a
percentage of long-term debt and stockholders' equity was 55% at July 2, 2000,
as compared with 51% at July 4, 1999.
Accounts and note receivable on July 2, 2000, were $55.2 million, as compared
with $57.3 million at July 4, 1999. Receivables, including those sold pursuant
to the Receivables Purchase Agreement, represented 67 days of sales outstanding
at July 2, 2000 and 58 days at July 4, 1999. 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 2, 2000, were $115.8 million, up $2.1 million from $113.7
million at July 4, 1999.
For the first six months of 2000, domestic capital spending was $2.1 million
compared to $4.0 million for the 1999 period. Domestic capital spending in 2000
is expected to be approximately $12 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 $2.3 million was invested
in the first six months of 2000.
OTHER MATTERS
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,
<PAGE>
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 and Consent Solicitation for
the 8-1/8% Debentures, (vii) increases in prevailing interest rates, and
(viii) the inability to continue the cost savings associated with the
Company's 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.
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
<PAGE>
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 Agreement
dated as of April 24, 2000, by and between Cone
Receivables II LLC, the Registrant, Redwood
Receivables Corporation, and General Electric
<PAGE>
Exhibit Sequential
No. Description Page No.
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, 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.
<PAGE>
Exhibit Sequential
No. Description Page No.
*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 person 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.
*4.2 Note Agreement dated as of August 13, 1992,
between the Registrant and The Prudential
Insurance Company of America, with form of
<PAGE>
Exhibit Sequential
No. Description Page No.
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 The Prudential
Insurance Company of America superseding
Letter Agreement, filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
<PAGE>
Exhibit Sequential
No. Description Page No.
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.
*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
<PAGE>
Exhibit Sequential
No. Description Page No.
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
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.
<PAGE>
Exhibit Sequential
No. Description Page No.
*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.
*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
<PAGE>
Exhibit Sequential
No. Description Page No.
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
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
<PAGE>
Exhibit Sequential
No. Description Page No.
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 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.
<PAGE>
Exhibit Sequential
No. Description Page No.
*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 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.
<PAGE>
Exhibit Sequential
No. Description Page No.
*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 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).
<PAGE>
Exhibit Sequential
No. Description Page No.
*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).
27 Financial Data Schedule 33
------------------------------------------
* 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.
<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 14, 2000 /S/Gary L. Smith
Gary L. Smith
Executive Vice President and
Chief Financial Officer
