NEW YORK — Driven by strong performance in its denim operation and margins boosted by cost-cutting measures put in place over the past year, Cone Mills Corp. reported $3 million in net income for the fourth quarter of 2002, compared with a $3.5 million net loss in the year-ago period.

The company also reported a profit of $7.2 million for the year, marking the Greensboro, N.C.-based firm’s first profitable fiscal year since 1994. Last year, the company posted a $40.6 million net loss, which included $19.9 million in pretax restructuring charges.

Of this accomplishment, president and chief executive officer John Bakane said in a conference call with financial analysts: "This…fulfills the commitment the management team made to our stakeholders in last year’s annual report."

However, Bakane made it clear he wasn’t reaching for the champagne. He said: "This ceo believes that the U.S. economy is in deep trouble because, contrary to popular belief, the U.S. is not in a garden-variety fiscal downturn. I believe we are in a secular downturn caused by the biggest blunder in trade policy since the U.S. depression."

He noted that China’s manufacturing plants are attracting 20 million new workers a year at a time when the entire U.S. manufacturing sector employs 17 million. He noted that Cone and other U.S. manufacturers need to modernize their plants and migrate to lower-cost nations to prepare for the onslaught of competition in 2005, when the 145 nations of the World Trade Organization are to drop quotas on apparel and textiles.

Cone and others are constrained in doing so, he said, because "U.S. capital markets are frozen like a deer in headlights at a time when U.S. manufacturers need capital to modernize and prepare for a trade war."

Cone itself has proposed to issue $27 million in debt that can be converted into stock as part of its effort to build its manufacturing base in Mexico and Turkey. That proposal has drawn the fire of dissident director Marc Kozberg who, as reported, has assembled a group of investors with an 8.9 percent stake in the company in an effort to shoot the proposal down. Kozberg’s complaint is that the proposal would dilute the value of Cone’s stock.Cone reported that its Parras Cone de Mexico joint venture last year contributed $8.3 million to its operating income. Cone officials also said that a joint venture in Turkey established last year started to ship product to Levi Strauss & Co.’s European division in recent weeks.

For the quarter ended Dec. 29, Cone’s sales were up 15.5 percent to $102.3 million. For the year, sales were down 1 percent to $365.4 million. The denim division recorded $11.9 million in earnings from continuing operations in the quarter, up from $2.5 million in the prior year’s quarter. Sales rose 31.1 percent to $86.1 million.

For the year, the division earned $38.1 million, up from $13.4 million. Sales rose 3.8 percent to $365.4 million. Cone shares fell 15 cents, to close at $1.47 in New York Stock Exchange trading on Thursday.

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