Cone denim gains offset home-related decline
April 28, 2003,
Helped by stronger sales, and a big leap in profits in its core denim business, diversified textiles producer Cone Mills Inc. recorded a fourth-quarter profit of $1.8 million, up 25.1 percent from $1.4 million last year.
Sales in Cone's commission printing business, which prints fabrics for other home fashions producers, tumbled by 23.2 percent, to $11.6 million from $15.2 million. And the printing business barely broke even during the quarter with an operating profit of $8,000, down by 99.2 percent from $1.1 million in the same period last year.
Cone's decorative fabrics business recorded a loss of $905,000, compared with a prior-year profit of $516,000. Decorative fabric sales fell by 28.5 percent, to $7.4 million from $10.3 million the preceding year.
Generating the lion's share of the profits, and Cone's only sales gain, was the core denim business, which continued to rebound from earlier weakness. Denim sales improved by 2.9 percent, to $84.5 million from $82.1 million last year.
Even though margins held steady during the quarter, costs climbed sharply higher, putting pressure on operating profits, which fell by 23.4 percent, to $5.1 million from $6.7 million. Average gross margin was unchanged at 13.5 percent. But hampered, in part, by the lower level of sales, operating costs jumped up by 130 basis points, or 1.3 percentage points, to 8.5 percent of sales from 7.2 percent a year ago.
Having turned around the once-ailing denim business and restored it to profitability, Cone is now looking for ways to expand that business, despite a challenging economic environment. The company has already cut a deal with a fund managed by WL Ross and Co. LLC to support a recapitalization plan that would provide the funds necessary for the denim expansion. And now Cone is working with its lenders to push out until August the maturity of a note now due at the end of May.
Until all talks are concluded, Cone said it has postponed its annual shareholders meeting until the middle of the year, when it hopes to submit a final recapitalization plan for approval.
Cone Mills Corp.
|Qtr. 3/30 (x000)||2003||2002||% change|
|a-Second-quarter results include $318,000 in miscellaneous expenses, compared with $465,000 last year; and $981,000 in income from a Mexican joint venture, compared with a $47,000 loss a year ago.
|Oper. income (EBIT)||5,116||6,676||-23.4|
|Average gross margin||13.5%||13.5%||—|