Cone Mills posts 3Q profit of $1.4 million

By Don Hogsett -- Home Textiles Today, 11/27/2000

GREENSBORO, NC -With sales starting to recover in its core denim business, helping to strengthen margins and lower costs, Cone Mills recorded a sharply improved third quarter, posting a $1.4 million profit, compared with a $5.4 million prior-year loss.

Driving the bottom-line improvement, long-depressed sales in the denim and khaki segment shot up by 21.9 percent, offsetting continued weakness in the commission printing business, which supplies home furnishing producers.

Led by the recovery in denim and khaki, overall sales advanced at a double-digit clip, rising by 12.3 percent, to $165.3 million from $147.2 million last year.

Honing in on Cone's various home furnishings units, outside sales for the commission printing business declined by 21.8 percent, to $13.2 million from $16.9 million last year due to weak market conditions. Providing a possible boost to business going forward, Cone said two competitors of its Carlisle commission printing business, including its single-largest competitor, had announced plant closings. But given the current sales erosion, the commission print business posted a $2 million operating loss during the third quarter.

Sales for the decorative fabrics segment were $19.7 million during the quarter, flat against last year's performance. Continued sales growth of 9.6 percent in Cone's jacquard business was offset by weakness at the John Wolf print division, and the decorative fabrics business posted an operating loss of $200,000, compared with a prior-year profit of $400,000.

John Bakane, ceo, said profits in the quarter "were held down by weakness in our finishing division."

Given the big improvement in Cone's core denim and khaki business, average gross margin strengthened substantially, widening by 330 basis points, to 10.6 percent from 7.3 percent a year ago. Gross margin dollars shot up by almost two-thirds, climbing by 64.4 percent, to $17. million from $10.7 million the prior year.

In another lift to the bottom line, Cone continued to hack away at costs, with its expense ratio declining by 140 basis points, to 6.7 percent of sales from 8.1 percent a year ago. Costs were whittled down by 7.8 percent, to $11.1 million from $12.0 million.

( ): Denotes loss

a-Third-quarter results include: miscellaneous expense of $1.3 million, compared with $264,000 a year ago; an income-tax payment of $260,000 vs. a prior-year tax benefit of $2.8 million; and $932 in income from an unconsolidated affiliate, compared to a year-before loss of $405,000. Prior-year results included $3.1 million in restructuring charges.

b-Nine-month results include: a $332,000 credit stemming from an earlier restructuring charge, compared with a 1999 restructuring charge of $16.0 million; miscellaneous expenses of $3.2 million vs. $264,000 the preceding year; an income-tax payment of $272,000 vs. a year-before tax credit of $7.8 million; and $2.2 million in income form an unconsolidated affiliate vs. a prior-year profit of $1.6 million. The previous year included a $1.1 million charge stemming form a change in accounting.