CONE POSTS $1.4 MILLION IN NET INCOME
Byline: Vicki M. Young
NEW YORK — A 21.9 percent jump in sales in its denim and khaki segment helped Cone Mills Corp. post $1.4 million in net income for its third quarter, but results were still lower than the Street had expected.
Net for the quarter ended Oct. 1 was $1.5 million, or 2 cents a share after preferred dividends, compared with a loss of $5.4 million, or 24 cents, in the comparable 1999 quarter. Sales for the period were up 12.3 percent to $165.3 million from $147.2 million. Results for the 1999 period were adjusted for restructuring charges and the results of businesses exited.
According to First Call/Thomson Financial, analysts had forecasted earnings of 3 cents a share.
Shares of the Greensboro, N.C.-based producer of apparel and home furnishings fabrics closed unchanged Wednesday at $4.13 in trading on the New York Stock Exchange.
John Bakane, president and chief executive officer, said in a statement, “Cone’s third-quarter results were driven by big increases in denim shipments reflecting denim’s strong market position and a continued commitment to reduce costs as evidenced by lower selling and administrative expenses. Despite uncertainty at retail and temporary weakness from our print business, we are gaining momentum and continue to see improvements resulting from a focus on core strengths.”
During a morning conference call with analysts, Bakane said, “The U.S. textile industry is completing its third consecutive year of decline, a pattern we have not seen since 1980 or 1982.” He pointed out that Cone overall is profitable, adding, “This is no small feat in this industry.”
The ceo also said that its new Mexican denim plant, in Tamaulipas on more than 500 acres of land, will be completed by yearend. Cone and Guilford Mills said last year that they established a 50/50 joint venture to help fund the infrastructure for the park, where each company will operate independently of the other. Bakane also said Cone has given its “approval for a large jeans manufacturer to allow him to put up a garment processing facility on our site. We are pushing this strategy.”
The company attributed the quarterly revenue increase to 21.9 percent sales growth in its denim and khaki business, although that was partially offset by weakness in commission finishing. Denim and khaki sales were $132.3 million versus $108.5 million in the year-ago period. While the category did well, denim sales prices were down 5 percent compared with the 1999 period.
Outside sales for the commission finishing segment dropped 21.8 percent to $13.2 million from $16.9 million. The company said it experienced lower sales from the Carlisle and Raytex operations as a result of weak market conditions.
Bakane said that earnings for the most recent quarter were held down by weaknesses in Cone’s finishing division. Results at Carlisle are expected to improve as a result of the shutdown of two competitors, but that will be partially offset by initial ramp-up costs to absorb the migration of customers to Carlisle.
As for Raytex, weakness in sales volume for top-of-bed home furnishings at the plant produced a loss of $1.5 million for the quarter, reducing Cone’s earnings by 4 cents a share. Because of a lack of any indication of a demand change in the next couple of quarters, the ceo said in a statement that Cone is “exploring its options concerning the Raytex plant.”
For the nine months, Cone reported $2.7 million in income, or a 1 cent a share loss after preferred dividends, compared with a loss of $14.2 million, or 65 cents, in the prior-year period. Sales slipped 2.2 percent to $468.5 million from $478.9 million. The 1999 results included pre-tax restructuring charges and related expenses of $16 million and exit inventory losses of $3.6 million.