Cone Mills Announces First Quarter Results

Apr 24, 2001, 01:00 ET from Cone Mills Corporation

    GREENSBORO, N.C., April 24 /PRNewswire Interactive News Release/ --
     Cone Mills Corporation (NYSE:   COE) today reported net sales of $147.5
 million for the first quarter of 2001, an increase of 4.1% from $141.7 million
 for the first quarter of 2000.  The company's net loss for the first quarter
 of 2001 was $2.9 million, or $.15 per share after preferred dividends, and
 includes about $.02 per share of run-out expense related to the Raytex plant
 closing. For comparative purposes, first quarter 2000 results were a net loss
 of $0.3 million or $.04 per share.
     Earnings before interest, taxes, depreciation and amortization (EBITDA)
 declined to $5.7 million for the first quarter ($6.4 million excluding
 Raytex), as compared to $10.1 million for the first quarter of the prior year.
 The inclusion of Cone's pro rata share of Parras Cone's EBITDA would result in
 an EBITDA for Cone of $7.3 million for the first quarter of 2001.
     The increase in sales from first quarter 2000 was the result of a 10.6%
 sales increase in the denim and khaki segment and a 3.3% increase in Carlisle
 sales, partially offset by a 13.9% sales decrease in the decorative fabrics
 segment and the closing of the Raytex plant in the first quarter of 2001.
 Gross profit for the first quarter declined to 7.8% of sales versus 12.1% for
 the year-ago period.  The decline in gross margin is primarily attributable to
 higher wage, energy, chemical and raw material costs, as compared with year-
 ago levels.  Selling and administrative expenses were 7.8% of sales for the
 first quarter, as compared with 9.5% for the first quarter of 2000.
     John Bakane, president and chief executive officer, commented, "While
 results for the first quarter were disappointing, we were encouraged by
 stronger denim sales volume and Carlisle's return to profitability in the face
 of a difficult business environment.  Higher operating costs, particularly
 energy and raw materials, a poor retail climate and weak furniture sales had a
 negative impact on operating income."
     Denim and khaki segment sales increases were driven by improved volume and
 a more value-added product mix, partially offset by flat to marginally lower
 prices.  Operating earnings for the segment declined to $3.2 million as denim
 results were negatively impacted by higher operating costs and khaki losses
 were driven by additional losses on closeouts that resulted from a distressed
 market for such goods.  Cone's khaki business strategy is to focus the product
 line more sharply around core fabrics, thereby reducing inventory requirements
 and improving quality.
     Outside sales of the commission finishing segment were down 13.2% for the
 first quarter of 2001, as compared with first quarter 2000.  Excluding Raytex,
 which was closed in the first quarter of 2001, first quarter sales revenue
 increased 3.3%.  Carlisle was profitable in the first quarter, benefiting from
 market consolidation and improved expense management.  Results were negatively
 impacted by weaker than expected home decorative volume and cost increases for
 energy and chemicals.  The Raytex shutdown was completed in the first quarter
 of 2001 as expected.  The company is now in the process of offering the Raytex
 property and equipment for sale.
     Sales for the decorative fabrics segment declined to $16.8 million; weak
 furniture market conditions had a negative impact on both business units.  The
 segment had an operating loss of $1.4 million for the first quarter of 2001,
 as compared with an operating loss of $0.2 million for the year-ago period.
 The business outlook for this segment improved during the quarter with
 quarter-end backlogs improving by 22%, as compared with year-end 2000.
     Gary Smith, chief financial officer, commented, "Given the difficult
 retail and competitive environment and planned inventory reductions by some of
 our customers, we expect second quarter results to be lower than second
 quarter 2000, although second quarter 2001 results are expected to improve
 over first quarter 2001.  Cone continues to anticipate that economic
 conditions will improve and that its near-term management initiatives will
 improve operating results in the second half of 2001, as compared with present
 results."
     Liquidity under the company's revolving credit agreement continues to
 range between $10 and $20 million and there is additional borrowing capacity
 under its receivables securitization to support increased sales.  The company
 is in compliance with all of its financing agreements and has begun
 discussions with its lenders regarding the August maturity of its revolving
 credit agreement and the payment due under the senior note agreement.  These
 discussions are expected to be completed by the end of the second quarter.
     In regard to the outlook, Mr. Bakane added, "Over the past year, Cone has
 shown considerable progress in its core businesses as EBITDA, excluding
 restructuring charges and associated expenses, rose by 15% last year to $44
 million (including Cone's 50% interest in Parras Cone, which is not
 consolidated, EBITDA was $52 million).  And in the first quarter we increased
 sales in a poor business climate.
     "Nonetheless, no one has sufficient visibility today as to whether the
 U.S. economy has hit bottom," Mr. Bakane commented further.  "Everywhere we
 look in the U.S. economy, we see excess capacity and excess inventory, whether
 it is in computer equipment, softgoods or agricultural commodities.  Since the
 beginning of the year, our senior management team has been engaged in a
 process to reinvent the competitiveness of Cone Mills for this tougher
 environment.  This means examining different processes, organizational
 structures and ways of doing business.  Make no mistake about it, the focus of
 this initiative is to improve our operations by dramatically reducing our
 costs and improving operating profitability in second half 2001.
     "Through realization of the benefits of our operations initiative, it is
 our intention to return Cone to a higher level of operating performance.  This
 improvement should pave the way for us to put into place a more appropriate
 capital structure for the company and its long-term Mexican expansion
 initiative.  We expect to release details of our operations initiative within
 30 days and brief our stakeholders on what we expect to accomplish.  In
 addition, based on the advice of J.P. Morgan, the company's strategic advisor,
 and given conditions in the capital markets we will today notify the SEC that
 Cone is withdrawing plans to exchange new securities for our outstanding 8-
 1/8% debentures due March 15, 2005."
     A conference call to discuss first quarter 2001 earnings will be held at
 11:00 a.m. eastern daylight time on April 24, 2001.  All persons interested in
 accessing the conference call may do so via our website http://www.cone.com.
     Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC,
 is the world's largest producer of denim fabrics and the largest commission
 printer of home furnishings fabrics in North America.  Manufacturing
 facilities are located in North Carolina and South Carolina, with a joint
 venture plant in Coahuila Mexico.
     The matters disclosed in the foregoing release include forward-looking
 statements.  These statements represent Cone'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 Cone'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, Cone's principal raw material, (iv)
 Cone's relationships with Levi Strauss as its major customer, (v) Cone's
 ability to attract and maintain adequate capital to fund operations and
 strategic initiatives, (vi) increases in prevailing interest rates, and (vii)
 the inability to achieve the cost savings associated with Cone's restructuring
 initiatives.  For a further description of these risks, see Cone's 2000 Form
 10-K, "Item 1 - Business - Competition - Raw Materials and Customers" and
 "Management's Discussion and Analysis of Results of Operations and Financial
 Condition."  Other risks and uncertainties may be described from time to time
 in Cone's other reports and filings with the Securities and Exchange
 Commission.
 
                             CONE MILLS CORPORATION
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
 
                                                    Thirteen        Thirteen
                                                  Weeks Ended     Weeks Ended
                                                     04/01/01       04/02/00
                                                   (unaudited)    (unaudited)
 
     Net Sales                                       $147,535       $141,677
     Cost of Goods Sold                               136,002        124,576
     Gross Profit                                      11,533         17,101
     Selling and Administrative                        11,462         13,426
     Restructuring and Impairment of Assets                --           (332)
     Income from Operations                                71          4,007
     Interest Expense - Net                            (4,514)        (4,301)
     Other Expense                                       (560)          (807)
     Loss before Income Tax Benefit and
     Equity in Earnings of Unconsolidated Affiliates   (5,003)        (1,101)
     Income Tax Benefit                                (1,751)          (374)
     Loss before Equity in Earnings of
      Unconsolidated Affiliates                        (3,252)          (727)
     Equity in Earnings of Unconsolidated Affiliates      349            450
     Net Loss                                         $(2,903)      $   (277)
 
     Loss Available to Common Stockholders            $(3,903)      $   (984)
 
     Loss Per Share - Basic and Diluted                $(0.15)      $  (0.04)
 
     Weighted-Average Common Shares Outstanding
     Basic and Diluted                                 25,518         25,425
 
                             CONE MILLS CORPORATION
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (in thousands)
 
                                                     04/01/01        04/02/00
                                                   (unaudited)     (unaudited)
 
     ASSETS
     Current Assets
     Cash                                              $2,574         $1,025
     Accounts and notes receivable - net               46,968         60,589
     Inventories                                      103,717        116,892
     Other current assets                               6,733          7,167
     Total Current Assets                             159,992        185,673
 
     Investments in and Advances to
      Unconsolidated Affiliates                        57,411         47,843
     Other Assets                                      17,775         38,118
     Property, Plant and Equipment                    186,409        215,674
                                                     $421,587       $487,308
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current Liabilities
     Current maturities of long-term debt             $83,495        $80,714
     Accounts payable and accrued liabilities          63,228         73,947
     Deferred income taxes                             11,067         12,091
     Total Current Liabilities                        157,790        166,752
 
     Long-Term Debt                                   108,341        119,227
     Deferred Items                                    31,643         45,139
     Stockholders' Equity                             123,813        156,190
                                                     $421,587       $487,308
 
 
                             CONE MILLS CORPORATION
                       SELECTED SEGMENT OPERATING RESULTS
                                 (in thousands)
 
 
                                                      Thirteen       Thirteen
                                                    Weeks Ended     Weeks Ended
                                                      04/01/01       04/02/00
                                                    (unaudited)    (unaudited)
     Net Sales
      Denim and Khaki                                 $115,326       $104,262
      Commission Finishing                              19,349         20,803
      Decorative Fabrics                                16,836         19,549
      Yarn-Dyed Products                                    --             10
      Other                                                119            283
                                                       151,630        144,907
     Less Intersegment Sales                             4,095          3,230
                                                      $147,535       $141,677
 
     Income (Loss) from Operations
      Denim and Khaki                                   $3,206         $5,336
      Commission Finishing                                (613)          (839)
      Decorative Fabrics                                (1,363)          (216)
      Yarn-Dyed Products                                    --            (60)
      Other                                                (80)           692
      Unallocated Expenses                                (730)          (788)
                                                           420          4,125
     Restructuring and Impairment of Assets                 --            332
                                                           420          4,457
     Less Equity in Earnings of
      Unconsolidated Affiliates                            349            450
     Income from Operations                                $71         $4,007
 
                             CONE MILLS CORPORATION
                               EBITDA CALCULATION
                                 (in thousands)
 
                                                     Thirteen       Thirteen
                                                    Weeks Ended   Weeks Ended
                                                     04/01/01       04/02/00
                                                   (unaudited)    (unaudited)
     Income from Operations                               $71         $4,007
     Depreciation and Amortization                      5,587          6,420
     Restructuring and Impairment of Assets                --           (332)
 
     EBITDA                                             5,658         10,095
     50% Parras Cone EBITDA (see below)                 1,659          1,947
 
     Pro Forma EBITDA                                  $7,317        $12,042
 
                             PARRAS CONE de MEXICO
                               EBITDA CALCULATION
                                 (in thousands)
 
                                                        Three         Three
                                                    Months Ended   Months Ended
                                                      03/31/01      03/31/00
                                                   (unaudited)    (unaudited)
     Income from Operations                            $1,527         $2,068
     Depreciation and Amortization                      1,790          1,825
 
     EBITDA                                            $3,317         $3,893
 
     Cone's Pro Rata Share - 50%                       $1,659         $1,947
 
                      MAKE YOUR OPINION COUNT - Click Here
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SOURCE Cone Mills Corporation
    GREENSBORO, N.C., April 24 /PRNewswire Interactive News Release/ --
     Cone Mills Corporation (NYSE:   COE) today reported net sales of $147.5
 million for the first quarter of 2001, an increase of 4.1% from $141.7 million
 for the first quarter of 2000.  The company's net loss for the first quarter
 of 2001 was $2.9 million, or $.15 per share after preferred dividends, and
 includes about $.02 per share of run-out expense related to the Raytex plant
 closing. For comparative purposes, first quarter 2000 results were a net loss
 of $0.3 million or $.04 per share.
     Earnings before interest, taxes, depreciation and amortization (EBITDA)
 declined to $5.7 million for the first quarter ($6.4 million excluding
 Raytex), as compared to $10.1 million for the first quarter of the prior year.
 The inclusion of Cone's pro rata share of Parras Cone's EBITDA would result in
 an EBITDA for Cone of $7.3 million for the first quarter of 2001.
     The increase in sales from first quarter 2000 was the result of a 10.6%
 sales increase in the denim and khaki segment and a 3.3% increase in Carlisle
 sales, partially offset by a 13.9% sales decrease in the decorative fabrics
 segment and the closing of the Raytex plant in the first quarter of 2001.
 Gross profit for the first quarter declined to 7.8% of sales versus 12.1% for
 the year-ago period.  The decline in gross margin is primarily attributable to
 higher wage, energy, chemical and raw material costs, as compared with year-
 ago levels.  Selling and administrative expenses were 7.8% of sales for the
 first quarter, as compared with 9.5% for the first quarter of 2000.
     John Bakane, president and chief executive officer, commented, "While
 results for the first quarter were disappointing, we were encouraged by
 stronger denim sales volume and Carlisle's return to profitability in the face
 of a difficult business environment.  Higher operating costs, particularly
 energy and raw materials, a poor retail climate and weak furniture sales had a
 negative impact on operating income."
     Denim and khaki segment sales increases were driven by improved volume and
 a more value-added product mix, partially offset by flat to marginally lower
 prices.  Operating earnings for the segment declined to $3.2 million as denim
 results were negatively impacted by higher operating costs and khaki losses
 were driven by additional losses on closeouts that resulted from a distressed
 market for such goods.  Cone's khaki business strategy is to focus the product
 line more sharply around core fabrics, thereby reducing inventory requirements
 and improving quality.
     Outside sales of the commission finishing segment were down 13.2% for the
 first quarter of 2001, as compared with first quarter 2000.  Excluding Raytex,
 which was closed in the first quarter of 2001, first quarter sales revenue
 increased 3.3%.  Carlisle was profitable in the first quarter, benefiting from
 market consolidation and improved expense management.  Results were negatively
 impacted by weaker than expected home decorative volume and cost increases for
 energy and chemicals.  The Raytex shutdown was completed in the first quarter
 of 2001 as expected.  The company is now in the process of offering the Raytex
 property and equipment for sale.
     Sales for the decorative fabrics segment declined to $16.8 million; weak
 furniture market conditions had a negative impact on both business units.  The
 segment had an operating loss of $1.4 million for the first quarter of 2001,
 as compared with an operating loss of $0.2 million for the year-ago period.
 The business outlook for this segment improved during the quarter with
 quarter-end backlogs improving by 22%, as compared with year-end 2000.
     Gary Smith, chief financial officer, commented, "Given the difficult
 retail and competitive environment and planned inventory reductions by some of
 our customers, we expect second quarter results to be lower than second
 quarter 2000, although second quarter 2001 results are expected to improve
 over first quarter 2001.  Cone continues to anticipate that economic
 conditions will improve and that its near-term management initiatives will
 improve operating results in the second half of 2001, as compared with present
 results."
     Liquidity under the company's revolving credit agreement continues to
 range between $10 and $20 million and there is additional borrowing capacity
 under its receivables securitization to support increased sales.  The company
 is in compliance with all of its financing agreements and has begun
 discussions with its lenders regarding the August maturity of its revolving
 credit agreement and the payment due under the senior note agreement.  These
 discussions are expected to be completed by the end of the second quarter.
     In regard to the outlook, Mr. Bakane added, "Over the past year, Cone has
 shown considerable progress in its core businesses as EBITDA, excluding
 restructuring charges and associated expenses, rose by 15% last year to $44
 million (including Cone's 50% interest in Parras Cone, which is not
 consolidated, EBITDA was $52 million).  And in the first quarter we increased
 sales in a poor business climate.
     "Nonetheless, no one has sufficient visibility today as to whether the
 U.S. economy has hit bottom," Mr. Bakane commented further.  "Everywhere we
 look in the U.S. economy, we see excess capacity and excess inventory, whether
 it is in computer equipment, softgoods or agricultural commodities.  Since the
 beginning of the year, our senior management team has been engaged in a
 process to reinvent the competitiveness of Cone Mills for this tougher
 environment.  This means examining different processes, organizational
 structures and ways of doing business.  Make no mistake about it, the focus of
 this initiative is to improve our operations by dramatically reducing our
 costs and improving operating profitability in second half 2001.
     "Through realization of the benefits of our operations initiative, it is
 our intention to return Cone to a higher level of operating performance.  This
 improvement should pave the way for us to put into place a more appropriate
 capital structure for the company and its long-term Mexican expansion
 initiative.  We expect to release details of our operations initiative within
 30 days and brief our stakeholders on what we expect to accomplish.  In
 addition, based on the advice of J.P. Morgan, the company's strategic advisor,
 and given conditions in the capital markets we will today notify the SEC that
 Cone is withdrawing plans to exchange new securities for our outstanding 8-
 1/8% debentures due March 15, 2005."
     A conference call to discuss first quarter 2001 earnings will be held at
 11:00 a.m. eastern daylight time on April 24, 2001.  All persons interested in
 accessing the conference call may do so via our website http://www.cone.com.
     Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC,
 is the world's largest producer of denim fabrics and the largest commission
 printer of home furnishings fabrics in North America.  Manufacturing
 facilities are located in North Carolina and South Carolina, with a joint
 venture plant in Coahuila Mexico.
     The matters disclosed in the foregoing release include forward-looking
 statements.  These statements represent Cone'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 Cone'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, Cone's principal raw material, (iv)
 Cone's relationships with Levi Strauss as its major customer, (v) Cone's
 ability to attract and maintain adequate capital to fund operations and
 strategic initiatives, (vi) increases in prevailing interest rates, and (vii)
 the inability to achieve the cost savings associated with Cone's restructuring
 initiatives.  For a further description of these risks, see Cone's 2000 Form
 10-K, "Item 1 - Business - Competition - Raw Materials and Customers" and
 "Management's Discussion and Analysis of Results of Operations and Financial
 Condition."  Other risks and uncertainties may be described from time to time
 in Cone's other reports and filings with the Securities and Exchange
 Commission.
 
                             CONE MILLS CORPORATION
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
 
                                                    Thirteen        Thirteen
                                                  Weeks Ended     Weeks Ended
                                                     04/01/01       04/02/00
                                                   (unaudited)    (unaudited)
 
     Net Sales                                       $147,535       $141,677
     Cost of Goods Sold                               136,002        124,576
     Gross Profit                                      11,533         17,101
     Selling and Administrative                        11,462         13,426
     Restructuring and Impairment of Assets                --           (332)
     Income from Operations                                71          4,007
     Interest Expense - Net                            (4,514)        (4,301)
     Other Expense                                       (560)          (807)
     Loss before Income Tax Benefit and
     Equity in Earnings of Unconsolidated Affiliates   (5,003)        (1,101)
     Income Tax Benefit                                (1,751)          (374)
     Loss before Equity in Earnings of
      Unconsolidated Affiliates                        (3,252)          (727)
     Equity in Earnings of Unconsolidated Affiliates      349            450
     Net Loss                                         $(2,903)      $   (277)
 
     Loss Available to Common Stockholders            $(3,903)      $   (984)
 
     Loss Per Share - Basic and Diluted                $(0.15)      $  (0.04)
 
     Weighted-Average Common Shares Outstanding
     Basic and Diluted                                 25,518         25,425
 
                             CONE MILLS CORPORATION
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (in thousands)
 
                                                     04/01/01        04/02/00
                                                   (unaudited)     (unaudited)
 
     ASSETS
     Current Assets
     Cash                                              $2,574         $1,025
     Accounts and notes receivable - net               46,968         60,589
     Inventories                                      103,717        116,892
     Other current assets                               6,733          7,167
     Total Current Assets                             159,992        185,673
 
     Investments in and Advances to
      Unconsolidated Affiliates                        57,411         47,843
     Other Assets                                      17,775         38,118
     Property, Plant and Equipment                    186,409        215,674
                                                     $421,587       $487,308
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current Liabilities
     Current maturities of long-term debt             $83,495        $80,714
     Accounts payable and accrued liabilities          63,228         73,947
     Deferred income taxes                             11,067         12,091
     Total Current Liabilities                        157,790        166,752
 
     Long-Term Debt                                   108,341        119,227
     Deferred Items                                    31,643         45,139
     Stockholders' Equity                             123,813        156,190
                                                     $421,587       $487,308
 
 
                             CONE MILLS CORPORATION
                       SELECTED SEGMENT OPERATING RESULTS
                                 (in thousands)
 
 
                                                      Thirteen       Thirteen
                                                    Weeks Ended     Weeks Ended
                                                      04/01/01       04/02/00
                                                    (unaudited)    (unaudited)
     Net Sales
      Denim and Khaki                                 $115,326       $104,262
      Commission Finishing                              19,349         20,803
      Decorative Fabrics                                16,836         19,549
      Yarn-Dyed Products                                    --             10
      Other                                                119            283
                                                       151,630        144,907
     Less Intersegment Sales                             4,095          3,230
                                                      $147,535       $141,677
 
     Income (Loss) from Operations
      Denim and Khaki                                   $3,206         $5,336
      Commission Finishing                                (613)          (839)
      Decorative Fabrics                                (1,363)          (216)
      Yarn-Dyed Products                                    --            (60)
      Other                                                (80)           692
      Unallocated Expenses                                (730)          (788)
                                                           420          4,125
     Restructuring and Impairment of Assets                 --            332
                                                           420          4,457
     Less Equity in Earnings of
      Unconsolidated Affiliates                            349            450
     Income from Operations                                $71         $4,007
 
                             CONE MILLS CORPORATION
                               EBITDA CALCULATION
                                 (in thousands)
 
                                                     Thirteen       Thirteen
                                                    Weeks Ended   Weeks Ended
                                                     04/01/01       04/02/00
                                                   (unaudited)    (unaudited)
     Income from Operations                               $71         $4,007
     Depreciation and Amortization                      5,587          6,420
     Restructuring and Impairment of Assets                --           (332)
 
     EBITDA                                             5,658         10,095
     50% Parras Cone EBITDA (see below)                 1,659          1,947
 
     Pro Forma EBITDA                                  $7,317        $12,042
 
                             PARRAS CONE de MEXICO
                               EBITDA CALCULATION
                                 (in thousands)
 
                                                        Three         Three
                                                    Months Ended   Months Ended
                                                      03/31/01      03/31/00
                                                   (unaudited)    (unaudited)
     Income from Operations                            $1,527         $2,068
     Depreciation and Amortization                      1,790          1,825
 
     EBITDA                                            $3,317         $3,893
 
     Cone's Pro Rata Share - 50%                       $1,659         $1,947
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X73556564
 
 SOURCE  Cone Mills Corporation