Page 1 of 64
Index to Exhibits-Pages 31-36
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1995
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.)
1201 Maple Street, Greensboro, North Carolina 27405
(Address of principal executive offices) (Zip Code)
(910) 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 August 1,
1995: 27,380,409 shares.
Page 1
FORM 10-Q
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income
Thirteen and twenty-six weeks ended
July 2, 1995 and July 3, 1994 (Unaudited) . .3
Consolidated Balance Sheets
July 2, 1995 and July 3, 1994
(Unaudited) and January 1, 1995 . . . . .4 & 5
Consolidated Statements of Stockholders' Equity
Twenty-six weeks ended July 2, 1995
and July 3, 1994 (Unaudited) . . . . . . . .6
Consolidated Statements of Cash Flows
Twenty-six weeks ended July 2, 1995
and July 3, 1994 (Unaudited) . . . . . . . .7
Notes to Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . .8
Item 2. Managements's Discussion and Analysis of
Financial Condition and Results of Operations . 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . 29
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . 30
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 30
Page 2
FORM 10-Q
PART I
Item 1.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
Thirteen Thirteen Twenty-Six Twenty-Six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 2, 1995 July 3, 1994 July 2, 1995 July 3, 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 232,952 $ 201,662 $ 459,157 $ 397,581
Operating Costs and Expenses:
Cost of sales 191,305 159,629 377,253 313,210
Selling and administrative 21,950 19,327 42,777 38,280
Depreciation 7,201 5,801 14,402 11,603
220,456 184,757 434,432 363,093
Income from Operations 12,496 16,905 24,725 34,488
Other Income (Expense):
Interest income 160 49 385 137
Interest expense (4,109) (1,884) (7,110) (4,089)
(3,949) (1,835) (6,725) (3,952)
Income from Continuing Operations before Income Taxes
and Equity in Earnings (Loss) of Unconsolidated Affiliates 8,547 15,070 18,000 30,536
Income Taxes 2,996 5,445 6,300 10,985
Income from Continuing Operations before Equity
in Earnings (Loss) of Unconsolidated Affiliates 5,551 9,625 11,700 19,551
Equity in Earnings (Loss) of Unconsolidated Affiliates (6,423) 222 (8,938) 321
Income (Loss) from Continuing Operations (872) 9,847 2,762 19,872
Gain on Disposal - Discontinued Operations - (Net of
income tax of $276) - - - 439
Income (Loss) before Cumulative Effect of Accounting Change (872) 9,847 2,762 20,311
Cumulative Effect of Accounting Change for
Postemployment Benefits - (Net of income
tax benefit of $772) - - - (1,228)
Net Income (Loss) $ (872) $ 9,847 $ 2,762 $ 19,083
Income (Loss) Available to Common Shareholders:
Income (Loss) from Continuing Operations $ (1,592) $ 9,175 $ 1,370 $ 18,528
Income (Loss) before Cumulative Effect of
Accounting Change $ (1,592) $ 9,175 $ 1,370 $ 18,967
Cumulative Effect of Accounting Change - - - (1,228)
Net Income (Loss) $ (1,592) $ 9,175 $ 1,370 $ 17,739
Earnings (Loss) Per Share - Fully Diluted:
Income (Loss) from Continuing Operations $ (.06) $ .33 $ .05 $ .67
Income (Loss) before Cumulative Effect of
Accounting Change $ (.06) $ .33 $ .05 $ .68
Cumulative Effect of Accounting Change - - - (.04)
Net Income (Loss) $ (.06) $ .33 $ .05 $ .64
Weighted Average Common Shares and
Common Share Equivalents Outstanding -
Fully Diluted 27,380 27,858 27,489 27,861
See Notes to Consolidated Financial Statements.
Page 3
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
July 2, July 3, January 1,
ASSETS 1995 1994 1995
(Unaudited) (Unaudited) (Note)
Current Assets:
Cash $ 2,284 $ 3,384 $ 1,158
Accounts receivable - trade, less
provision for doubtful accounts $3,000 89,708 57,141 56,654
Inventories:
Greige and finished goods 80,937 84,294 83,377
Work in process 16,122 15,814 15,796
Raw materials 23,383 17,259 19,973
Supplies and other 33,212 30,124 30,274
153,654 147,491 149,420
Other current assets 7,778 6,117 6,007
Total Current Assets 253,424 214,133 213,239
Investments in Unconsolidated Affiliates 32,392 28,437 34,294
Other Assets 39,150 4,953 38,803
Property, Plant and Equipment:
Land 19,766 20,559 20,662
Buildings 79,452 72,431 79,418
Machinery and equipment 302,580 254,037 284,401
Other 32,073 26,782 30,581
433,871 373,809 415,062
Less accumulated depreciation 189,471 169,335 177,321
Property, Plant and Equipment-Net 244,400 204,474 237,741
$ 569,366 $ 451,997 $ 524,077
Note: The balance sheet at January 1, 1995 has been derived from the audited financial
statements at that date.
See Notes to Consolidated Financial Statements.
Page 4
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and par value data)
July 2, July 3, January 1,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 1995
(Unaudited) (Unaudited) (Note)
Current Liabilities:
Notes payable $ 10,541 $ 14,603 $ 10,700
Current maturities of long-term debt 389 256 414
Accounts payable - trade 39,770 28,842 38,430
Sundry accounts payable and accrued expenses 44,398 36,104 39,881
Income taxes payable - 954 -
Deferred income taxes 28,254 28,299 28,148
Total Current Liabilities 123,352 109,058 117,573
Long-Term Debt 172,632 75,800 126,108
Deferred Items:
Deferred income taxes 39,343 36,187 36,789
Other deferred items 6,438 5,800 6,727
45,781 41,987 43,516
Stockholders' Equity:
Class A Preferred Stock - $100 par value; authorized
1,500,000 shares; issued and outstanding 383,948
shares; 1994, 470,752 shares and 383,948 shares
- Employee Stock Ownership Plan 38,395 47,075 38,395
Class A Preferred Stock held in escrow (1994, 86,804 shares) - (8,680) -
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 27,380,409 shares;
1994, 27,747,221 shares and 27,403,621 shares 2,738 2,775 2,740
Capital in excess of par 71,090 75,351 71,354
Retained earnings 125,872 109,917 125,771
Currency translation adjustment (10,494) (1,286) (1,380)
Total Stockholders' Equity 227,601 225,152 236,880
$ 569,366 $ 451,997 $ 524,077
Note: The balance sheet at January 1, 1995 has been derived from the audited financial statements
at that date.
See Notes to Consolidated Financial Statements.
Page 5
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JULY 2, 1995 AND JULY 3, 1994
(amounts in thousands, except share data)
(Unaudited)
Class A Preferred Class A Preferred
Stock Stock - Escrow
Shares Amount Shares Amount
Balance, January 1, 1995 383,948 $ 38,395 - $ -
Net income - - - -
Currency translation loss (net
of income tax benefit of $3,630) - - - -
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Shares Redeemed - - - -
Common Stock:
Options exercised - - - -
Purchase of common shares - - - -
Balance, July 2, 1995 383,948 $ 38,395 - $ -
Class A Preferred Class A Preferred
Stock Stock - Escrow
Shares Amount Shares Amount
Balance, January 2, 1994 465,077 $ 46,508 (81,125) $ (8,113)
Net income - - - -
Currency translation loss (net
of income tax benefit of $858)
Class A Preferred Stock - - - - -
Employee Stock Ownership Plan:
Cash dividends paid - - - -
Shares issued (7.0% dividend on shares
held in Cone Mills escrow account) 5,679 567 (5,679) (567)
Shares redeemed (4) - - -
Common Stock:
Options exercised - - - -
Purchase of common shares - - - -
Balance, July 3, 1994 470,752 $ 47,075 (86,804) $ (8,680)
See Notes to Consolidated Financial Statements.
Page 6
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
TWENTY-SIX WEEKS ENDED JULY 2, 1995 AND JULY 3, 1994
(amounts in thousands, except share data)
(Unaudited)
Capital in Currency
Common Stock Excess Retained Translation
Shares Amount of Par Earnings Adjustment
Balance, January 1, 1995 27,403,621 $ 2,740 $ 71,354 $ 125,771 $ (1,380)
Net income - - - 2,762 -
Currency translation loss (net
of income tax benefit of $3,630) - - - - (9,114)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - (2,661) -
Shares Redeemed - - - - -
Common Stock:
Options exercised 4,000 1 25 - -
Purchase of common shares (27,212) (3) (289) - -
Balance, July 2, 1995 27,380,409 $ 2,738 $ 71,090 $ 125,872 $ (10,494)
Capital in Currency
Common Stock Excess Retained Translation
Shares Amount of Par Earnings Adjustment
Balance, January 2, 1994 27,744,783 $ 2,774 $ 75,397 $ 93,468 $ -
Net income - - - 19,083 -
Currency translation loss (net
of income tax benefit of $858) - - - - (1,286)
Class A Preferred Stock -
Employee Stock Ownership Plan:
Cash dividends paid - - - (2,634) -
Shares issued (7.0% dividend on shares
held in Cone Mills escrow account) - - - - -
Shares redeemed
Common Stock:
Options exercised 11,000 1 62 - -
Purchase of common shares (8,562) - (108) - -
Balance, July 3, 1994 27,747,221 $ 2,775 $ 75,351 $ 109,917 $ (1,286)
See Notes to Consolidated Financial Statements.
Page 6a
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
July 2, 1995 July 3, 1994
(Unaudited) (Unaudited)
Cash Flows (Used In) Provided By Operating Activities $ (3,910) $ 16,473
Cash Flows from Investing Activities:
Investments in unconsolidated affiliates (16,150) (3,523)
Capital expenditures (21,943) (15,954)
Other 760 943
Net cash used in investing activities (37,333) (18,534)
Cash Flows from Financing Activities:
Principal payments - long-term debt (97,189) (47,461)
Proceeds from long-term debt borrowings 48,000 45,578
Proceeds from debentures issued 99,831 -
Other (8,273) 6,825
Net cash provided by financing activities 42,369 4,942
Net increase in cash 1,126 2,881
Cash at Beginning of Period 1,158 503
Cash at End of Period $ 2,284 $ 3,384
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest, net of interest capitalized $ 7,417 $ 4,171
Income taxes, net of refunds $ 4,032 $ 8,490
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend paid to ESOP trustee for Cone escrow account $ - $ 567
Class A Preferred Stock issued $ - $ 567
See Notes to Consolidated Financial Statements.
Page 7
FORM 10-Q
Item 1. (continued)
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 2, 1995
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") condensed
consolidated financial statements for July 2, 1995
and July 3, 1994 are unaudited, but in the opinion of
management reflect all adjustments necessary to
present fairly the consolidated balance sheets of
Cone Mills Corporation and Subsidiaries at July 2,
1995, January 1, 1995 and July 3, 1994 and the
related consolidated statements of income for the
respective thirteen and twenty-six weeks ended July
2, 1995 and July 3, 1994, and stockholders' equity
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 1994.
Substantially all components of textile inventories
are valued at the lower of cost or market using the
last-in, first-out (LIFO) method. Nontextile
inventories are valued at the lower of average cost
or market. 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, 1995 and July 3, 1994 and related
consolidated statements of income 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.
Page 8
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Sale of Accounts Receivable
The Company has an agreement with the subsidiary of
a major financial institution which allows the sale
without recourse of up to $50 million of an undivided
interest in eligible trade receivables. This
agreement, dated August 11, 1992, and amended June
30, 1994, is extendable to August 1997. Accounts
receivable is shown net of $31 million sold at July
2, 1995, net of $50 million sold at July 3, 1994, and
net of $50 million sold at January 1, 1995. As a
result of the sale of the interest in these
receivables, cash flows provided by operating
activities include a decrease of $19 million and an
increase of $15 million for the twenty-six weeks
ended July 2, 1995 and July 3, 1994, respectively.
Note 3. Investments in Unconsolidated Affiliates
Investments in unconsolidated affiliated companies
are accounted for by the equity method. The
Company's equity in earnings (including foreign
currency transaction losses) and currency translation
adjustments are recorded on a one quarter delay
basis.
In December 1994, the Mexican government devalued the
peso and allowed it to freely trade against the U.S.
dollar resulting in a substantial decline in value of
the peso versus the U.S. dollar. On January 1, 1995,
the peso was trading at 4.94 pesos per U.S. dollar
versus an exchange rate of approximately 3.45 prior
to the devaluation. During the first quarter of 1995
the peso continued to devalue versus the U.S. dollar
and was trading at an exchange rate of 6.78 pesos per
U.S. dollar on April 2, 1995. The devaluation of the
peso created foreign currency transaction losses for
the Company's Mexican affiliates, primarily related
to debt denominated in U.S. dollars for Compania
Industrial de Parras S.A., ("CIPSA"). Due to the
continued devaluation of the peso in the first
quarter of 1995, the Company recognized a $6.4
million loss as its pro rata share in its second
quarter income statement.
Page 9
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the second quarter of 1995 the peso recovered
to an exchange rate of 6.24 pesos per U.S. dollar on
July 2, 1995. The specific dollar effect on income
that these U.S. dollar denominated debt transactions
will have on the Company's third quarter earnings
will not be known until CIPSA releases second quarter
U.S. GAAP operating results.
Note 4. Long-Term Debt
On March 15, 1995 the Company completed the sale of
$100 million 8-1/8% Debentures through an
underwritten public offering. The unsecured
debentures are due March 15, 2005, and are not
redeemable prior to maturity. Interest is payable
semiannually each March 15 and September 15.
Proceeds were used to repay all outstanding
borrowings under the Revolving Credit Facility and
for general corporate purposes. In early 1995,
considering the uncertainty in the bond market, the
Company entered into an interest rate hedge contract
to fix the interest rate on the debentures. The
contract was terminated in conjunction with the
pricing of the debentures at a cost of $4.3 million.
Amortization of the loss on the interest rate hedge
and original issue discount, both over a 10-year
life, will result in an 8.57% effective rate for the
issue.
Page 10
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The total Revolving Credit Facility of $80 million
remains available for future working capital
requirements. At July 2, 1995 and July 3, 1994,
long-term debt consisted of the following:
July 2, 1995
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
8-1/8% Debentures 95,688 - 95,688
Capital Lease Obligation 1,533 155 1,378
Industrial Revenue Bonds 645 199 446
Other 155 35 120
Total $173,021 $ 389 $172,632
July 3, 1994
Current
Total Maturity Long-Term
(amounts in thousands)
8% Senior Note $ 75,000 $ - $ 75,000
Industrial Revenue Bonds 869 223 646
Other 187 33 154
Total $ 76,056 $ 256 $ 75,800
Note 5. Class A Preferred Stock
The dividend rate for Class A Preferred Stock is 7.50%,
which is payable March 31, 1996.
Page 11
FORM 10-Q
Item 1.(continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Stock Option Plans
1984 Stock Option Plan:
Option price per share $5.25 $6.50
Outstanding at 1/2/94 95,200 103,800
Exercised (7,000) (4,000)
Outstanding at 7/3/94 88,200 99,800
Exercised (10,000) -
Outstanding at 1/1/95 78,200 99,800
Exercised - (4,000)
Outstanding at 7/2/95 78,200 95,800
1992 Stock Option Plan:
Option price per share $15.625 $12.00
Outstanding 1/2/94 500,000
Canceled (4,000)
Outstanding 7/3/94 496,000
Canceled (4,000)
Granted 11/9/94 - 410,000
Outstanding at 1/1/95 492,000 410,000
Canceled (37,000)
Outstanding at 7/2/95 455,000 410,000
1994 Stock Option Plan:
Option price per share $12.875 $11.625
Granted 5/17/94 6,000
Granted 5/16/95 - 7,000
Outstanding at 7/2/95 6,000 7,000
Options exercisable
at 7/2/95 78,200 68,850 182,000 82,000 6,000 7,000
Page 12
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Earnings (Loss) Per Share
Thirteen Thirteen
Weeks Ended Weeks Ended
July 2, 1995 July 3, 1994
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands, except per share data)
Income (loss) from
continuing operations $ (872) $ (872) $ 9,847 $ 9,847
Less: Class A Preferred
dividends (720) (720) ( 672) ( 672)
Adjusted net income (loss) $(1,592) $(1,592) $ 9,175 $ 9,175
Weighted average common
shares outstanding 27,380 27,380 27,751 27,751
Common share equivalents
from assumed exercise
of outstanding options,
less shares assumed
repurchased - - 104 107
Weighted average common
shares and common share
equivalents outstanding 27,380 27,380 27,855 27,858
Earnings (loss) per common
share and common share
equivalent $ (.06) $ (.06) $ .33 $ .33
Page 13
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Earnings (Loss) Per Share (continued)
Twenty-six Twenty-six
Weeks Ended Weeks Ended
July 2, 1995 July 3, 1994
Fully Fully
Primary Diluted Primary Diluted
(amounts in thousands, except per share data)
Income from continuing
operations $ 2,762 $ 2,762 $19,872 $19,872
Less: Class A Preferred
dividends (1,392) (1,392) (1,344) (1,344)
Adjusted income from
continuing operations 1,370 1,370 18,528 18,528
Gain on disposal-
discontinued operations - - 439 439
Adjusted income before
cumulative effect of
accounting change 1,370 1,370 18,967 18,967
Cumulative effect of
accounting change - - (1,228) (1,228)
Adjusted net income $ 1,370 $ 1,370 $17,739 $17,739
Weighted average common
shares outstanding 27,380 27,380 27,748 27,748
Common share equivalents from:
Assumed exercise of outstanding
options, less shares assumed
repurchased 84 109 113 113
Weighted average common shares
and common share equivalents
outstanding 27,464 27,489 27,861 27,861
Earnings per common share and
common share equivalent:
Income from continuing
operations $ .05 $ .05 $ .67 $ .67
Income before cumulative effect
of accounting change $ .05 $ .05 $ .68 $ .68
Cumulative effect of
accounting change $ - - (.04) (.04)
Net income $ .05 $ .05 $ .64 $ .64
Primary and fully diluted earnings (loss) per share have been
computed by dividing the net earnings (loss) available to
common stockholders by the sum of the weighted average common
shares and common share equivalents outstanding.
Page 14
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Litigation and Contingencies
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs"), former employees of the Company,
instituted a class action suit against the Company and
Wachovia Bank & Trust Company, N.A. ("Wachovia") and
certain current and former employees of the Company and
Wachovia. The suit was brought on behalf of salaried
employees of the Company who were participants in certain
Company retirement plans. The Plaintiffs asserted a
variety of claims related to actions taken and statements
made concerning certain employee benefit plans maintained
by the Company.
On March 20, 1992, the United States District Court in
Greenville, South Carolina, entered a judgment finding
that the Company had promised to contribute certain
surplus funds (or their equivalent in Company stock)
relating to the overfunding of the Company's pension
plans to the 1983 ESOP by December 23, 1985, that such
surplus amounted to $69 million, that the Company's
actual contribution totaled approximately $55 million,
and that the Company and certain of its executive
officers therefore had breached their fiduciary duties
under the Employee Retirement Income Security Act of 1974
("ERISA") to certain participants in the 1983 ESOP. The
District Court ordered the Company to pay to the 1983
ESOP for the benefit of plan participants, both salaried
and hourly, the sum of $14.2 million in cash or the
equivalent in Company stock. In addition, the District
Court awarded $3.5 million in attorneys' fees to the
Plaintiffs, $2.2 million of which was to be paid from the
sum awarded to the 1983 ESOP. Judgment was entered in
favor of the defendants on all remaining claims except
for claims relating to the ESOP contribution.
On March 20, 1992, the Company and the individual
defendants appealed the District Court's judgment against
them to the United States Court of Appeals for the Fourth
Circuit. On April 2, 1992, the Plaintiffs appealed the
District Court's judgment to the Court of Appeals insofar
as it dismissed certain of their claims. To secure the
judgment on appeal the Company had deposited in escrow
with the trustee of the 1983 ESOP an $8 million letter of
Page 15
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
credit and 75,330 shares of Class A Preferred Stock
valued at $7.5 million which subsequently earned
dividends of an additional 11,474 shares valued at $1.2
million. To record these escrow transactions, the
Company increased outstanding Class A Preferred Stock by
$8.7 million. The increase in outstanding Class A
Preferred Stock was offset by a contra stockholders'
equity account labeled "Class A Preferred Stock held in
escrow." These escrow account transactions did not have
an effect upon net income or stockholders' equity of the
Company.
On May 6, 1994, the Court of Appeals, sitting en banc,
affirmed the prior conclusion of a panel of three of its
judges, and unanimously reversed the $15.5 million
judgment and unanimously affirmed all of the District
Court's rulings in favor of the Company. However, the
Court of Appeals affirmed, by an equally divided court,
the District Court's holding that Plaintiffs should be
allowed to proceed on an alternative theory whether,
subject to proof of any detrimental reliance, Plaintiffs
could establish that a letter to salaried employees on
December 15, 1983 could allow recovery on a theory of
equitable estoppel. Accordingly, the case was remanded
to the District Court for a determination of whether the
Plaintiffs could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by
the Company for summary judgment on the issues of
equitable estoppel and third-party beneficiary of
contract which had been remanded to it by the Court of
Appeals. The court ruled that the Plaintiffs could not
forecast necessary proof of detrimental reliance. The
District Court, however, granted Plaintiffs motion to
amend the complaint insofar as they seek to pursue a
"new" claim for unjust enrichment, but denied their
motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court
further denied the Company's motion to decertify the
class.
Page 16
FORM 10-Q
Item 1. (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On July 24, 1995, the District Court held a "final
hearing" on this matter and the parties are awaiting the
decision. Because of the uncertainties inherent in the
litigation process, it is not possible to predict the
ultimate outcome of this lawsuit. However, the Company
has defended this matter vigorously, and it is the
opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse
effect on the Company's financial condition.
Because the original judgment of the District Court was
reversed, the escrowed stock and letter of credit were
ordered released by order of the District Court entered
July 22, 1994. Subject to the court's order, the stock
was redeemed, the offsetting contra account eliminated
and letter of credit terminated. None of these escrow
transactions had an effect on net income or stockholders'
equity.
Page 17
FORM 10-Q
Item 2.
MANAGEMENTS' DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATING RESULTS
Second Quarter Ended July 2, 1995 Compared with Second Quarter
Ended July 3, 1994.
Net sales for the second quarter of 1995 were a record $233.0
million, up 15.5% as compared with second quarter 1994 net
sales of $201.7 million. Excluding the results of the recently
acquired Raytex and Greeff operations, net sales were up
11.6%. This sales increase, excluding the impact of
acquisitions, resulted from higher sales of denim fabrics
partially offset by lower sales of specialty sportswear and
home furnishings fabrics. Export sales for the second quarter
of 1995 accounted for 18.0% of total sales compared with 17.4%
for the second quarter of 1994. General economic conditions
during the second quarter of 1995 were mixed as retail sales
of consumer durables and apparel weakened except for jeanswear
which experienced strong retail sales. The denim industry
operated at full capacity during second quarter 1995. For
comparison, during the later half of 1993 and first half of
1994 the denim industry operated at less than capacity as
excess inventories in the softgoods pipeline were reduced.
During the second quarter, Cone recognized a noncash charge of
$6.4 million related primarily to the impact of the peso
devaluation on the U.S. dollar denominated debt of its
unconsolidated Mexican affiliates. After these charges, Cone
reported a net loss of $.06 per share, as compared with net
income of $.33 per share, reported for second quarter 1994.
Excluding the results of its unconsolidated Mexican
affiliates, income from continuing operations was $5.6
million, or $.18 per share as compared with $9.6 million or
$.32 per share, for the previous year.
Gross profit (net sales less cost of sales and depreciation)
declined to 14.8% of sales as compared with 18.0% of sales for
the second quarter of 1994. This decline resulted from the
inability to pass on higher cotton costs through increased
pricing, lower margins in home furnishings and sportswear
fabrics operations arising from weaker business conditions
and, to a lesser extent, higher depreciation and amortization
costs associated with the Company's growth initiatives.
Page 18
FORM 10-Q
Item 2. (continued)
Business Segment. Cone Mills operates in two principal
business segments, apparel fabrics and home furnishings
products. The following table sets forth certain net sales and
operating income information regarding these segments for the
second quarters of 1995 and 1994.
Second Quarter
1995 1994
(Dollar amounts in millions)
NET SALES
Apparel $ 178.1 76.5% $ 149.9 74.3%
Home Furnishings 54.9 23.5 51.8 25.7
Total $ 233.0 100.0% $ 201.7 100.0%
OPERATING INCOME (1)
Apparel $ 11.4 6.4% $ 13.3 8.9%
Home Furnishings 1.7 3.0 4.5 8.7
(1) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
Apparel Fabrics. Sales of apparel fabrics were $178.1
million, up 18.8% as compared with year-ago levels. The
increase came from stronger sales of denims, partially
offset by weaker sales of specialty sportswear fabrics.
Sales increases resulted primarily from higher unit volume.
Average prices, adjusted for mix changes, increased
marginally. Apparel segment profit margins declined to 6.4%
of sales as compared with 8.9% of sales for the second
quarter of 1994. The decrease was caused primarily by the
large unrecovered increase in cotton costs, partially
offset by increased volume and improved capacity
utilization as denim plants operated at full capacity.
Export sales for the apparel segment, primarily denims,
were $40.7 million, up 21.4% as compared with second
quarter 1994.
Home Furnishings. Sales of the home furnishings segment
increased by 6.0% to $54.9 million as the effect of the
Raytex, Greeff and David and Dash acquisitions were
partially offset by lower sales for the Company's Carlisle
and John Wolf units.
Page 19
FORM 10-Q
Item 2. (continued)
Home furnishings operating income declined to $1.7 million
as compared with $4.5 million for the second quarter of
1994. This earnings decline resulted from a combination of
lower sales volume at John Wolf and Carlisle, lower levels
of capacity utilization and less favorable product mix at
Cone Finishing, and start-up costs associated with growth
initiatives and higher raw material costs at the Olympic
Products division.
Total Company selling and administrative expenses decreased as
a percent of sales from 9.6% for the second quarter of 1994 to
9.4% for the most recent quarter as the Company benefited from
the leverage of sales growth. Selling and administration
expenses for the second quarter of 1995 were $22.0 million, up
13.6% from the second quarter of 1994.
Interest expense for the second quarter of 1995 increased $2.2
million compared with the second quarter of 1994, primarily
the result of higher borrowing levels associated with
acquisitions.
Income taxes as a percent of taxable income were 35.1% in the
second quarter of 1995 compared with 36.1% for the 1994
period. Both periods reflect tax benefits resulting from
operation of the Company's foreign sales corporation.
Six Months Ended July 2, 1995 Compared with Six Months Ended
July 3, 1994.
For the first six months of 1995, the Company experienced
strong demand for denim apparel fabrics and weakening markets
for speciality sportswear and home furnishings fabrics. Net
sales for the first half of 1995 were $459.2 million up 15.5%
as compared with first half 1994 net sales of $397.6 million.
Excluding the results of the recently acquired Raytex and
Greeff operations, net sales were up 11.3%. Export sales for
both periods accounted for approximately 17% of total sales.
Net income for the first half of 1995 was $2.8 million
compared with $19.1 million for the first half of 1994.
However, 1995 earnings were negatively affected by a $8.9
million noncash charge from unconsolidated Mexican affiliates
related primarily to the peso devaluation. Income for the
first half of 1994 was increased by a gain of $.4 million,
Page 20
FORM 10-Q
Item 2. (continued)
arising from the final disposal of assets of the Company's
discontinued operations, and reduced by $1.2 million from the
cumulative effect of adoption of SFAS NO. 112. Net income for
the first six months of 1995 after preferred dividends was
$.05 per share, or $.37 per share excluding Mexican affiliates
losses, as compared with net income of $.64 per share last
year or $.68 per share before SFAS No. 112. In addition to
Mexican affiliate charges, earnings were adversely affected by
lower operating margins and higher interest expense.
Gross profit (net sales less cost of sales and depreciation)
declined to 14.7% of sales as compared with 18.3% of sales for
the first half of 1994. This decline resulted from the
inability to pass on higher cotton costs through increased
pricing, lower margins in home furnishings operations and, to
a lesser extent, higher depreciation and amortization costs
associated with the Company's growth initiatives.
Business Segment. Cone Mills operates in two principal
business segments, apparel fabrics and home furnishings
products. The following table sets forth certain net sales and
operating income information regarding these segments for the
first six months of 1995 and 1994.
First Six Months
1995 1994
(Dollar amounts in millions)
NET SALES
Apparel $ 348.4 75.9% $ 295.9 74.4%
Home Furnishings 110.8 24.1 101.7 25.6
Total $ 459.2 100.0% $ 397.6 100.0%
OPERATING INCOME (1)
Apparel $ 20.3 5.8% $ 26.1 8.8%
Home Furnishings 5.4 4.9 10.0 9.8
(1) Operating income excludes general corporate expenses.
Percentages reflect operating income as a percentage of
segment net sales.
Page 21
FORM 10-Q
Item 2. (continued)
Apparel Fabrics. Sales of apparel fabrics were $348.4
million, up 17.7% as compared with year-ago levels. The
increase came primarily from stronger sales of denims.
Sales increases resulted from higher unit volume as average
prices adjusted for mix changes increased only slightly.
Apparel segment profit margins declined to 5.8% of sales as
compared with 8.8% of sales for the first half of 1994. The
decrease was caused primarily by the large unrecovered
increase in cotton costs, partially offset by increased
volume and improved capacity utilization as denim plants
operated at full capacity.
Export sales for the apparel segment, primarily denims,
were $78.0 million, up 19.1% as compared with the 1994
period.
Home Furnishings. Sales of the home furnishings segment
increased by 8.9% to $110.8 million as the effect of the
Raytex, Greeff and David and Dash acquisitions were
partially offset by fashion weaknesses in demand for the
Company's home furnishings fabrics.
Home furnishings operating income declined to $5.4 million
as compared with $10.0 million for the first half of 1994.
This decline resulted from a combination of lower sales
volume at John Wolf and Carlisle, lower levels of capacity
utilization and less favorable mix at Cone Finishing, and
start-up costs associated with growth initiatives and
higher raw material costs at the Olympic Products division.
Total Company selling and administrative expenses decreased as
a percent of sales from 9.6% for the first half of 1994 to
9.3% for the most recent six months as the Company benefited
from the leverage of sales growth.
Interest expense for the first six months of 1995 increased
$3.0 million compared with the first half of 1994, primarily
the result of higher borrowing levels associated with
acquisitions.
Income taxes as a percent of taxable income were 35.0% in the
first half of 1995 compared with 36.0% for the 1994 period.
Page 22
FORM 10-Q
Item 2. (continued)
Liquidity and Capital Resources
The Company's principal long-term capital sources are a $75
million Note Agreement with The Prudential Insurance Company
of America (the "Term Loan"), its 8 1/8% Debentures due March
15, 2005 (the "Debentures"), issued on March 15, 1995 as
described below, and stockholders' equity. Primary sources of
liquidity are internally generated funds, an $80 million
Credit Agreement with a group of banks with Morgan Guaranty
Trust Company of New York ("Morgan Guaranty") as Agent Bank
(the "Revolving Credit Facility"), and a $50 million
Receivables Purchase Agreement (the "Receivables Purchase
Agreement") with Delaware Funding Corporation, an affiliate of
Morgan Guaranty.
On March 15, 1995, the Company completed the sale of
$100,000,000 of Debentures through an underwritten public
offering. A portion of the proceeds were used to repay all
outstanding borrowings under the Revolving Credit Facility.
Amounts repaid under the Revolving Credit Facility will remain
available for future borrowings. On July 2, 1995, the Company
had funds available of $99.0 million under its Revolving
Credit Facility and Receivables Purchase Agreement.
During the first half of 1995, the Company used $3.9 million
of funds in its operating activities as $27.6 million of cash
provided by net income before depreciation and amortization
expenses and noncash charges from unconsolidated Mexican
affiliates, was more than offset by increases in working
capital requirements, primarily accounts receivable as
discussed below. During the period amounts sold under the
Receivables Purchase Agreement were reduced by $19.0 million.
Additional uses of cash include capital spending of $21.9
million, investment of $16.2 million in the joint venture in
Mexico, and the preferred stock dividend of $2.7 million.
Funding came primarily from the $100,000,000 of debentures
sold in March of 1995.
During the first half of 1994, the Company generated $16.5
million in funds from operating activities which included
$30.7 million of cash provided by net income before
depreciation and amortization expenses and noncash results
from unconsolidated Mexican affiliates, partially offset by
increased working capital requirements, primarily increases in
accounts receivables and reductions of accounts payable and
accrued expenses. Major uses of cash during this period
included $16.0 million for capital expenditures, $2.6 million
Page 23
FORM 10-Q
Item 2. (continued)
for preferred stock dividends and $3.5 million for investment
in the Mexican joint venture. Funding came primarily from
operating cash flow and short term borrowings and the
additional sale of accounts receivables to support working
capital needs.
On July 2, 1995, the Company's long-term capital structure
consisted of $172.6 million of long-term debt, including the
Term Loan and Debentures, and $227.6 million of stockholders'
equity. For comparison, on July 3, 1994 the Company had $75.8
million of long-term debt and $225.2 million of stockholders'
equity. Long-term debt as a percent of long-term debt and
stockholders' equity was 43% on July 2, 1995, compared with
25% on July 3, 1994.
The Company accounts for investments in unconsolidated
affiliated companies using the equity method on a one quarter
delay basis. In December 1994, the Mexican government devalued
the peso and allowed it to trade freely against the U.S.
dollar resulting in a substantial decline in the value of the
peso versus the U.S. dollar. On January 1, 1995, the peso was
trading at 4.94 pesos per U.S. dollar versus an exchange rate
of approximately 3.45 prior to the devaluation. During the
first quarter of 1995 the peso continued to devalue versus the
U.S. dollar and was trading at an exchange rate of 6.78 pesos
per U.S. dollar on April 2, 1995. Based on the change in
exchange rates for the first quarter 1995, the Company's
stockholder equity was reduced by $3.9 million as a currency
translation adjustment in the second quarter of 1995. During
the second quarter of 1995 the peso recovered to an exchange
rate of 6.24 pesos per U.S. dollar on July 2, 1995.
Accounts receivable on July 2, 1995, were $89.7 million, up
$32.6 million from $57.1 million at July 3, 1994. At the end
of the 1995 period, the Company had sold $31 million of
accounts receivable, compared with $50 million at July 3,
1994. In addition, the increase in receivables was a result of
the increased sales level in the 1995 period. Receivables,
including those sold pursuant to the Receivables Purchase
Agreement, represented 48 days of sales outstanding at July 2,
1995 and 50 days at July 3, 1994.
Inventories on July 2, 1995, were $153.7 million, up 4.2% from
the July 3, 1994 amount of $147.5 million. The increase
resulted from higher raw materials inventories and the
purchase of Raytex.
Page 24
FORM 10-Q
Item 2. (continued)
Capital spending in 1995 is expected to be approximately $62
million, including $15 million for a new jacquard plant. Other
projects include new weaving machines that replace 1970's
vintage weaving machines, additional dyeing capacity to
increase production flexibility, an additional screen printing
machine and approximately $6 million for computers, software
and information systems. Capital spending for the first half
of 1995 was $21.9 million compared with $16.0 million for the
first half of 1994. In addition to capital expenditures, the
Company expects for 1995 to spend approximately $26 million on
the Mexican joint venture, of which $16.2 million was spent in
the first half of the year.
Financial Outlook and Strategy
Beginning in 1992 and through late 1993, Cone benefited from
favorable apparel fabric markets characterized by increasing
prices and volume in both domestic and international denim
markets and the rapid expansion of sportswear fabrics markets.
While first half 1994 sales did not grow due to short-term
denim inventory adjustments in the softgoods pipeline, second
half 1994 and first half 1995 denim operations experienced
accelerated growth. In addition to this improvement, Company
management believes that demographic trends and other market
developments continue to present favorable long-term
opportunities for sales growth.
Net income was lower in the first half of 1995 than in the
first half of 1994 as a result of the sharp increase in cotton
costs not recovered in pricing, the peso devaluation and weak
demand for home furnishings fabrics. For the remainder of
1995, results are expected to be adversely affected by high
cotton costs and weakening specialty sportswear and home
furnishings market, partially offset by improved prices and
increased denim volume.
In addition to the Company's plans to maintain modern
manufacturing facilities through capital reinvestment, the
Company has set priorities for the use of cash flow and debt
capacity. Cone's first priority is international denim
manufacturing and marketing opportunities. In 1993, the
Company purchased a 20% ownership of CIPSA, and signed
agreements with CIPSA providing for the formation of the joint
venture denim manufacturing facility. Cone's second priority
for cash flow and debt capacity is acquisitions in related
home furnishings product lines. The acquisition of Raytex and
Page 25
FORM 10-Q
Item 2. (continued)
Greeff are results of this strategy. The Company also from
time to time reviews and will continue to review acquisitions
and other investment opportunities (some of which may be
material to the Company) that permit Cone to add value through
its manufacturing and marketing expertise. However, the
Company currently has no agreement, arrangement or
understanding to make any such acquisition or investment.
Other potential uses of cash include additional common stock
repurchases, the reduction of outstanding preferred stock, or
cash dividends, depending on the expected benefits to
shareholders. On February 17, 1994, the Board of Directors of
the Company authorized the repurchase, from time to time, of
up to 2.5 million shares of the Company's outstanding common
stock in market transactions. As of August 1, 1995, 385,400
shares had been repurchased in open market transactions and
future repurchase decisions will be based on the Company's
expected capital structure, alternative investment
opportunities, and the market price of the common stock. No
stock repurchases have been made since January 1995.
The Company believes its internally generated operating funds
and funds available under its existing credit facilities, will
be sufficient to meet its working capital, capital spending,
possible stock repurchases, and financing commitment needs for
the foreseeable future.
Regulatory Matters
Federal, state and local regulations relating to the workplace
and the discharge of materials into the environment are
continually changing; therefore, 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. Cone Mills
has an active environmental committee which fosters protection
of the environment and compliance with laws.
Legal Proceedings
In November 1988 certain former employees of the Company
instituted a class action suit against the Company and certain
other defendants in which the plaintiffs ("Plaintiffs")
asserted a variety of claims related to the 1983 ESOP and
certain other employee benefit plans maintained by the
Page 26
FORM 10-Q
Item 2. (continued)
Company. In March 1992 the United States District Court in
Greenville, South Carolina entered a judgment in the amount of
$15.5 million (including an attorneys' fees award) against the
Company with respect to an alleged promise to make additional
Company contributions to the 1983 ESOP and all claims
unrelated to the alleged promise were dismissed. The Company,
certain individual defendants and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the
Fourth Circuit, sitting en banc, affirmed the prior conclusion
of a panel of three of its judges and unanimously reversed the
$15.5 million judgment and unanimously affirmed all of the
District Court's rulings in favor of the Company. However, the
Court of Appeals affirmed, by an equally divided court, the
District Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to proof of
detrimental reliance, Plaintiffs could establish that a letter
to salaried employees on December 15, 1983 created an
enforceable obligation that could allow recovery on a theory
of equitable estoppel. Accordingly, the case was remanded to
the District Court for a determination of whether the
Plaintiffs could establish detrimental reliance creating
estoppel of the Company.
On April 19, 1995, the District Court granted a motion by the
Company for summary judgement on the issues of equitable
estoppel and third-party beneficiary of contract which had
been remanded to it by the Court of Appeals. The court ruled
that the Plaintiffs could not forecast necessary proof of
detrimental reliance. The District Court, however, granted
Plaintiffs motion to amend the complaint insofar as they seek
to pursue a "new" claim for unjust enrichment, but denied
their motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court further
denied the Company's motion to decertify the class.
On July 24, 1995, the District Court held a "final hearing" in
this matter and the parties are awaiting the decision. Because
of the uncertainties inherent in the litigation process, it is
not possible to predict the ultimate outcome of this lawsuit.
However, the Company has defended this matter vigorously, and
it is the opinion of the Company's management that this
lawsuit, when finally concluded, will not have a material
adverse effect on the Company's financial condition.
Page 27
FORM 10-Q
Item 2. (continued)
The Company is a party to various other legal claims and
actions incidental to its business. 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.
Page 28
FORM 10-Q
PART II
Item 1. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the
"Plaintiffs") former employees of the Company, instituted
a class action suit against the Company and certain other
defendants in which the Plaintiffs asserted a variety of
claims related to the Cone Mills Corporation 1983 ESOP
(the "1983 ESOP") and certain other employee benefit
plans maintained by the Company. In March 1992, the
United States District Court in Greenville, South
Carolina entered a judgment in the amount of $15.5
million (including an attorneys' fee award) against the
Company with respect to an alleged promise to make
additional Company contributions to the 1983 ESOP and all
claims unrelated to the alleged promise were dismissed.
The Company, certain individual defendants and the
Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for
the Fourth Circuit, sitting en banc, affirmed the prior
conclusion of a panel of three of its judges and
unanimously reversed the $15.5 million judgment and
unanimously affirmed all of the District Court's rulings
in favor of the Company. However, the Court of Appeals
affirmed, by an equally divided court, the District
Court's holding that Plaintiffs should be allowed to
proceed on an alternative theory whether, subject to
proof of detrimental reliance, Plaintiffs could establish
that a letter to salaried employees on December 15, 1983
created an enforceable obligation that could allow
recovery on a theory of equitable estoppel. Accordingly,
the case was remanded to the District Court for a
determination of whether the Plaintiffs could establish
detrimental reliance creating estoppel of the Company.
On April 19, 1995, the District Court granted a motion by
the Company for summary judgment on the issues of
equitable estoppel and third-party beneficiary of
contract which had been remanded to it by the Court of
Appeals. The court ruled that the Plaintiffs could not
forecast necessary proof of detrimental reliance. The
District Court, however, granted Plaintiffs motion to
amend the complaint insofar as they seek to pursue a
"new" claim for unjust enrichment, but denied their
motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court
further denied the Company's motion to decertify the
class.
Page 29
FORM 10-Q
Item 1. (continued)
On July 24, 195, the District Court held a "final
hearing" on this matter and the parties are awaiting the
decision. Because of the uncertainties inherent in the
litigation process, it is not possible to predict the
ultimate outcome of this lawsuit. However, the Company
has defended this matter vigorously, and it is the
opinion of the Company's management that this lawsuit,
when finally concluded, will not have a material adverse
effect on the Company's financial condition.
The Company is a party to various other legal claims and
actions incidental to its business. 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.
Item 4. Submission of Matters To A Vote Of Security Holders
Cone Mills Corporation's Annual Meeting of Shareholders
was held May 9, 1995. The proposals voted upon and the
results of the voting were as follows:
1. Election of three Class III Directors for a three-year
term.
Broker
For Against Abstentions Withheld Non-Votes
Doris R. Bray 22,100,209 117,486 0 0 3,575,100
Dewey L. Trogdon 22,095,829 121,866 0 0 3,575,100
Bud W. Willis III 22,100,109 117,586 0 0 3,575,100
2. Ratification of the appointment of McGladrey & Pullen as
Independent auditors for the Corporation for the fiscal
year ending December 31, 1995.
Broker
For Against Abstentions Withheld Non-Votes
22,107,648 101,546 8,501 0 3,575,100
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 30
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 2.1 Receivables Purchase Agreement dated
as of August 11, 1992, between the
Registrant and Delaware Funding
Corporation filed as Exhibit 2.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
* 2.1(a) Amendment to Receivables Purchase
Agreement dated April 4, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.1 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(b) Amendment to Receivables Purchase
Agreement dated June 7, 1994, between
the Registrant and Delaware Funding
Corporation filed as Exhibit 2.2 to
the Registrant's report on Form 8-K
dated March 1, 1995.
* 2.1(c) Amendment to Receivables Purchase
Agreement dated as of June 30, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.1 to the Registrant's report on
Form 10-Q for the quarter ended
July 3, 1994.
* 2.1(d) Amendment to Receivables Purchase
Agreement dated as of November 15, 1994,
between the Registrant and Delaware
Funding Corporation filed as Exhibit
2.4 to the Registrant's report on
Form 8-K dated March 1, 1995.
2.1(e) Amendment to Receivables Purchase
Agreement dated as of June 30, 1995,
between the Registrant and Delaware
Funding Corporation. 38
Page 31
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, with following exhibits
thereto attached, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993:
* 2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation and
Compania Industrial de Parras, S.A. de
C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
* 2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and
Cone Mills (Mexico), S.A. de C.V. filed as
Exhibit 2.2(d) to Registrant's report on
Form 10-Q for the quarter ended
July 4, 1993.
2.2(e) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V. 41
* 2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
Page 32
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation. 48
2.2(i) Guaranty Agreement dated as of June 15,
1995, between Cone Mills Corporation
and Morgan Guaranty Trust Company of
New York. 56
* 2.2(j) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
* 2.3 Asset Purchase Agreement dated as
of December 2, 1994 between the
Registrant, Lancer Industries, Inc.
and M.P.M. Transportation, Inc.,
filed as Exhibit 2 to the Registrant's
Current Report on Form 8-K dated
December 2, 1994.
* 4.1 Restated Articles of Incorporation of
the Registrant effective August 25, 1993,
filed as Exhibit 4.1 to Registrant's
report on Form 10-Q for the quarter ended
October 3, 1993.
* 4.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
Page 33
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 4.3 Note Agreement dated as of August 13, 1992,
between Cone Mills Corporation and The
Prudential Insurance Company of America,
with form of 8% promissory note attached,
filed as Exhibit 4.01 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.3(a) Letter Agreement dated September 11, 1992,
amending the Note Agreement dated August 13,
1992, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.2 to the Registrant's
report on Form 8-K dated March 1, 1995.
* 4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
* 4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
4.3(e) Letter Agreement dated as of June 30,
1995, amending the Note Agreement dated
August 13, 1992, between the Registrant
and the Prudential Insurance Company
of America. 62
Page 34
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 4.4 Credit Agreement dated as of August 13,
1992, among Cone Mills Corporation,
the banks listed therein and Morgan
Guaranty Trust Company of New York,
as Agent, with form of note attached
filed as Exhibit 4.02 to the Registrant's
report on Form 8-K dated August 13, 1992.
* 4.4(a) Amended and Restated Credit Agreement
dated November 18, 1994, among the
Registrant, various banks and Morgan
Guaranty Trust Company of New York,
as Agent, filed as Exhibit 4.1
to the Registrant's report on Form 8-K
dated March 1, 1995.
4.4(b) Amendment to Credit Agreement dated as of
June 30, 1995, amending the Amended and
Restated Credit Agreement dated
November 18, 1994, among the Registrant,
various banks and Morgan Guaranty Trust
Company of New York, as Agent. 63
* 4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
* 4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
* 4.7 Registration rights agreement dated
as of March 30, 1992, among the
Registrant and the shareholders listed
therein, filed as Exhibit 4.8 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
* 4.8 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994,filed as
Exhibit 4.8 to the Registrant's
report on Form 10-K for year ended
January 1, 1995.
Page 35
FORM 10-Q INDEX TO EXHIBITS
Exhibit
No. Description Page No.
* 4.9 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.
* 4.10 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713)
* 4.11 Form of 8 1/8% Debenture in aggregate
principal amount of $100,000,000 due
March 15, 2005, filed as Exhibit 4.11
to the Registrant's report on Form 10-K
for the year ended January 1, 1995.
27 Financial Data Schedule 65
* Incorporated by reference to the statement or report
indicated.
Page 36
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 11, 1995 JOHN L. BAKANE
John L. Bakane
Executive Vice President and
Chief Financial Officer
Page 37