Page 1 of 174
Index to Exhibits - Pages 25-32
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
Commission file number 1-3634
CONE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 North Elm Street, Greensboro, North Carolina 27408
(Address of principal executive offices) (Zip Code)
(336) 379-6220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding as of October 29, 1999:
25,485,717 shares.
CONE MILLS CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations
Thirteen and thirty-nine weeks ended October 3,
1999 and September 27, 1998
(Unaudited)..............................................3
Consolidated Condensed Balance Sheets
October 3, 1999 and September 27, 1998 (Unaudited)
and January 3, 1999......................................4
Consolidated Condensed Statements of Cash Flows
Thirty-nine weeks ended October 3, 1999
and September 27, 1998 (Unaudited).......................5
Notes to Consolidated Condensed Financial Statements
(Unaudited)..............................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............15
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................22
Item 5. Other Information..............................................24
Item 6. Exhibits and Reports on Form 8-K...............................24
Item 1. Part I
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
October 3, September October 3, September
1999 27, 1998 1999 27, 1998
-------------- ------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $147,197 187,359 478,946 574,834
Cost of Goods Sold 136,521 167,618 438,684 517,810
-------------- ------------- -------------- --------------
Gross Profit 10,676 19,741 40,262 57,024
Selling and Administrative 11,992 14,663 37,022 42,484
Restructuring and Impairment of Assets 3,100 132 16,017 132
-------------- ------------- -------------- --------------
Income (Loss) from Operations (4,416) 4,946 (12,777) 14,408
-------------- ------------- -------------- --------------
Other Income (Expense)
Interest income 400 837 1,276 2,199
Interest expense (3,521) (3,534) (10,678) (11,255)
Other expense (264) - (264) -
-------------- ------------- -------------- --------------
(3,385) (2,697) (9,666) (9,056)
-------------- ------------- -------------- --------------
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings (Losses) of Unconsolidated
Affiliate and Cumulative Effect of Accounting
Change (7,801) 2,249 (22,443) 5,352
Income Taxes (Benefit) (2,808) 742 (7,775) 1,766
-------------- ------------- -------------- --------------
Income (Loss) before Equity in Earnings (Losses)
of Unconsolidated Affiliate and Cumulative
Effect of Accounting Change (4,993) 1,507 (14,668) 3,586
Equity in Earnings (Losses) of Unconsolidated
Affiliate (405) 1,285 1,552 3,801
-------------- ------------- -------------- --------------
Income (Loss) before Cumulative Effect of
Accounting Change (5,398) 2,792 (13,116) 7,387
Cumulative Effect of Accounting Change - - (1,038) -
-------------- ------------- -------------- --------------
Net Income (Loss) $ (5,398) $ 2,792 $ (14,154) $ 7,387
============== ============= ============== ==============
Income (Loss) Available to Common Shareholders
Income (Loss) before Cumulative Effect of
Accounting Change $ (6,188) $ 2,072 $ (15,416) $ 5,194
Cumulative Effect of Accounting Change - - (1,038) -
============== ============= ============== ==============
Net Income (Loss) $ (6,188) $ 2,072 $ (16,454) $ 5,194
============== ============= ============== ==============
Earnings (Loss) Per Share - Basic and Diluted
Income (Loss) before Cumulative Effect of
Accounting Change $ (0.24) $ 0.08 $ (0.61) $ 0.20
Cumulative Effect of Accounting Change - - (0.04) -
============== ============= ============== ==============
Net Income (Loss) $ (0.24) $ 0.08 $ (0.65) $ 0.20
============== ============= ============== ==============
Weighted-Average Common Shares Outstanding
Basic 25,486 25,972 25,453 26,107
============== ============= ============== ==============
Diluted 25,486 25,994 25,453 26,162
============== ============= ============== ==============
See Notes to Consolidated Condensed Financial Statements.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
October 3, September 27, January 3,
1999 1998 1999
-------------- -------------- -------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 3,925 $ 624 $ 639
Accounts receivable, less allowances of $5,050; 1998, $1,500 48,798 29,237 26,010
Subordinated note receivable - 28,515 10,414
Inventories 118,393 118,200 120,430
Other current assets 10,504 15,524 10,253
-------------- -------------- -------------
Total Current Assets 181,620 192,100 167,746
Investments in Unconsolidated Affiliates 46,003 40,582 45,489
Other Assets 36,158 35,848 36,616
Property, Plant and Equipment 222,543 250,104 238,666
-------------- -------------- -------------
$ 486,324 $ 518,634 $ 488,517
============== ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ - $ 8,500 $ 1,000
Notes payable 67,714 10,714 10,714
Current maturities of long-term debt
41,280 34,317 27,255
Accounts payable
Sundry accounts payable and accrued liabilities 34,688 48,233 42,071
Deferred income taxes 15,158 20,230 22,670
-------------- -------------- -------------
Total Current Liabilities 158,840 121,994 103,710
Long-Term Debt 119,004 146,274 161,385
Deferred Income Taxes 32,588 42,949 30,050
Other Liabilities 11,702 11,315 11,448
Stockholders' Equity
Class A preferred stock - $100 par value; authorized 1,500,000 shares;
issued and outstanding 372,638 shares;
1998, 383,948 shares 37,264 38,395 38,395
Class B preferred stock - no par value; authorized
5,000,000 shares - - -
Common stock - $.10 par value; authorized 42,700,000
shares; issued and outstanding 25,485,717 shares;
1998, 25,459,433 shares and 25,432,233 shares 2,549 2,546 2,543
Capital in excess of par 57,522 57,418 57,264
Retained earnings 75,761 106,860 92,799
Deferred compensation - restricted stock (448) (617) (579)
Accumulated other comprehensive loss, currency translation
adjustment (8,458) (8,500) (8,498)
-------------- -------------- ------------
Total Stockholders' Equity 164,190 196,102 181,924
-------------- -------------- -------------
$ 486,324 $ 518,634 $ 488,517
============== ============== =============
Note: The balance sheet at January 3, 1999, has been derived from
the financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
October 3, 1999 September 27, 1998
------------------ --------------------
(Unaudited) (Unaudited)
CASH PROVIDED BY OPERATIONS $ 1,327 $ 19,636
------------------ --------------------
INVESTING
Proceeds from sale of property, plant and equipment 2,824 5,495
Capital expenditures (8,040) (21,933)
------------------ --------------------
Cash used in investing (5,216) (16,438)
------------------ --------------------
FINANCING
Net borrowings (payments) under line of credit agreements (1,000) 4,000
Decrease in checks issued in excess of deposits (2,377) (5,945)
Principal payments on long-term debt (10,714) (10,714)
Proceeds from long-term debt borrowings 25,000 17,000
Proceeds from sale of common stock 326 -
Purchase of outstanding common stock (45) (4,795)
Dividends paid - Class A Preferred (87) (2,976)
Redemption of Class A Preferred stock (3,928) -
------------------ -------------------
Cash provided by (used in) financing 7,175 (3,430)
------------------ --------------------
Net change in cash 3,286 (232)
Cash at Beginning of Period 639 856
------------------ --------------------
Cash at End of Period $ 3,925 $ 624
================== ====================
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments for:
Interest $ 13,588 $ 14,376
================== ====================
Income taxes, net of refunds $ 280 $ (7,058)
================== ====================
Supplemental Schedule of Noncash Investing and Financing Activities:
Stock dividend - Class A Preferred Stock $ 2,797 $ -
================== ====================
Purchase of outstanding common stock through incurrence of accounts
payable $ - $ 153
================== ====================
See Notes to Consolidated Condensed Financial Statements.
CONE MILLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of Financial Statement Preparation
The Cone Mills Corporation (the "Company") consolidated condensed financial
statements for October 3, 1999 and September 27, 1998 are unaudited, but in the
opinion of management reflect all adjustments necessary to present fairly the
consolidated condensed balance sheets of Cone Mills Corporation and Subsidiaries
at October 3, 1999, September 27, 1998, and January 3, 1999, and the related
consolidated condensed statements of operations for the respective thirteen and
thirty-nine weeks ended October 3, 1999 and September 27, 1998 and cash flows
for the thirty-nine weeks then ended. All adjustments are of a normal recurring
nature. The results are not necessarily indicative of the results to be expected
for the full year.
These statements should be read in conjunction with the audited financial
statements and related notes included in the Company's annual report on Form
10-K for fiscal year 1998.
Inventories are stated at the lower of cost or market. The last-in, first-out
(LIFO) method is used to determine cost of most domestically produced goods. The
first-in, first-out (FIFO) or average cost methods are used to determine cost of
all other inventories. Because amounts for inventories under the LIFO method are
based on an annual determination of quantities as of the year-end, the
inventories at October 3, 1999 and September 27, 1998 and related consolidated
condensed statements of operations for the thirteen and thirty-nine weeks then
ended are based on certain estimates relating to quantities and cost as of the
end of the fiscal year.
Note 2. Inventories
(in thousands) 10/03/99 9/27/98 1/03/99
Greige and finished goods $ 86,745 $ 79,820 $ 87,087
Work in process 6,554 10,751 9,810
Raw materials 13,685 15,403 11,508
Supplies and other 11,409 12,226 12,025
$ 118,393 $ 118,200 $ 120,430
Note 3. Long-Term Debt
(in thousands) 10/03/99 9/27/98 1/03/99
Senior Note $ 32,143 $ 42,858 $ 42,858
Revolving Credit Agreement 57,000 17,000 32,000
8 1/8% Debentures 97,575 97,130 97,241
186,718 156,988 172,099
Less current maturities 67,714 10,714 10,714
$ 119,004 $ 146,274 $ 161,385
The Senior Note agreement and Revolving Credit Agreement both contain
restrictive covenants that require, among other requirements, the maintenance of
defined levels of tangible net worth and interest coverage. At October 3, 1999,
the Company did not comply with these specific covenant requirements for which
the Company received waivers and amendments on October 3, 1999.
Note 4. Class A Preferred Stock
On February 11, 1999, the Company declared a 7.5% stock dividend on the
Company's Class A Preferred Stock, which was paid on March 31, 1999. The
dividend was charged to retained earnings in the amount of approximately $2.8
million. The 2000 dividend rate for Class A Preferred Stock is 8.0%, payable
March 31, 2000.
Note 5. Depreciation and Amortization
The following table presents depreciation and amortization included in the
consolidated condensed statements of operations.
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
10/03/99 9/27/98 10/03/99 9/27/98
Depreciation $ 5,709 $ 7,110 $ 18,801 $ 21,333
Amortization 664 664 2,014 2,013
$ 6,373 $ 7,774 $ 20,815 $ 23,346
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
10/03/99 9/27/98
Net income (loss) $ (5,398) $ 2,792
Preferred stock dividends (790) (720)
Basic EPS - income (loss) available
to common shareholders (6,188) 2,072
Effect of dilutive securities - -
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $ (6,188) $ 2,072
Determination of shares:
Basic EPS - weighted-average shares 25,486 25,972
Effect of dilutive securities - 22
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,486 25,994
Earnings (loss) per share - basic and diluted $ ( 0.24) $ 0.08
Note 6. Earnings (Loss) Per Share (continued)
The following table sets forth the computation of basic and diluted earnings
(loss) per common share ("EPS").
(in thousands, except Thirty-Nine Thirty-Nine
per share data) Weeks Ended Weeks Ended
10/03/99 9/27/98
Income (loss) before cumulative $ (13,116) $ 7,387
effect of accounting change
Preferred stock dividends (2,300) (2,193)
Income (loss) before cumulative
effect of accounting change
available to common shareholders (15,416) 5,194
Cumulative effect of accounting change (1,038) -
Basis EPS - income (loss) available
to common shareholders (16,454) 5,194
Effect of dilutive securities - -
Diluted EPS - income (loss) available to
common shareholders after assumed
conversions $(16,454) $ 5,194
Determination of shares:
Basis EPS - weighted-average shares 25,453 26,107
Effect of dilutive securities - 55
Diluted EPS - adjusted weighted-average
shares after assumed conversions 25,453 26,162
Earnings (loss) per share - basic and diluted
Income (loss) before cumulative effect
of accounting change $ ( 0.61) $ 0.20
Cumulative effect of accounting change ( 0.04) -
Net income (loss) $ ( 0.65) $ 0.20
Common stock options outstanding at October 3, 1999 were not included in the
computation of diluted earnings per share because to do so would have been
antidilutive.
Note 7. Segment Information
The Company has four principal business segments, which are based upon
organizational structure: 1) denim and khaki; 2) yarn-dyed products; 3)
commission finishing; and 4) decorative fabrics.
Operating income (loss) for each segment is total revenue less operating
expenses applicable to the segment. Intersegment revenue relates to the
commission finishing segment. Equity in earnings of unconsolidated affiliate is
included in the denim and khaki segment. Restructuring and impairment of asset
expenses, unallocated expenses, interest and other expenses, 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
10/03/99 9/27/98
Net Sales
Denim and Khaki $ 108,493 $ 144,777
Yarn-Dyed Products 1,760 5,130
Commission Finishing 20,453 26,134
Decorative Fabrics 19,689 15,390
Other 348 692
150,743 192,123
Less Intersegment Sales 3,546 4,764
$ 147,197 $ 187,359
Income (Loss) from Operations
Denim and Khaki $ 2,380 $ 15,923
Yarn-Dyed Products (1,290) (3,943)
Commission Finishing (1,993) (3,892)
Decorative Fabrics 422 53
Other (153) (445)
Unallocated Expenses (1,087) (1,465)
(1,721) 6,231
Restructuring and Impairment of Assets (3,100) -
(4,821) 6,231
Less Equity in Earnings (Losses) of
Unconsolidated Affiliate (405) 1,285
(4,416) 4,946
Other Expense, Net (3,385) (2,697)
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings (Losses) of
Unconsolidated Affiliate and Cumulative
Effect of Accounting Change $ (7,801) $ 2,249
32
Note 7. Segment Information (continued)
(in thousands) Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net Sales
Denim and Khaki $ 348,366 $ 432,890
Yarn-Dyed Products 15,831 29,163
Commission Finishing 72,694 81,343
Decorative Fabrics 54,037 41,049
Other 1,248 4,141
492,176 588,586
Less Intersegment Sales 13,230 13,752
$ 478,946 $ 574,834
Income (Loss) from Operations
Denim and Khaki $ 18,947 44,655
Yarn-Dyed Products (5,095) (7,275)
Commission Finishing (5,665) (12,499)
Decorative Fabrics 1,295 (668)
Other (411) (933)
Unallocated Expenses (4,279) (5,071)
4,792 18,209
Restructuring and Impairment of Assets (16,017) -
(11,225) 18,209
Less Equity in Earnings of
Unconsolidated Affiliate 1,552 3,801
(12,777) 14,408
Other Expense, Net (9,666) (9,056)
Income (Loss) before Income Taxes (Benefit),
Equity in Earnings of Unconsolidated
Affiliate and Cumulative Effect of
Accounting Change $ (22,443) $ 5,352
Note 8. Comprehensive Income (Loss)
Comprehensive income (loss) is the total of net income (loss) and other changes
in equity, except those resulting from investments by owners and distributions
to owners not reflected in net income (loss). Total comprehensive income (loss)
for the periods was as follows:
(in thousands) Thirteen Thirteen
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net income (loss) $ (5,398) $ 2,792
Other comprehensive income,
currency translation adjustment 59 38
$ (5,339) $ 2,830
Note 8. Comprehensive Income (Loss) (continued)
(in thousands) Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended
10/03/99 9/27/98
Net income (loss) $(14,154) $ 7,387
Other comprehensive income,
currency translation adjustment 40 4
$ (14,114) $ 7,391
Note 9. Reclassification of Selling and Administrative
In the first quarter of 1999 the Company changed the criteria for items to be
included in selling and administrative expenses to conform to prevailing
industry practices. The Company has restated its prior year consolidated
condensed statement of operations to reflect the new classification criteria.
This resulted in the reclassification of $7.5 million and $22.1 million from
selling and administrative expenses to cost of goods sold for the thirteen and
thirty-nine weeks ended September 27, 1998, respectively.
Note 10. Cumulative Effect of Accounting Change
Beginning in fiscal year 1999, the Company adopted Statement of Position ("SOP")
98-5, "Reporting on the Costs of Start-Up Activities," which requires future
start-up costs to be expensed as incurred and previously capitalized start-up
costs to be expensed when SOP 98-5 is adopted. The Company recognized a charge
of $1.0 million, the Company's 50% portion of Parras Cone's unamortized start-up
costs, as a cumulative effect of an accounting change in the first quarter of
1999. Had SOP 98-5 not been adopted during the first quarter of 1999, net loss
would have been reduced by $0.8 million, or $0.03 per share, for the thirty-nine
weeks ended October 3, 1999.
Note 11. Securitization of Accounts Receivable
Funds generated by the sale of receivables in the U.S. are provided through Cone
Receivables II LLC ("CRIILLC"). CRIILLC's sole business is the ongoing purchase
of certain trade receivables from Cone Mills Corporation. CRIILLC sells an
undivided 100% ownership interest in these receivables under an agreement (the
"Accounts Receivable Facility") with Redwood Receivables Corporation
("Redwood"), whose purchases yield proceeds of up to $50 million at any point in
time. Redwood issues commercial paper backed by, among other things, Redwood's
ownership interest in the receivables. CRIILLC is a separate corporate entity
with its own separate creditors who, in the event of its liquidation, will be
entitled to be satisfied out of CRIILLC's assets prior to any value in CRIILLC
becoming available to the Company. This Accounts Receivable Facility expires in
August 2004.
Under this securitization agreement, the sale price to CRIILLC for the
receivables will be subject to a purchase discount equal to a percentage over
Redwood's commercial paper interest rate, which percentage may vary based upon
the Company's operating performance. At present, the percentage over the
commercial paper rate is 1.00%. As of October 3, 1999, the total amount
outstanding under the Accounts Receivable Facility was $48.7 million. Fees
incurred in connection with the sale of accounts receivable for the three months
ended October 3, 1999, were $264,000 and were recorded as other expense.
Note 12. Subsequent Event - Amendment of the Articles of Incorporation
On October 14, 1999, the Company's Board of Directors amended the Company's
Restated Articles of Incorporation creating a series of Class B Preferred Stock
(the "Class B Preferred Stock (Series A)"). The number of shares constituting
the Class B Preferred Stock (Series A) is 500,000. The Class B Preferred Stock
(Series A) is junior to the Class A Preferred Stock and senior to Common Stock
in dividends or distributions of assets upon liquidation, dissolution or winding
up of the Company. Dividends on the Class B Preferred Stock (Series A) are
cumulative and accrue from the quarterly dividend payment date. Each share of
Class B Preferred Stock (Series A) entitles the holder thereof to 100 votes on
all matters submitted to a vote of shareholders of the Company. Except as
otherwise provided, the holders of shares of Class B Preferred Stock (Series A)
and the holders of shares of the Company's common stock vote together as a
single class on all matters submitted to a vote of shareholders of the Company.
These shares were reserved under the Shareholder Rights Plan. See Note 13 to
Consolidated Condensed Financial Statements.
Note 13. Subsequent Event - Shareholder Rights Plan
On October 14, 1999, the Company's Board of Directors adopted a new Shareholder
Rights Plan (the "Plan"). Under the terms of the Plan, Company common stock
acquired by a person or a group buying 20% or more of the Company's common stock
would be diluted, except in transactions approved by the Board of Directors.
Under the terms of the Plan the Company's Board of Directors declared a dividend
distribution of one right (a "Right") for each outstanding share of the
Company's common stock paid on November 1, 1999, to shareholders of record at
the close of business on October 25, 1999. Each Right entitles the registered
holder to purchase from the Company a unit (a "Unit") consisting of one
one-hundredth of a share of Class B Preferred Stock (Series A) at a purchase
price of $30 per Unit. Under the Plan, the Rights detach and become exercisable
upon the earlier of (i) ten days following public announcement that a person or
group of affiliated or associated persons has acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of the outstanding shares of the
Company's common stock, or (ii) ten business days following the commencement of,
or first public announcement of the intent of a person or group to commence, a
tender offer or exchange offer that would result in a person or group
beneficially owning 20% or more of such outstanding shares of the Company's
common stock. The exercise price, the kind and the number of shares covered by
each right are subject to adjustment upon the occurrence of certain events
described in the Plan.
If the Company is acquired in a merger or consolidation in which the Company is
not the surviving corporation, or the Company engages in a merger or
consolidation in which the Company is the surviving corporation and the
Company's common stock is changed or exchanged, or more than 50% of the
Company's assets or earning power is sold or transferred, the Rights entitle a
holder (other than the acquiring person or group) to buy, at the exercise price,
stock of the acquiring Company having a market value equal to twice the exercise
price. Following an acquisition by any person or group of 20% or more of the
Company's common stock, but prior to the acquisition by such person or group of
50% or more of the outstanding common stock, the Company's Board of Directors
may exchange the Rights (other than the Rights owned by such person or group),
in whole or in part, at an exchange ratio of one share of the Company's common
stock, or one one-hundredth of a share of Preferred Stock, per Right.
The Rights expire on October 13, 2009, and are redeemable upon action by the
Board of Directors at a price of $.01 per right at any time before they become
exercisable.
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter Ended October 3, 1999 Compared with Third Quarter Ended September
27, 1998.
Cone Mills had sales for the third quarter of 1999 of $147.2 million, down
21.4%, as compared with the third quarter of 1998 sales of $187.4 million. For
the 1999 period, sales of denim and khaki, yarn-dyed products, and commission
finishing decreased, partially offset by increased decorative fabric sales.
Starting in the fourth quarter of 1998, and continuing through the first nine
months of 1999, denim sales slowed significantly, the result of weaker consumer
interest in denims.
Gross profit for the third quarter of 1999 decreased to 7.3% of sales, as
compared with 10.5% for the previous year. Lower volume and pricing in denims
more than offset the improved operating results in commission finishing and
decorative fabrics.
Segment Information. Cone operates in four principal business segments: denim
and khaki, yarn-dyed products, commission finishing and decorative fabrics.
See Note 7 to Notes to Consolidated Condensed Financial Statements (unaudited)
included in Part 1, Item 1.
Denim and Khaki. For the third quarter of 1999, denim and khaki segment
sales were $108.5 million, down 25.1% from the third quarter of 1998 sales
of $144.8 million. Lower sales volume and prices in denim resulted
primarily from the negative impact of weaker consumer interest in denims
and the resulting over-supply conditions, coupled with price pressure
associated with supply and demand, declining cotton prices and inventory
adjustments at the mill and retail level. For the third quarter of 1999,
operating income for the denim and khaki segment was $4.4 million, or 4.0%
of sales before a $2.0 million inventory charge for the exit of piece-dyed
shirting as discussed below in the Commission Finishing segment. This
compared with income of $15.9 million, or 11.0%, for the third quarter of
1998. The reduced margin and income resulted primarily from lower volume
and prices and reduced plant operating schedules. Operating income for the
segment includes the equity in earnings (losses) from the Parras Cone joint
venture.
Yarn-Dyed Products. As part of the restructuring program, the Company
ceased manufacturing yarn-dyed products in May 1999. For the third quarter
of 1999, sales of yarn-dyed products were $1.8 million, as compared with
$5.1 million in the 1998 period. While most of the operating losses for
this segment were previously reserved under the Company's restructuring
plan, a loss of $1.3 million was included in segment data for the third
quarter of 1999 due primarily to realization of lower than anticipated
prices on inventory. For the 1998 period, the yarn-dyed products segment
had an operating loss of $3.9 million.
Commission Finishing. Outside sales of commission finishing from the
Carlisle and Raytex plants were $16.9 million for the third quarter of
1999, down 20.9% from $21.4 million for the third quarter of 1998. Lower
sales of print home furnishings and over-the-counter fabrics accounted for
the decline. Despite the sharply reduced sales, the segment had improved
operating results. For the third quarter of 1999, the loss was $2.0
million, an improvement of 48.8% from the loss of $3.9 million for the
third quarter of 1998. During the third quarter of 1999 the Company
implemented a substantial restructuring, downsizing and refocusing of the
Carlisle Finishing plant. Refocusing the product line included the exiting
of the piece-dyed shirting (chamois) business. Associated with the Carlisle
restructuring initiative, the Company recognized restructuring charges of
$2.7 million in the quarter for severance pay and related benefits,
consulting expenses and writedown of certain production equipment.
Decorative Fabrics. For the third quarter of 1999, sales of the decorative
fabrics segment were $19.7 million, up 27.9% from sales of $15.4 million
for the third quarter of 1998. Cone Jacquard's sales improved as capacity
expanded and John Wolf decorative fabrics sales were up as the unit
improved its product offering and marketing effort. The decorative fabrics
segment had earnings of $0.4 million for the third quarter of 1999 compared
with $0.1 million for the third quarter of 1998.
Selling and administrative expenses for the third quarter of 1999 were $12.0
million, or 8.1% of sales, as compared with $14.7 million, or 7.8% of sales in
the third quarter of 1998. The lower dollar amount of selling and administrative
expense reflects the cost savings realized from restructuring initiatives.
Selling and administrative expenses for 1998 were restated to conform to
industry practices.
Interest expense for the third quarter of 1999 was $3.5 million, the same as the
third quarter of 1998.
For the third quarter of 1999, the income tax benefit as a percent of the
taxable loss was 36.0%. For the third quarter of 1998, income taxes as a percent
of taxable income were 33%.
Equity in earnings (losses) of Parras Cone, the Company's joint venture plant in
Mexico, was a loss of $0.4 million for the third quarter of 1999, as compared
with income of $1.3 million for the 1998 period. The change represents higher
cotton costs as a percentage of sales and additional marketing and management
fees paid to the joint venture partners.
For the third quarter of 1999, Cone Mills had net loss of $5.4 million, or $.24
per share after preferred dividends. Included in the quarter were pre-tax
charges of $5.1 million for restructuring and exit inventory charges, resulting
primarily from the implementation of the Company's turnaround plan at Carlisle.
Also, there was a loss of $0.8 million associated with the liquidation of
remaining yarn-dyed shirting inventories. Excluding those charges, the loss was
$.09 per share. For comparison, third quarter 1998 net income was $2.8 million,
or $.08 per share after preferred dividends.
Nine Months Ended October 3, 1999 Compared with Nine Months Ended September 27,
1998
For the first nine months of 1999, Cone Mills had sales of $478.9 million, down
16.7% from sales of $574.8 million for the first nine months of 1998, primarily
due to a sales shortfall in denim. Lower denim sales resulted from weaker
consumer interest in jeans and adjustments to retail and manufacturing
inventories.
Gross profit for the first nine months of 1999 decreased to 8.4% of sales, as
compared with 9.9% for the previous year. Lower volume and pricing in denims and
the aggressive elimination of unprofitable lines and inventories more than
offset the improved operating results in commission finishing and decorative
fabrics.
Segment Information. Cone operates in four principal business segments: denim
and khaki, yarn-dyed products, commission finishing and decorative fabrics.
See Note 7 to Notes to Consolidated Condensed Financial Statements (unaudited)
included in Part 1, Item 1.
Denim and Khaki. For the first nine months of 1999, denim and khaki segment
sales were $348.4 million, down 19.5% from the first nine months of 1998
sales of $432.9 million. Almost all of the sales shortfall resulted from
lower sales volume and prices for denims. Operating income of the denim and
khaki segment for the first nine months of 1999 was $21.2 million excluding
exit inventory charges for piece-dyed shirting and denim yarn
manufacturing, or 6.1% of sales, compared with $44.7 million, or 10.3%, for
the first nine months of 1998. The reduced margin and income resulted
primarily from lower sales volume, lower prices, reduced plant operating
schedules and closeouts on khaki inventories as the Company refocused this
product line. Operating income for the segment includes the equity in
earnings from the Parras Cone joint venture plant.
Yarn-Dyed Products. The Company ceased manufacturing yarn-dyed products in
May 1999. For the first nine months of 1999, sales of yarn-dyed products
were $15.8 million, down from $29.2 million in the 1998 period. For the
first nine months of 1999, the yarn-dyed products segment had an operating
loss of $5.1 million, as compared with a loss of $7.3 million for the first
nine months of 1998.
Commission Finishing. Outside sales of the commission finishing segment,
which consists of the Carlisle and Raytex plants, were $59.5 million for
the first nine months of 1999, down 12.0% from $67.6 million for the first
nine months of 1998. Anticipated recovery in print demand in 1999 has not
materialized. For the 1999 period, the operating loss was $5.7 million, an
improvement of 54.7% from the loss of $12.5 million for the 1998 period. As
discussed earlier, during the third quarter of 1999, the Company
implemented a substantial restructuring, downsizing and refocusing of the
Carlisle Finishing plant.
Decorative Fabrics. For the first nine months of 1999, sales of the
decorative fabrics segment were $54.0 million, up 31.6% from sales of $41.0
million for the 1998 period. Cone Jacquard's sales improved as capacity
expanded and John Wolf decorative fabrics sales improved. The decorative
fabrics segment had earnings of $1.3 million for the 1999 period compared
with a loss of $0.7 million for the first nine months of 1998. Results for
1999 were negatively impacted by higher than expected start-up costs
related to capacity additions at the jacquard plant.
Selling and administrative expenses for the first nine months of 1999 were $37.0
million, or 7.7% of sales, as compared with $42.5 million, or 7.4% of sales in
the 1998 period. The lower dollar amount of selling and administrative expenses
reflects the cost savings realized from restructuring initiatives. Selling and
administrative expenses for 1998 were restated to conform to industry practices.
Interest expense for the first nine months of 1999 was $10.7 million, down from
$11.3 million for the 1998 period.
For the first nine months of 1999, the income tax benefit as a percent of the
taxable loss was $34.6%. In the 1998 period, income tax as a percent of income
was 33.0%.
Equity in earnings of Parras Cone, the Company's joint venture plant in Mexico,
was $1.6 million for the first nine months of 1999, as compared with $3.8
million for the 1998 period. In the 1999 period, the plant had lower capacity
utilization, higher cotton costs as a percentage of sales, and additional
marketing and management fees paid to the joint venture partners.
For the first nine months of 1999, the Company had a net loss of $14.2 million,
or $.65 per share after preferred dividends. This included a $1.0 million
after-tax charge from the cumulative effect of an accounting change related to
capitalized start-up costs. In the period, the Company also recognized pre-tax
restructuring and related expenses of $19.6 million associated with its
restructuring programs and incurred additional losses of $3.0 million associated
with the sale of yarn-dyed shirtings inventories resulting from the exit of this
business. Excluding those restructuring charges, related exit expenses and the
accounting change, the Company had a loss of $.02 per share after preferred
dividends. For comparison, in the first nine months of 1998, Cone Mills had net
income of $7.4 million, or $.20 per share after preferred dividends.
Liquidity and Capital Resources
The Company's principal long-term capital components consist of debt outstanding
under its Senior Note, its 8 1/8% Debentures and stockholders; equity. Primary
sources of liquidity are internally generated funds, an $80 million Revolving
Credit Facility (under which $23 million was available on October 3, 1999), and
a new $50 million Receivable Purchase and Servicing Agreement (the "Receivables
Agreement") entered into on September 1, 1999 with Cone Receivables II LLC,
Redwood Receivables Corporation, an affiliate of General Electric Capital
Corporation ("Redwood"), and General Electric Capital Corporation. The new
Receivables Agreement will terminate in August 2004 and replaces a similar
facility with Delaware Funding Corporation.
Pursuant to the Receivables Agreement documents, the Company will sell or
contribute to Cone Receivables II LLC certain of their accounts receivable and
Cone Receivables II LLC will in turn sell to Redwood an undivided 100% ownership
interest in such receivables. Redwood will then issue commercial paper backed
by, among other things, Redwood's ownership interest in the receivables. The
sale price to Cone Receivables II LLC for the receivables will be subject to a
purchase discount equal to a percentage over Redwood's commercial paper interest
rate, which percentage may vary based upon the Company's operating performance.
At present, the percentage over the commercial paper rate is 1.00%.
The Company is currently in negotiation with its banks to amend and restate the
current Revolving Credit Facility. The Company expects the amended and restated
Revolving Credit Facility to be secured by Company assets. Waivers and
amendments for covenant compliance under certain credit agreements at October 3,
1999 are in place. The Company has received commitments from its banks to amend
and restate the Revolving Credit Facility and expects to consummate the credit
facility prior to the expiration of any waivers or amendments.
During the first nine months of 1999, the Company generated cash from
operations, before changes in working capital, of $4.1 million, as compared with
$25.7 million for the first nine months of 1998. In the 1999 period, working
capital increased by $2.8 million. Uses of cash in the 1999 period included $8.0
million for capital expenditures and $3.9 million for the redemption of
preferred stock.
The Company believes that internally generated operating funds and funds
available under its credit facilities will be sufficient to meet its needs for
the foreseeable future. International investments, including the proposed denim
facility discussed below, will require additional long-term financing.
In April 1999, Guilford Mills, Inc. and the Company entered into a 50/50 joint
venture to develop and operate a new textile and apparel industrial park in
Altamira, near Tampico, Tamaulipas, Mexico. It is expected that the investment
for the infrastructures for Cone will range from $6 million to $10 million.
A textile plant planned to be built on the property by Cone will be a ring-spun,
value-added denim plant with a capacity of 20 million yards expandable to 40
million yards. The Company expects to invest $40 million to $75 million in the
initial denim facility depending upon whether it outsources yarn manufacturing,
forms a yarn alliance or produces its own yarn. The Company could invest an
additional $30 million to $45 million for the expansion to 40 million yards. The
funds required for this facility will require debt financing, which the Company
has not arranged at this date.
On October 3, 1999, the Company's long-term capital structure consisted of
$176.0 million of long-term debt and $164.2 million of stockholders' equity. For
comparison, on September 27, 1998, the Company had $146.3 million of long-term
debt and $196.1 million of stockholders' equity. Long-term debt (including
current maturities of long-term debt) as a percentage of long-term debt and
stockholders' equity was 53% at October 3, 1999, as compared with 44% at
September 27, 1998.
Accounts and note receivable on October 3, 1999, were $48.8 million, as compared
with $57.8 million at September 27, 1998. Receivables, including those sold
pursuant to the Receivables Purchase Agreement, represented 63 days of sales
outstanding at October 3, 1999 and 53 days at September 27, 1998. The increase
in days of sales outstanding primarily reflects a change in customer sales mix
with fewer customers paying in advance of due date.
Inventories on October 3, 1999, were $118.4 million, essentially the same as
September 27, 1998. The Company continues to curtail operating schedules to
control denim inventories and to liquidate inventories associated with
businesses in which it has exited.
For the first nine months of 1999, capital spending was $8.0 million compared to
$21.9 million for the first nine months of 1998. Domestic capital spending in
1999 is expected to be approximately $12 million. The reduced spending in 1999
is because the Company completed its relooming program of domestic denim
facilities in 1998. In addition to the 1999 domestic capital spending budget,
the Company expects to spend approximately $6 million for investments in
international initiatives.
Other Matters
YEAR 2000 ISSUES
The Company has implemented a comprehensive plan to address possible exposures
to Year 2000 issues. Executive management has reviewed the status of the
Company's Year 2000 compliance efforts on a continuous basis. Critical
financial, operational and manufacturing systems have been inventoried and
assessed and system modifications or replacements have been essentially
completed. As of November 1, 1999, only two systems remain non-compliant. Both
systems will be remediated in time so as not to cause any disruptions for the
century rollover.
Although the Company has received written vendor certification that all new core
business systems are Year 2000 compliant, the Company has completed additional
internal Y2K testing. No major problems were encountered.
The Company is coordinating Year 2000 readiness with other entities with which
it interacts, both domestically and globally, including suppliers, customers and
financial service organizations. Coordination efforts involve communication with
major suppliers and customers to undertake testing of electronic interfaces and
obtaining written certifications of compliance where applicable. Risk
assessments and action plans have been substantially completed. Testing and
certification of electronic interfaces were completed in the third quarter.
The Company has made significant investments to modernize its core business
systems over the past several years. With each system modification or
replacement, Cone has addressed the Year 2000 issue. Therefore, remediation
costs to address the Company's Year 2000 issues are expected to be approximately
$1.0 million.
The Company currently has contingency plans that address core business
system-related interruptions and will further develop such plans related to
manufacturing, operating and control systems to protect the business from
potential Year 2000 interruptions. These plans will be completed during calendar
year 1999 and will include, for example, as a worst case scenario, processing
certain significant business transactions manually. The Company is taking
reasonable steps to prevent major interruptions related to the Year 2000 issue;
however, the potential impact on the Company's financial position, results of
operations, or cash flows if the Company, its suppliers or its customers are not
fully Year 2000 compliant is not reasonably estimable.
Federal, state and local regulations relating to the workplace and the discharge
of materials into the environment continue to change and, consequently, it is
difficult to gauge the total future impact of such regulations on the Company.
Existing government regulations are not expected to cause a material change in
the Company's competitive position, operating results or planned capital
expenditures. The Company has an active environmental committee, which fosters
protection of the environment and compliance with laws.
The Company is a party to various legal claims and actions. Management believes
that none of these claims or actions, either individually or in the aggregate,
will have a material adverse effect on the financial condition of the Company.
"Safe Harbor" Statement under Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Except for the historical information presented, the matters disclosed
in the foregoing discussion and analysis and other parts of this report
include forward-looking statements. These statements represent the
Company's current judgment on the future and are subject to risks and
uncertainties that could cause actual results to differ materially.
Such factors include, without limitation: (i) the demand for textile
products, including the Company's products, will vary with the U.S. and
world business cycles, imbalances between consumer demand and
inventories of retailers and manufacturers and changes in fashion
trends, (ii) the highly competitive nature of the textile industry and
the possible effects of reduced import protection and free-trade
initiatives, (iii) the unpredictability of the cost and availability of
cotton, the Company's principal raw material, (iv) the Company's
relationships with Levi Strauss as its major customer, and (v) the
risks associated with unforeseen technological difficulties arising
under the Company's Year 2000 compliance efforts and the potential for
increased costs associated therewith. For a further description of
these risks see the Company's 1998 Form 10-K, "Item 1. Business
-Competition, -Raw Materials and -Customers" and "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Overview" of the Company's 1998 Annual Report to
Shareholders incorporated by reference into Item 7. of the Form 10-K.
Other risks and uncertainties may be described from time to time in the
Company's other reports and filings with the Securities and Exchange
Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks relating to fluctuations in interest
rates, currency exchange rates and commodity prices. There has been no material
change in the Company's market risks that would significantly affect the
disclosures made in the Form 10-K for the year ended January 3, 1999.
PART II
Item 1. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the "Plaintiffs") former
employees of the Company, instituted a class action suit against the Company and
certain other defendants in which the Plaintiffs asserted a variety of claims
related to the Cone Mills Corporation 1983 ESOP (the "1983 ESOP") and certain
other employee benefit plans maintained by the Company. In March 1992, the
United States District Court in Greenville, South Carolina entered a judgment in
the amount of $15.5 million (including an attorneys' fee award) against the
Company with respect to an alleged promise to make additional Company
contributions to the 1983 ESOP and all claims unrelated to the alleged promise
were dismissed. The Company, certain individual defendants and the Plaintiffs
appealed.
On May 6, 1994, the United States Court of Appeals for the Fourth Circuit,
sitting en banc, affirmed the prior conclusion of a panel of three of its judges
and unanimously reversed the $15.5 million judgment and unanimously affirmed all
of the District Court's rulings in favor of the Company. However, the Court of
Appeals affirmed, by an equally divided court, the District Court's holding that
Plaintiffs should be allowed to proceed on an alternative theory whether,
subject to proof of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an enforceable
obligation that could allow recovery on a theory of equitable estoppel.
Accordingly, the case was remanded to the District Court for a determination of
whether the Plaintiffs could establish detrimental reliance creating estoppel of
the Company.
On April 19, 1995, the District Court granted a motion by the Company for
summary judgment on the issues of equitable estoppel and third-party beneficiary
of contract which had been remanded to it by the Court of Appeals. The Court
ruled that the Plaintiffs could not forecast necessary proof of detrimental
reliance. The District Court, however, granted Plaintiffs motion to amend the
complaint insofar as they sought to pursue a "new" claim for unjust enrichment,
but denied their motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The Court further denied the
Company's motion to decertify the class.
The District Court held a hearing on July 24, 1995 to decide on the merits of
the Plaintiffs' lone remaining claim of unjust enrichment, and in an order
entered September 25, 1995, the District Court dismissed that claim with
prejudice. On October 20, 1995, the Plaintiffs appealed to the Court of Appeals
from the April 19, 1995 and September 25, 1995 orders of the District Court.
Oral argument on Plaintiffs' appeal was held in the Court of Appeals on October
31, 1996. On August 20, 1999, the dismissal in the District Court of the
Plaintiffs' cause of action was upheld in a per curiam decision. The Plaintiffs'
petition for rehearing and rehearing en banc was denied on September 14, 1999.
The Plaintiffs have 90 days from that date to petition the United States Supreme
Court for discretionary review. Due to the uncertainties inherent in the
litigation process, it is not possible to predict the ultimate outcome of this
lawsuit. However, the Company has defended this matter vigorously, and it is the
opinion of the Company's management that the probability is remote that this
lawsuit, when finally concluded, will have a material adverse effect on the
Company's financial condition or results of operations.
The Company and its subsidiaries are involved in legal proceedings and claims
arising in the ordinary course of business. Although there can be no assurance
as to the ultimate disposition of these matters, management believes that the
probable resolution of such contingencies will not have a material adverse
effect on the financial condition of the Company.
Item 5. Other Information
Notice of a matter to be presented by a shareholder for consideration at the
2000 annual meeting other than pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received by the Company prior to February 16, 2000. Failure
to give timely notice will result in the proxy statement relating to the meeting
not including information on the matter or the manner in which management's
proxies will vote on the matter and the proxies received by management will have
discretionary authority to vote on such matter.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this Form 10-Q are listed in the accompanying
Index to Exhibits.
(b) Reports on Form 8-K.
None
Exhibit Sequential
No. Description Page No.
*2.1(a) Purchase Agreement between Registrant
and Cone Receivables LLC dated as of
March 25, 1997, filed as Exhibit
2.1(l) to Registrant's report on Form
10-Q for the quarter ended March
30, 1997.
*2.1(b) Receivables Purchase Agreement dated
as of March 25, 1997, among Cone
Receivables LLC, as Seller, the
Registrant, as Servicer, and
Delaware Funding Corporation, as
Buyer, filed as Exhibit 2.1(m) to
Registrant=s report on Form 10-Q
for the quarter ended March 30, 1997.
*2.1(c) Amendment to Receivables Purchase
Agreement dated March 24, 1998,
between the Registrant and Delaware
Funding Corporation, filed as Exhibit
2.1(c) to Registrant=s report on
Form 10-Q for the quarter ending
March 29, 1998.
*2.1(d) Second Amendment to Receivables
Purchase Agreement dated as of
July 16, 1998, between the Registrant
and Delaware Funding Corporation, filed
as Exhibit 2.1(d) to Registrant=s report on
Form 10-Q for the quarter ending
September 27, 1998.
*2.1(e) Third Amendment to Receivables Purchase
Agreement dated as of December 23, 1998,
between the Registrant and Delaware Funding
Corporation, filed as Exhibit 2.1(e) to
Registrant's report on Form 10-K for the
year ending January 3, 1999.
*2.1(f) Fourth Amendment to Receivables Purchase
Agreement dated as of March 23, 1999,
between the Registrant and Delaware
Funding Corporation, filed as Exhibit 2.1(f)
to Registrant's report on Form 10-Q for
the quarter ending April 4, 1999.
2.1(g) Receivables Purchase Termination and
Reassignment Agreement dated as of
September 1, 1999, among Cone Receivables
Exhibit Sequential
No. Description Page No.
LLC, as Seller, the Registrant in its
individual capacity and as Servicer, and
Delaware Funding Corporation, as Buyer. 34
2.1(h) 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. 41
2.1(i) Receivables Transfer Agreement dated as
of September 1, 1999, by and among the
Registrant, any other Originator Party
Hereto, and Cone Receivables II LLC. 115
*2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993,
with exhibits herein numbered 2.2(b),
(c), (d), (f), (g), and (j) attached.
*2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
*2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation
and Compania Industrial de Parras, S.A.
de C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
*2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V.,
and Cone Mills (Mexico), S.A. de C.V.
filed as Exhibit 2.2(d) to
Registrant's report on Form 10-Q for
the quarter ended July 4, 1993.
Exhibit Sequential
No. Description Page No.
*2.2(e) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V., filed as Exhibit 2.2(e)
to the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
*2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation filed as Exhibit 2.2(h) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*2.2(i) Guaranty Agreement dated as of June 15,
1995, between Cone Mills Corporation and
Morgan Guaranty Trust Company of New York
filed as Exhibit 2.2(i) to the Registrant's
report on Form 10-Q for the quarter ended
July 2, 1995.
*2.2(j) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
Exhibit Sequential
No. Description Page No.
*2.2(k) Call Option dated September 25, 1995, between Registrant and
SMM Trust, 1995 - M, a Delaware business trust, filed as
Exhibit 2.2(k) to the Registrant's report on Form 10-Q for the
quarter ended October 1, 1995.
*2.2(l) Put Option dated September 25, 1995, between Registrant and SMM
Trust, 1995 - M, a Delaware business trust, filed as Exhibit
2.2(l) to the Registrant's report on Form 10-Q for the quarter
ended October 1, 1995.
*2.2(m) Letter Agreement dated January 11, 1996
among Registrant, Rodolfo Garcia Muriel,
and Compania Industrial de Parras,
S.A. de C.V., filed as Exhibit 2.2(m) to
the Registrant's report on Form 10-K
for the year ended December 31, 1995.
*4.1 Restated Articles of Incorporation of the Registrant effective
August 25, 1993, filed as Exhibit 4.1 to Registrant's report on
Form 10-Q for the quarter ended October 3, 1993.
4.1(a) 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. 155
*4.1(b) 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 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).
Exhibit Sequential
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 filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
Exhibit Sequential
No. Description Page No.
*4.3(f) Letter Agreement dated as of June 30,
1995, between the Registrant and
The Prudential Insurance Company
of America superseding Letter Agreement
filed as Exhibit 4.3(e) to the
Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*4.3(g) Letter Agreement dated as of March 30, 1996, between the
Registrant and The Prudential Insurance Company of America
filed as Exhibit 4.3(g) to the Registrant's report on Form 10-Q
for the quarter ended March 31, 1996.
*4.3(h) Letter Agreement dated as of January
31, 1997, between the Registrant and
The Prudential Insurance Company of
America filed as Exhibit 4.3(h) to
the Registrant's report on Form 10-K
Company of America, filed as Exhibit 4.3(j)
to Registrant's report on Form 10-Q
for the quarter ending March 29, 1998.
4.3(i) Letter Agreement dated September 1, 1999,
amending the Note Agreement dated August
13, 1992, between the Registrant and The
Prudential Insurance Company of America. 163
4.3(j) Letter Agreement dated November 12, 1999,
between the Registrant and The Prudential
Insurance Company of America. 165
4.3(k) Letter Agreement dated November 12, 1999,
between the Registrant and The Prudential
Insurance Company of America superseding
Letter Agreement filed as Exhibit 4.3(j)
herein. 166
*4.4 Credit Agreement dated August 7, 1997, among the Registrant,
various banks and Morgan Guaranty Trust Company of New York as
agent, filed as Exhibit 4.4 to the Registrant's report on Form
10-Q for the quarter ended September 28, 1997.
Sequential
No. Description Page No.
4.4(a) Amendment No. 1 and Waiver to Credit
Agreement dated as of October 3, 1999,
among the Registrant, various banks, and
Morgan Guaranty Trust Company of New York,
as Agent. 167
4.4(b) Waiver to Credit Agreement dated as of
November 12, 1999, to the Credit Agreement
dated August 7, 1997, and amended as of
October 3, 1999, among the Registrant,
various banks, and Morgan Guaranty Trust
Company of New York, as Agent. 171
*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 Cone Mills Corporation 1983 ESOP as
amended and restated effective
December 1, 1994, filed as Exhibit 4.9
to the Registrant's report on Form 10-K
for year ended January 1, 1995.
*4.7(a) First Amendment to the Cone Mills Corporation 1983 ESOP dated
May 9, 1995, filed as Exhibit 4.9(a) to the Registrant's report
on Form 10-K for year ended December 31, 1995.
*4.7(b) Second Amendment to the Cone Mills Corporation 1983 ESOP dated
December 5, 1995, filed as Exhibit 4.9(b) to the Registrant's
report on Form 10-K for year ended December 31, 1995.
*4.7(c) Third Amendment to the Cone Mills Corporation 1983 ESOP dated
August 7, 1997, filed as Exhibit 4.8(c) to the Registrant's
report on Form 10-Q for the quarter ended September 28, 1997.
Exhibit Sequential
No. Description Page No.
*4.7(d) Fourth Amendment to the Cone Mills Corporation 1983 ESOP dated
December 4, 1997, filed as Exhibit 4.8(d) to the Registrant's
report on Form 10-K for the year ended December 28, 1997.
*4.8 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee (Bank of New York is
successor Trustee), filed as Exhibit 4.1
to Registrant=s Registration Statement
on Form S-3 (File No. 33-57713).
27 Financial Data Schedule 174
* 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONE MILLS CORPORATION
(Registrant)
Date November 17, 1999 /s/ Gary L. Smith
Gary L. Smith
Executive Vice President and
Chief Financial Officer