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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number 1-3634
CONE MILLS CORPORATION
(exact name of registrant as specified in its charter)
North Carolina 56-0367025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 North Elm Street, Greensboro, N.C. 27408
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 336-379-6220
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $ .10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by nonaffiliates of the registrant
as of February 19, 1998: $200,319,346.
Number of shares of common stock outstanding as of February 19, 1998: 26,166,933
shares.
Documents incorporated by reference: Portions of 1997 Annual Report to
Shareholders, Part II, Items 5, 6, 7 and 8; Proxy Statement for Annual Meeting
to be held May 12, 1998, Part III, Items 10, 11, 12 and 13 of this report.
Index to Exhibits - Pages 24 - 35
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PART I
Item 1. Business
THE COMPANY
Overview
Founded in 1891 Cone Mills Corporation (the "Company" or "Cone"), incorporated
and headquartered in North Carolina, is the world's largest producer of denim
fabrics and the largest commission printer of home furnishings in North America.
The Company competes domestically and internationally on the basis of styling
and product development, management experience, versatility and size of
manufacturing facilities and the Cone name and reputation. Cone employs
approximately 6,100 employees and operates nine manufacturing plants in North
and South Carolina. The Company also has a 50% interest in a denim manufacturing
facility in Mexico.
The Company operates in two business segments: Apparel Fabrics, which includes
denims and speciality sportswear; and Home Furnishings Products, which includes
commission printing and finishing services and print and jacquard decorative
fabrics.
The Company seeks growth of its core denim, specialty sportswear and decorative
fabric businesses through expansion into new geographic areas and markets,
product development and investment in value-added technology such as CAD/CAM.
Capital expenditures for the last five years have totaled approximately $210
million and the Company expects to spend approximately $37 million in 1998 for
capital projects.
The Company is engaged in denim production in Mexico through a joint venture
facility with Compania Industrial de Parras, S.A., ("CIPSA"). This facility,
Parras Cone de Mexico, S.A., ("Parras Cone"), in which the Company has a 50%
ownership interest, was completed and began production of basic denims and yarn
in late 1995.
During 1997 the Company sold its synthetic fabric division, including its
finished inventory, forward commitments and order book and substantially all the
assets of its real estate operations. Throughout 1997, the Company consolidated
its specialty sportswear finishing operation into its Carlisle finishing
facility and expects to achieve improved capacity utilization at Carlisle. The
consolidation involved the closing of the Company's Granite finishing operations
and moving machinery, equipment and manufacturing operations from that plant to
the Carlisle facility.
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Manufacturing efficiency was disrupted to a greater extent than planned, which
materially adversely impacted results of the sportswear and home furnishing
fabrics product lines for the year. See "Item 7. Management's Discussion and
Analysis of Results of Operations and Financial Condition-Strategic Initiatives"
and "Item 8. Financial Statements and Supplementary Data-Note 22 of the Notes to
Consolidated Financial Statements."
Business Segments
Information concerning industry segments for the Company's 1997, 1996 and 1995
fiscal years are incorporated by reference. See "Item 7. Management's Discussion
and Analysis of Results of Operations and Financial Condition-Strategic
Initiatives" and "Item 8. Financial Statement and Supplementary Data-Notes 19
and 22 of the Notes to Consolidated Financial Statements."
Market Developments
Within the apparel fabrics industry, casualwear, including denim and similar
apparel, has been the fastest growing category in recent years. The Company
believes that this growth is the result of several factors, including (i) the
adoption of casual lifestyles by the "baby-boom" generation, born between 1946
and 1964, and their children, (ii) the enhanced value of casual garments to
consumers resulting from lower acquisition costs and lower life cycle costs
(elimination of alteration, dry cleaning and pressing costs), (iii) enhanced
styling of casual garments along with greater acceptance of casual wear in the
workplace and (iv) strong brands such as Levi, Wrangler and The Gap which
continue to create fashion interest for consumers.
The Company's domestic apparel fabrics markets have been affected by changing
demographics associated with the maturation of the baby-boom generation. As the
baby-boom generation has matured, product trends have evolved away from
commodity-type products to higher quality products with more diverse styling. As
a result, denim apparel manufacturers desire better fabric quality and styling
to meet consumer demand, as well as faster service to reduce the risk of
changing fashion trends. The size of the 15-to 24-year-old age category, which
accounts for the largest jeans consumption segment of the U.S. population, began
to expand in the mid-1990s when the children of baby boomers began to reach
these ages. Demand for denim apparel is expected to increase as this segment of
the U.S. population expands.
4
Internationally, consumption of denims has increased in industrialized
countries, notwithstanding moderate population growth, as these countries
continue to adopt U.S. casual fashion trends. In less industrialized countries,
the potential market for denim jeans has continued to grow as youth populations
expand. However, the growth in denim demand has been countered by increased
global supply primarily in countries with lower labor costs. Apparel fabrics
exports were $175.1 million, $187.0 million and $175.7 million in 1997, 1996 and
1995, respectively. See "Business International Operations."
Apparel Products
Denims. The Company's denim products, accounting for approximately 80% of
apparel fabrics sales, are primarily designed for use in garments targeted for
the upper-end market, where styling and quality generally command premium fabric
prices. Fabric styling of denims is supported by the Company's stylists and
extensive use of computer-aided design and manufacturing systems. Denims are
generally "yarn-dyed," which means that the yarn is dyed before the fabric is
woven. The result is a fabric with variations in color that give denim its
distinctive appearance. After weaving, fabrics are processed further in
finishing operations that produce different textures and other physical
properties. During this process, the Company's product development specialists
and stylists generally work in collaboration with customers to assure that
fabrics meet customer requirements and can be manufactured efficiently. This
creates a strong working relationship that allows Cone to react quickly to its
customers' rapidly changing needs.
Although the markets and end uses for denim are very diverse, the Company
categorizes the market into heavyweight denims and specialty weight denims.
Heavyweight denim is used primarily in jeans and is by far the largest segment
of the denim market. Within the heavyweight market, the Company further
classifies its denims as "value-added" and "basic." Value-added denims are
distinguished by styling and customer service. Basic denims are less
differentiated by styling and customer service with competition being primarily
in the form of price and quality.
Cone's value-added denims are sold principally to independent brand name apparel
manufacturers. Cone's basic denims, with mass market appeal, are used primarily
in garments sold through retail chains, department stores and catalogs.
Customers for this product include a majority of the same names as for
value-added denims. Although the Company's basic denims are designed for the
upscale segment of these markets, the Company also produces basic heavyweight
blue
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denim, primarily at Parras Cone, to service mass market needs of certain
customers. Sales of this product constituted approximately one-fourth of total
denim sales in 1997.
The Company's largest denim customer is Levi Strauss, whose 501(R) jeans are
produced solely from the Company's proprietary fabrics. Other customers include
V.F. Corporation (Wrangler), The Gap, Calvin Klein, Aalfs (Arizona), P.L.
Industries (Hilfiger) and H.I.S. (Chic).
Specialty weight denims include a variety of weave constructions, colors and
weights and are used primarily in women's and children's wear. Although these
fabrics constitute only a small portion of the denim market, they tend to
establish market trends because of their use in higher fashion garments. Cone's
customers in this group include OshKosh and The Gap.
Specialty Sportswear Fabrics. The Company is the largest domestic producer of
yarn-dyed, plaid flannel and solid shade, chamois flannel shirting fabrics.
These fabrics are primarily manufactured for use in menswear and in
lighter-weight apparel products for women's and children's wear and sold through
catalogs, department stores and discounters. Customers for these fabrics include
M. Fine, L.L. Bean, J.C. Penney, Woolrich, Eddie Bauer and Levi Strauss.
Cone also serves niche markets for piece-dyed fabrics based on dye, finishing
and yarn formation technologies and provides fabrics such as fade resistant
Deepdown(TM) fabric and its wrinkle resistant fabric ProSpin(R).
Cone styles and distributes a line of specialty print fabrics for a wide range
of branded apparel customers. These fabrics, printed at the Company's Carlisle
plant, are products primarily for fashion women's and children's wear. Cone's
customers for these fabrics include OshKosh, L.L. Bean, Healthtex, J.C. Penney
and William Carter.
Through its Carlisle plant, the Company also provides fabric printing services
to converters of fashion apparel fabrics. These converters purchase unfinished
fabrics from weaving mills, use outside sources such as Carlisle to dye the
fabrics and print their designs, and then market the finished fabrics to apparel
manufacturers.
Marketing and Sales. The Company's marketing focus is to serve upper-end and
brand name apparel manufacturers through the
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development of products that are recognized in the marketplace for their
distinctive quality and styling.
Styles of the Company's denim and other fabrics vary in color, finish and
fabrication, depending upon fashion trends and the needs of the specific
customer. The Company's stylists monitor fashion trends by traveling throughout
the United States, Europe and the Far East to attend fashion and trade shows,
meet with garment manufacturers and retailers and conduct market research.
The Company employs an apparel fabrics marketing and sales staff of more than
140 persons. Business management of apparel fabrics is organized into four
operating divisions: Cone Denim North America, Cone Sportswear, Cone
International Marketing and Cone Denim Europe. Except for Cone Denim Europe, the
Company's apparel fabrics marketing groups are headquartered in Greensboro,
North Carolina, in proximity to apparel manufacturing facilities so that
customer requirements can be translated more effectively into finished products.
To provide a more direct working relationship with its customers, the Company
also maintains offices in New York, Los Angeles, San Francisco, Dallas, Brussels
and Singapore.
Manufacturing. The Company's denim facilities are modern, flexible, vertically
integrated, and encompass all manufacturing processes necessary to convert raw
fiber into finished fabrics. The Company has flexibility in its yarn spinning
operations, with open-end and ring spinning equipment. The Company's denim
weaving facilities utilize all major cotton weaving technologies, including
double-width projectile, air-jet and rapier machines. The Company's dyeing and
finishing facilities include a wide range of technologies, with seven indigo
long-chain dyeing machines, and beam dyeing, continuous overdye machinery and
raw cotton dyeing equipment. Specialty dyeing and printing processes for apparel
fabrics are conducted at the Company's Carlisle plant, which is one of the
largest textile printing facilities in the United States.
Cone is recognized internationally as a quality leader with its denim and
sportswear weaving plants being certified under the ISO 9002 process.
Product and process development is supported by manufacturing development
groups, which have specialists located in each facility. These groups work with
the Company's stylists and its customers' stylists to produce new products for
the marketplace. The Company uses on-line computer-aided design systems to
increase styling effectiveness.
7
Raw Materials. The primary raw material for the Company's fabric manufacturing
operations is cotton. The policies of the U.S. Government affect the cost and
supply of cotton in the U.S. and the policies of foreign governments have an
effect on worldwide prices and supplies as well. Since 1991, U.S. law has
allowed limited imports of cotton or related government payments to cotton
purchasers which have resulted in effective U.S. cotton costs being more
competitive with world levels. In 1996, Congress passed additional farm
legislation aimed at reducing farm subsidies and allowing farmers more
versatility in planting decisions. The long-term impact of this legislation on
cotton supplies and pricing is unclear. Although management believes that U.S.
companies will continue to be able to acquire adequate cotton supplies at prices
competitive with offshore manufacturers, there can be no assurance that these
results will always occur. To the extent that effective U.S. cotton prices
exceed world prices, the Company's competitiveness may be materially adversely
affected.
Since cotton is an agricultural product, its supply and quality are subject to
the forces of nature. Although the Company has always been able to acquire
sufficient supplies of cotton for its operations in the past, any shortage in
the cotton supply by reason of weather, disease or other factors could
materially adversely affect the Company's operations.
In late 1993 and continuing through 1995, cotton prices increased throughout the
world. Major trends that affected the rise in cotton prices during this time
frame were (i) an increase in worldwide demand, (ii) disappointing cotton crops
and (iii) financial speculation in the commodities markets. Mill-delivered
cotton prices per pound for the industry rose from the lower $.60s in 1993 to
the upper $.70s in 1994, into the $.90s during 1995. Cotton prices trended
downward into the mid $.70s to lower $.80s for 1996 and from the upper $.70s to
upper $.60s for 1997. Significant factors that affected the decrease in cotton
prices were (i) successful cotton crops in 1996 and 1997 especially in the U.S.,
(ii) decision by the Chinese government to encourage consumption of internally
produced and stored cotton rather than imports and (iii) the Asian economic
crisis that began in 1997 reducing consumption by mills in Asia. The Company
cannot always fully pass increased cotton costs on to its customers. See "Item
7. Management's Discussion and Analysis of Results of Operations and Financial
Condition."
The Company 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 hedge
committed and anticipated fabric
8
sales and to manage margin risks associated with price fluctuations on
anticipated cotton purchases. The Company primarily uses forward purchase
contracts and, to a lesser extent, futures and options contracts. Management
believes that its cotton purchasing program has resulted in lower overall cotton
prices than if cotton were purchased solely on a spot market basis or by solely
matching cotton purchases with product sales. Since prices for forward purchase
contracts are sometimes fixed in advance of shipment, the Company may benefit
from its fixed price purchases in cotton if prices thereafter rise, or fail to
benefit if prices subsequently fall. There can be no assurance the forward
purchase contracts and hedging transactions will not result in higher cotton
costs to the Company or will protect the Company from price fluctuations.
Cone also purchases "greige goods" (fabrics that have not been dyed or
finished), yarn and dyes and chemicals. These raw materials have normally been
available in adequate supplies through a number of suppliers.
Competition. The textile apparel fabrics business is highly competitive. Primary
competitive factors include price, product styling and differentiation, customer
service, quality and flexbility, with the significance of each factor dependent
upon the particular needs of the customer and the product involved.
No single company dominates the industry and domestic and foreign competitors
range from large, integrated enterprises to small niche concerns. There are nine
denim manufacturers in the United States, of which Cone is the largest, and
three domestic producers comprise approximately 60% of the U.S. productive
capacity. Increased foreign competition in domestic markets is in the form of
imported apparel garments and fabrics from Mexico and other countries. The
migration of garment manufacturing facilities to Mexico and Caribbean countries,
additional worldwide capacity, more aggressive pricing from domestic companies
and the proliferation of newly styled fabrics competing for fashion acceptance
have been factors affecting the Company's business environment. Any failure of
the Company to compete effectively in this environment or to keep pace with
changing markets could have a material adverse effect on the Company's results
of operations and financial position.
The level of import protection in the U.S. for domestic producers of textiles is
subject to both domestic political and foreign policy considerations. The World
Trade Organization ("WTO") was formed in January 1995 and is the successor to
the General Agreement on Trade and Tariffs ("GATT") approved by Congress in
December 1994. This new multilateral trade organization has set forth mechanisms
by
9
which world trade in textiles and clothing is being progressively liberalized by
phasing-out quotas and reducing duties over a ten-year period which began in
January of 1995. Although the Company's export business should benefit from
reduced tariffs, there can be no assurance that the significant reduction in
import protection for domestic textile manufacturers will not have a material
adverse effect on the Company's results of operations and financial condition.
The North American Free Trade Agreement ("NAFTA"), which became effective on
January 1, 1994, has created a free-trade zone among Canada, Mexico and the U.S.
NAFTA contains safeguards which were sought by the U.S. textile industry,
including a rule of origin requirement that products be processed in one of the
three countries in order to benefit from the agreement. NAFTA will phase out all
trade restrictions and tariffs on textiles and apparel among the three
countries. In addition, legislation has been proposed that would grant benefits
to other countries in the Caribbean that are roughly equivalent to those
applicable to Mexico under NAFTA. The Company's Mexican joint venture, Parras
Cone, benefits from its access to U.S. markets. There can be no assurance that
NAFTA, or the possible adoption of any proposed legislation, will not adversely
affect the Company.
The Company has focused its operations on the manufacture of fabrics for use in
garments that are less vulnerable to import penetration. Management believes the
location of the Company's U.S. manufacturing facilities, its 50% interest in the
Parras Cone plant in Mexico and its emphasis on shortening production and
delivery times allows Cone to respond more quickly than foreign producers to
changing fashion trends and to its domestic customers' demands for precise
production schedules and rapid delivery. The Company has invested in
technological and process improvements to meet demand for quality and styling.
Its emphasis on customer service is supported by its just-in-time and quick
response programs and by electronic data interchange (EDI) with customers. These
efforts have improved communication, planning and processing time in
manufacturing.
The Company believes it effectively competes in foreign markets through export
sales. See "Business - International Operations."
Seasonality
Demand for the Company's apparel products and the level of the Company's sales
fluctuate moderately during the year. There are three retail selling seasons:
spring, fall (back-to-school) and the holiday season. The Company's sales for a
particular selling season
10
generally begin six months in advance of that season.
Home Furnishings Products
The Company services the home furnishings markets through three divisions: Cone
Finishing, Cone Jacquards and Cone Decorative Fabrics.
Cone Finishing. The Cone Finishing Division, consisting of the Company's
Carlisle and Raytex plants, is the largest commission printer of decorative
fabrics in the United States and provides custom printing services to leading
home furnishings stylists and distributors. As commission printers, Carlisle and
Raytex prints fabrics owned by customers on a fee basis. The home furnishings
fabrics processed at Carlisle are generally used for upholstery and drapery
prints.
The Carlisle plant is a modern, one-million square foot facility specializing in
rotary screen printing. In recent years, the Company has invested heavily in
computerized color-mixing systems and automated process controls in order to
support its competitive strategy of focusing on quality and service. Customers
for Carlisle's home furnishings printing services include Waverly Division of F.
Schumacher & Co., P. Kaufman and Covington.
The Raytex plant is a modern, 260,000 square foot facility specializing in wide
rotary screen printing. In 1996, a new preparation range was installed providing
additional product capabilities. Raytex is one of the largest wide-fabric
commission printers in the United States. Customers for Raytex include Croscill,
Beco, Springs Industries and Revman.
Cone Finishing Division's marketing headquarters are located in New York City.
Marketing efforts of the New York sales staff are augmented by close working
relationships between Carlisle's and Raytex's production and technical staff and
customers' designers and stylists. Cone Finishing also maintains a customer
service center that utilizes electronic data interchange (EDI) with major
customers.
Consumer fashion preference is based upon coloration, texture and value. As with
all home furnishing fabrics, there is a risk that consumer fashion preference
will shift away from prints which took place in recent years.
Cone Jacquards. In 1995, the Company built a new jacquard weaving plant in order
to dampen the effects of shifts in consumer
11
preference from printed fabrics. The Cone Jacquards plant is a modern, 138,000
square foot facility with wide weaving machines. Cone Jacquards produces
broadloom jacquard fabrics for furniture manufacturers, fabric distributors,
retailers, converters and specialty products manufacturers. Customers for Cone
Jacquards include Richloom, Klaussner Furniture, Barrow Industries, Flexsteel
Industries and Schnadig Corporation.
Cone Decorative Fabrics. Cone Decorative Fabrics is a "converter" of printed and
solid woven fabrics for upholstery, draperies and bedspreads. A converter
designs and markets fabrics, which are manufactured and printed for the
converter by others. The Decorative Fabrics division's lines are printed
primarily at the Carlisle plant under the names "John Wolf Decorative Fabrics"
and "David and Dash."
Cone Decorative Fabrics is a well known designer and marketer of printed and
solid woven fabrics for use in upholstery, draperies and bedspreads.
Cone Decorative Fabrics are marketed domestically and internationally through
the division's sales staff and sales agents. The division's sales staff and
sales agents handle sales to large customers such as hotels, institutions and
furniture manufacturers, as well as jobbers, who resell to decorators, fabric
retailers and certain smaller quantity users. International sales and sales to
other smaller customers are made primarily through agents. Due to continuing
unsatisfactory operating results, in late 1997 the Company reorganized the
operations of John Wolf Decorative Fabrics to reduce costs and compete more
effectively.
Other Business Units. In 1997, the Company sold substantially all the assets of
its real estate operations, including most of the assets of its subsidiary
Cornwallis Development Co., for $19.5 million. Net sales from real estate
activities were historically less than two percent of the Company's total net
revenues. See "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition-Strategic Initiatives."
Competition. The home furnishings products business is highly competitive and
the Company competes primarily on the basis of quality and service. The Cone
Finishing Division competes directly with several large commission printers as
well as a number of smaller competitors. The Cone Finishing Division competes
indirectly with other suppliers of products used in the home furnishing industry
including jacquard woven fabrics, velvets and plain shade fabrics. Cone
Decorative Fabrics competes with a large number of domestic and foreign
suppliers of decorative fabrics.
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Seasonality. Demand for the Company's home furnishing products and the level of
the Company's sales fluctuate moderately during the year.
International Operations
The Company has a long history of distributing its products internationally and
exported approximately 35% of the Company's denim sales in 1997. The Company has
sales agents in Europe, Japan, Korea, Hong Kong, Africa, and throughout Central
and South America, and it maintains support services in trade financing, traffic
and transportation in order to support its international presence. The Company's
strategy is to service its international customers with the same degree of
commitment to quality, service and fabric development as its domestic customers.
The Company's international customers include: Levi International, Joker Jeans
and Big Star in Europe; Edwin in Japan; Wellsum in Hong Kong; and Americanino
brand, Custer, Jeans and Jackets, UFO brand and Wrangler in South America.
Principal competitive factors in the international markets for denims are
quality, price and styling. Denim jeans have an image of being uniquely American
products, which complements the Company's strategy of serving the upper-end
"genuine" jeans market.
The Company's competitiveness in international market segments is influenced by
tariffs and transportation costs. The Company has a 50% interest in a denim
manufacturing facility in Mexico and is assessing the feasibility of additional
manufacturing platforms within certain trade blocs in order to compete more
effectively in these markets.
The Company has several objectives in pursuing its Mexican initiatives. The
Company is seeking access to the Mexican distribution system to sell the
Company's products and access to lower cost cut-and-sew facilities in order to
increase market share with private label customers and large branded customers
migrating to Mexico. The Company is also seeking to gain production cost
advantages while benefiting from its technological expertise. The Company
exports basic denims made by Parras Cone by utilizing Cone's distribution
network.
Cone Decorative Fabrics and Cone Jacquards export approximately 10% of their
sales volume. Styling and service are the principal competitive factors
affecting its position in these markets. The Company believes that there is an
international demand for U.S. styling and design.
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Trademarks, Copyrights and Patents
The Company owns several registered trademarks containing the "Cone" name and
pine cone design. In addition, the Company holds various other trademarks, trade
names, copyrights and patents used in connection with its business and products,
both domestically and internationally. The Company believes that the name
recognition of Cone Mills and its reputation for quality, service and product
development have value in both domestic and international markets.
Customers
The Company has one customer, Levi Strauss ("Levi"), which accounts for more
than 10% of net sales. Sales to this customer accounted for approximately 37%,
49% and 39% of sales in 1997, 1996 and 1995, respectively. The loss of Levi as a
customer, or a significant reduction in its purchases from the Company, would
have a material adverse effect on the Company's financial position and results
of operations.
Levi has been a customer of the Company since 1915 and a close, cooperative
supplier/customer relationship has evolved through the development of the
Company's proprietary fabrics for use in Levi's 501(R) family of jeans. In
addition to supplying fabrics for Levi's 501(R) family of jeans, the Company
sells other denim fabrics to Levi. Because the Company is Levi's major denim
supplier, Levi initiated discussions with the Company in 1989 concerning ways to
assure the continuity of this relationship. As a result of these discussions,
Cone and Levi entered into an exclusive Supply Agreement as of March 30, 1992,
which confirms that Levi will continue to use only Cone's proprietary denim
fabrics in manufacturing Levi's 501(R) family of jeans and that Cone will
continue to supply such fabrics solely to Levi. The volume of purchases by Levi
and the prices charged by Cone will continue to be subject to customary
negotiations between the parties.
The Supply Agreement expires on March 30, 2003 and is automatically extended,
unless either party gives notice otherwise, for an additional year so that the
remaining term is five years. Following a change in control, the Supply
Agreement would terminate at the end of the three-year supply arrangement or of
the lease term, as the case may be. Additionally, Levi may terminate the Supply
Agreement at any time upon 30 days' written notice and either party may
terminate the Supply Agreement in the event of the other party's insolvency,
bankruptcy or occurrence of a similar event.
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Backlog
The Company's order backlog was approximately $157 million at December 28, 1997,
as compared to approximately $132 million at December 29, 1996. Physical
deliveries for accepted fabric orders in the apparel industry vary in that some
products are ordered for immediate delivery only, while others are ordered for
delivery several months in the future. In addition, the Company has an ongoing
proprietary program for which orders are issued only for nearby delivery.
Therefore, orders on hand are not necessarily indicative of total future
revenues. It is expected that substantially all of the orders outstanding at
December 28, 1997, will be filled within the first quarter of 1998.
Research and Development
The research and development activities of the Company are directed primarily
toward improving the quality, styling and performance of its apparel fabrics and
other products and services. The Company also is engaged in the development of
computer-aided design and manufacturing systems and other methods of improving
the interaction between the Company's stylists and its customers. These
activities are conducted at various facilities, and expenses related to these
activities are an immaterial portion of the Company's overall operating costs.
Governmental Regulation
Federal, state and local regulations relating to the workplace and the discharge
of materials into the environment are continually changing; therefore, it is
difficult to gauge the total future impact of such regulations on the Company.
However, existing government regulations are not expected to have a material
effect on the Company's financial position, operating results or planned capital
expenditures. The Company currently has an active environmental protection
committee and an active workplace safety organization.
Employees
At January 31, 1998, the Company employed approximately 6,100 persons, of whom
approximately 1,200 were salaried and approximately 4,900 were hourly employees.
Of such hourly employees, approximately 1,900 are represented by collective
bargaining units and are employed under collective bargaining agreements that
provide for annual wage negotiations in the spring of each year. Based upon its
records relating to the withholding of union dues from employee
15
compensation, the Company believes that approximately 950 of its employees are
dues-paying union members. The Company has not suffered any major disruptions in
its operations from strikes or similar events for more than a decade and
considers its relationship with its employees to be satisfactory.
Item 2. Property
Cone's U.S. manufacturing facilities consist of nine plants, seven located in
North Carolina and two in South Carolina, with approximately 4.4 million square
feet of floor space. The apparel fabrics and home furnishings products segments
operate six and three plants, respectively. The Company also maintains several
distribution centers and warehouses. Internationally, the Company has a 50%
interest in a 575,000 square foot denim manufacturing facility in Parras,
Mexico.
All such facilities are maintained in good condition and are both adequate and
suitable for their respective purposes. Even when such facilities are
substantially fully utilized, the Company believes that it is properly
positioned to expand productive capacity. Additional higher margin fabrics can
be produced through changes in product mix and acquisition of yarn and greige
goods from outside sources for further processing and finishing.
All U.S. manufacturing facilities are held in fee and are substantially free of
any significant liens or other encumbrances. The Mexican denim facility serves
as collateral for a portion of the debt of the joint venture company.
The Company leases its executive and administrative offices, located in
Greensboro, North Carolina. Other offices, located in various U.S. cities,
Brussels, and Singapore, are leased from unrelated parties.
Item 3. Legal Proceedings
In November 1988, William J. Elmore and Wayne Comer (the "Plaintiffs") former
employees of the Company, instituted a class action suit against the Company and
certain other defendants in which the Plaintiffs asserted a variety of claims
related to the Cone Mills Corporation 1983 ESOP (the "1983 ESOP") and certain
other employee benefit plans maintained by the Company. In March 1992, the
United States District Court in Greenville, South Carolina entered a judgment in
the amount of $15.5 million (including an attorneys' fee award) against the
Company with respect to an alleged promise to make additional Company
contributions to the 1983 ESOP
16
and all claims unrelated to the alleged promise were dismissed. The Company,
certain individual defendants and the Plaintiffs appealed.
On May 6, 1994, the United States Court of Appeals for the Fourth Circuit,
sitting en banc, affirmed the prior conclusion of a panel of three of its judges
and unanimously reversed the $15.5 million judgment and unanimously affirmed all
of the District Court's rulings in favor of the Company. However, the Court of
Appeals affirmed, by an equally divided court, the District Court's holding that
Plaintiffs should be allowed to proceed on an alternative theory whether,
subject to proof of detrimental reliance, Plaintiffs could establish that a
letter to salaried employees on December 15, 1983 created an enforceable
obligation that could allow recovery on a theory of equitable estoppel.
Accordingly, the case was remanded to the District Court for a determination of
whether the Plaintiffs could establish detrimental reliance creating estoppel of
the Company.
On April 19, 1995, the District Court granted a motion by the Company for
summary judgment on the issues of equitable estoppel and third-party beneficiary
of contract which had been remanded to it by the Court of Appeals. The Court
ruled that the Plaintiffs could not forecast necessary proof of detrimental
reliance. The District Court, however, granted Plaintiffs motion to amend the
complaint insofar as they sought to pursue a "new" claim for unjust enrichment,
but denied their motion to amend so far as they sought to add claims for
promissory estoppel and unilateral contract. The court further denied the
Company's motion to decertify the class.
The District Court held a hearing on July 24, 1995 to decide on the merits
Plaintiffs' lone remaining claim of unjust enrichment, and in an order entered
September 25, 1995, the District Court dismissed that claim with prejudice. On
October 20, 1995, the Plaintiffs appealed to the Court of Appeals from the April
19, 1995 and September 25, 1995 orders of the District Court. Oral argument on
Plaintiffs' appeal was held in the Court of Appeals on October 31, 1996. Due to
the uncertainties inherent in the litigation process, it is not possible to
predict the ultimate outcome of this lawsuit. However, the Company has defended
this matter vigorously, and it is the opinion of the Company's management that
the probability is remote that this lawsuit, when finally concluded, will have a
material adverse effect on the Company's financial condition or results of
operations.
The Company and its subsidiaries are involved in legal proceedings and claims
arising in the ordinary course of business. Although there can be no assurance
as to the ultimate disposition of these
17
matters, management believes that the probable resolution of such contingencies
will not have a material adverse effect on the financial condition of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 4A. Executive Officers of the Registrant
Name Age Position with the Company
- ---- --- -------------------------
J. Patrick Danahy 54 Director, President, and
Chief Executive Officer
John L. Bakane 47 Director,
Executive Vice President and
President Apparel Products Group
Anthony L. Furr 54 Vice President and
Chief Financial Officer
Marvin A. Woolen, Jr. 57 Vice President-Cotton Purchasing
James S. Butner 52 Vice President
Neil W. Koonce 50 Vice President and
General Counsel
Terry L. Weatherford 55 Vice President and Secretary
David E. Bray 59 Treasurer
Gary L. Smith 39 Controller
All officers of the Registrant are elected or reelected each year at the Annual
Meeting of the Board of Directors or at other times as necessary. All officers
serve at the pleasure of the Board of Directors and until their successors are
elected and qualified.
J. Patrick Danahy joined the Company in 1971. He has been a Director since 1989
and President and Chief Executive Officer since 1990.
John L. Bakane joined the Company in 1975. He was named Chief Financial Officer
in 1988 and was elected to the Board of Directors in 1989. He was elected
Executive Vice President in 1995. In November 1996, he assumed responsibility
for management of the Denim
18
Group of the Company and in April 1997 he was appointed President of Cone
Apparel Products Group.
Anthony L. Furr joined the Company in May 1997 as Vice President and Chief
Financial Officer. From 1992 to 1995 he was Chairman, President and Chief
Executive Officer of Wachovia Bank of South Carolina, N.A. and Executive Vice
President of the parent Wachovia Corporation for whom he served as Executive
Vice President and Chief Financial Officer from 1990 to 1992.
Marvin A. Woolen was employed by the Company in July 1995 as director of cotton
purchasing. He has been in the cotton sales, merchandising, purchasing, classing
and shipping business since 1971. From 1988 to 1995 he was president of Rollins
Company, a cotton shipping firm. He was elected Vice President in 1997.
James S. Butner has been employed by the Company since 1984. He was named
corporate Vice President for Industrial and Public Relations in 1988.
Neil W. Koonce was employed by the Company in 1974. He has been General Counsel
since 1987 and Vice President since 1989.
Terry L. Weatherford was employed by the Company and elected Assistant Secretary
in May 1993. He was elected Secretary in December 1993. In 1995 he also was
elected Vice President.
David E. Bray has been employed by the Company since 1977 and has been Treasurer
since 1988.
Gary L. Smith was employed by the Company in 1981 and was serving as Manager of
Business Analysis when he was elected Assistant Controller in 1994. He was named
Controller in December 1996.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock has traded on the New York Stock Exchange under the
ticker symbol "COE" since June 18, 1992, the date of its public offering. The
approximate number of holders of record of the Company's Common Stock as of
February 27, 1998 was 449.
Information required by this Item on the sales prices and dividends of the
Common Stock of the Company appearing under the heading "Quarterly Financial
Data (Unaudited)" on page 38 of the
19
Registrant's 1997 Annual Report is incorporated herein by reference.
Item 6. Selected Financial Data
The information appearing under the heading "Historical Financial Review" on
page 40 of the Registrant's 1997 Annual Report to Shareholders is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The information appearing under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 14 thru 18
of the Registrant's 1997 Annual Report to Shareholders is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required for the Company in 1997.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes thereto, appearing on pages 20
through 38 of the Registrant's 1997 Annual Report to Shareholders, are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information relating to directors of the Company is presented under the heading
"Election of Directors" in the Company's definitive Proxy Statement prepared for
the Annual Meeting of Shareholders to be held on May 12, 1998, and is hereby
incorporated by reference. Information regarding executive officers is included
as Item 4A in Part I.
Item 11. Executive Compensation.
Information relating to executive compensation is presented under the heading
"Executive Compensation" in the Company's definitive
20
Proxy Statement prepared for the Annual Meeting of Shareholders to be held on
May 12, 1998, and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information with respect to beneficial ownership of the Company's voting
securities by each director and all officers and directors as a group, and by
any person known to beneficially own more than 5% of any class of voting
security of the Company, is presented under the heading "Security Ownership of
Directors, Nominees and Named Executive Officers" and "Security Ownership of
Certain Beneficial Owners" in the Company's definitive Proxy Statement prepared
for the Annual Meeting of Shareholders to be held on May 12, 1998, and is hereby
incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
Information with respect to certain relationships and related transactions is
presented under the headings "Compensation of Directors" in the Company's
definitive Proxy Statement prepared for the Annual Meeting of Shareholders to be
held on May 12, 1998 and is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following financial statements of the Registrant are
incorporated by reference in Item 8 hereof:
Report of Independent Auditor
Consolidated Statements of Operations for the Years
Ended December 28, 1997, December 29, 1996 and
December 31, 1995
Consolidated Balance Sheets as of December 28, 1997
and December 29, 1996
Consolidated Statements of Stockholders' Equity for the
Years Ended December 28, 1997, December 29, 1996 and
December 31, 1995
Consolidated Statements of Cash Flows for the Years
Ended December 28, 1997, December 29, 1996 and
21
December 31, 1995
Notes to Consolidated Financial Statements
(a)(2) The following Financial Statement Schedules are
presented on pages 22 through 23 hereto.
Report of Independent Auditor relating to Schedule
II
Schedule II - Valuation and Qualifying Accounts
All other schedules specified under Regulation S-X are
omitted because they are not applicable, not required or
the information required appears in the Consolidated
Financial Statements or Notes thereto.
(a)(3) Exhibits. Exhibits to this report are listed on the
accompanying Index to Exhibits.
(b) Reports on Form 8-K
No report on 8-K was filed during the fourth quarter of
1997.
22
MCGLADREY & PULLEN, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Cone Mills Corporation
Greensboro, North Carolina
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule II is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in our audits of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
/s/ McGLADREY & PULLEN, LLP
McGladrey & Pullen, LLP
[zz]
Greensboro, North Carolina
February 13, 1998
23
CONE MILLS CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 28, 1997, December 29, 1996 and December 31, 1995
(amounts in thousands)
Column A Column B Column C Column D Column E
- ---------------------------------------------------- -------- -------- -------- --------
Additions
----------------------
Balance (1) (2)
at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
----------- --------- -------- -------- ---------- ---------
December 28, 1997
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful Accounts $3,000 $ 624 $ -- $2,124(a)(c) $1,500
------ ------ ---- ------ ------
Reserve for inventory (b) -- 5,075 -- -- 5,075
------ ------ ---- ------ ------
Reserve for fixed asset writedowns 2,638 -- -- 1,000 1,638
------ ------ ---- ------ ------
Reserve for loss on real estate disposal 4,500 -- -- 4,500 --
------ ------ ---- ------ ------
Reserve for future losses(b) 1,725 950 -- 1,318 1,357
------ ------ ---- ------ ------
December 29, 1996
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful Accounts $3,200 $ 127 $ -- $ 327(a) $3,000
------ ------ ---- ------ ------
Reserve for fixed asset writedowns (b) -- 2,638 -- -- 2,638
------ ------ ---- ------ ------
Reserve for loss on real estate disposal (b) -- 4,500 -- -- 4,500
------ ------ ---- ------ ------
Reserve for future losses (b) 2,644 1,522 -- 2,441 1,725
------ ------ ---- ------ ------
December 31, 1995
Valuation accounts deducted
from the assets to which
they apply:
Provision for doubtful Accounts $3,000 $ 411 $ -- $ 211(a) $3,200
------ ------ ---- ------ ------
Reserve for inventory 45 -- -- 45 --
------ ------ ---- ------ ------
Reserve for future losses (b) -- 2,644 -- -- 2,644
------ ------ ---- ------ ------
(a) Represents bad debts charged off.
(b) Represents reserves charged to costs and expenses.
(c) Includes reduction of $1,750 related to sale of receivables to Cone
Receivables, LLC.
24
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*2.1(a) Purchase Agreement between Registrant
and Cone Receivables LLC dated as of
March 25, 1997, filed as Exhibit 2.1(l)
to Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
*2.1(b) Receivables Purchase Agreement dated
as of March 25, 1997, among Cone
Receivables LLC, as Seller, the
Registrant, as Servicer, and
Delaware Funding Corporation, as
buyer, filed as Exhibit 2.1(m) to
Registrant's report on Form 10-Q
for the quarter ended March 30, 1997.
*2.2(a) Investment Agreement dated as of
June 18, 1993, among Compania Industrial
de Parras, S.A. de C.V., Sr. Rodolfo
Garcia Muriel, and Cone Mills
Corporation, filed as Exhibit 2.2(a)
to Registrant's report on Form 10-Q for
the quarter ended July 4, 1993, with
exhibits herein numbered 2.2(b),(c),
(d), (f), (g), and (j) attached.
*2.2(b) Commercial Agreement dated as of June
25, 1993, among Compania Industrial de
Parras, S.A. de C.V., Cone Mills
Corporation and Parras Cone de Mexico,
S.A., filed as Exhibit 2.2(b) to
Registrant's report on Form 10-Q for the
quarter ended July 4, 1993.
*2.2(c) Guaranty Agreement dated as of June 25,
1993, between Cone Mills Corporation
and Compania Industrial de Parras, S.A.
de C.V., filed as Exhibit 2.2(c) to
Registrant's report on Form 10-Q for
the quarter ended July 4, 1993.
25
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*2.2(d) Joint Venture Agreement dated as of
June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V.,
and Cone Mills (Mexico), S.A. de C.V.
filed as Exhibit 2.2(d) to
Registrant's report on Form 10-Q for
the quarter ended July 4, 1993.
*2.2(e) First Amendment to Joint Venture
Agreement dated as of June 14, 1995,
between Compania Industrial de Parras,
S.A. de C.V., and Cone Mills (Mexico),
S.A. de C.V., filed as Exhibit 2.2(e)
to the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*2.2(f) Joint Venture Registration Rights
Agreement dated as of June 25, 1993,
among Parras Cone de Mexico, S.A.,
Compania Industrial de Parras, S.A. de
C.V. and Cone Mills (Mexico),
S.A. de C.V. filed as Exhibit 2.2(e)
to Registrant's report on Form 10-Q
for the quarter ended July 4, 1993.
*2.2(g) Parras Registration Rights Agreement
dated as of June 25, 1993, between Compania
Industrial de Parras, S.A. de C.V. and
Cone Mills Corporation filed as Exhibit
2.2(f) to the Registrant's report on Form
10-Q for the quarter ended July 4, 1993.
*2.2(h) Guaranty Agreement dated as of June 14,
1995, between Compania Industrial de
Parras, S.A. de C.V. and Cone Mills
Corporation filed as Exhibit 2.2(h) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*2.2(i) Guaranty Agreement dated as of June 15, 1995,
between Cone Mills Corporation and Morgan
Guaranty Trust Company of New York filed as
Exhibit 2.2(i) to the Registrant's report on
Form 10-Q for the quarter ended July 2, 1995.
26
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*2.2(j) Support Agreement dated as of June 25,
1993, among Cone Mills Corporation, Sr.
Rodolfo L. Garcia, Sr. Rodolfo Garcia
Muriel and certain other person listed
herein ("private stockholders") filed
as Exhibit 2.2(g) to Registrant's
report on Form 10-Q for the quarter
ended July 4, 1993.
*2.2(k) Call Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(k) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
*2.2(l) Put Option dated September 25, 1995,
between Registrant and SMM Trust, 1995
- M, a Delaware business trust, filed
as Exhibit 2.2(l) to the Registrant's
report on Form 10-Q for the quarter
ended October 1, 1995.
*2.2(m) Letter Agreement dated January 11, 1996
among Registrant, Rodolfo Garcia
Muriel, and Compania Industrial de
Parras, S.A. de C.V., filed as Exhibit
2.2(m) to the Registrant's report on
Form 10-K for the year ended December
31, 1995.
*2.3 Olympic Division Acquisition Agreement
by and among Vitafoam Incorporated,
British Vita PLC, and Registrant
dated January 19, 1996 with related
Lease Agreement, Lease Agreement and
Option to Purchase, Sublease Agreement,
Services Agreement, License Agreement
and Hold Back Escrow Agreement, each
dated January 22, 1996. The Acquisition
Agreement and related agreements were
filed as Exhibit 2.4 to the Registrant's
report on Form 10-K for the year ended
December 31, 1995. The following
exhibits and schedules to the Acquisition
27
Exhibit Sequential
No. Description Page No.
--- ----------- --------
Agreement have been omitted. The
Registrant hereby undertakes to furnish
supplementally a copy of such omitted
exhibit or schedule to the Commission
upon request.
Exhibits
--------
Exhibit A1 Form of Buyer Lease
Exhibit A2 Form of Buyer Lease
Exhibit B Form of Holdback Escrow
Agreement
Exhibit C1 Facility 1
Exhibit C2 Facility 2
Exhibit C3 Facility 3
Exhibit C4 Facility 4
Exhibit C5 Facility 5
Exhibit C6 Facility 6
Exhibit D Form of Sublease Agreement
Exhibit E Form of Opinion of Buyer's
Counsel
Exhibit F Form of Opinion of Seller's
Counsel
Exhibit G Form of Assumption Agreement
Exhibit H Form of Services Agreement
Exhibit I Inventory Valuation Principles
Exhibit J Form of License Agreement
Schedules
---------
Schedule 1.1(a) Excluded Assets
Schedule 1.1(b) Tangible Fixed Assets
Schedule 2.8 Assigned Contracts
Schedule 2.10 Allocation of Purchase
Price
Schedule 4.3 Consents and
Authorizations
Schedule 4.7 Contracts by Category
Schedule 4.9 Litigation
Schedule 4.11 Tax Matters
Schedule 4.12 Licenses and Permits
Schedule 4.14 Tangible Personal
Property
Schedule 4.15 Employees and Wage Rates
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
28
Exhibit Sequential
No. Description Page No.
--- ----------- --------
Schedule 4.18 Licenses to Intellectual
Property; Third-party
Patents
Schedule 4.19 Purchases from One Party
Schedule 4.22 Real Property
Schedule 4.23 Business Names
Schedule 4.24 Environmental Matters
Schedule 9.4 Facility 5 Remediation Plan
*4.1 Restated Articles of Incorporation of
the Registrant effective August 25,
1993, filed as Exhibit 4.1 to
Registrant's report on Form 10-Q for
the quarter ended October 3, 1993.
*4.2 Amended and Restated Bylaws of Registrant,
Effective June 18, 1992, filed as Exhibit
3.5 to the Registrant's Registration
Statement on Form S-1 (File No. 33-46907).
*4.3 Note Agreement dated as of August 13,
1992, between Cone Mills Corporation
and The Prudential Insurance Company of
America, with form of 8% promissory
note attached, filed as Exhibit 4.01 to
the Registrant's report on Form 8-K
dated August 13, 1992.
*4.3(a) Letter Agreement dated September 11,
1992, amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.2 to the
Registrant's report on Form 8-K dated
March 1, 1995.
*4.3(b) Letter Agreement dated July 19, 1993,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.3 to the
Registrant's report on Form 8-K dated
March 1, 1995.
*4.3(c) Letter Agreement dated June 30, 1994,
amending the Note Agreement dated
29
Exhibit Sequential
No. Description Page No.
--- ----------- --------
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.4 to the
Registrant's report on Form 8-K dated
March 1, 1995.
*4.3(d) Letter Agreement dated November 14, 1994,
amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company of
America filed as Exhibit 4.5 to the
Registrant's report on Form 8-K dated
March 1, 1995.
*4.3(e) Letter Agreement dated as of June 30,
1995, amending the Note Agreement dated
August 13, 1992, between the Registrant
and The Prudential Insurance Company
of America filed as Exhibit 4.3(e) to
the Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*4.3(f) Letter Agreement dated as of June 30,
1995, between the Registrant and
The Prudential Insurance Company
of America superseding Letter Agreement
filed as Exhibit 4.3(e) to the
Registrant's report on Form 10-Q
for the quarter ended July 2, 1995.
*4.3(g) Letter Agreement dated as of March 30,
1996, between the Registrant and The
Prudential Insurance Company of America
filed as Exhibit 4.3(g) to the
Registrant's report on Form 10-Q for
the quarter ended March 31, 1996.
*4.3(h) Letter Agreement dated as of January
31, 1997, between the Registrant and
The Prudential Insurance Company of
America filed as Exhibit 4.3(h) to the
Registrant's report on Form 10-K for
the year ended December 29, 1996.
30
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*4.3(i) 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 the
Registrant's report on Form 10-Q for
the quarter ended September 28, 1997.
*4.4 Credit Agreement dated August 7, 1997,
among the Registrant, various banks and
Morgan Guaranty Trust Company of New
York as agent, filed as Exhibit 4.4 to
the Registrant's report on Form 10-Q
for the quarter ended September 28,
1997.
*4.5 Specimen Class A Preferred Stock
Certificate, filed as Exhibit 4.5
to the Registrant's Registration
Statement on Form S-1(File No. 33-46907).
*4.6 Specimen Common Stock Certificate,
effective June 18, 1992, filed as
Exhibit 4.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-46907).
*4.7 The 401(k) Program of Cone Mills
Corporation, amended and restated
effective December 1, 1994, filed as
Exhibit 4.8 to the Registrant's report
on Form 10-K for year ended January 1,
1995.
*4.7(a) First Amendment to the 401(k) Program
of Cone Mills Corporation dated May 9,
1995, filed as Exhibit 4.8(a) to the
Registrant's report on Form 10-K for
year ended December 31, 1995.
*4.7(b) Second Amendment to the 401(k)
Program of Cone Mills Corporation
dated December 5, 1995, filed as
Exhibit 4.8(b) to the Registrant's
31
Exhibit Sequential
No. Description Page No.
--- ----------- --------
Report on Form 10-K for year ended
December 31, 1995.
*4.7(c) Third Amendment to the 401(k) Program
of Cone Mills Corporation dated August
7, 1997, filed as Exhibit 4.7(c) to the
Registrant's report on Form 10-Q for
the quarter ended September 28, 1997.
4.7(d) Fourth Amendment to the 401(k)
Program of Cone Mills Corporation
dated December 4, 1997. 38
*4.8 Cone Mills Corporation 1983 ESOP as
amended and restated effective December
1, 1994, filed as Exhibit 4.9 to the
Registrant's report on Form 10-K for
year ended January 1, 1995.
*4.8(a) First Amendment to the Cone Mills
Corporation 1983 ESOP dated May 9,
1995, filed as Exhibit 4.9(a) to the
Registrant's report on Form 10-K for
year ended December 31, 1995.
*4.8(b) Second Amendment to the Cone Mills
Corporation 1983 ESOP dated December 5,
1995, filed as Exhibit 4.9(b) to the
Registrant's report on Form 10-K for
year ended December 31, 1995.
*4.8(c) Third Amendment to the Cone Mills
Corporation 1983 ESOP dated August 7,
1997, filed as Exhibit 4.8(c) to the
Registrant's report on Form 10-Q for
the quarter ended September 28, 1997.
4.8(d) Fourth Amendment to the Cone Mills
Corporation 1983 ESOP dated
December 4, 1997. 40
32
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*4.9 Indenture dated as of February 14,
1995, between Cone Mills Corporation
and Wachovia Bank of North Carolina,
N.A. as Trustee, filed as Exhibit 4.1
to Registrant's Registration Statement
on Form S-3 (File No. 33-57713).
Management contract or compensatory plan or arrangement
(Exhibits 10.1 - 10.13)
*10.1 Employees' Retirement Plan of Cone
Mills Corporation as amended and
restated effective December 1, 1994,
filed as Exhibit 10.1 to the
Registrant's report on Form 10-K for
the year ended January 1, 1995.
*10.1(a) First Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated May 9,1995, filed as
Exhibit 10.1(a) to the Registrant's
report on Form 10-K for the year ended
December 31, 1995.
*10.1(b) Second Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated December 5, 1995,
filed as Exhibit 10.1(b) to the
Registrant's report on Form 10-K for
the year ended December 31, 1995.
*10.1(c) Third Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation dated August 16, 1996,
filed as Exhibit 10.1(c) to the
Registrant's report on Form 10-K for
the year ended December 29, 1996.
*10.1(d) Fourth Amendment to the Employees'
Retirement Plan of Cone Mills
Corporation, filed as Exhibit 10 to the
Registrant's report on Form 10-Q for
the quarter ended
33
Exhibit Sequential
No. Description Page No.
--- ----------- --------
September 28, 1997.
10.1(e) Fifth Amendment to Employees'
Retirement Plan of Cone Mills
Corporation dated December 4, 1997. 41
*10.2 Cone Mills Corporation SERP as amended
and restated as of December 5, 1995,
filed as Exhibit 10.2 to the
Registrant's report on Form 10-K for
the year ended December 31, 1995.
*10.3 Excess Benefit Plan of Cone Mills
Corporation as amended and restated as
of December 5, 1995, filed as Exhibit
10.3 to the Registrant's report on Form
10-K for the year ended December 31,
1995.
*10.4 1984 Stock Option Plan of Registrant
filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1
(File No. 33-28040).
*10.5 Form of Nonqualified Stock Option
Agreement under 1984 Stock Option Plan
of Registrant filed as Exhibit 10.8 to
the Registrant's Registration Statement
on Form S-1 (File No. 33-28040).
*10.6 Form of Incentive Stock Option Agreement
under 1984 Stock Option Plan of
Registrant filed as Exhibit 10.9 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-28040).
*10.7 1992 Stock Option Plan of Registrant
filed as Exhibit 10.9 to the
Registrant's Report on Form 10-K for
the year ended December 29, 1991.
*10.7(a) Amended and Restated 1992 Stock Plan
filed as Exhibit 10.1 to
Registrant's report on Form 10-Q
34
Exhibit Sequential
No. Description Page No.
--- ----------- --------
for the quarter ended March 31, 1996.
*10.8 Form of Incentive Stock Option
Agreement under 1992 Stock Option Plan
filed as Exhibit 10.10 to the
Registrant's report on Form 10-K for
the year ended January 3, 1993.
*10.8(a) Form of Nonqualified Stock Option
Agreement under 1992 Stock Option Plan,
filed as Exhibit 10.8(a) to the
Registrant's report on Form 10-K for
the year ended December 29, 1996.
*10.8(b) Form of Nonqualified Stock Option
Agreement under 1992 Amended and
Restated Stock Plan, filed as Exhibit
10.8(b) to the Registrant's report on
Form 10-K for the year ended December
29, 1996.
10.8(c) Form of Restricted Stock Award
Agreement under 1992 Amended and
Restated Stock Plan. 44
*10.9 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.
*10.10 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.
*10.11 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.
35
Exhibit Sequential
No. Description Page No.
--- ----------- --------
*10.12 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.
*10.13 1997 Senior Management Discretionary
Bonus Plan, filed as Exhibit 10.13 to
the Registrant's report on Form 10-K
for the year ended December 29, 1996.
10.14 Consulting Agreement between Dewey L.
Trogdon and the Registrant dated
December 19, 1997. 48
*10.15 Form of Agreement between the Registrant
and Levi Strauss dated as of March 30,
1992, filed as Exhibit 10.14 to the
Registrant's Registration Statement on
Form S-1 (File No. 33-46907).
*10.16 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).
21 Subsidiaries of the Registrant. 50
23.l 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 and
33-67800) of their reports on the
consolidated financial statements
and schedules included in this
Annual Report on Form 10-K. 51
27 Financial Data Schedule 52
- ---------
* Incorporated by reference to the statement or report indicated.
Page 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CONE MILLS CORPORATION
Date: March 26, 1998 By: /s/ J. Patrick Danahy
---------------- ---------------------
J.Patrick Danahy
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Dewey L. Trogdon Chairman of the Board March 26, 1998
- ---------------------
(Dewey L. Trogdon)
/s/ J. Patrick Danahy Director, President March 26, 1998
- --------------------- and Chief Executive
(J. Patrick Danahy) Officer (Principal
Executive Officer)
/s/ Anthony L. Furr Vice President and March 26, 1998
- --------------------- Chief Financial Officer
(Anthony L. Furr)
/s/ Gary L. Smith Controller March 26, 1998
- --------------------- (Principal Accounting
(Gary L. Smith) Officer)
/s/ John L. Bakane Director March 26, 1998
- ---------------------
(John L. Bakane)
/s/ Doris R. Bray Director March 26, 1998
- ---------------------
(Doris R. Bray)
Page 37
Signature Title Date
--------- ----- ----
/s/ Jeanette C. Kimmel Director March 26, 1998
- ----------------------
(Jeanette C. Kimmel)
/s/ Charles M. Reid Director March 26, 1998
- ----------------------
(Charles M. Reid)
/s/ John W. Rosenblum Director March 26, 1998
- ---------------------
(John W. Rosenblum)
Director March 26, 1998
(Cyrus C. Wilson)