CONE MILLS CORPORATION
804 GREEN VALLEY ROAD, SUITE 300
GREENSBORO NC 27408
June 24, 2003
VIA EDGAR
Securities and Exchange Commission
450 5TH ST NW
Washington, DC 20001
RE: Cone Mills Corporation (the "Registrant") - Form 11K
The 401(k) Program of Cone Mills Corporation
Gentlemen:
On behalf of the Registrant and pursuant to Rule 15d of the Securities Exchange
Act of 1934, I hereby file the annual report on Form 11-K of The 401(k) Program
of Cone Mills Corporation.
These reports are being transmitted by EDGAR pursuant to General Instruction E
of Form 11-K and Rule 101(b)(3) of Regulation S-T.
If there are any questions or comments regarding the contents of the materials
in this transmission, please contact the undersigned, telephone 336.379.6568.
Sincerely,
CONE MILLS CORPORATION
/s/Neil W. Koonce
Neil W. Koonce
Vice President, General Counsel and Secretary
Enclosures
c: Schell Bray Aycock Abel & Livingston, LLP (w/enclosures)
McGladrey & Pullen, LLP (w/enclosures)
New York Stock Exchange (w/enclosures)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 31, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-3634
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
The 401(k) Program of Cone Mills Corporation
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office.
CONE MILLS CORPORATION
804 Green Valley Road, Suite 300
Greensboro, NC 27408
The 401(k) Program
of Cone Mills Corporation
Financial Report
December 31, 2002
CONTENTS
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INDEPENDENT AUDITOR'S REPORT 1
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FINANCIAL STATEMENTS
Statements of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4 - 7
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McGladrey & Pullen
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Advisory Committee
The 401(k) Program
of Cone Mills Corporation
Greensboro, North Carolina
We have audited the accompanying statements of net assets available for benefits
of The 401(k) Program of Cone Mills Corporation as of December 31, 2002 and
2001, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2002. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the The 401(k)
Program of Cone Mills Corporation as of December 31, 2002 and 2001, and the
changes in net assets available for benefits for the year ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.
/s/ McGladrey & Pullen, LLP
Greensboro, North Carolina
April 18, 2003
1
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2002 and 2001
2002 2001
- --------------------------------------------------------------------------------
Assets:
Investments, at fair value:
Master trust funds (Note 6) $ 23,716,711 $ 32,701,097
Participant loans 427,553 512,005
----------------------------------------
24,144,264 33,213,102
----------------------------------------
Receivables:
Employer contributions 31,236 38,139
Employee contributions 109,060 121,770
----------------------------------------
140,296 159,909
----------------------------------------
Net Assets Available for Benefits $ 24,284,560 $ 33,373,011
========================================
See Notes to Financial Statements.
2
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31, 2002
- ----------------------------------------------------------------------------------------------
Additions (reductions) to net assets attributed to:
Investment income:
Loss on sale of investments $ (516,457)
Unrealized depreciation in fair value of investments (4,028,855)
Interest and dividends 756,633
--------------
(3,788,679)
--------------
Contributions:
Employer 506,883
Employee 1,741,213
--------------
2,248,096
--------------
Transfers from the 401(k) Program (Hourly) of Cone Mills Corporation 17,178
--------------
Total reductions (1,523,405)
--------------
Deductions from net assets attributed to:
Benefits paid directly to participants 7,535,973
Other deductions 29,073
--------------
Total deductions 7,565,046
--------------
Net decrease (9,088,451)
Net assets available for benefits:
Beginning of year 33,373,011
--------------
End of year $ 24,284,560
==============
See Notes to Financial Statements.
3
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
NOTES TO FINANCIAL STATEMENTS
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Note 1. Significant Accounting Policies
Accounting principles and practices: The 401(k) Program of Cone Mills
Corporation's (the "Plan") investments are held in a trust fund administered by
The Vanguard Group, Inc. ("Vanguard"). The accounting records with respect to
financial transactions are maintained by Vanguard. Vanguard invests the
participant's accounts, as elected by the participant, among thirteen investment
alternatives. Participants may change their investment options on a daily basis.
The financial statements of the Plan are presented under the accrual method of
accounting.
Valuation of assets and income recognition: The Plan's investments are stated at
fair value. Shares of registered investment companies are valued at quoted
market prices which represent the net asset value of shares held by the Plan at
year-end. Units of the Retirement Savings Trust are valued at net asset value at
year-end. The Company stock fund is valued at its year-end unit closing price
(comprised of year-end market price plus uninvested cash portion.) Participant
loans are valued at cost which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
Benefit payments: Benefits are recorded when paid.
Note 2. Description of the Plan
The Plan is a qualified, defined contribution plan which became effective
January 1, 1947 under the name of the Supplemental Retirement Plan of Cone Mills
Corporation ("SRP"). In 1992, the Plan was amended effective January 1, 1993, to
include hourly employees as members in the Plan and to cause other changes which
updated and improved the Plan. In 1993, the Plan was amended effective January
1, 1994, to allow members to contribute up to 15% of adjusted total compensation
on a before-tax (Section 401(k)) basis. The Supplemental Retirement Plan -
Hourly became effective as of January 1, 1994, at which time all hourly
employees transferred their account balances to this new plan. On June 1, 1998,
the Cone Mills Corporation Employee Equity Plan ("EEP") was merged into the Plan
with all of the EEP's net assets being transferred into the Plan at that date.
Immediately thereafter, the EEP was terminated with the Plan being the survivor.
On that same date, the Plan assumed its current name in conjunction with the
change to Vanguard as Plan trustee and administrator.
Assets: Assets of the Plan are included with assets of "The 401(k) Program -
Hourly of Cone Mills Corporation" in a master trust. Allocations of net
investment income and investment gains and losses to the participating plans are
based on shares held in individual accounts.
Eligibility: Salaried employees who have attained age 21 and have completed
ninety days of service are eligible to participate in the Plan but are not
eligible to receive an employer matching contribution until having completed one
year of service.
4
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Description of the Plan (Continued)
Member contributions: Members may contribute from 2% to 50% of compensation on a
before-tax (Section 401(k)) basis.
Company contributions: Matching contributions are required in an amount equal to
40% of each member's contributions not in excess of 6% of his compensation.
Additional matching contributions may be made at the discretion of Cone Mills
Corporation.
Benefits: The accumulated value of a member's individual account is paid after
retirement or other separation from service. Benefits are ordinarily paid in a
lump-sum distribution in the year following the year of retirement or other
termination of employment; however, installment distributions may be made at the
election of the participant.
Member accounts: Individual accounts are maintained for each participant which
record the accumulated value of Company contributions allocated to such
participant, the participant's contributions and investment earnings thereon.
Participants receive statements showing the value of their accounts quarterly.
Vesting: All members' accounts are 100% vested.
Investment alternatives: Participants must direct their salary deferral
contributions to selected investments as made available and determined by the
Plan Administrator. Participants may change their investment options any time
throughout the year via direct phone or internet access to Vanguard.
Loans to participants and hardship withdrawals: Participants may borrow from
their fund accounts up to a maximum equal to the lesser of $50,000 or 50% of
their vested account balance. The loans are secured by the balance in the
participant's account and bear interest at rates that range from 5.75% to
10.50%, which are commensurate with local prevailing rates. Loan terms range
from one to four years, or longer for the purchase of a primary residence.
Principal and interest are paid ratably through monthly payroll deductions.
Under the provisions of the Plan relating to financial hardship a participant
may receive an in-service withdrawal of funds from his/her plan account.
Estimates: The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Note 3. Related Party Transactions
The Plan invests in shares of mutual funds managed by Vanguard. Vanguard acts as
trustee for only those investments as defined by the Plan. Transactions in such
investments qualify as party-in-interest transactions which are exempt from the
prohibited transaction rules.
5
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 4. Plan Termination
If the Plan is terminated, each member would be entitled to the total amount in
his account, payable under the terms of the Plan.
Note 5. Tax Status
Effective January 1, 2002, the Plan adopted a prototype plan sponsored by
Vanguard which received a favorable opinion letter from the Internal Revenue
Service which stated that the prototype is designed in accordance with
applicable sections of the Internal Revenue Code ("IRC"). Accordingly, the
Company believes the Plan is currently designed and is being operated in
compliance with the applicable provisions of the IRC and that, therefore, the
Plan qualifies under Section 401(a) and the related trust is tax-exempt.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
Note 6. Investment in Master Trust
At December 31, 2002 and 2001, the Plan's investment assets were held in a trust
account at Vanguard and consist of an interest in a master trust. The master
trust also includes the investment assets of The 401(k) Program - Hourly of Cone
Mills Corporation.
The master trust was composed of the following investments at December 31, 2002
and 2001:
2002 2001
------------------------------------
Registered investment companies:
Vanguard 500 Index Fund $ 1,420,326 $ 2,026,746
Vanguard International Growth Fund 208,975 255,636
Vanguard LifeStrategy Moderate Conservative Growth Fund 13,754 -
Vanguard LifeStrategy Growth Fund 12,553 -
Vanguard LifeStrategy Income Fund 67,498 -
Vanguard LifeStrategy Moderate Growth Fund 236,095 315,811
Vanguard Morgan Growth Fund Investor Shares 17,598 -
Vanguard Small-Cap Index Fund 346,051 419,721
Vanguard Total Bond Market Index Fund 1,138,764 756,730
Vanguard U. S. Growth Fund 8,140,420 14,354,079
Vanguard Wellington Fund 7,297,834 9,795,205
Common/collective trust:
Vanguard Retirement Savings Trust 13,909,622 14,574,297
Common stocks:
Cone Mills Stock Fund 4,048,434 4,637,772
------------------------------------
Net assets $ 36,857,924 $ 47,135,997
====================================
6
THE 401(k) PROGRAM
OF CONE MILLS CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 6. Investment in Master Trust (Continued)
The net investment income of the master trust for the year ended December 31,
2002 is summarized as follows:
Interest and dividends $ 1,152,061
Loss on sale of investments (654,866)
Unrealized depreciation in fair value
of investments (5,738,740)
--------------
$ (5,241,545)
==============
The Plan's interest in the master trust, as a percentage of net assets of the
master trust was 64.3% and 69.4% at December 31, 2002 and 2001.
Note 7. Reconciliation of Differences Between These Financial Statements and the
Financial Information Required on Form 5500
December 31,
- ----------------------------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------------------------
Net assets available for benefits as presented in these financial
statements $ 24,284,560 $ 33,373,011
Adjustment of benefits payable (118,774) (33,468)
--------------------------------
Net assets available for benefits as presented in Form 5500 $ 24,165,786 $ 33,339,543
================================
Net decrease in net assets available for benefits as
presented in these financial statements $ (9,088,451) $ (7,935,385)
Adjustment of benefits paid (85,306) 8,936,691
--------------------------------
Net increase (decrease) in net assets available for benefits as
presented in Form 5500 $ (9,173,757) $ 1,001,306
================================
7
INDEX TO EXHIBITS
Exhibit 23 Consent of McGladrey & Pullen, LLP, independent auditor,
with respect to the incorporation by reference in the
Registrant's Registration Statement on Form S-8 (Nos.
33-31979, 33-51951 and 33-51953) of their report on the
financial statements filed herewith.
SIGNATURES
THE PLAN. Pursuant to the requirement of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
THE 401(k) PROGRAM OF CONE MILLS CORPORATION
By: /s/Terry L. Weatherford,
Terry L. Weatherford, Member of Advisory Committee
By: /s/Gary L. Smith
Gary L. Smith, Member of Advisory Committee
Date: June 24, 2003