Cone Mills Corporation (NYSE: COE) today announced second-quarter 2000 sales of $161.5 million with net income of $1.5 million, or $.02 per share of common stock after preferred dividends. John Bakane, president and chief executive officer, commented: "In light of the tremendous restructuring we have come through in the past eighteen months, led by improved results in denim and our Carlisle facility, we were able to earn a profit this quarter. While these earnings are small, it is evidence that we have made progress through the determined efforts of our associates to add shareholder value."

For comparison, in the second quarter of 1999 sales were $174.5 million with net income of $.7 million or, after preferred dividends, essentially breakeven for common shareholders. Excluding sales of businesses exited in 1999, sales for the second quarter of 2000 were down less than 2% from 1999 amounts. Lower denim prices and weak sales at our Raytex finishing plant, partially offset by improved jacquard sales, account for the sales decrease.

Gross profit for the second quarter of 2000 increased to 12.1% of sales, as compared with 8.2% for the previous year. The improvement was primarily the result of better operating results in the denim and khaki segment, commission finishing, and the realization of savings from the 1999 comprehensive restructuring program, including the elimination of losses related to the yarn-dyed products segment. Selling and administrative expenses for the second quarter of 2000 were $12.8 million, or 7.9% of sales, as compared with $11.7 million, or 6.7% of sales in second-quarter 1999. Expenses associated with the company's new credit facility and lower denim prices on essentially the same volume resulted in selling and administrative expenses increasing as a percent of sales.

Denim and khaki segment sales revenues for the second quarter of 2000 were $122.0 million, down 4.1% from second-quarter 1999 sales of $127.2 million. While sales volume has returned to levels equivalent to second-quarter 1999, revenues were adversely affected by lower denim prices, the result of the industry downturn in the second half of 1999. Despite lower denim prices, operating income for the denim and khaki segment increased to $8.7 million, or 7.1% of sales for the most recent quarter, as compared with $7.3 million, or 5.7% of sales for the second quarter of 1999. The increased earnings resulted primarily from the reduction of losses in khaki operations and improved operating performance in denim manufacturing in 2000. Operating income for the segment includes the equity in earnings from the Parras Cone joint venture plant.

Outside sales for the commission finishing segment were $19.2 million for the second quarter of 2000, down 14.6% from sales of $22.5 million for the second quarter of 1999. Lower sales and operating losses were experienced at Raytex, resulting from weaker demand in top-of-bed prints. Despite the sales shortfall, the segment had an operating profit of $.1 million for the second quarter of 2000, as compared with a loss of $1.7 million for the second quarter of 1999. The Carlisle finishing plant posted strong operating results for the most recent quarter.

For the second quarter of 2000, sales of the decorative fabrics segment were $20.0 million, up 12.4%, as compared with second-quarter 1999 sales of $17.8 million. The increase was the result of continued growth in jacquards. The decorative fabrics segment had an operating loss of $.3 million for the second quarter of 2000, as compared with a $.4 million operating profit for the previous year.

As part of the 1999 comprehensive restructuring program, the company ceased manufacturing yarn-dyed products and exited the business in 1999. For the second quarter of 1999, sales of yarn-dyed products were $6.6 million and the operating loss for the segment was $.5 million.

For the first six months of 2000, sales were $303.2 million with net income of $1.2 million, or a loss of $.02 per share after preferred dividends. For comparison, in the first six months of 1999 Cone Mills had sales of $331.7 million and a net loss of $8.8 million or $.40 per share after preferred dividends. The 1999 amounts included a $1.0 million after-tax charge from the cumulative effect of an accounting change related to capitalized start-up costs and pre-tax restructuring and related expenses of $14.5 million associated with the company's restructuring program.

In July, the company amended its $80 million Revolving Loan Agreement to extend the maturity to August 2001. In the near future, the company intends to make an offering to holders of its 8-1/8% Debentures due March 15, 2005 to exchange its common stock for $15 million of the debentures and its new secured subordinated debentures and warrants to purchase its common stock for $85 million of the debentures. In addition, the exchange includes a consent to make certain changes in the indenture governing the 8-1/8% debentures and a release of the collateral currently securing the debentures. The principal purpose of the transaction is to enable the company to revise its debt structure in a manner that will provide more flexibility and that will, among other things, permit the company to obtain financing necessary for its proposed expansion into Mexico.

Mr Bakane commented further: "The near-term market outlook for our businesses includes continued strength in denim, offset by a normal seasonal slowing and the recent softening of retail trends in non-denim businesses. We cannot rely upon the marketplace for our success, because future results must continue to be driven by internal improvements in performance, particularly in the non-denim businesses. Our initiatives to accomplish this are as follows:
  1. Implement a financing plan, as outlined above, that will allow the company to begin construction of its planned denim facility in Tamaulipas Mexico. Our goal is to continue to improve our denim profitability and cash flow and to establish a stable financial structure for the coming three to five years;

  2. Implement a growth and profit improvement plan for the Decorative Fabrics division led by our new division president; and

  3. Apply what was learned during the Carlisle turnaround initiative to return the Raytex finishing plant to profitability."
Founded in 1891, Cone Mills Corporation, headquartered in Greensboro, NC, is the world's largest producer of denim fabrics and the largest commission printer of home furnishings fabrics in North America. Manufacturing facilities are located in North Carolina and South Carolina, with a joint venture plant in Coahuila Mexico.

The matters disclosed in the foregoing release include forward-looking statements. These statements represent the company's current judgment on the future and are subject to risks 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 business cycles, imbalances between consumer demand and inventories of retailers and manufacturers and changes in fashion trends, (ii) the highly competitive nature of the textile industry and the possible effects of reduced import protection and free-trade initiatives, (iii) the unpredictability of the cost and availability of cotton, the company's principal raw material, (iv) the company's relationships with Levi Strauss as its major customer, (v) the company's ability to attract and maintain adequate capital to fund operations and strategic initiatives, (vi) increases in prevailing interest rates, and (vii) the inability to achieve the cost savings associated with the company's restructuring initiatives. For a further description of these risks, see the Company's 1999 Form 10-K, "Item 1. Business -Competition, -Raw Materials and -Customers" and "Management's Discussion and Analysis of Results of Operations and Financial Condition." Other risks and uncertainties may be described from time to time in the company's other reports and filings with the Securities and Exchange Commission.

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