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Page 1 of 40
Index to Exhibits - Pages 23 - 36
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 2003
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) (I.R.S. Employer Identification No.)
804 Green Valley Road, Suite 300, Greensboro, N.C. 27408
- -------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 336-379-6220
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes __ No X
-
Number of shares of common stock outstanding as of April 28, 2003: 25,772,344.
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CONE MILLS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated Condensed Statements of Income
Thirteen weeks ended March 30, 2003 and
March 31, 2002 (Unaudited).....................................3
Consolidated Condensed Balance Sheets
March 30, 2003 and March 31, 2002 (Unaudited)
and December 29, 2002..........................................4
Consolidated Condensed Statements of Cash Flows
Thirteen weeks ended March 30, 2003 and March 31, 2002
(Unaudited) ...................................................5
Notes to Consolidated Condensed Financial Statements
(Unaudited)....................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................14
Item 3. Quantitative and Qualitative Disclosures about Market
Risk ........................................................21
Item 4. Controls and Procedures.......................................21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................22
Item 6. Exhibits and Reports on Form 8-K..............................22
PART I
Item 1.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands, except per share data) March 30, 2003 March 31, 2002
- --------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Net Sales $ 102,264 $ 105,820
Cost of Goods Sold 88,465 91,515
---------------------------------
Gross Profit 13,799 14,305
Selling and Administrative 8,683 7,629
---------------------------------
Income from Operations 5,116 6,676
---------------------------------
Other Income (Expense)
Interest income 79 18
Interest expense ( 3,649 ) ( 4,308 )
Other ( 318 ) ( 465 )
---------------------------------
( 3,888 ) ( 4,755 )
---------------------------------
Income from Operations before Income Tax Expense
and Equity in Earnings (Losses) of Unconsolidated Affiliates 1,228 1,921
Income Tax Expense 408 434
---------------------------------
Income from Operations before Equity in Earnings
(Losses) of Unconsolidated Affiliates 820 1,487
Equity in Earnings (Losses) of Unconsolidated Affiliates 981 ( 47 )
---------------------------------
Net Income $ 1,801 $ 1,440
---------------------------------
Income Available to Common Stockholders $ 825 $ 408
---------------------------------
Earnings Per Share - Basic and Diluted $ 0.03 $ 0.02
---------------------------------
Weighted-Average Common Stock Outstanding
Basic 25,758 25,667
---------------------------------
Diluted 25,998 26,010
---------------------------------
See Notes to Consolidated Condensed Financial Statements.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 30, March 31, December 29,
(in thousands, except share and par value data) 2003 2002 2002
- -------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited) (Note)
ASSETS
Current Assets
Cash $ 2,889 $ 294 $ 1,654
Accounts receivable, less allowances: 2003, $3,400;
2002, $5,700 and $3,400 31,659 41,166 33,017
Inventories 54,786 60,334 48,848
Other current assets 2,017 3,591 1,630
--------------------------------------------------
Total Current Assets 91,351 105,385 85,149
Investments in and Advances to Unconsolidated Affiliates 54,594 51,358 53,613
Other Assets 30,254 24,215 30,423
Property, Plant and Equipment 144,790 159,664 149,077
--------------------------------------------------
$ 320,989 $ 340,622 $ 318,262
--------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 49,905 $ 81,720 $ 46,170
Accounts payable 28,404 28,551 25,589
Sundry accounts payable and accrued liabilities 20,229 19,889 25,448
--------------------------------------------------
Total Current Liabilities 98,538 130,160 97,207
Long-Term Debt 99,130 98,686 99,019
Deferred Income Taxes 15,246 10,849 14,884
Other Liabilities 13,925 14,077 13,699
Stockholders' Equity
Class A preferred stock - $100 par value; authorized
1,500,000 shares; issued and outstanding: 2003, 319,741
shares; 2002, 363,590 shares and 327,283 shares 31,974 36,359 32,728
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: 2003, 25,757,544 shares;
2002, 25,687,993 shares and 25,757,344 shares 2,576 2,569 2,576
Capital in excess of par 58,098 57,927 58,098
Retained earnings (deficit) 11,013 ( 542 ) 9,279
Deferred compensation - restricted stock - ( 10 ) -
Accumulated other comprehensive loss ( 9,511 ) ( 9,453 ) ( 9,228 )
--------------------------------------------------
Total Stockholders' Equity 94,150 86,850 93,453
--------------------------------------------------
$ 320,989 $ 340,622 $ 318,262
--------------------------------------------------
Note: The balance sheet at December 29, 2002, has been
derived from the audited financial statements at that date.
See Notes to Consolidated Condensed Financial Statements.
CONE MILLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands) March 30, 2003 March 31, 2002
- ---------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
CASH USED IN OPERATIONS $ ( 3,191 ) $ ( 2,986 )
----------------------------------
INVESTING
Proceeds from sale of property, plant and equipment 1,065 874
Capital expenditures ( 779 ) ( 687 )
----------------------------------
Cash provided by investing 286 187
----------------------------------
FINANCING
Increase (decrease) in checks issued in excess of deposits 1,226 ( 2,975 )
Principal borrowings on long-term debt 3,735 6,564
Proceeds from issuance of common stock - 58
Dividends paid - Class A Preferred ( 67 ) ( 91 )
Redemption of Class A Preferred stock ( 754 ) ( 992 )
----------------------------------
Cash provided by financing 4,140 2,564
----------------------------------
Net change in cash 1,235 ( 235 )
Cash at Beginning of Period 1,654 529
----------------------------------
Cash at End of Period $ 2,889 $ 294
----------------------------------
Supplemental Disclosures of Additional Cash Flow Information:
Cash payments (receipts) for:
Interest $ 5,642 $ 6,550
----------------------------------
Income tax refunds $ ( 1 ) $ -
----------------------------------
Supplemental Schedule of Noncash Financing Activities:
Stock dividend - Class A Preferred Stock $ - $ 3,920
----------------------------------
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 and Stock-Based Employee
Compensation
Financial Statement Preparation. The Cone Mills Corporation ("Cone")
consolidated condensed financial statements for March 30, 2003 and March 31,
2002 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 March 30, 2003, March 31, 2002 and
December 29, 2002, and the related consolidated condensed statements of income
and cash flows for the thirteen weeks ended March 30, 2003 and March 31, 2002.
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 Cone's annual report on Form 10-K for
fiscal year 2002.
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 March 30, 2003 and March 31, 2002 and related consolidated
condensed statements of income for the thirteen weeks then ended are based on
certain estimates relating to quantities and cost as of the end of the fiscal
year.
Stock-Based Employee Compensation. Cone has stock-based employee compensation
plans. Cone accounts for those plans under the recognition and measurement
principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations. No stock-based
employee compensation cost is reflected in net income, as all options granted
under those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share if Cone had applied the fair
value recognition provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation. SFAS No. 123 requires pro forma disclosures only for
options granted after December 31, 1994; therefore, the pro forma amounts for
compensation expense may not be representative of the pro forma earnings impact
upon future years.
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands, except per share data) March 30, 2003 March 31, 2002
--------------------------------------
Net income, as reported $ 1,801 $ 1,440
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects ( 125 ) ( 156 )
--------------------------------------
Pro forma net income $ 1,676 $ 1,284
--------------------------------------
Earnings per share - basic and diluted:
Basic and diluted - as reported $ 0.03 $ 0.02
Basic and diluted - pro forma $ 0.03 $ 0.01
Note 2. Securitization of Accounts Receivable
As of March 30, 2003 and March 31, 2002, the total amount of advances of
proceeds from the sale of receivables under the Accounts Receivable
Securitization Facility ("A/R Securitization Facility") was $26.6 million and
$31.7 million, respectively. As of March 30, 2003 and March 31, 2002, included
in accounts receivable were deferred purchase price receivables under the A/R
Securitization Facility of $26.1 million and $34.3 million, respectively.
Expenses incurred in connection with the sale of accounts receivable were $0.3
million and $0.5 million for the thirteen weeks ended March 30, 2003 and March
31, 2002, respectively, and were included in "Other" in the Consolidated
Condensed Statements of Income. The table below summarizes certain cash flows
under the securitization for the fiscal quarters ended March 30, 2003 and March
31, 2002:
(in thousands) 3/30/03 3/31/02
----------------------------------
Proceeds from securitizations $ 23,666 $ 30,911
Reductions due to change in level of receivables sold ( 24,895 ) ( 36,140 )
Daily yield paid ( 319 ) ( 451 )
Servicing fees paid ( 126 ) ( 141 )
Servicing fees received 126 141
Note 3. Inventories
(in thousands) 3/30/03 3/31/02 12/29/02
---------------------------------------------------------
Greige and finished goods $ 30,431 $ 37,384 $ 24,401
Work in process 5,339 3,816 6,237
Raw materials 10,041 9,334 9,188
Supplies and other 8,975 9,800 9,022
---------------------------------------------------------
$ 54,786 $ 60,334 $ 48,848
---------------------------------------------------------
Note 4. Long-Term Debt and Recapitalization Plan
(in thousands) 3/30/03 3/31/02 12/29/02
---------------------------------------------------------
Senior Note $ 21,905 $ 26,720 $ 22,170
Revolving Credit Agreement 28,000 55,000 24,000
8-1/8% Debentures 99,130 98,686 99,019
---------------------------------------------------------
149,035 180,406 145,189
Less current maturities 49,905 81,720 46,170
---------------------------------------------------------
$ 99,130 $ 98,686 $ 99,019
---------------------------------------------------------
On December 2, 2002, Cone amended agreements with its lenders extending the
maturity date of its existing Revolving Credit Facility and its Senior Note
obligation through May 30, 2003, which subsequently was extended through June
27, 2003. The Revolving Credit Facility commitment was $56.4 million, including
letters of credit, as of March 30, 2003. Cone's obligations under its Revolving
Credit Facility, its Senior Note and its 8-1/8% Debentures are secured by
substantially all of the assets of Cone.
In January 2003, Cone presented a recapitalization plan to its lenders. Some of
the key elements of the recapitalization plan as presented include:
o Cone had entered into a letter of intent with WLR Recovery Fund II, L.P.
("WLR"), a fund managed by W.L. Ross and Company, in which WLR would
purchase up to $27.0 million of convertible notes;
o Existing lenders and bondholders would be asked to extend maturities by two
to three years and make other modifications to their agreements;
o The contingent payment rights would be satisfied by the issuance of $1
million in common stock at the closing of the transaction;
o Cone would distribute to present holders of its common stock
nontransferable rights to purchase up to $27.0 million of convertible
notes. Any notes not purchased in the offering by common stockholders would
be available for purchase by directors and employees, and any remaining
notes would then be purchased by WLR; and
o The new notes would bear interest at 12% per annum and be convertible into
common stock at a $1.00 per share.
This recapitalization plan is subject to a number of contingencies and
conditions, including negotiation of a final agreement with WLR, agreement to
the proposed changes by Cone's lenders and bondholders, approval of certain
elements of the plan by Cone's common stockholders, and the effectiveness of
certain registration statements to be filed with the Securities and Exchange
Commission.
Based upon present economic conditions and Cone's near-term operating outlook
along with an evaluation of several options for expanding low-cost denim
capacity, we do not believe the recapitalization plan outlined in January will
be our ultimate recapitalization proposal to our lenders and stockholders. In
the interim, until a more definitive recapitalization plan can be proposed, we
are working with our lenders to extend the existing Revolving Credit Facility
and
Senior Note obligation. Cone believes that the maturity of the Revolving Credit
Facility and Senior Note will be extended as needed to support ongoing
operations, however, there can be no assurance that such an extension will be
available on acceptable terms and conditions.
Note 5. Class A Preferred Stock
On February 12, 2003, Cone declared a 12.00% stock dividend on Cone's Class A
Preferred Stock, which was paid on March 31, 2003. The dividend, in the amount
of $3.9 million, will be charged to retained earnings in Cone's fiscal quarter
ended June 29, 2003.
Note 6. Depreciation and Amortization
The following table presents depreciation and amortization included in
operations in the consolidated condensed statements of income.
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands) 3/30/03 3/31/02
-------------------------------------
Depreciation $ 4,790 $ 5,049
Amortization 23 23
-------------------------------------
$ 4,813 $ 5,072
-------------------------------------
Note 7. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
common share ("EPS").
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands, except per share data) 3/30/03 3/31/02
---------------------------------------
Net income $ 1,801 $ 1,440
Preferred stock dividends ( 976 ) ( 1,032 )
---------------------------------------
Basic EPS - income available to common
stockholders 825 408
Effect of dilutive securities - -
---------------------------------------
Diluted EPS - income available to common
stockholders after assumed conversions $ 825 $ 408
---------------------------------------
Determination of shares:
Weighted-average shares 25,758 25,675
Contingently issuable (unvested restricted shares) - ( 8 )
---------------------------------------
Basic EPS - weighted-average shares 25,758 25,667
Effect of dilutive securities 240 343
---------------------------------------
Diluted EPS - adjusted weighted-average shares after
assumed conversions 25,998 26,010
---------------------------------------
Earnings per share - basic and diluted $ 0.03 $ 0.02
---------------------------------------
Note 8. Segment Information
Cone has three principal business segments based upon organizational structure:
1) Denim; 2) Commission Finishing; and 3) Decorative Fabrics.
Operating income (loss) for each segment is total revenue less operating
expenses applicable to the segment. Intersegment revenue relates to the denim
and commission finishing segments. Equity in earnings (losses) of unconsolidated
affiliates is included in the denim segment. Unallocated expenses, interest and
income tax expense are not included in segment operating income (loss).
Unallocated expenses include certain legal expenses, bank fees and fees and
discounts on the sale of accounts receivable.
Net sales and income (loss) from operations for Cone's operating segments are as
follows:
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands) 3/30/03 3/31/02
---------------------------------------
Net Sales
Denim $ 84,495 $ 82,115
Commission Finishing 11,620 15,159
Decorative Fabrics 7,375 10,319
Other 74 62
---------------------------------------
103,564 107,655
Less Intersegment Sales 1,300 1,835
---------------------------------------
$ 102,264 $ 105,820
---------------------------------------
Income (Loss) from Operations
Denim $ 7,656 $ 5,781
Commission Finishing 8 1,056
Decorative Fabrics ( 905 ) 516
Other ( 396 ) ( 368 )
Unallocated Expenses ( 266 ) ( 356 )
---------------------------------------
6,097 6,629
Less Equity in Earnings (Losses) of
Unconsolidated Affiliates 981 ( 47 )
---------------------------------------
5,116 6,676
Other Expense, Net ( 3,888 ) ( 4,755 )
---------------------------------------
Income from Operations before Income
Tax Expense and Equity in Earnings
(Losses) of Unconsolidated Affiliates $ 1,228 $ 1,921
---------------------------------------
Note 9. Comprehensive Income
Comprehensive income is the total of net income and other changes in equity,
except those resulting from investments by owners and distributions to owners
not reflected in net income. Total comprehensive income for the periods was as
follows:
Thirteen Thirteen
Weeks Ended Weeks Ended
(in thousands) 3/30/03 3/31/02
---------------------------------------
Net income $ 1,801 $ 1,440
Other comprehensive loss,
cotton derivatives losses ( 283 ) ( 177 )
---------------------------------------
$ 1,518 $ 1,263
---------------------------------------
Cotton derivatives losses as of March 30, 2003, reflected above in other
comprehensive income will be recognized in cost of goods sold over the next
twelve months.
Note 10. Financial Instruments
Cone utilizes derivative financial instruments to manage risks associated with
changes in cotton prices.
Cotton is the primary raw material for Cone's fabric manufacturing operations.
Cone has an established cotton purchasing program, administered in conformance
with policies approved by the Board of Directors, to ensure an uninterrupted
supply of appropriate quality and quantities of cotton, to cover committed and
anticipated fabric sales and to manage margin risks associated with price
fluctuations on anticipated cotton purchases. Cone primarily uses forward
purchase contracts and, to a lesser extent, futures and option contracts. Cone
considers its cotton derivatives to be primarily cash flow hedges of anticipated
future transactions under SFAS No. 133. The effective portion of derivative
gains and losses for these hedges is initially reported as a component of other
comprehensive income outside results of operations and subsequently reclassified
into results of operations when the forecasted transactions being hedged affect
results of operations. At March 30, 2003 and March 31, 2002, Cone recorded in
accumulated other comprehensive income cotton derivative gains, net of deferred
tax benefits, of $0.1 million. Gains of $0.7 million were credited to cost of
goods sold during the first quarter 2003, as compared to $0.4 million during the
first quarter 2002. The ineffective portion of derivative gains and losses is
reported in results of operations immediately. Hedge ineffectiveness for the
fiscal quarters ended March 30, 2003 and March 31, 2002, was immaterial.
Note 11. Restructuring and Impairment of Assets
A roll-forward of the activity related to Cone's restructuring charges for the
quarters ended March 30, 2003 and March 31, 2002 follows:
Corporate
& Textile
Products
(in thousands) Group
----------------
Balance, December 29, 2002 $ 58
Deductions, terminal leave and related benefits -
----------------
Balance, March 30, 2003 $ 58
----------------
Balance, December 30, 2001 $ 639
Deductions, terminal leave and related benefits ( 426 )
----------------
Balance, March 31, 2002 $ 213
----------------
Note 12. Income Tax Expense
The effective tax rate for the first quarter of 2003 was 33% versus an effective
tax rate of 23% for the first quarter of 2002. Tax benefits of export sales
significantly reduced the effective tax rate for the first quarter of 2002.
Note 13. Contingencies
The November 9, 2001, amendment of Cone's Revolving Credit Facility and Senior
Note contained certain contingent payment rights that were exercisable by the
lenders if Cone were unable to refinance its debt prior to January 15, 2003.
These rights stipulated that Cone would be required to pay to the lenders within
two years thereafter, upon notice from the lenders, an amount equal to the
greater of $1 million or 10% of the market value of Cone's outstanding common
stock at the time of notice. Cone was unable to refinance this debt by January
15, 2003.
On December 2, 2002, Cone amended agreements with its lenders extending the
maturity date of its existing Revolving Credit Facility and its Senior Note
obligation through May 30, 2003, which subsequently was extended through June
27, 2003. As a part of Cone's discussions with its lenders regarding an
extension of its lending agreements into 2004, we have been unable to reach an
agreement with our lenders to defer the exercise date of certain contingent
payment rights. In April 2003, our lenders verbally indicated that they would
exercise their rights as part of a credit extension. As part of our discussions
regarding an extension, we have been working to achieve a mutually agreeable
resolution to the ultimate valuation and payment of these rights including the
possibility of paying all or a portion in common stock. Cone expects to
recognize a charge in its second quarter 2003 consolidated financial statements
for these contingent payment rights. Based upon the common stock price for the
past 45 days through May 8, 2003, the indicated payment would have been
approximately $4.6 million. Cone will continue to discuss with its lenders a
reduction in the valuation of these rights.
Item 2.
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The U.S. economy continued to grow slowly in the first quarter of 2003. The U.S.
Commerce Department reported that the economy grew at an annual rate of 1.6%,
slightly up from the 1.4% rate of growth in the fourth quarter of 2002. Economic
growth was negatively impacted by several one-time factors, including war
worries and bad winter weather. During the first three months of 2003 consumer
spending slowed and businesses continued to cut both capital spending and
inventory investment. In the face of these economic conditions, Cone experienced
a 3.4% sales decline, as compared with the prior year period and reported net
income of $1.8 million or $.03 per share after preferred dividends for the first
quarter of 2003. For comparison, Cone reported net income of $1.4 million or
$.02 per share after preferred dividends for the first quarter of 2002.
The textile business is an extremely competitive business on a global basis.
Overall apparel and textile imports into the U.S. continued to grow at
double-digit rates with the bulk of the growth coming from the Far East. Many
Asian countries, including China, have artificially pegged their currencies to
the U.S. dollar, which has helped to keep their goods cheaper thereby boosting
their exports. This currency effect, the general global oversupply of apparel
and textiles, U.S. retail consolidation and the slowing in consumer spending
have resulted in volume and deflationary pricing pressures throughout the
apparel and home furnishings markets. On an aggregate basis the North American
Free Trade Agreement ("NAFTA") and the Caribbean Basin Initiative ("CBI")
countries currently provide approximately 60% of the denim jeans and fabric
imports into the U.S. For the twelve-month period ended February 2003, imports
of denim apparel from Mexico and CBI grew at an annual rate of 1.2%, as compared
with a 5.5% rate of growth for imports from the Far East. Denim apparel produced
in CBI is made principally from U.S. fabrics while denim apparel produced in
Mexico is made typically from U.S. or Mexican produced fabrics.
Cone's business strategy is to invest and grow in its core franchises where it
is recognized as a market leader. As a result of economic and industry
conditions, Cone is focused on four initiatives: (1) engage in businesses in
which Cone believes it is an industry leader; (2) retain, attract, motivate and
focus a talented and capable management team; (3) migrate to low-cost
manufacturing platforms for commodity products; and (4) attract and efficiently
invest capital. Our long-term migration strategy is focused on the Americas
where free trade agreements, such as NAFTA, CAFTA (Central America Free Trade
Act) and FTAA (Free Trade of the Americas), are in place or are expected to be
enacted in the future. We believe that denim jeans produced in these regions
will maintain a significant market share of the U.S. retail market because of
certain unique product characteristics. Among the characteristics of denim
fabric and jeans that make them more likely to be sourced closer to or in the
U.S. are the significant fashion element, especially in women's jeans, the
overall low labor content as compared to other textiles and apparel, the
availability of U.S. cotton and certain other supply chain factors.
Cone's strategy is to grow its denim business by expanding its production
capacity in Mexico or other low-cost countries in this hemisphere. The options
to expand Cone's denim capacity in low cost countries include acquiring existing
operations, acquiring existing buildings and retrofitting into a denim operation
or building a greenfield facility. We believe that the capital investment for
such a denim expansion is approximately $60-$90 million. The capital cost for
such a facility will be dependent upon its size, age and flexibility. Funding
the denim facility will require debt and equity financing and certain
modifications to Cone's current debt structure and lending agreements. Cone has
not arranged financing or modified its debt structure or lending agreements to
date, and there can be no assurance that such financing will be available on
acceptable terms and conditions or that its present lenders will agree to the
required modifications.
Regarding the near-term operating outlook, we expect continued pressure on
margins as a result of weak U.S. economic conditions, higher cotton prices and
the impact of high competitor inventory levels and imports. Cone is unable to
determine what impact SARS (severe acute respiratory syndrome) will have on its
business other than to note that its markets and operations are principally
U.S., Europe, Mexico and Central America.
RESULTS OF OPERATIONS
First Quarter Ended March 30, 2003 Compared with First Quarter Ended March 31,
2002
For the first quarter of 2003, Cone had sales of $102.3 million, as compared
with sales of $105.8 million for the first quarter of 2002 or a 3.4% decrease.
The decrease in sales was attributable to lower sales volume in both the
commission finishing and decorative fabrics segments.
Gross profit for the first quarters of both 2003 and 2002 was 13.5% of sales. In
the first quarter of 2003, the gross profit margin was favorably impacted by
lower raw material costs that were offset by lower denim sales prices, lower
capacity utilization in the commission finishing and decorative fabrics
operations and higher energy costs.
Cone operates in three principal business segments: Denim, Commission Finishing
and Decorative Fabrics. (See Note 8 of the Notes to Consolidated Condensed
Financial Statements included in Part I, Item 1.)
Denim. Denim sales revenues of $84.5 million increased by 2.9% in the first
quarter 2003, as compared to the first quarter of 2002. Sales yards were up
approximately 1%, as compared with first quarter of 2002. The increase in
denim sales was primarily the result of a more profitable product mix and
reduced closeouts. Denim sales prices continued to decline slightly, as
compared with the first quarter of 2002. Operating income was $7.7 million
for the first quarter, as compared with $5.8 million for the prior year
quarter. The improvement in operating income on marginally higher volume is
primarily attributable to lower raw material costs and savings related to
cost reduction initiatives. These savings were partially offset by lower
sales prices, higher employee benefit costs, additional freight cost
associated with the start-up of the Turkish joint venture and higher energy
costs. Operating income for the segment includes the equity in earnings
(losses) of the Parras Cone joint venture and the Altamira industrial park
joint venture. Equity in earnings of Parras Cone, Cone's joint venture
plant in Mexico, was $1.0 million for the
first quarter of 2003, as compared with $0.1 million for the first quarter
of 2002. Parras Cone results were favorably impacted by lower raw material
prices and the decline in value of the Mexican peso versus the U.S. dollar.
Commission Finishing. The commission finishing segment consists only of the
Carlisle plant. Outside sales (total segment sales less intercompany sales)
of the commission finishing segment for the first quarter of 2003 were
$10.5 million, down 21.3%, as compared with the first quarter of 2002 sales
revenue. Sales volume declined significantly as a result of overall weak
market conditions in all of Carlisle's market segments. For the first
quarter of 2003 the segment reported breakeven operating income results, as
compared with $1.1 million operating income in the first quarter of 2002.
Operating results were negatively impacted by lower sales volume, which
resulted in curtailed operating schedules, and higher energy costs. Plant
operating efficiencies continued to improve in the first quarter of 2003,
as compared with the first quarter of 2002. The home fashions industry
continues to experience extremely difficult market conditions as retailers
have reduced future order commitments and inventory positions.
Decorative Fabrics. The decorative fabrics segment consists only of Cone
Jacquards. For the first quarter of 2003, sales revenue of the decorative
fabrics segment was $7.4 million, down 28.5%, as compared with the first
quarter of 2002 sales revenue. Market conditions in the bedding and
furniture segments continued to be weak and were exacerbated by increased
import penetration of furniture products and the low level of new product
introductions achieved by Cone Jacquards in 2001 and 2002. Operating
results were affected negatively by lower sales volume, resulting in poor
plant utilization levels and unsatisfactory operating efficiencies. In
addition, in order to improve its new product introductions in 2003 the
business unit increased expenditures on design and sampling. In the first
quarter of 2002, Cone Jacquards operated a normal operating schedule versus
a curtailed schedule in the first quarter of 2003. Decorative fabrics
operating loss for the first quarter of 2003 was $0.9 million, as compared
with operating income of $0.5 million in the first quarter of 2002.
Selling and administrative expenses for the first quarter of 2003 were $8.7
million, as compared with $7.6 million for the prior year first quarter. Selling
and administrative expenses were 8.5% of sales in the first quarter of 2003, as
compared to 7.2% for the comparable 2002 quarter. Selling and administrative
expenses for the first quarter of 2003 were higher as a percentage of sales
primarily as a result of increased pension costs related to a negative return on
assets as contrasted with an assumed positive rate of return in 2002 and other
welfare benefit items.
Interest expense for the first quarter of 2003 was $3.6 million, as compared
with $4.3 million for the first quarter of 2002. Benefits from lower market
interest rates and lower borrowings outstanding were partially reduced by
increased rates under the lending agreements. Other expenses of $0.3 million in
the first quarter of 2003 consist of the ongoing expenses of the accounts
receivable securitization program, as compared to other expense of $0.5 million
in the first quarter of 2002.
The effective tax rate for the first quarter of 2003 was 33% versus an effective
tax rate of 23% for the first quarter of 2002. Tax benefits of export sales
significantly reduced the effective tax rate for the first quarter of 2002.
As discussed under "Denim" above, equity in earnings of Parras Cone and ASISA,
Cone's joint ventures in Mexico, was $1.0 million for the first quarter 2003, as
compared with a loss of less than $0.1 million for the first quarter of 2002.
For the first quarter of 2003, Cone had a net profit $1.8 million, or $.03 per
share after preferred dividends. For comparison, for the first quarter of 2002,
Cone reported a net profit of $1.4 million, or $.02 per share after preferred
dividends.
LIQUIDITY AND CAPITAL RESOURCES
Cone's principal long-term capital components consist of debt outstanding under
its Revolving Credit Facility, its Senior Note, its 8-1/8% Debentures and
stockholders' equity. Primary sources of liquidity are internally generated
funds, availability under the Revolving Credit Facility and a $60 million
Receivables Purchase and Servicing Agreement (the "A/R Securitization
Facility").
The following is a summary of primary financing agreements as of March 30, 2003:
($ amounts in millions) Interest/
Facility Amount Discount
Financing Agreement Commitment Outstanding Rate Maturity Date
- -----------------------------------------------------------------------------------------------------------
8-1/8% Debentures $ 100.0 $ 100.0 8.125% Mar 15, 2005
Senior Note 21.9 21.9 14.200 June 27, 2003
Revolving Credit Facility 56.4 28.0 8.750 June 27, 2003
A/R Securitization Facility 60.0 26.6 4.740 Sept 1, 2004
On December 2, 2002, Cone amended agreements with its lenders extending the
maturity date of its existing Revolving Credit Facility and its Senior Note
obligation through May 30, 2003, which subsequently was extended through June
27, 2003. The amended agreements provided that Cone present a recapitalization
proposal to its lenders by January 22, 2003. A recapitalization plan was
presented to our lenders prior to the required date. We have been unable to
reach an agreement with our lenders to defer the exercise date of certain
contingent payment rights (Equity Appreciation Rights) that were issued as part
of our November 2001 credit extension agreements. In April 2003, our lenders
verbally indicated that they would exercise their rights as part of a credit
extension. These rights entitle the lenders, upon giving of notice within two
years of January 15, 2003, to receive a payment of the greater of $1 million or
10% of the market value of Cone's outstanding common stock if we did not
refinance the Revolving Credit Facility and Senior Note by January 15, 2003,
which did not occur. Cone has requested an extension of the maturity dates of
both debts to March 2004, and as part of our discussions regarding the
extension, we have been working to achieve a mutually agreeable resolution to
the ultimate valuation and payment of the Equity Appreciation Rights, including
the possibility of paying all or a portion in common stock. Cone expects to
recognize a charge relating to these rights in its second quarter 2003
consolidated financial statements. Based upon the common stock price for the
past 45 days through April 25, 2003, the indicated payment would have been
approximately $4.8 million. Cone will continue to discuss with its lenders a
reduction in the valuation of these rights.
At March 30, 2003, Cone had availability under its financing agreements of $26.6
million. Availability under the Revolving Credit Facility and the A/R
Securitization Facility is determined by overall facility commitment levels and
borrowing base calculations, as defined in the respective agreements. During the
first quarter of 2003, cash used in operations was $3.2 million as cash
generated was offset by an increase of $5.9 million in inventories. During the
first quarter of 2003, Cone invested in capital expenditures of $0.8 million and
received proceeds of $1.1 million from the sale of non-essential equipment.
Cone's domestic capital budget is $10.0 million for 2003. Cone's capital budget
is based upon project requests to maintain its manufacturing facilities in good
condition and to provide the flexibility and capability necessary to meet market
demands. Cone expects to finance capital expenditures with internally generated
funds.
Cone believes that internally generated operating funds and funds available
under its Revolving Credit Facility currently in effect are sufficient to meet
its needs for working capital and domestic capital spending permitted under the
terms of the Revolving Credit Facility. However, its Revolving Credit Facility
and its Senior Note obligation mature on June 27, 2003. There is no assurance
that Cone will be able to obtain the requested extension on its Revolving Credit
Facility and its Senior Note or otherwise obtain financing on terms and
conditions acceptable to Cone. Cone has not yet been able to finance its
proposed denim expansion strategy, and its current debt structure will not
permit that financing. Cone is in the process of exploring its alternatives
related to financing its businesses.
On January 16, 2003 Cone entered into a letter of intent with WLR Recovery Fund
II, L.P. ("WLR"), a fund managed by W.L. Ross and Company, in which WLR would
purchase up to $27.0 million of convertible notes to support a recapitalization
of Cone's balance sheet that would provide funds to allow Cone to execute its
Mexican expansion strategy. Funds managed by W.L. Ross and Company currently
hold 50% of Cone's Revolving Credit Facility and a portion of its bonds. The
recapitalization plan contemplated by the letter of intent contains the
following elements:
o Existing lenders and bondholders would be asked to extend maturities by two
to three years and make other modifications to their agreements;
o The contingent payment rights would be satisfied by the issuance of $1
million in common stock at the closing of the transaction;
o Cone would distribute to present holders of its common stock
nontransferable rights to purchase up to $27.0 million of convertible
notes. Any notes not purchased in the offering by common stockholders would
be available for purchase by directors and employees, and any remaining
notes would then be purchased by WLR; and
o The new notes would bear interest at 12% per annum and be convertible into
common stock at a $1.00 per share.
This recapitalization plan is subject to a number of contingencies and
conditions, including negotiation of a final agreement with WLR, agreement to
the proposed changes by Cone's lenders and bondholders, approval of certain
elements of the plan by Cone's common stockholders, and the effectiveness of
certain registration statements to be filed with the Securities and Exchange
Commission.
Based upon present economic conditions and Cone's near-term operating outlook
along with an evaluation of several options for expanding low-cost denim
capacity we do not believe the recapitalization plan described above will be our
ultimate recapitalization proposal to our lenders and stockholders.
We are unable to predict whether our lenders will accept our ultimate
recapitalization proposal or modifications thereof. Cone believes that the
maturity of its Revolving Credit Facility and its Senior Note will be extended
to August 2004. However, given the lack of liquidity in the capital markets and
the negative perception by lenders regarding the U.S. textile industry, there is
no assurance that Cone will be able to refinance or replace its Revolving Credit
Facility and its Senior Note or otherwise obtain financing on terms and
conditions acceptable to Cone. We will continue to explore alternatives related
to financing our business and the expansion of denim capacity in low-cost
countries.
On March 30, 2003, Cone's long-term capital structure consisted of $149.0
million of long-term debt (including current maturities) and $94.2 million of
stockholders' equity. For comparison, Cone had $180.4 million of long-term debt
(including current maturities) and $86.9 million of stockholders' equity at
March 31, 2002.
Accounts receivable on March 30, 2003, were $31.7 million, as compared with
$41.2 million at March 31, 2002. Receivables, including those sold pursuant to
the A/R Securitization Facility, represented 52 days of sales outstanding at
March 30, 2003 and 65 days at March 31, 2002. Advances outstanding under the A/R
Securitization Facility were $26.6 million at March 30, 2003 and $31.7 million
at March 31,2002. The decrease in days outstanding was primarily the result of
certain denim customers paying in advance of the due date and the exit from the
khaki business in late 2001. In the future we would expect days outstanding to
increase from first quarter 2003 levels as our business evolves to an increased
level of shipments to countries under the CBI trade initiative.
Inventories on March 30, 2003 were $54.8 million, as compared with $48.8 million
at December 29, 2002, reflecting an increase in denim finished goods
inventories. For comparison purposes, inventories at March 31, 2002 were $60.3
million. The year over year reduction in inventories is primarily the result of
reduced denim finished goods inventory levels and lower cotton and other raw
material prices.
Cone's financing agreements prohibit it from paying dividends on its Common
Stock.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Except for the historical information presented, the matters disclosed in the
following discussion and analysis and other parts of this report, as well as
oral statements made from time to time by representatives of Cone, include
forward-looking statements within the meaning of the Federal Securities laws.
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.
These forward-looking statements include statements relating to our anticipated
financial performance and business prospects. Statements preceded by, followed
by or that include words such as "believe," "anticipate," "estimate," "expect,"
"could," and other similar expressions are to be considered such forward-looking
statements. These forward-looking statements speak only as of the date
stated and we do not undertake any obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise, even if experience or future events make it clear that any
expected results expressed or implied by these forward-looking statements will
not be realized. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, these expectations may not prove to
be correct or we may not achieve the financial results, savings or other
benefits anticipated in the forward-looking statements. These forward-looking
statements are necessarily estimates reflecting the best judgment of our senior
management and involve a number of risks and uncertainties, some of which may be
beyond our control, that could cause actual results to differ materially from
those suggested by the forward-looking statements. Such factors include, without
limitation:
o 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,
o the highly competitive nature of the textile industry and the possible
effects of reduced import protection, free-trade initiatives and
retaliatory measures in trade disputes,
o the unpredictability of the cost and availability of cotton, Cone's
principal raw material, and other manufacturing costs,
o Cone's relationships with Levi Strauss as its major customer including its
sourcing practices,
o Cone's ability to attract and maintain adequate capital to fund operations
and strategic initiatives,
o increases in prevailing interest rates,
o Cone's ability to complete an acceptable recapitalization transaction that
will enable it to expand its denim manufacturing in low-cost countries,
o Cone's ability to extend its present credit arrangements, and
o the effect on Cone' sales and markets of events such as the events of
September 11, 2001.
For a further description of these risks see "Item 1. Business -Competition,
- -Raw Materials and -Customers" and "Item 7. Management's Discussion and Analysis
of Results of Operations and Financial Condition -- Overview" contained in
Cone's 2002 Form 10-K. Other risks and uncertainties may be described from time
to time in Cone's other reports and filings with the Securities and Exchange
Commission.
OTHER MATTERS
Federal, state and local regulations relating to the workplace and the discharge
of materials into the environment continue to change and, consequently, it is
difficult to gauge the total future impact of such regulations on Cone. Existing
government regulations are not expected to cause a material change in Cone's
competitive position, operating results or planned capital expenditures. Cone
has an active environmental committee, which fosters protection of the
environment and compliance with laws.
Cone 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
results of operations, financial condition and liquidity of Cone. As of March
30, 2003, no significant litigation existed.
NON-GAAP FINANCIAL MEASURE
EBITDA, which is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with accounting
principles generally accepted in the United States of America) but because it is
a widely accepted financial indicator of the ability to incur and service debt,
is used as the basis for certain financial covenants in Cone's current debt
agreements as well as for its incentive compensation plans, and is calculated by
Cone as follows:
Thirteen Weeks Ended
--------------------------
(in thousands) 3/30/03 3/31/02
--------------------------
Income from operations $ 5,116 $ 6,676
Depreciation and amortization 4,813 5,072
--------------------------
EBITDA $ 9,929 $11,748
--------------------------
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Cone is exposed to market risks relating to fluctuations in interest rates and
commodity prices. There has been no material change in Cone's market risks that
would significantly affect the disclosures made in the Form 10-K for the year
ended December 29, 2002.
Item 4. Controls and Procedures
Based on their evaluation of Cone's disclosure controls and procedures, which
was completed within 90 days prior to the filing of this report, the Chief
Executive Officer ("CEO") and the Chief Financial Officer ("CFO") have concluded
that Cone's disclosure controls and procedures are effective to ensure that
information required to be disclosed by Cone in the reports that it files or
submits under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. In reaching this
conclusion, the CEO and CFO determined that Cone's disclosure controls and
procedures are effective in ensuring that such information is accumulated and
communicated to Cone's management to allow timely decisions regarding required
disclosure.
There were no significant changes in Cone's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluations.
PART II
Item 1. Legal Proceedings
Cone 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
results of operations, financial condition and liquidity of Cone. As of March
30, 2003, no significant litigation existed.
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.
Cone filed the following current reports on Form 8-K during the period
December 30, 2002, to the date of the filing of this report:
o Current report on Form 8-K, filed on January 17, 2003, disclosing Cone's
entering into a letter of intent with WLR Recovery Fund II, L.P., a fund
managed by W.L. Ross and Company, to purchase up to $27.0 million of
convertible notes to support a recapitalization of Cone's balance sheet.
The Form 8-K contained one exhibit, the press release issued by Cone on
January 17, 2003.
o Current report on Form 8-K, filed on April 24, 2003, disclosing Cone's
first quarter 2003 earnings release and conference call. The Form 8-K
contained one exhibit, the earnings release issued by Cone on April 24,
2003.
o Current report on Form 8-K, filed on May 6, 2003, disclosing John L. Bakane
elected by the Board of Directors to the position of Chairman of the Board.
The Form 8-K contained one exhibit, the press release issued by Cone on May
6, 2003.
Exhibit
No. Description
*2.1 Receivables Purchase and Servicing Agreement dated as of September 1,
1999, by and among Cone Receivables II LLC, as Seller, Redwood
Receivables Corporation, as Purchaser, the Registrant, as Servicer,
and General Electric Capital Corporation, as Operating Agent and
Collateral Agent, filed as Exhibit 2.1(h) to Registrant's report on
Form 10-Q for the quarter ended October 3, 1999.
*2.2 Receivables Transfer Agreement dated as of September 1, 1999, by and
among the Registrant, any other Originator Party hereto, and Cone
Receivables II LLC, filed as Exhibit 2.1(i) to Registrant's report on
Form 10-Q for the quarter ended October 3, 1999.
*2.3.1 First Amendment and Waiver to Securitization Agreements dated as of
November 16, 1999, by and between Cone Receivables II LLC, the
Registrant, Redwood Receivables Corporation and General Electric
Capital Corporation, together with all exhibits thereto, filed as
Exhibit 2.1(c) to Registrant's report on Form 10-K for the fiscal year
ending January 2, 2000.
*2.3.2 Second Amendment to Securitization Agreements dated as of January 28,
2000, by and between Cone Receivables II LLC, the Registrant, Redwood
Receivables Corporation, and General Electric Capital Corporation,
together with all exhibits thereto, filed as Exhibit 2.1(d) to
Registrant's report on Form 10-K for the fiscal year ending January 2,
2000.
*2.3.3 Third Amendment to Securitization Agreements dated as of March 31,
2000, by and between Cone Receivables II LLC, the Registrant, Redwood
Receivables Corporation, and General Electric Capital Corporation,
together with all Exhibits thereto, filed as Exhibit 2.1(e) to
Registrant's report on Form 10-Q for the quarter ended April 2, 2000.
*2.3.4 Fourth Amendment to Securitization Agreements dated as of April 24,
2000 by and between Cone Receivables II LLC, the Registrant, Cone
Foreign Trading LLC, Redwood Receivables Corporation, and General
Electric Capital Corporation, together with all exhibits thereto,
filed as Exhibit 2.1(f) to Registrant's report on Form 10-Q for the
quarter ended April 2, 2000, filed as Exhibit 2.3.4 to Registrant's
Registration Statement on Form S-4 (File No. 333-43014).
*2.3.5 Fifth Amendment to Securitization Agreements dated as of June 30, 2000
by and between Cone Receivables II LLC, the Registrant, Cone Foreign
Trading LLC, Redwood Receivables Corporation, and General Electric
Capital Corporation, filed as Exhibit 2.3.5 to Registrant's
Registration Statement on Form S-4 (File No. 333-43014).
Exhibit
No. Description
*2.3.6 Sixth Amendment to Securitization Agreements dated as of December 12,
2000 by and between Cone Receivables II LLC, the Registrant, Cone
Foreign Trading LLC, Redwood Receivables Corporation and General
Electric Capital Corporation, filed as Exhibit 2.3.6 to Registrant's
Registration Statement on Form S-4 (File No. 333-43014).
*2.3.7 Seventh Amendment to Securitization Agreement dated as of April 23,
2001 by and between Cone Receivables II LLC, the Registrant, Cone
Foreign Trading LLC, and General Electric Capital Corporation, filed
as Exhibit 2.3.7 to Registrant's report on Form 10-Q for the quarter
ended July 1, 2001.
*2.3.8 Eighth Amendment to Securitization Agreement dated as of July 20, 2001
by and between Cone Receivables II LLC, the Registrant, Cone Foreign
Trading LLC, and General Electric Capital Corporation, filed as
Exhibit 2.3.8 to Registrant's report on Form 10-Q for the quarter
ended July 1, 2001.
*2.3.9 Ninth Amendment to Securitization Agreement dated as of November 9,
2001 by and between Cone Receivables II LLC, the Registrant, Cone
Foreign Trading LLC, and General Electric Capital Corporation, filed
as Exhibit 2.3.9 to the Registrant's report on Form 10-K for the year
ended December 30, 2001.
*2.4 Investment Agreement dated as of June 18, 1993, among Compania
Industrial de Parras, S.A. de C.V., Sr. Rodolfo Garcia Muriel, and the
Registrant, filed as Exhibit 2.2(a) to Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.5 Commercial Agreement dated as of July 1, 1999, among Compania
Industrial de Parras, S.A. de C.V., the Registrant, and Parras Cone de
Mexico, S.A., filed as Exhibit 2.2(b) to Registrant's report on Form
10-K for the fiscal year ending January 2, 2000.
*2.5.1 Amended and Restated Commercial Agreement, dated as of December 12,
2000, among Compania Industrial de Parras, S.A. de C.V., the
Registrant and Parras Cone de Mexico, S.A., filed as Exhibit 2.5.1 to
Registrant's Registration Statement on Form S-4 (File No. 333-43014).
*2.6 Guaranty Agreement dated as of June 25, 1993, between the Registrant
and Compania Industrial de Parras, S.A. de C.V., filed as Exhibit
2.2(c) to Registrant's report on Form 10-Q for the quarter ended July
4, 1993.
Exhibit
No. Description
*2.7 Joint Venture Agreement dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V., and Cone Mills (Mexico), S.A. de
C.V., filed as Exhibit 2.2(d) to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993.
*2.7.1 First Amendment to Joint Venture Agreement dated as of June 14, 1995,
between Compania Industrial de Parras, S.A. de C.V., and Cone Mills
(Mexico), S.A. de C.V., filed as Exhibit 2.2(e) to Registrant's report
on Form 10-Q for the quarter ended July 2, 1995.
*2.8 Joint Venture Registration Rights Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A., Compania Industrial de Parras, S.A.
de C.V. and Cone Mills (Mexico), S.A. de C.V., filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q for the quarter ended July 4,
1993.
*2.9 Parras Registration Rights Agreement dated as of June 25, 1993,
between Compania Industrial de Parras, S.A. de C.V. and the
Registrant, filed as Exhibit 2.2(f) to Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.10 Support Agreement dated as of June 25, 1993, among the Registrant, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia Muriel and certain other persons
listed therein ("private stockholders"), filed as Exhibit 2.2(g) to
Registrant's report on Form 10-Q for the quarter ended July 4, 1993.
*3.1 Restated Articles of Incorporation of the Registrant effective August
25, 1993, filed as Exhibit 4.1 to Registrant's report on Form 10-Q for
the quarter ended October 3, 1993.
*3.1.1 Articles of Amendment of the Articles of Incorporation of the
Registrant effective October 22, 1999, to fix the designation,
preferences, limitations, and relative rights of a series of its Class
B Preferred Stock, filed as Exhibit 4.1(a) to Registrant's report on
Form 10-Q for the quarter ended October 3, 1999.
*3.2 Amended and Restated Bylaws of Registrant, effective June 18, 1992,
filed as Exhibit 3.5 to Registrant's Registration Statement on Form
S-1 (File No. 33-46907).
*4.1 Rights Agreement dated as of October 14, 1999, between the Registrant
and First Union National Bank, as Rights Agent, with Form of Articles
of Amendment with respect to the Class B Preferred Stock (Series A),
the Form of Rights Certificate, and Summary of Rights attached, filed
as Exhibit 1 to Registrant's report on Form 8-A dated October 29,
1999.
Exhibit
No. Description
*4.2 Note Agreement dated as of August 13, 1992, between the Registrant and
The Prudential Insurance Company of America, with form of 8%
promissory note attached, filed as Exhibit 4.01 to Registrant's report
on Form 8-K dated August 13, 1992.
*4.2.1 Letter Agreement dated September 11, 1992, amending the Note Agreement
dated August 13, 1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit 4.2 to Registrant's
report on Form 8-K dated March 1, 1995.
*4.2.2 Letter Agreement dated July 19, 1993, amending the Note Agreement
dated August 13, 1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit 4.3 to Registrant's
report on Form 8-K dated March 1, 1995.
*4.2.3 Letter Agreement dated June 30, 1994, amending the Note Agreement
dated August 13, 1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit 4.4 to Registrant's
report on Form 8-K dated March 1, 1995.
*4.2.4 Letter Agreement dated November 14, 1994, amending the Note Agreement
dated August 13, 1992, between the Registrant and The Prudential
Insurance Company of America, filed as Exhibit 4.5 to Registrant's
report on Form 8-K dated March 1, 1995.
*4.2.5 Letter Agreement dated as of June 30, 1995, amending the Note
Agreement dated August 13, 1992, between the Registrant and The
Prudential Insurance Company of America, filed as Exhibit 4.3(e) to
Registrant's report on Form 10-Q for the quarter ended July 2, 1995.
*4.2.6 Letter Agreement dated as of June 30, 1995, between the Registrant and
The Prudential Insurance Company of America superseding Letter
Agreement, filed as Exhibit 4.3(e) to Registrant's report on Form 10-Q
for the quarter ended July 2, 1995, filed as Exhibit 4.3(f) to
Registrant's report on Form 10-K for year ended December 31, 1995.
*4.2.7 Letter Agreement dated as of March 30, 1996, between the Registrant
and The Prudential Insurance Company of America, filed as Exhibit
4.3(g) to Registrant's report on Form 10-Q for the quarter ended March
31, 1996.
Exhibit
No. Description
*4.2.8 Letter Agreement dated as of January 31, 1997, between the Registrant
and The Prudential Insurance Company of America, filed as Exhibit
4.3(h) to Registrant's report on Form 10-K for the year ended December
29, 1996.
*4.2.9 Letter Agreement dated as of July 31, 1997, between the Registrant and
The Prudential Insurance Company of America, filed as Exhibit 4.3(i)
to Registrant's report on Form 10-Q for the quarter ended September
28, 1997.
*4.2.10 Modification to Note Agreement dated as of February 14, 1998, between
the Registrant and The Prudential Insurance Company of America, filed
as Exhibit 4.3(j) to Registrant's report on Form 10-Q for the quarter
ended March 29, 1998.
*4.2.11 Letter Agreement dated as of September 1, 1999, amending the Note
Agreement dated August 13, 1992, between the Registrant and The
Prudential Insurance Company of America, filed as Exhibit 4.3(i) to
Registrant's report on Form 10-Q for the quarter ended October 3,
1999.
*4.2.12 Amendment of 1992 Note Agreement dated as of January 28, 2000, by and
among the Registrant and The Prudential Insurance Company of America,
together with all exhibits thereto, filed as Exhibit 9 to Registrant's
report on Form 8-K dated February 11, 2000.
*4.2.13 Waiver under Note Agreement dated as of July 3, 2000, by and among the
Registrant and The Prudential Insurance Company of America, filed as
Exhibit 4.2.13 to Registrant's Registration Statement on Form S-4
(File No. 333-43014).
*4.2.14 Amendment of 1992 Note Agreement dated as of July 14, 2000, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.14 to Registrant's Registration Statement on Form
S-4 (File No. 333-43014).
*4.2.15 Amendment of 1992 Note Agreement dated as of December 12, 2000, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.15 to the Registrant's Registration Statement on
Form S-4 (File No. 333-43014).
*4.2.16 Amendment of 1992 Note Agreement and Waiver dated as of April 23,
2001, by and among the Registrant and The Prudential Insurance Company
of America, filed as Exhibit 4.2.16 to Registrant's report on Form
10-Q for quarter ended July 1, 2001.
Exhibit
No. Description
*4.2.17 Amendment of 1992 Note Agreement dated as of June 28, 2001, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.17 to Registrant's report on Form 10-Q for the
quarter ended July 1, 2001.
*4.2.18 Waiver Under 1992 Note Agreement dated as of August 10, 2001, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.18 to Registrant's report on Form 10-Q for the
quarter ended September 30, 2001.
*4.2.19 Amendment of 1992 Note Agreement dated as of September 25, 2001, by
and among the Registrant and The Prudential Insurance Company of
America, filed as Exhibit 4.2.19 to Registrant's report on Form 10-Q
for the quarter ended September 30, 2001.
*4.2.20 Amendment of 1992 Note Agreement dated as of October 25, 2001, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.20 to Registrant's report on Form 10-Q for the
quarter ended September 30, 2001.
*4.2.21 Amendment of 1992 Note Agreement dated as of November 9, 2001, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.21 to the Registrant's report on Form 10-K for
the year ended December 30, 2001.
*4.2.22 Amendment of 1992 Note Agreement dated as of March 22, 2002, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.22 to the Registrant's report on Form 10-K for
the year ended December 30, 2001.
*4.2.23 Amendment of 1992 Note Agreement dated as of December 2, 2002, by and
among the Registrant and The Prudential Insurance Company of America,
filed as Exhibit 4.2.23 to the Registrant's report on Form 8-K dated
December 6, 2002.
4.2.24 Amendment of 1992 Note Agreement dated as of April 30, 2003, by and
among the Registrant and The Prudential Insurance Company of America.
*4.3 Credit Agreement dated as of January 28, 2000, by and among the
Registrant, as Borrower, Bank of America, N.A., as Agent and as Lender
and the Lenders party thereto from time to time, together with all
exhibits thereto, filed as Exhibit 1 to Registrant's report on Form
8-K dated February 11, 2000.
Exhibit
No. Description
*4.3.1 Amendment No. 1 to Credit Agreement dated as of July 14, 2000, by and
among the Registrant, as Borrower, Cone Global Finance Corp., CIPCO
S.C. Inc. and Cone Foreign Trading LLC, as Guarantors, Bank of
America, N.A., as Agent and as Lender, and the Lenders party thereto
from time to time, filed as Exhibit 4.3.1 to Registrant's Registration
Statement on Form S-4 (File No. 333-43014).
*4.3.2 Amendment No. 2 to Credit Agreement dated as of December 12, 2000, by
and among the Registrant, as Borrower, Cone Global Finance Corp.,
CIPCO S.C. Inc. and Cone Foreign Trading LLC, as Guarantors, Bank of
America, N.A., as Agent and as Lender, and the Lenders party thereto
from time to time, filed as Exhibit 4.3.2 to Registrant's Registration
Statement on Form S-4 (File No. 333-43014).
*4.3.3 Waiver and Amendment No. 3 to Credit Agreement dated as of April 23,
2001, by and among the Registrant, as Borrower, Bank of America, N.A.,
as Agent and as Lender, and the Lenders Signatory Thereto, filed as
Exhibit 4.3.3 to Registrant's report on Form 10-Q for the quarter
ended July 1, 2001.
*4.3.4 Amendment No. 4 to Credit Agreement dated as of June 28, 2001, by and
among the Registrant, as Borrower, Bank of America, N.A., as Agent and
Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.4 to
Registrant's report on Form 10-Q for the quarter ended July 1, 2001.
*4.3.5 Amendment No. 5 to Credit Agreement dated as of August 10, 2001, by
and among the Registrant, as Borrower, Bank of America, N.A., as Agent
and Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.5
to Registrant's report on Form 10-Q for the quarter ended September
30, 2001.
*4.3.6 Amendment No. 6 to Credit Agreement dated as of September 25, 2001, by
and among the Registrant, as Borrower, Bank of America, N.A., as Agent
and Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.6
to Registrant's report on Form 10-Q for the quarter ended September
30, 2001.
*4.3.7 Amendment No. 7 to Credit Agreement dated as of October 25, 2001, by
and among the Registrant, as Borrower, Bank of America, N.A., as Agent
and Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.7
to Registrant's report on Form 10-Q for the quarter ended September
30, 2001.
*4.3.8 Amendment No. 8 to Credit Agreement dated as of November 9, 2001, by
and among the Registrant, as Borrower, Bank of America, N.A., as Agent
and Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.8
to the Registrant's report on Form 10-K for the year ended December
30, 2001.
Exhibit
No. Description
*4.3.9 Amendment No. 9 to Credit Agreement dated as of February 27, 2002, by
and among the Registrant, as Borrower, Bank of America, N.A., as Agent
and Lender, and the Lenders Signatory Thereto, filed as Exhibit 4.3.9
to the Registrant's report on Form 10-K for the year ended December
30, 2001.
*4.3.10 Amendment No. 10 to Credit Agreement dated as of December 2, 2002, by
and among the Registrant, as Borrower, Bank of America, N.A., Each of
the Lenders Signatory Thereto, and Bank of America, N.A., as Agent,
filed as Exhibit 4.3.10 to the Registrant's report on Form 8-K dated
December 6, 2002.
4.3.11 Amendment No. 11 to Credit Agreement dated as of April 30, 2003, by
and among the Registrant, as Borrower, Each of the Lenders Signatory
Thereto, and Bank of America, N.A., as Agent.
*4.4 Guaranty Agreement dated as of January 28, 2000, made by Cone Global
Finance Corporation, CIPCO S.C., Inc. and Cone Foreign Trading LLC in
favor of Bank of America, N.A. as Revolving Credit Agent for the
Lenders, The Prudential Insurance Company of America, SunTrust Bank,
Morgan Guaranty Trust Company of New York, Wilmington Trust Company,
as General Collateral Agent, Bank of America, N.A., as Priority
Collateral Agent, and Atlantic Financial Group, Ltd., together with
all exhibits thereto, filed as Exhibit 2 to Registrant's report on
Form 8-K dated February 11, 2000.
*4.5 Priority Security Agreement dated as of January 28, 2000, by the
Registrant and certain of its subsidiaries, as Grantors, and Bank of
America, N.A., as Priority Collateral Agent, together with all
exhibits thereto, filed as Exhibit 3 to Registrant's report on Form
8-K dated February 11, 2000.
*4.6 General Security Agreement dated as of January 28, 2000, by the
Registrant and certain of its subsidiaries, as Grantors, and
Wilmington Trust Company, as General Collateral Agent, together with
all exhibits thereto, filed as Exhibit 4 to Registrant's report on
Form 8-K dated February 11, 2000.
*4.7 Securities Pledge Agreement dated as of January 28, 2000, by the
Registrant in favor of Wilmington Trust Company, as General Collateral
Agent, together with all exhibits thereto, filed as Exhibit 5 to
Registrant's report on Form 8-K dated February 11, 2000.
*4.8 CMM Pledge Agreement dated as of January 28, 2000, by the Registrant
in favor of Wilmington Trust Company, as General Collateral Agent,
together with all exhibits thereto, filed as Exhibit 6 to Registrant's
Report on Form 8-K dated February 11, 2000.
Exhibit
No. Description
*4.9 Deed of Trust, Security Agreement, Fixture Filing, Assignment of
Leases and Rents and Financing Statement dated as of January 28, 2000,
between the Registrant, as Grantor, TIM, Inc., as Trustee, Wilmington
Trust Company, as General Collateral Agent, and Bank of America, N.A.,
as Designated Collateral Subagent, together with all exhibits thereto,
filed as Exhibit 7 to Registrant's report on Form 8-K dated February
11, 2000.
*4.10 Deed of Trust, Security Agreement, Fixture Filing, Assignment of
Leases and Rents and Financing Statement dated as of January 28, 2000,
between the Registrant, as Grantor, TIM, Inc., as Trustee, and Bank of
America, N.A., as Priority Collateral Agent, together with all
exhibits thereto, filed as Exhibit 8 to Registrant's report on Form
8-K dated February 11, 2000.
*4.11 Termination Agreement dated as of January 28, 2000, between the
Registrant and Morgan Guaranty Trust Company of New York, as Agent for
various banks terminating the Credit Agent dated August 7, 1997, filed
as Exhibit 4.4(h) to Registrant's report on Form 10-K for the fiscal
year ending January 2, 2000.
*4.12 Specimen Class A Preferred Stock Certificate, filed as Exhibit 4.5 to
Registrant's Registration Statement on Form S-1 (File No. 33-46907).
*4.13 Specimen Common Stock Certificate, effective June 18, 1992, filed as
Exhibit 4.7 to Registrant's Registration Statement on Form S-1 (File
No. 33-46907).
*4.14 Cone Mills Corporation 1983 ESOP as amended and restated effective
December 1, 1994, filed as Exhibit 4.9 to Registrant's report on Form
10-K for year ended January 1, 1995.
*4.14.1 First Amendment to the Cone Mills Corporation 1983 ESOP dated May 9,
1995, filed as Exhibit 4.9(a) to Registrant's report on Form 10-K for
year ended December 31, 1995.
*4.14.2 Second Amendment to the Cone Mills Corporation 1983 ESOP dated
December 5, 1995, filed as Exhibit 4.9(b) to Registrant's report on
Form 10-K for year ended December 31, 1995.
*4.14.3 Third Amendment to the Cone Mills Corporation 1983 ESOP dated August
7, 1997, filed as Exhibit 4.8(c) to Registrant's report on Form 10-Q
for the quarter ended September 28, 1997.
Exhibit
No. Description
*4.14.4 Fourth Amendment to the Cone Mills Corporation 1983 ESOP dated
December 4, 1997, filed as Exhibit 4.8(d) to Registrant's report on
Form 10-K for the year ended December 28, 1997.
*4.15 Indenture dated as of February 14, 1995, between the Registrant and
Wachovia Bank of North Carolina, N.A. as Trustee (The Bank of New York
is successor Trustee), filed as Exhibit 4.1 to Registrant's
Registration Statement on Form S-3 (File No. 33-57713).
*10.1 Employees' Retirement Plan of Cone Mills Corporation as amended and
restated effective December 1, 1994, filed as Exhibit 10.1 to
Registrant's report on Form 10-K for the year ended January 1, 1995.
*10.1.1 First Amendment to the Employees' Retirement Plan of Cone Mills
Corporation dated May 9, 1995, filed as Exhibit 10.1(a) to
Registrant's report on Form 10-K for the year ended December 31, 1995.
*10.1.2 Second Amendment to the Employees' Retirement Plan of Cone Mills
Corporation dated December 5, 1995, filed as Exhibit 10.1(b) to
Registrant's report on Form 10-K for the year ended December 31, 1995.
*10.1.3 Third Amendment to the Employees' Retirement Plan of Cone Mills
Corporation dated August 16, 1996, filed as Exhibit 10.1(c) to
Registrant's report on Form 10-K for the year ended December 29, 1996.
*10.1.4 Fourth Amendment to the Employees' Retirement Plan of Cone Mills
Corporation, filed as Exhibit 10 to Registrant's report on Form 10-Q
for the quarter ended September 28, 1997.
*10.1.5 Fifth Amendment to Employees' Retirement Plan of Cone Mills
Corporation dated December 4, 1997, filed as Exhibit 10.1(e) to
Registrant's report on Form 10-K for the year ended December 28, 1997.
*10.1.6 Employees Retirement Plan of Cone Mills Corporation as amended and
restated as of June 30, 2001, filed as Exhibit 10.1.6 to Registrant's
report on Form 10-Q for the quarter ended July 1, 2001.
*10.7 Cone Mills Corporation SERP as amended and restated as of December 5,
1995, filed as Exhibit 10.2 to Registrant's report on Form 10-K for
the year ended December 31, 1995.
Exhibit
No. Description
*10.7.1 Cone Mills Corporation SERP as amended and restated effective June 30,
2001, filed as Exhibit 10.7.1 to Registrant's report on Form 10-Q for
the quarter ended July 1, 2001.
*10.8 Excess Benefit Plan of Cone Mills Corporation as amended and restated
as of December 5, 1995, filed as Exhibit 10.3 to Registrant's report
on Form 10-K for the year ended December 31, 1995.
*10.8.1 Excess Benefit Plan of Cone Mills Corporation as amended and restated
effective June 30, 2001, filed as Exhibit 10.8.1 to Registrant's
report on form 10-Q for the quarter ended July 1, 2001.
*10.9 1984 Stock Option Plan of Registrant filed as Exhibit 10.7 to
Registrant's Registration Statement on Form S-1 (File No. 33-28040).
*10.10 Form of Nonqualified Stock Option Agreement under 1984 Stock Option
Plan of Registrant, filed as Exhibit 10.8 to Registrant's Registration
Statement on Form S-1 (File No. 33-28040).
*10.11 Form of Incentive Stock Option Agreement under 1984 Stock Option Plan
of Registrant, filed as Exhibit 10.9 to Registrant's Registration
Statement on Form S-1 (File No. 33-28040).
*10.12 1992 Stock Option Plan of Registrant, filed as Exhibit 10.9 to
Registrant's Report on Form 10-K for the year ended December 29, 1991.
*10.12.1 Amended and Restated 1992 Stock Plan, filed as Exhibit 10.1 to
Registrant's report on Form 10-Q for the quarter ended March 31, 1996.
*10.13 Form of Incentive Stock Option Agreement under 1992 Stock Option Plan,
filed as Exhibit 10.10 to Registrant's report on Form 10-K for the
year ended January 3, 1993.
*10.14 Form of Nonqualified Stock Option Agreement under 1992 Stock Option
Plan, filed as Exhibit 10.8(a) to Registrant's report on Form 10-K for
the year ended December 29, 1996.
*10.14.1 Form of Nonqualified Stock Option Agreement under 1992 Amended and
Restated Stock Plan, filed as Exhibit 10.8(b) to Registrant's report
on Form 10-K for the year ended December 29, 1996.
Exhibit
No. Description
*10.15 Form of Restricted Stock Award Agreement under 1992 Amended and
Restated Stock Plan, filed as Exhibit 10.8(c) to Registrant's report
on Form 10-K for the year ended December 28, 1997.
*10.15.1 Form of Incentive Stock Option Agreement under 1992 Amended and
Restated Stock Plan, filed as Exhibit 10.8(d) to Registrant's report
on Form 10-K for the year ended December 28, 1997.
*10.16 1994 Stock Option Plan for Non-Employee Directors of Registrant, filed
as Exhibit 10.9 to Registrant's report on Form 10-K for the year ended
January 2, 1994.
*10.17 Form of Non-Qualified Stock Option Agreement under 1994 Stock Option
Plan for Non-Employee Directors of Registrant, filed as Exhibit 10.10
to Registrant's report on Form 10-K for the year ended January 2,
1994.
*10.18 Management Incentive Plan of the Registrant, filed as Exhibit 10.11(b)
to Registrant's report on Form 10-K for the year ended January 3,
1993.
*10.19 1997 Senior Management Incentive Compensation Plan, filed as Exhibit
10.2 to Registrant's report on Form 10-Q for the quarter ended March
31, 1996.
*10.20 1997 Senior Management Discretionary Bonus Plan, filed as Exhibit
10.13 to Registrant's report on Form 10-K for the year ended December
29, 1996.
*10.21 2000 Stock Compensation Plan for Non-Employee Directors of Registrant
dated as of May 9, 2000, filed as Exhibit 10.18 to Registrant's report
on Form 10-Q for the quarter ended April 7, 2000.
*10.22 Form of Agreement between the Registrant and Levi Strauss dated as of
March 30, 1992, filed as Exhibit 10.14 to Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
*10.23 First Amendment to Supply Agreement dated as of April 15, 1992,
between the Registrant and Levi Strauss dated as of March 30, 1992,
filed as Exhibit 10.15 to Registrant's Registration Statement on Form
S-1 (No. 33-46907).
*10.23.1 Second Amendment to Supply Agreement dated as of May 13, 2002, between
the Registrant and Levi Strauss dated as of March 30, 1992, filed as
Exhibit 10.23.1 to Registrant's report on Form 10-Q for the quarter
ended March 31, 2003.
Exhibit
No. Description
*10.24 Agreement dated January 1, 1999, between the Registrant and Parkdale
Mills, Inc., filed as Exhibit 10.17 to Registrant's report on Form
10-K for the year ended January 2, 2000.
*10.24.1 Amendment and Restatement of Yarn Purchase Agreement as amended
December 31, 2001, between the Registrant and Parkdale America, LLC,
Parkdale Mills, Incorporated, and Magnolia Manufacturing Co. Inc.
effective as of February 15, 2002, filed as Exhibit 10.24.1 to
Registrant's report on Form 10-K for the year ended December 29, 2002.
*10.25 Tenth Amendment to Master Lease dated as of January 28, 2000, between
Atlantic Financial Group, Ltd. and the Registrant, together with all
exhibits thereto, filed as Exhibit 10 to Registrant's Report on Form
8-K dated February 11, 2000.
*10.25.1 Eleventh Amendment to Master Lease dated as of July 14, 2000 between
Atlantic Financial Group, Ltd. and the Registrant, filed as Exhibit
10.25.1 to Registrant's Registration Statement on Form S-4 (File No.
333-43014).
*10.25.2 Assignment and Termination Agreement dated as of August 31, 2000,
among Atlantic Financial Group, Ltd., Suntrust Bank, and the
Registrant, filed as Exhibit 10.25.2 to Registrant's report on Form
10-Q for the quarter ended October 1, 2000.
*10.26 2001 Stock Incentive Plan, filed as Exhibit 10.26 to Registrant's
report on Form 10-Q for the quarter ended April 1, 2001.
*10.26.1 Form of Incentive Stock Option Agreement under 2001 Stock Incentive
Plan, filed as Exhibit 10.26.1 to Registrant's report on Form 10-Q for
the quarter ended April 1, 2001.
*10.26.2 2002 Executive Incentive Compensation Plan filed as Exhibit 10.26.2 to
Registrant's report on Form 10-K for the year ended December 30, 2001.
*10.27.1 Joint Venture Agreement between Isko Dokuma Isletmeleri Sanayi ve
Ticaret A.S. and Cone Mills Corporation and Zekeriye Konukoglu and
Fatih Konukoglu and Oguzhan Gurdogan dated as of June 17, 2002, filed
as Exhibit 10.27.1 to Registrant's report on Form 10-Q for the quarter
ended September 29, 2002.
*10.27.2 Commercial Agreement among Isko Dokuma Isletmeleri Sanayi ve Ticaret
A.S., Cone Mills Corporation and IsKone Denim Pazarlama A.S. dated as
of October 3, 2002, filed as Exhibit 10.27.2 to Registrant's report on
Form 10-Q for the quarter ended September 29, 2002.
Exhibit
No. Description
*10.27.3 Transfer Price Agreement among Isko Dokuma Isletmeleri Sanayi ve
Ticaret A.S., Cone Mills Corporation and IsKone Denim Pazarlama A.S.
dated as of October 3, 2002, filed as Exhibit 10.27.3 to Registrant's
report on Form 10-Q for the quarter ended September 29, 2002.
*10.27.4 License Agreement among Isko Dokuma Isletmeleri Sanayi ve Ticaret
A.S., Cone Mills Corporation and IsKone Denim Pazarlama A.S. dated as
of October 3, 2002, filed as Exhibit 10.27.4 to Registrant's report on
Form 10-Q for the quarter ended September 29, 2002.
*10.27.5 Administrative Services Agreement between Isko Dokuma Isletmeleri
Sanayi ve Ticaret A.S. and IsKone Denim Pazarlama A.S. dated as of
October 3, 2002, filed as Exhibit 10.27.5 to Registrant's report on
Form 10-Q for the quarter ended September 29, 2002.
*21 Subsidiaries of the Registrant.
*23.1 Consent of McGladrey & Pullen, LLP, independent auditor, with respect
to the incorporation by reference in the Registrant's Registration
Statements on Form S-8 (Nos. 33-31977; 33-31979; 33-51951; 33-51953;
33-53705; 33-67800; 333-37054; and 333-60954) of their reports on the
consolidated financial statements and schedules included in
Registrant's report on Form 10-K for the year ended December 29, 2002.
*23.2 Consent of Auditors of Parras Cone de Mexico, S.A. de C.V. with
respect to the incorporation by reference in the Registrant's
Registration Statements on Form S-8 (Nos. 33-31977; 33-31979;
33-51951; 33-51953; 333-37054; 333-60954; and 33-67800;) of their
reports on the financial statements and schedules included in
Registrant's report on Form 10-K/A for the year ended December 29,
2002.
*99.1 Financial Statements of Parras Cone de Mexico, S.A. de C.V. as of and
for the year ended December 29, 2002, as filed as Exhibit 99.1 to
Registrant's report on Form 10-K/A for the year ended December 29,
2002.
*99.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, filed as Exhibit 99.2 to Registrant's report on Form 10-Q for
the quarter ended June 30, 2002.
- --------------------------------------------------------------------------
*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, 804 Green
Valley Road, Suite 300, 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: May 14, 2003 /s/Gary L. Smith
------------ -----------------
Gary L. Smith
Executive Vice President and
Chief Financial Officer
Annex A
Quarterly Certifications
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, John L.Bakane, chairman, president and chief executive officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cone Mills
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ John L. Bakane
Title: Chairman, President and Chief Executive Officer
Annex A
Quarterly Certifications
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Gary L. Smith, chief financial officer, certify that:
1. I have reviewed this report on Form 10-Q of Cone Mills Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ Gary L. Smith
Title: Chief Financial Officer
Annex B
Quarterly Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of Cone Mills Corporation ("Cone"), does hereby certify, to
such officer's knowledge, that:
The Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2003,
of Cone fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and information contained in the Form 10-Q
fairly presents, in all material respects, the financial condition and results
of operations of Cone.
Dated: May 14, 2003 /s/ John L. Bakane
Name: John L. Bakane
Title: Chairman, President and Chief Executive Officer
Dated: May 14, 2003 /s/ Gary L. Smith
Name: Gary L. Smith
Title: Chief Financial Officer