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Cone Mills Announces Two Initiatives

GREENSBORO, N.C., Dec. 13 /PRNewswire/ -- Cone Mills Corporation(NYSE: COE) today announced two initiatives aimed at improving earnings nextyear. The initiatives are the expansion of the Parras Cone joint venturedenim plant in Parras, Mexico, and the shutdown of Cone's Raytex top-of-bedfabrics printing plant in Marion, South Carolina. In explaining the initiatives, John L. Bakane, Cone Mills Chief ExecutiveOfficer, commented, "These actions are the result of continued progress towardthe strategy we have been implementing over the past two years. That strategyhas followed three principles: 1. Concentration on businesses in which Cone Mills has a leadership position; 2. Redeployment of strong human and capital resources on those core businesses; 3. Continued migration to lower cost manufacturing platforms." In regard to expansion of low cost manufacturing platforms, Cone MillsCorporation and Compania Industrial de Parras, S.A. de C.V. (Parras) haveagreed to expand Parras Cone's production capacity by 11 million yards, or35%, for a capital investment of approximately $18 million. Parras Cone deMexico is a joint venture between Cone and Parras and has produced basic denimfabrics since it began commercial operations in late 1995. Cone Mills willcontinue to design, service and market the production of Parras Cone. According to Mr. Bakane, "Over the past five years, sourcing of denimjeans for U.S. markets from Mexico has more than doubled. The Parras Coneexpansion should allow us to keep up with this substantial growth in demand.In addition, since Parras Cone was originally constructed with theinfrastructure in place for this expansion, this move should further improvethe versatility and cost effectiveness of the plant." In commenting on the decision to close Raytex, Mr. Bakane added, "Raytexdid not fit our vision for the future Cone Mills because it did not have aleadership position in a market dominated by large vertical beddingmanufacturers. In addition, the closure of Raytex will eliminate significantoperating losses which for the first three quarters of 2000 have totaled$4.3 million or $.11 per share on sales of $14.1 million. Cone Mills willconsider offers from other companies to purchase the Raytex facility and hastargeted a closure date of approximately sixty days. While we deeply regretthe impact on our 200 associates at the Raytex Plant, we believe that thisaction will improve the earnings and capital strength of Cone Mills." Gary Smith, Chief Financial Officer of Cone Mills Corporation, outlinedthe impact of these two initiatives on Cone's earnings and financialconditions as follows; "For the fourth quarter, the closing of Raytex isexpected to result in approximately a $27 million after-tax charge primarilyin non-cash costs associated with write-off of goodwill and write-down offixed assets. Excluding the losses of the Raytex operation and costs ofclosing, Cone Mills expects to report substantially improved operating resultsover fourth quarter 1999 and be profitable before preferred dividends. Forthe first quarter of 2001, Raytex run-out costs are expected to beapproximately $.8 million or $.02 per share. We anticipate that workingcapital and fixed asset liquidations are expected to yield up to $10 millionof proceeds." In regard to Parras Cone, Mr. Smith added, "The expansion will be financedby internal cash flow of Parras Cone and borrowings under existing facilitiesof Parras Cone. Since operations began five years ago, Parras Cone has paiddown over $40 million of debt and at the end of November 2000, Parras Cone wascapitalized with a strong balance sheet consisting of approximately$72 million of equity and $28 million of debt. Parras Cone expects sales ofapproximately $75 million for the year 2000 and should begin to benefit fromthe expansion beginning in the third quarter of 2001." Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC,is the world's largest producer of denim fabrics and the largest commissionprinter of home furnishings fabrics in North America. Manufacturingfacilities are located in North Carolina and South Carolina, with a jointventure denim plant in Coahuila Mexico. Except for the historical information presented, the matters disclosed inthe foregoing release include forward-looking statements. These statementsrepresent the company's current judgment on the future and are subject torisks and uncertainties that could cause actual results to differ materially.Such factors include, without limitation: (i) the demand for textile products,including the company's products, will vary with the U.S. and world businesscycles, imbalances between consumer demand and inventories of retailers andmanufacturers and changes in fashion trends, (ii) the highly competitivenature of the textile industry and the possible effects of reduced importprotection and free-trade initiatives, (iii) the unpredictability of the costand availability of cotton, the Company's principal raw material, (iv) theCompany's relationships with Levi Strauss as its major customer, (v) theCompany's ability to attract and maintain adequate capital to fund operationsand strategic initiatives, (vi) successful completion of the Exchange Offerand Consent Solicitation for the 8-1/8% Debentures, (vii) increases inprevailing interest rates, and (viii) the inability to continue the costsavings associated with the Company's restructuring initiatives. For afurther description of these risks see the Company's 1999 Form 10-K, "Item 1.Business - Competition, -Raw Materials and - Customers" and "Management'sDiscussion and Analysis of Results of Operations and Financial Condition --Overview" of Item 7. of the Form 10-K. Other risks and uncertainties may bedescribed from time to time in the Company's other reports and filings withthe Securities and Exchange Commission.SOURCE Cone Mills CorporationWeb Site: http://www.cone.com

Copyright 2000 PR Newswire




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