CONE MILLS REPORTS $29M LOSS IN FOURTH
Byline: Scott Malone
NEW YORK — Cone Mills Corp. posted a $29 million net loss for its fourth quarter on Tuesday, as the company took $38.8 million in charges, primarily to close its Raytex home-fashions plant.
However, the Greensboro, N.C.-based company said it’s stepping up its efforts in Mexico and is planning this year to expand the capacity of its Parras-Cone denim joint venture and to break ground on a wholly owned Cone denim plant in Tamaulipas by yearend.
The loss for the quarter ended Dec. 31 compares with a $5.7 million loss a year earlier. Net sales were $149.2 million, up 8.6 percent.
Denim was the company’s bright spot for the quarter.
Cone’s denim and khaki operations recorded $7.3 million in income, compared with a $1.3 million loss recorded a year earlier. The segment was the company’s sole profitable business for the quarter — Cone’s commission finishing and decorative fabrics businesses lost money and its yarn-dyed fabric unit has been shut.
Denim and khaki segment sales were up 16.8 percent, to $116.9 million — a decline in sales of khaki fabric offset 25 percent growth on the denim side, officials said.
Cone officials also revealed that they’ve cut short some of the experiments they began in recent years. This spring, the company closed its joint-venture operation with Ashima Group, an Indian operation that Cone entered into in 1998. It also has shut the fledgling full-package apparel businesses the company had been developing to produce khaki pants with joint-venture partners in Mexico and Guatemala.
In an interview, Cone president and chief executive officer John Bakane explained that both ventures had been small and were proving to be a distraction to the company at a time when it needed to be more focused on improving its core operations.
“With the U.S. textile and apparel industry under such pressures, from a cyclical standpoint in this economy, this was just too much of a distraction to us,” he said.
In a conference call with analysts, Bakane offered Cone’s view of the current textile market when he said: “Our world is presently being shaped by excess worldwide capacity, particularly among marginal producers,” adding that another concern is “margin pressures in the U.S. manufacturing industry arising from economic slowdown and the rising cost of energy.”
“The structure of the U.S. textile industry is unsustainable in its present form,” he said. “The U.S. textile industry must invest in U.S. production and in low-cost production, such as Mexico.”
Cone is attempting to step up its Mexican operations, but has been slowed by difficulties in getting financing for new construction, company officials said. Last summer, the company began trying to refinance its debt, but progress has been slow.
The company’s plan is to split its current $100 million in outstanding 8.13 percent bonds into $15 million in company equity and $85 million in senior subordinated notes.
Bakane added that “Cone’s number one priority continues to be to break the company out of what we call ‘capital jail.”‘
Earlier this year, the company completed building the infrastructure for the joint-venture industrial park in Tamaulipas that it built with Guilford Mills Inc. However, it is behind its original schedule, which called for the company to begin building its own denim plant on that site by the end of 2000.
“To continue our near-term expansion of Mexican denim production, the Parras-Cone joint-venture plant has been scheduled for expansion,” Bakane said, adding that it should be done by the end of the year.
Also on the conference call, executive vice president and chief financial officer Gary Smith noted that the Parras-Cone joint venture has been profitable, recording earnings before interest, taxes, depreciation and amortization of $3.2 million for the quarter and $6.7 million for the year.
As a whole, Cone reported a year 2000 net loss of $29.1 million, compared with a $22.1 million net loss in 1999. Net sales were $617.7 million, up 0.2 percent.
The denim segment saw its earnings almost double for the year, to $31.4 million, compared with $17.6 million in the year-ago period. Segment sales were $475.5 million, up 6.1 percent.