Byline: Arnold J. Karr

NEW YORK — Depressed margins more than offset increased denim and khaki sales activity, as Cone Mills Corp. reported wider first-quarter losses.
For the 13 weeks ended April 1, Cone’s net loss expanded more than 10 times, to $2.9 million, or 15 cents a diluted share, from $277,000, or 4 cents, in the year-ago period. The loss per share was about three times analysts’ expectations.
The most recent period includes about 2 cents a share in run-out expenses related to the Raytex plant closing, and the 2000 quarter included a $332,000 pre-tax asset impairment charge. Earnings before interest, taxes, depreciation and amortization declined to $5.7 million, $7.3 million with the inclusion of Cone’s 50 percent share of its Parras joint venture in Mexico. In last year’s quarter, EBITDA was $10.1 million.
Elevated by a 10.6 percent increase in denim and khaki revenues, sales for the quarter were ahead 4.1 percent, to $147.5 million from $141.7 million in last year’s quarter. Denim and khaki sales reached $115.3 million from $104.3 million in the 2000 quarter, but operating income for the unit declined 39.9 percent, to $3.2 million from $5.3 million in the prior-year period.
Cone’s other two ongoing business units — commission finishing and decorative fabrics — experienced sales declines and operating losses.
“While results for the first quarter were disappointing, we were encouraged by stronger denim sales volume and [printing unit] Carlisle’s return to profitability in the face of a difficult business environment,” said John Bakane, president and chief executive, in a statement. “Higher operating costs, particularly energy and raw materials, a poor retail climate and weak furniture sales had a negative impact on operating income.”
The company said that the decline in denim and khaki profitability was caused by a combination of higher costs and soft market conditions. “Khaki losses were driven by additional losses on closeouts that resulted from a distressed market for such goods,” the company said. “Cone’s khaki business strategy is to focus the product line more sharply around core fabrics, thereby reducing inventory requirements and improving quality.”
The Greensboro, N.C.-based textile firm said it expected deterioration in second-quarter results versus prior-year levels but improvement in the second half.
Cone also disclosed that, on the advice of its investment consultant, it would not proceed with a plan to exchange new securities for outstanding debentures due in March, 2005.