Cone posts $2M profit in 2Q
July 29, 2002-- Home Textiles Today,
With a painful restructuring now behind it — and reaping the gains through stronger margins, lower costs, lower inventories and a deep cut in debt and interest expense — fabric producer Cone Mills Corp. recorded a second-quarter profit of $2.0 million, compared with a prior-year loss of $27.5 million, when the bottom line was weighed down by almost $25 million in restructuring charges.
Sales at the big denim producer and decorative fabrics producer and home furnishings printer rose by 3.4 percent, to $125.8 million from $121.7 million last year, reversing a long slide as the core denim business weakened and Cone sold off some of its business units as part of a sweeping overhaul.
John Bakane, president and ceo, who has led the restructuring and turnaround at Cone, said, "We are particularly encouraged by improvement in the gross profit margin. Nonetheless, we still have much to do in cost reduction, process improvement and the recapitalization of our balance sheet so we can expand and continue to grow value for our shareholders."
In a big lift to the bottom line, average gross margin more than tripled in the quarter, shooting up to 13.7 percent from 4.4 percent a year ago. Gross margin dollars improved by 219.4 percent, to $17.3 million from $5.4 million a year ago.
Still whittling down its overhead, Cone reduced its operating costs by 50 basis points, or half a percentage point, to 7.5 percent from 8.0 percent the prior year. In absolute dollars, costs were down by 2.9 percent, to $9.5 million from $9.7 million, a cash savings of $283,000.
After sharply reducing its long-term debt load, interest expense was reduced by 18.2 percent, to $3.9 million from $4.7 million. In another big savings, inventories were reduced by 39.7 percent, to $49.5 million from $82.1 million a year ago.
Stabilizing and staging a modest recovery, sales in the core denim business improved by 4.4 percent, to $101.7 million from $97.5 million. Leveraging the increase in sales and stronger margins, operating profits in the denim segment more than doubled, jumping up by 155.4 percent, to $8.7 million from $3.4 million last year.
Decorative fabrics sales declined by 4.4 percent, to $9.5 million from $9.9 million. The decorative fabrics business recorded an operating loss of $145,000, compared with a year-ago deficit of $144,000.
Cone Mills Corp.
|Qtr. 6/30 (x000)||2002||2001||% change|
a-First-quarter results include miscellaneous expenses of $541,000, down 29.1 percent from $763,000 last year; $729,000 in earnings from its share in a Mexican joint venture, compared with $223,000 last year; and a $1.0 million tax payment, compared with a prior-year tax benefit of $8.4 million. Earnings in the year-ago second quarter were reduced by a $19.7 million restructuring and asset impairment charge.
b-Six-month results include miscellaneous expense of $1.0 million vs. $1.3 million in 2001; an income-tax payment of $1.4 million vs. a year-ago tax benefit of $9.1 million; a $682,000 profit from its share in a Mexican joint venture, compared with a $572,000 profit last year. Earnings in the year-before six-month period were reduced by a restructuring and asset impairment charge of $19.7 million.
|Oper. income (EBIT)||7,801||(4,343)||—|
|Per share (diluted)||0.08||(1.08)||—|
|Average gross margin||13.7%||4.4%||—|
|Oper. income (EBIT)||14,477||(1,193)||—|
|Per share (diluted)||0.09||(1.23)||—|
|Average gross margin||13.6%||7.1%||—|