UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 28, 1996
Commission file number 1-10984
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BURLINGTON INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 56-1584586
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(State of incorporation) ( I.R.S. Employer
Identification No.)
3330 West Friendly Avenue
Greensboro, N.C. 27410
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 379-2000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, New York Stock Exchange
par value $.01 per share Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of December 3, 1996, the aggregate market value of Registrant's voting stock
held of record by nonaffiliates of Registrant was approximately $642,916,730
(based upon the closing composite price on the New York Stock Exchange on that
date), excluding Treasury shares and, without acknowledging affiliate status,
856,903 shares held beneficially by Directors and executive officers as a group.
As of December 3, 1996, there were outstanding 56,161,568 shares of Registrant's
Common Stock, par value $.01 per share, and 6,909,008 shares of Registrant's
Nonvoting Common Stock, par value $.01 per share.
Documents Incorporated by Reference
Portions of Registrant's 1996 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV hereof.
Portions of Registrant's Proxy Statement dated December 16, 1996 in connection
with its Annual Meeting of Stockholders to be held on February 6, 1997 are
incorporated by reference into Part III hereof.
<PAGE>
PART I
Item 1. Business
General
The Corporation is one of the world's largest and most diversified
manufacturers of textile products. It is a leading developer, marketer and
manufacturer of fabrics and other textile products used in a wide variety of
apparel and interior furnishings end uses. The Corporation operates in two
principal industry segments, products for apparel markets and products for
interior furnishings markets. Each of its divisions and subsidiaries essentially
functions as a stand-alone merchandising and manufacturing operation.
As of September 28, 1996, the Corporation operated 39 U.S.
manufacturing plants in eight states and three manufacturing plants in Mexico
and employed approximately 21,000 persons.
References herein to the "Corporation" mean Burlington Industries,
Inc. ("Burlington") and its subsidiaries.
Products for Apparel Markets
The Corporation serves the apparel market through five divisions,
each of which manufactures a distinct product line in terms of end uses.
Wool worsted and worsted blend fabrics. The Corporation's Menswear
division is the leading domestic manufacturer of woven wool worsted and worsted
blend fabrics supplied to manufacturers of men's and women's apparel as well as
to major clothing retailers. The division's line of innovative fashion fabrics
has been expanded in recent years to also include high value-added nonwool
fabrics. Products made with the division's fabrics are sold to the better,
moderate, and designer segments of men's and women's apparel. The division also
sells fabrics to manufacturers of better career and public service apparel and
military dress uniforms.
The division's sales are directed by five business units. Men's
Suiting constitutes the majority of sales and is focused on the moderate, better
and designer suit customers, both at the manufacturer and retail level. Men's
Sportswear has been repositioned during the past year to take advantage of the
consumer casualization trend. Coordinate sportswear and innovative products for
slacks, blazers and sportscoats are the focus of this unit. Womenswear provides
innovative worsted wool, wool blends and high value-added nonwool fabrics in
customized colors to the makers of branded womenswear. Private Label markets the
division's fabrics to retailers in both menswear and womenswear. These retailer
and store labels encompass all division products and market categories. The
division's Raeford group markets wool worsted and worsted blend fabrics to
manufacturers of a variety of career and uniform apparel, including apparel for
airlines, banks, school bands, governmental agencies and military and law
enforcement personnel.
Woven synthetic fabrics. The Corporation's Burlington Klopman
Fabrics division is a leading manufacturer of woven synthetic fabrics made with
100% polyester, 100% nylon and polyester blended with wool, rayon or other
fibers that are supplied to manufacturers of a wide variety of apparel,
activewear, interior furnishings, medical and industrial products.
The division produces lightweight polyester and polyester blend
fabrics and 100% nylon fabrics for men's, women's and children's wear sold in a
variety of price ranges, for high performance sportswear and activewear and for
a variety of other apparel, medical, interior furnishings and industrial uses.
The division also produces heavyweight polyester fabrics for use in the
manufacture of slacks, suits, skirts and sport coats as well as in the
manufacture of military and law enforcement uniforms.
The division is a leading manufacturer of waterproof, water
repellent, breathable and other coated synthetic fabrics used by makers of
outerwear and high performance sportswear and activewear. A number of its
products, including its Ultrex(R) line of breathable, water repellent fabrics,
are used in leading brands of skiwear and other activewear and by suppliers to
leading activewear retailers. The division recently introduced a new family of
composite fabrics for the outdoor activewear market.
The division's fabrics for the interior furnishings markets are
used by makers of upholstered furniture, bedspreads, draperies and other window
coverings and wallcoverings. The division's fabrics include flame retardant
fabrics used in commercial and residential furnishings.
The division also markets lightweight, reusable, protective
barrier fabrics under the Maxima(R) brand name to makers of, among other things,
clothing worn by hospital personnel and by industrial workers who are required
to work in clean and static-free environments.
The division is a leader in developing new applications and end
uses for synthetic fibers. In addition to its Ultrex(R) fabrics, the division
has continued to develop a number of fabrics made with microdenier filament
yarn, a yarn made from fiber that is thinner than silk. These products combine a
natural appearance and touch with the performance characteristics of synthetic
fibers. The Corporation's microdenier fabrics are currently being used in men's
and women's apparel fabrics, activewear, protective medical clothing and in home
furnishings. The Corporation is the leading domestic producer of microdenier
fabrics made from 100% polyester and polyester blended with wool or rayon.
Denim fabrics. The Denim division is the leading manufacturer of
fashion, value-added, specialty denim fabrics in the United States. It produces
innovative denim in a wide range of styles reflecting a variety of textures,
colors and fabric constructions. The division also produces a diversified line
of basic heavyweight, indigo-dyed denim fabrics for the jean market.
The division is a major supplier to all segments of the branded,
designer and private label jean markets. It also supplies specialty products to
sportswear and jean related manufacturers. The division also produces denim
garments made from the division's fabric for its denim customers.
The Corporation has entered into a joint venture with Mafatlal
Industries Limited to manufacture denim in India for Asian, Middle Eastern and
European markets. Production is scheduled to begin in mid-1997.
Cotton fabrics. In 1996, the Corporation formed a new business
unit, Burlington Sportswear, to produce 100% cotton and cotton/polyester blend
woven and knitted fabrics. Burlington Sportswear's products will serve the
better men's sportswear and uniform markets. The division will also arrange for
production of finished garments for its customers using the Corporation's
fabrics.
In 1996, the Corporation closed its Knitted Fabrics division,
which had experienced difficulties for a number of years. (Reference is made to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note B to the Notes to Consolidated Financial Statements in the
Corporation's 1996 Annual Report to Shareholders, which is incorporated herein
by reference, for information concerning the closing of the Knitted Fabrics
division.) Certain assets of this division have been transferred to the
Burlington Sportswear division to provide the manufacturing capabilities of that
division.
Synthetic yarn. The Burlington Madison Yarn Company division is
the only major manufacturer and marketer of both filament and spun synthetic
yarns in the United States. The division believes that its ability to produce
both types of synthetic yarn is an important competitive advantage because a
significant number of its customers require the different end-product
characteristics offered by these two types of synthetic yarns. While a portion
of the division's products are used by other divisions of the Corporation, the
majority is marketed to more than 300 unaffiliated customers in the apparel,
technical, medical products and home furnishings markets.
Mexican operations. In Mexico, the Corporation manufactures woven
fabrics for apparel which are marketed principally in the local market. The
Company recently announced that it will begin construction of facilities in
Mexico for its Menswear and Denim divisions.
Products for Interior Furnishings Markets
In the interior furnishings market, the Corporation operates four
businesses, one of which focuses on interior furnishings products and decorative
fabrics and three of which serve distinct segments of the carpet and rug
markets.
Interior furnishings fabrics and products. The Burlington House
division is a leading manufacturer of ready-made and made-to-measure draperies,
window coverings and coordinating bedroom ensembles, mattress ticking,
upholstery fabrics, and decorative fabrics for use by makers of bedroom
ensembles, draperies and window coverings.
The Burlington House division's product lines consist of:
o ready-made and made-to-measure draperies, window coverings,
vertical blinds, coordinating bedroom ensembles, table linens
and throws. These finished products are sold under the
Burlington House(R) name to department and specialty stores,
under the Burlington House American Lifestyle(TM) name to
discount stores and on a private label basis to several major
retailers.
o woven jacquard mattress ticking (primarily damasks).
Burlington House is the leading manufacturer of jacquard
mattress ticking supplied to domestic manufacturers of
mattresses. Mattress ticking is the exterior fabric surface of
a finished mattress. The Corporation believes that it produces
the widest variety of ticking patterns of any domestic
manufacturer. Burlington House sells mattress ticking to all
major domestic manufacturers of mattresses for both the
residential and institutional markets.
o woven jacquard and textured fabrics for residential
upholstered furniture. Upholstery fabrics are marketed to a
broad range of furniture manufacturers.
o woven jacquard and other decorative fabrics used by
manufacturers of bedroom ensembles, comforters, draperies and
window coverings.
Carpets. The Lees division is a leading domestic manufacturer of
tufted synthetic carpet and carpet tiles for commercial uses and a manufacturer
of tufted synthetic carpet for residential use.
The division markets and sells a wide variety of standard and
custom commercial carpet products under the Corporation's Lees(R) brand name
primarily for use in offices, institutions, airports, hotels, schools, and
health care facilities. The Corporation's commercial carpet products are sold in
the middle to high priced segments of the commercial carpet market, and are
marketed through dealers primarily to architects, designers and commercial
builders, as well as directly to end users.
The division also manufactures tufted synthetic carpet for
residential use. The division markets its residential carpet products primarily
under the Lees(R) brand name and competes with a large number of domestic and
Canadian manufacturers in the middle to upper middle price ranges of the
residential carpet market. The division is also a supplier of private label
carpets to major retail chains.
The division developed and patented a yarn dyeing process that
permits it to produce carpeting that resists staining and fading on a permanent
basis. Products incorporating this dyeing technology, which are marketed under
the Duracolor(R) name in the commercial market and the Lees For Life(R) name in
the residential market, represent a major portion of the current carpet sales of
the division. The division also has developed and markets a proprietary
thermoplastic carpet backing process for commercial carpets, known as
Unibond(R), which enhances the carpet's durability.
The division's yarn dyeing capability allows it to offer carpeting
in a wide range of colors. Through its Colorfax(R) program, the division offers
customers the ability to order sample yardage manufactured to their exact color
specifications. Such samples are generally deliverable within 72 hours after the
division's receipt of specifications.
Area rugs. The Burlington House Area Rugs division is the leading
producer in the United States of tufted area and bath rugs for home use
primarily under the Burlington House American Lifestyle(TM) label. The
division's customers are major retail chains.
Accent rugs. Burlington acquired The Bacova Guild, Ltd., a leading
producer of printed accent rugs and welcome mats, in fiscal year 1995. Bacova
markets these products, in addition to fully coordinated bath ensembles, to
diverse market segments that include the leading U.S. department stores, mail
order catalogs, mass merchants, specialty stores and international customers.
Mexican operations. The Corporation manufactures residential and
commercial carpeting and fabrics for home furnishings in Mexico.
Financial Information Concerning Industry Segments and Other Matters
Reference is made to Note P to the Notes to Consolidated Financial
Statements in the Corporation's 1996 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning industry segments
for the Corporation's 1996, 1995 and 1994 fiscal years.
As part of the Corporation's strategy to divest non-core assets,
during fiscal year 1996 the Corporation disposed of J. G. Furniture, an office
furniture business, as well as interests in certain real estate and furniture
intermediary product businesses. In addition, in November 1996 the Corporation
sold its subsidiary, Advanced Textiles, Inc. ("ATI"), for $7,896,500, payable
$600,000 in cash and the balance by a seven-year convertible, promissory note
bearing interest at 9.5% per annum, the maturity of which is subject to
acceleration if certain events occur. ATI engages in the business of
manufacturing fiber glass products.
Exports
The Corporation's exports have increased to 9.8% of revenues in
fiscal year 1996, with export sales of $213 million. The Corporation's export
sales were $161 million in fiscal year 1995 and $131 million in fiscal year
1994.
Operations
The Corporation's domestic operations are organized primarily by
product category and, except in the case of the Corporation's yarn operations,
interdivisional sales are minimal. Each is essentially a stand-alone
merchandising and manufacturing operation. Products are distributed through
direct sales by divisional personnel, except in a few cases, mainly export
sales, where products are sold through independent agents or distributors.
The Corporation's corporate headquarters, principal sales and
merchandising offices and principal staff operations are located in Greensboro,
North Carolina. The Corporation maintains a major domestic sales and
merchandising office in New York City and sales offices in other major cities in
the United States.
Internationally, the Corporation has manufactured woven fabrics
for apparel, fabrics for home furnishings and carpet in Mexico for over 50 years
through wholly owned subsidiaries. The products of the Mexican operations are
sold in Mexico, either by subsidiary personnel or by agents or distributors, and
are also exported to the United States and other countries.
Manufacturing
The Corporation is a vertically integrated manufacturer.
Generally, raw fibers are purchased and spun into yarn, or filament yarns are
purchased and processed. Yarns, after dyeing in some cases, are woven, knitted
or tufted into fabric. Fabric is then sold either in dyed and finished form, as
greige (unfinished) goods or processed into finished apparel products.
Residential and commercial interior furnishings products are further processed
and packaged for sale by retailers.
"Just-in-time" manufacturing techniques, which reduce in-process
inventories, floor space requirements and the time required to process a
particular order, are used in most facilities. Programs to link customers and
suppliers of the Corporation by means of electronic data transmission are also
in place in most divisions. These programs improve efficiency and reduce lead
times by improving communication, planning and processing times at the various
stages of production. They also assist the Corporation in working effectively
with manufacturers to coordinate their operations with the demands of retailers
and, as such, are an important part of the domestic textile industry's "Quick
Response" program designed to improve its competitive position vis-a-vis
imports. Raw Materials
The Corporation uses many types of fiber, both natural (wool,
cotton, rayon and Tencel(R)) and man-made (polyester, nylon, polypropylene,
acrylic and acetate), in the manufacture of its textile products. Total raw
material costs were 33.8% of net sales in the 1996 fiscal year, 34.1% of net
sales in the 1995 fiscal year and 30.2% of net sales in the 1994 fiscal year.
(Reference is made to "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" for information concerning the impact of
price increases of the Corporation's key raw materials in fiscal year 1995.) The
Corporation believes that future price levels for all fibers will depend
primarily upon supply and demand conditions, general inflation, U. S. and
foreign government fiscal policies and agricultural programs and prices of
underlying raw materials such as petroleum.
Generally, the Corporation has had no difficulty in obtaining raw
materials. Wool and man-made fibers are available from a wide variety of sources
both domestically and abroad. Cotton is available from a wide variety of
domestic sources. Other materials, such as dyes and chemicals, are generally
available, but, as in the case of raw materials, continued availability is
dependent to varying degrees upon the adequacy of petroleum supplies. The
Corporation purchases essentially all its raw materials and dyes.
Research and Development
Textile manufacturers generally focus their research and
development efforts on product development rather than basic research. Major
innovations in the textile industry have come primarily from fiber producers
(microdenier fiber, for example) or machinery manufacturers (shuttleless looms).
While breakthroughs by textile manufacturers in fabric development have occurred
(for example, the Corporation's Duracolor(R) carpets using stain-resistant
technology), generally, textile makers have enhanced their competitiveness
through continual development and refinement of products to meet or create new
consumer needs (for example, the Corporation's use of microdenier fibers in a
wide range of apparel and other applications). Accordingly, with few exceptions,
basic research and development expenditures have not been as significant a
component of textile manufacturing success as expenditures on design innovation
or capability and on capital equipment that increase the range of end products
and enhance productivity.
Basic research and development responsibility for particular
product areas is located in the divisions, where process and product development
efforts focus on the specific needs of that division. Total expenditures for
research, product development, productivity enhancements, enhanced styling and
market samples aggregated $62.3 million in the 1996 fiscal year, $67.4 million
in the 1995 fiscal year and $68.3 million in the 1994 fiscal year. Included in
these amounts are research and development expenditures, which totaled $13.5
million in the 1996 fiscal year ($10.0 million in the apparel products segment
and $3.5 million in the interior furnishings products segment), compared with
$17.1 million and $18.9 million in the 1995 and 1994 fiscal years, respectively.
Trademarks and Patents
The Corporation owns all trademarks and tradenames that it
believes are material to the operation of its business. The Corporation markets
its products under a variety of trademarks and tradenames, principally utilizing
variations of the Burlington(R) name. Certain products are marketed under
nationally-recognized names such as Lees(R) for carpets and Klopman(R) for
fabrics.
From time to time, the Corporation's product development efforts
have resulted in new processes or products, some of which have been patented.
Examples of Burlington-developed technology include the patented Ultrex(R)
waterproof breathable woven fabric used in activewear and barrier fabrics and
Duracolor(R) and Lees For Life(R) carpets, manufactured using stain-resistant
technology with respect to which the Corporation has obtained patents. Because
the Corporation's business is not dependent to any significant degree upon
patents and licenses (with the possible exception of the patented stain
resistant carpet technology in the case of the interior furnishings segment),
the loss of any patents or licenses now held by the Corporation would not have a
material adverse effect upon its business or results of operations.
The Corporation derives licensing income (approximately $3.3
million in the 1996 fiscal year) from licenses of the Corporation's technology
and from licenses of the Burlington(R) name, principally to manufacturers of
socks and hosiery products in the United States and Europe.
Competition
The domestic textile industry is highly competitive. No one firm
dominates the United States market and many companies compete only in limited
segments of the textile market. Certain of the Corporation's products also
compete with nontextile products. Textile competition is based in varying
degrees on price, product styling and differentiation, quality and customer
service. The importance of each of these factors depends upon the needs of
particular customers and the degree of fashion risk inherent in the product.
Imports of foreign-made textile and apparel products are a
significant source of competition for many sectors of the domestic textile
industry. The U.S. Government has attempted to regulate the growth of certain
textile and apparel imports through tariffs and bilateral agreements which
establish quotas on imports from lesser developed countries that historically
account for significant shares of U.S. imports. Despite these efforts, imported
apparel and apparel textile fabrics, which represent the area of heaviest import
penetration, represent in excess of 60% of the U.S. market, up from less than
approximately 24% in 1975.
U.S. retailers' and apparel manufacturers' sourcing decisions are
affected by factors often beyond their control, such as changing relative labor
and raw material costs, lead times, political instability and infrastructure
deficiencies of newly industrializing countries, fluctuating currency exchange
rates, individual government policies and international agreements regarding
textile and apparel trade. As evidence of the impact of these factors, sourcing
of textile and apparel imports for goods shipped into the United States -- once
dominated primarily by Hong Kong, Taiwan and Korea -- has been shifting to other
lower-cost producer countries such as The People's Republic of China, Thailand,
Malaysia, the Philippines, Mexico and countries in the Caribbean Basin. The
Corporation believes that changing cost structures, delivery lead times,
political uncertainty and infrastructure deficiencies associated with many of
these producers have caused importers to reassess the degree of reliance placed
upon certain of these sources, and to reconsider the importance of the
reliability of domestic manufacturing sources. In addition to these factors, the
U.S. Government's policies designed to benefit Mexico and the Caribbean Basin,
through favored quota and tariff treatment, have accelerated the shift in
production of garments away from Far East sources, indirectly benefiting U.S.
textile producers. The U.S. "807" tariff program, in particular, has grown
significantly in the last five years, benefiting U.S. textile producers whose
fabrics are incorporated into garments assembled in Caribbean countries before
returning to U.S. markets, where duty is charged upon only the value added in
assembling the garments.
Under the North American Free Trade Agreement ("NAFTA") with
Mexico and Canada, there are no textile/apparel quotas between the United States
and either Mexico or Canada for products which meet certain origin criteria.
Tariffs among the three countries are either already zero or are being phased
out over a finite time period. There are provisions in NAFTA that give Mexican
apparel makers incentives to use fabric made in the United States. Because the
Corporation is a major U.S. apparel fabrics manufacturer and a resident,
diversified textile manufacturer in Mexico, the Corporation believes that NAFTA
is advantageous to the Corporation. Legislation has been introduced to grant
some NAFTA-like benefits to the Caribbean countries. The status of that
legislation is uncertain at this time.
It is possible that the combined benefits of NAFTA, coupled with
the significant growth of the use of U.S. produced textile products in Caribbean
Basin garment production under the "807" tariff program and the possibility of
enhanced trade with the Caribbean, could counterbalance some of the
disadvantages that will arise out of the changes contemplated in the Uruguay
Round (referred to below). The impact of the economic factors and
legislative/treaty provisions described above are apparent in the rapid growth
of U.S. apparel imports from the Caribbean Basin and Mexico, primarily due to
the advantages of quota/tariff provisions described above. Apparel imports from
the Caribbean Basin and Mexico have grown from 6.5% of total apparel imports in
1984 to 32.5% in 1995. Mexico has now become the largest exporter of apparel to
the U.S., surpassing China, which had been the largest since 1989.
Also of significance to domestic textile and apparel companies is
the ultimate impact of the Uruguay Round of multilateral trade negotiations held
under the auspices of GATT (General Agreement on Tariffs and Trade). The World
Trade Organization ("WTO") established under GATT in January, 1995 has
responsibility for overseeing international trade in manufactured goods,
agriculture, intellectual property and services. The WTO will oversee the
phaseout of textile and apparel quotas over a ten-year period. In addition,
tariffs on textile/apparel products will be reduced (but not eliminated) over
the same ten-year period. After the end of the ten years, textile/apparel trade
would revert to regular GATT rules which would prohibit quotas and most other
non-tariff barriers.
Over the years, the Corporation has attempted to offset the
negative impact of increased imports by focusing on product lines and markets
that are less vulnerable to import penetration. Capital expenditures and systems
improvements have centered on strengthening value-added product and market
diversification strategies and on increasing productivity, lowering costs and
improving quality. The Corporation has also introduced manufacturing techniques
such as "just-in-time" and "Quick Response" and created electronic data links
with customers and suppliers, thereby shortening lead times and improving
service.
The long-run success of the Corporation's efforts will be
influenced in varying degrees by the phaseout of bilateral agreements with
textile and apparel exporting countries, NAFTA, the adoption of legislation or
administrative actions restricting or liberalizing trade among world textile
producing and consuming countries such as the enactment of the GATT/Uruguay
Round implementing legislation, the effectiveness of anti-dumping and
countervailing duty remedies and of enforcement activities by the U.S.
Government, the value of the United States dollar in relation to other
currencies and world economic developments generally. The Corporation's success
will also be affected by the ability of certain of the Corporation's apparel
fabrics customers to remain competitive, the success of the Corporation's
modernization and cost-reduction efforts and, most importantly, the ongoing
ability of the Corporation to produce innovative, quality products to satisfy
specific customer needs at competitive costs.
Employees
The number of persons employed by the Corporation in both its
domestic and foreign operations as of September 28, 1996, was approximately
21,000. The Corporation's workforce in the United States is not represented by
labor unions. All wage employees in the Corporation's Mexican operations
(approximately 800 persons) are represented by labor unions.
Customers
The Corporation markets its products to approximately 13,800
customers in the United States as well as to customers in Canada, Mexico, Latin
America, Europe and the Pacific Rim countries. For the 1996 fiscal year, no
single customer represented more than 10% of the Corporation's net sales, and
the Corporation's 10 largest customers accounted for approximately 27% of net
sales.
Backlog
Several of the Corporation's divisions operate in businesses that
are characterized by very short forward order positions. The businesses of other
operations have more extended positions. In the aggregate, however, the backlog
of orders at any time is not material, since most orders are deliverable within
a few months. The backlog of forward orders, after eliminating sales within the
Corporation, was approximately 13.3% of annual net sales at the end of the 1996
fiscal year, compared with approximately 14.8% of annual net sales at the end of
the 1995 fiscal year, virtually all of which was expected to be shipped within
less than a year. Backlog at the end of the 1996 fiscal year for the apparel
products segment was 15.3% of annual net sales of the segment and for the
interior furnishings products segment was 10.3% of annual net sales of the
segment.
Governmental Regulation
The Corporation is subject to various Federal, state and local
laws and regulations limiting the production, discharge, storage, handling and
disposal of a variety of substances, particularly the Federal Clean Water Act,
the Federal Clean Air Act (as amended in 1990), the Resource Conservation and
Recovery Act (including amendments relating to underground tanks) and the
Federal Comprehensive Environmental Response, Compensation and Liability Act as
amended by the Superfund Amendment and Reauthorization Act of 1986, and other
Federal, state and local laws and regulations for the protection of public
health and the environment. The Corporation is presently engaged in a number of
environmental remediation plans and has reported dispositions of waste which
could result in future remediation obligations. The Corporation cannot with
certainty assess at this time the impact of future emission standards and
enforcement practices under the 1990 Clean Air Act upon its operations or
capital expenditure requirements. Reference is also made to the discussion of
"Legal and Environmental Contingencies" under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Corporation's
1996 Annual Report to Shareholders, which is incorporated herein by reference.
The Corporation's operations also are governed by laws and
regulations relating to workplace safety and worker health, principally the
Occupational Safety and Health Act and regulations thereunder which, among other
things, establish cotton dust, formaldehyde, asbestos and noise standards, and
regulate the use of hazardous chemicals in the workplace. The Corporation uses
numerous chemicals, including resins containing formaldehyde, in processing some
of its products. Although the Corporation does not use asbestos in the
manufacture of its products, some of its facilities contain some structural
asbestos.
The Corporation believes that it has complied in all material
respects with the foregoing environmental or health and safety laws or
regulations and does not believe that future compliance with such laws or
regulations will have a material adverse effect on its results of operations or
financial condition.
Item 2. Properties
As of September 28, 1996, the Corporation operated 39
manufacturing plants in the United States, of which 22 were located in North
Carolina, 8 were in Virginia, 3 were in Arkansas, 2 were in Mississippi and 1
each was in Georgia, South Carolina, Tennessee and Texas. All but three of these
plants are owned in fee. The aggregate floor area of these manufacturing plants
in the United States is approximately 14.3 million square feet. The
Corporation's international operations include 3 manufacturing plants in Mexico.
Of the Corporation's manufacturing plants, 23 are used principally
in the apparel products segment and 19 are used in the interior furnishings
products segment. In addition, the Corporation has 4 manufacturing plants not
currently in operation. The Corporation's plants generally operate on a
three-shift basis for five-, six- or seven-day weeks during 49 weeks per year,
or fewer weeks per year during curtailments. The Corporation considers its
plants and equipment to be in excellent condition.
The corporate headquarters building in Greensboro, North Carolina,
containing approximately 430,000 square feet, was completed and occupied in
1971. The building is located on property occupied under a 99-year ground lease
that began in 1969. The Corporation has a major sales and merchandising office
in New York City, New York under a lease expiring in 2009.
Item 3. Legal Proceedings
In June 1992, an action was commenced in the United States
District Court for the Eastern District of Arkansas by two employees of the
Corporation, purporting to represent as a class all participants in the
Company's Employee Stock Ownership Plan ("ESOP"), which was created in 1989. In
that year, the Corporation's then-parent sold shares of common stock to the ESOP
for an aggregate purchase price of $112.5 million (the "ESOP Purchase"). The
defendants included the Corporation and certain of its officers, directors and
employees, Morgan Stanley & Co. and two of its employees, and NationsBank of
Georgia, N.A. ("NationsBank of Georgia"), the independent trustee of the ESOP.
The complaint, as amended, alleged certain breaches of duty by defendants,
acting as fiduciaries, the entry into certain "prohibited transactions", and
violation of Section 10b-5 of the Securities Exchange Act of 1934, in each case
under federal law, and certain breaches of fiduciary duty under Delaware law, in
connection with the ESOP Purchase and certain other corporate transactions
entered into by the Corporation between 1987 and 1992. The complaint sought an
award of damages to the ESOP trust, payment of attorneys' fees and costs, and
demanded rescission of the 1989 sale of common stock to the ESOP trust and
removal of the defendants as ESOP fiduciaries. In November, 1992, the Court
granted the motion of the Corporation to transfer venue to the Middle District
of North Carolina.
The Federal Court in North Carolina certified the case as a class
action. After discovery was completed, the defendants moved for summary
judgment. The motion was pending at the time the parties entered into a
"Stipulation of Settlement" to settle the case for the amount of $26,500,000,
with each of the corporate defendants agreeing to pay approximately $9,056,085
(which included accrued interest). The Stipulation of Settlement was given
provisional approval by the Court on July 19, 1996, and on September 20, 1996,
the Court entered an order of final approval of the settlement. On October 28,
1996, the sum of $9,056,085 was paid by or on behalf of the Corporation to the
Settlement Administrator. The settlement fund, less amounts paid towards
attorney fees and other expenses as ordered by the Court, was paid to
NationsBank N.A. (South), successor in interest to NationsBank (Georgia) as the
ESOP trustee, on October 29, 1996, for administration pursuant to the terms of
the ESOP trust.
The Corporation and its subsidiaries also have sundry claims and
other lawsuits pending against them and also have made certain guarantees in the
ordinary course of business. It is not possible to determine with certainty the
ultimate liability, if any, of the Corporation in any of the matters referred to
in this item, but in the opinion of management, their outcome should have no
material adverse effect upon the financial condition or results of operations of
the Corporation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
Executive Officers of the Corporation
The Corporation's executive officers are listed below.
Name Age Position
---- --- --------
George W. Henderson, III......... 48 Director, President and Chief
Executive Officer
Bernard A. Leventhal............. 63 Director and Vice Chairman
Abraham B. Stenberg.............. 61 Director, Executive Vice President
and President and Chief Operating
Officer of the Burlington Interior
Furnishings Group
Gary P. Welchman................. 53 Executive Vice President
John D. Englar................... 49 Director, Senior Vice President,
Corporate Development and Law
Charles E. Peters, Jr. .......... 45 Senior Vice President and Chief
Financial Officer
James H. Clippard, Jr. .......... 59 Vice President, Investor Relations
Agustin J. Diodati............... 58 Vice President and Controller
Barbara K. Eisenberg............. 51 Vice President, Corporate Secretary
and Associate General Counsel
James M. Guin.................... 53 Vice President, Human Resources and
Public Relations
Lynn L. Lane..................... 45 Vice President and Treasurer
George C. Waldrep, Jr. .......... 57 Group Vice President
Robert A. Wicker................. 52 Vice President and General Counsel
<PAGE>
Mr. Henderson has been Chief Executive Officer of the Corporation
since 1995 and President and Chief Operating Officer of the Corporation since
1993. He was a Group Vice President of the Corporation for more than five years
prior to 1993.
Mr. Leventhal has been Vice Chairman of the Corporation since
1995. Prior thereto, he was an Executive Vice President of the Corporation (from
1993) and President of the Corporation's Menswear division for more than five
years. Mr. Leventhal was a Group Vice President of the Corporation for more than
five years prior to 1993.
Mr. Stenberg has been an Executive Vice President of the
Corporation since 1993 and President and Chief Operating Officer of the
Burlington Interior Furnishings Group since 1995, in which capacity he has
senior management responsibility for the Corporation's interior furnishings
segment's four businesses--Burlington House, Burlington House Area Rugs, Lees
and The Bacova Guild, Ltd.--as well as the Corporation's operations in Mexico.
Prior thereto, he was a Group Vice President of the Corporation for more than
five years prior to 1993.
Mr. Welchman has been Executive Vice President of the Corporation
since 1993. Prior thereto, he was a Group Vice President of the Corporation
(from 1991). He has served as President of the Klopman Fabrics division for more
than five years.
Mr. Englar has been Senior Vice President, Corporate Development
and Law of the Corporation since 1995. Prior thereto, he was a Senior Vice
President, Finance and Law (from 1993) and Chief Financial Officer of the
Corporation (from 1994). He was Vice President and General Counsel of the
Corporation for more than five years prior to 1994 and Secretary for more than
five years prior to 1993.
Mr. Peters has been Senior Vice President and Chief Financial
Officer of the Corporation since 1995. He was Senior Vice President-Finance of
Boston Edison Company from 1991 until joining Burlington and Senior Vice
President and Chief Financial Officer of GenRad, Inc., a multi-national
manufacturer of automatic test equipment, prior to 1991.
Mr. Clippard has been Vice President, Investor Relations since
August, 1996. Prior thereto, he was Vice President, Finance and Investor
Relations (from 1994). For more than five years prior thereto he was Director of
Investor Relations for IBM Corporation.
Mr. Diodati has been a Vice President and Controller of the
Corporation for more than five years.
Ms. Eisenberg has been Vice President of the Corporation since
1995. She has been Secretary of the Corporation since 1993 and Associate General
Counsel of the Corporation for more than five years.
Mr. Guin has been Vice President, Human Resources and Public
Relations, since January, 1996. He was Director of Human Resources for the
Corporation from 1993 through 1995 and prior thereto he was a divisional
personnel manager for various divisions of the Corporation.
Ms. Lane was elected Vice President and Treasurer of the
Corporation in August, 1996. She was Vice President and Treasurer of R.J.
Reynolds Tobacco Company from 1995 until joining Burlington and was Vice
President and Assistant Treasurer, Capital Markets of RJR Nabisco, Inc. from
1991 to 1995.
Mr. Waldrep has been a Group Vice President of the Corporation for
more than five years.
Mr. Wicker has been Vice President and General Counsel of the
Corporation since 1995. He was Associate General Counsel of the Corporation
since 1993, and was a partner at the law firm of Smith, Helms, Mulliss & Moore
for more than five years prior thereto.
Executive officers of the Corporation are elected by, and serve at
the discretion of, its Board of Directors. None of the executive officers or
Directors of the Corporation is related by blood, marriage or adoption to any
other executive officer or Director of the Corporation.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Reference is made to Note R to the Notes to Consolidated Financial
Statements in the Corporation's 1996 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning the composite high
and low sales prices for the Corporation's Common Stock for each fiscal quarter
of fiscal years 1996 and 1995. The Corporation's common stock is traded on the
New York Stock Exchange and the Pacific Stock Exchange.
As of November 18, 1996, there were approximately 1,652 holders of
record of the Corporation's common stock and four holders of record of the
Corporation's nonvoting common stock.
The Corporation has not paid any cash dividends on its common
stock during fiscal years 1996 and 1995. The Corporation's bank credit agreement
places annual limitations on the payment of dividends on the Corporation's
common stock. Under such agreement, the Corporation may not pay dividends in an
aggregate amount in any fiscal year, on a cumulative basis since the beginning
of such fiscal year through such time, in an amount exceeding 50% of
Consolidated Net Income (as defined in such bank credit agreement) for the
preceding fiscal year.
Item 6. Selected Financial Data
The information required by this Item is set forth in the table
entitled "Statistical Review" in the Corporation's 1996 Annual Report to
Shareholders, and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is set forth under the
caption "Management's Discussion and Analysis of Results of Operations and
Financial Condition" in the Corporation's 1996 Annual Report to Shareholders,
and the material referenced therein in Notes B and O to the Notes to
Consolidated Financial Statements in the Corporation's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Report of the
Corporation's Independent Auditors, required by this Item are incorporated
herein by reference to the Corporation's 1996 Annual Report to Shareholders. See
Item 14 for a list of those financial statements and the pages of the
Corporation's 1996 Annual Report to Shareholders from which they are
incorporated.
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page No.
---------
Burlington Industries, Inc. and Subsidiary Companies:
II. Valuation and Qualifying Accounts. S-1
All other schedules have been omitted because they are not
applicable, not required or because the required information is included in the
consolidated financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is set forth under the
caption "Information about Nominees and Directors" in the Corporation's Proxy
Statement dated December 16, 1996 and is incorporated herein by reference.
Information with respect to the Corporation's executive officers
is included in Part I of this Report.
Item 11. Executive Compensation
The information required by this Item is set forth under the
captions "Compensation of Directors"; "Report of the Compensation and Benefits
Committee on Executive Compensation"; "Executive Compensation"; and "Stock
Performance Graph" in the Corporation's Proxy Statement dated December 16, 1996
and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the
caption "Security Ownership of Certain Beneficial Owners and Management" in the
Corporation's Proxy Statement dated December 16, 1996 and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is set forth in the
paragraph immediately following the notes to the Summary Compensation Table in
the Corporation's Proxy Statement dated December 16, 1996 and is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The information contained in the Corporation's 1996 Annual
Report to Shareholders under the captions and on the pages
indicated below is incorporated herein by reference:
Report of Ernst & Young LLP,
Independent Auditors (page 40)
Consolidated Statements of Operations -
for the fiscal years ended September 28, 1996,
September 30, 1995 and October 1, 1994 (page 24)
Consolidated Balance Sheets -
as of September 28, 1996 and September 30, 1995
(page 25)
Consolidated Statements of Cash Flows -
for the fiscal years ended September 28, 1996,
September 30, 1995 and October 1, 1994 (page 26)
Notes to Consolidated Financial Statements (pages 27
to 38)
2. Financial Statement Schedules
The financial statement schedule listed under Item 8 is
filed as a part of this Report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits
are filed as a part of this Report.
(b) The Corporation has not filed any reports on Form 8-K
during the last quarter of fiscal year 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
Date: December 12, 1996
By /s/ George W. Henderson, III
--------------------------------
George W. Henderson, III
President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Corporation and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ George W. Henderson, III Director, President and December 12, 1996
- ---------------------------- Chief Executive Officer
George W. Henderson, III (Principal Executive Officer)
/s/ Charles E. Peters, Jr. Senior Vice President and December 12, 1996
- ---------------------------- Chief Financial Officer
Charles E. Peters, Jr. (Principal Financial Officer)
/s/ Agustin J. Diodati Vice President and Controller December 12, 1996
- ---------------------------- (Principal Accounting
Agustin J. Diodati Officer)
/s/ Joseph F. Abely, Jr. Director December 12, 1996
- ----------------------------
Joseph F. Abely, Jr.
/s/ John D. Englar Director December 12, 1996
- ----------------------------
John D. Englar
/s/ Frank S. Greenberg Director December 12, 1996
- ----------------------------
Frank S. Greenberg
/s/ Bernard A. Leventhal Director December 12, 1996
- ----------------------------
Bernard A. Leventhal
/s/ David I. Margolis Director December 12, 1996
- ----------------------------
David I. Margolis
/s/ John G. Medlin, Jr. Director December 12, 1996
- ----------------------------
John G. Medlin, Jr.
/s/ Nelson Schwab III Director December 12, 1996
- ----------------------------
Nelson Schwab III
/s/ Abraham B. Stenberg Director December 12, 1996
- ----------------------------
Abraham B. Stenberg
<PAGE>
Index to Exhibits
-----------------
(Item 14(a)(3))
Exhibit
No. Description
---------- -----------
3.1 Restated Certificate of Incorporation of the Corporation
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994.)
3.2 Bylaws of the Corporation (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended October 1, 1994.)
4.1 Credit Agreement dated as of September 30, 1988, as amended
and restated as of November 8, 1995, among the Corporation,
the Lenders listed therein, Chemical Bank ("Chemical"), Bank
of America Illinois, The Bank of Nova Scotia ("Scotiabank"),
The Chase Manhattan Bank, N.A., First Union National Bank of
North Carolina, NationsBank, N.A. and Wachovia Bank of North
Carolina, N.A., as Managing Agents, Chemical, as
Administrative Agent, and Scotiabank, as Fronting Bank
(incorporated by reference from the Corporation's Form 8-K
Report dated November 9, 1995).
4.2 Indenture dated as of September 1, 1995, between the
Corporation and Wachovia Bank of North Carolina, N.A., as
Trustee, relating to the 7.25% Notes of the Corporation due
2005 (incorporated by reference from the Corporation's
Registration Statement on Form S-3, filed on August 2, 1995.)
NOTE: Pursuant to the provisions of Item 601 (b)(4)(iii) of
Regulation S-K, the Corporation hereby undertakes to furnish
to the Commission upon request copies of other instruments
pursuant to which various entities hold long-term debt of the
Corporation or its consolidated or unconsolidated
subsidiaries, none of which instruments governs indebtedness
exceeding 10% of the total assets of the Corporation and its
subsidiaries on a consolidated basis.
10.1 Lease dated as of May 1, 1994, between the Corporation and The
Fisher-Sixth Avenue Company and Hawaiian Sixth Ave. Corp.
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994.)
10.2 Indenture of Lease dated February 26, 1969, between Blanche S.
Benjamin and Edward B. Benjamin, and a predecessor to the
Corporation, including the amendment thereto (incorporated by
reference from Holdings' Registration Statement on Form S-1,
File No. 33-16437, filed on August 12, 1987.)
10.3 Agreement dated as of February 1, 1996, between the
Corporation and George W. Henderson, III (incorporated by
reference from the Corporation's Form 10-Q Quarterly Report
for the fiscal quarter ended March 30, 1996). (Management
contract or compensatory plan, contract or arrangement).
10.4 Agreement dated as of November 8, 1994, between the
Corporation and Bernard A. Leventhal (incorporated by
reference from the Corporation's Form 10-K Annual Report for
the fiscal year ended October 1, 1994). (Management contract
or compensatory plan, contract or arrangement).
10.5 Agreement dated as of November 8, 1994, between the
Corporation and Abraham B. Stenberg (incorporated by reference
from the Corporation's Form 10-K Annual Report for the fiscal
year ended October 1, 1994). (Management contract or
compensatory plan, contract or arrangement).
10.6 Agreement dated as of February 1, 1996, between the
Corporation and John D. Englar (incorporated by reference from
the Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 30, 1996). (Management contract or
compensatory plan, contract or arrangement).
10.7 Agreement dated as of February 1, 1996, between the
Corporation and James M. Guin (incorporated by reference from
the Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 30, 1996). (Management contract or
compensatory plan, contract or arrangement).
10.8 Agreement dated as of February 1, 1996, between the
Corporation and Gary P. Welchman (incorporated by reference
from the Corporation's Form 10-Q Quarterly Report for the
fiscal quarter ended March 30, 1996). (Management contract or
compensatory plan, contract or arrangement).
10.9 Agreement dated as of June 1, 1995, between the Corporation
and Agustin J. Diodati (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended September 30, 1995). (Management contract or
compensatory plan, contract or arrangement).
10.10 Agreement dated as of May 1, 1996, between the Corporation and
George C. Waldrep, Jr. (incorporated by reference from the
Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended June 29, 1996). (Management contract or
compensatory plan, contract or arrangement).
10.11 Agreement dated as of November 13, 1995, between the
Corporation and Charles E. Peters, Jr. (incorporated by
reference from the Corporation's Form 10-K Annual Report for
the fiscal year ended September 30, 1995). (Management
contract or compensatory plan, contract or arrangement).
10.12 Agreement dated as of July 5, 1996, between the Corporation
and Lynn L. Lane. (Management contract or compensatory plan,
contract or arrangement).
10.13 1994 Deferred Compensation Plan (incorporated by reference
from the Form 10-K Annual Report for Burlington Equity for the
fiscal year ended October 2, 1993). (Management contract or
compensatory plan, contract or arrangement).
10.14 Form of Stock Purchase Agreement dated as of March 19, 1992,
between Burlington Industries Equity Inc. (predecessor to the
Corporation, "Burlington Equity") and The Equitable Life
Assurance Society of the United States and its affiliates (the
"Equitable Investors") (incorporated by reference from
Amendment No. 6 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 19, 1992).
(Management contract or compensatory plan, contract or
arrangement).
10.15 Description of Supplemental Pre-Retirement and Post-Retirement
Benefits Plan, as amended, and form of participant agreement
(incorporated by reference from the Form 10-K Annual Report
for Burlington Equity for the fiscal year ended October 2,
1993). (Management contract or compensatory plan, contract or
arrangement).
10.16 Benefits Equalization Plan, as amended and restated on July
28, 1994 (incorporated by reference from the Corporation's
Form 10-K Annual Report for the 1994). (Management contract or
compensatory plan, contract or arrangement).
10.17 Stock Plan for Non-Employee Directors, as amended
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994). (Management
contract or compensatory plan, contract or arrangement).
10.18(a) Burlington Industries Equity Inc. 1992 Equity Incentive Plan
("1992 Incentive Plan") (incorporated by reference from
Amendment No. 3 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 5, 1992).
(Management contract or compensatory plan, contract or
arrangement).
10.18(b) Amendments to the 1992 Incentive Plan, effective as of July
22, 1992 (incorporated by reference from the Form 10-K Annual
Report for Burlington Equity for the fiscal year ended October
3, 1992). (Management contract or compensatory plan, contract
or arrangement).
10.18(c) Forms of agreements under 1992 Incentive Plan (incorporated by
reference from the Form 10-K Annual Report for Burlington
Equity for the fiscal year ended October 3, 1992). (Management
contract or compensatory plan, contract or arrangement).
10.18(d) Forms of amendments to agreements under 1992 Incentive Plan,
effective as of July 28, 1993 (incorporated by reference from
the Form 10-K Annual Report for Burlington Equity for the
fiscal year ended October 2, 1993). (Management contract or
compensatory plan, contract or arrangement).
10.19(a) Burlington Industries, Inc. 1995 Equity Incentive Plan ("1995
Incentive Plan") (incorporated by reference from Exhibit A to
the Corporation's proxy statement dated December 18, 1995).
(Management contract or compensatory plan, contract or
arrangement).
10.19(b) Amendment to 1995 Incentive Plan, effective as of November 1,
1995. (Management contract or compensatory plan, contract or
arrangement).
10.19(c) Form of agreement under 1995 Incentive Plan (incorporated by
reference from the Corporation's Form 10-Q Quarterly Report
for the fiscal quarter ended March 30, 1996). (Management
contract or compensatory plan, contract or arrangement).
10.20(a) Consulting Agreement between the Corporation and Frank S.
Greenberg for calendar year 1996, effective January 1, 1996
(incorporated by reference from the Corporation's Form 10-K
Annual Report for the fiscal year ended September 30, 1995).
(Management contract or compensatory plan, contract or
arrangement).
10.20(b) Consulting Agreement between the Corporation and Frank S.
Greenberg for calendar year 1997, effective January 1, 1997.
(Management contract or compensatory plan, contract or
arrangement).
10.21(a) Stockholder Agreement ("Stockholder Agreement") dated as of
October 23, 1990, among Burlington Equity and the other
parties listed on the signature pages thereof (incorporated by
reference from the Form 10-K Annual Report for Capital for the
fiscal year ended September 29, 1990).
10.21(b) Amendment dated January 17, 1992, to the Stockholder Agreement
(incorporated by reference from Amendment No. 3 to Burlington
Equity's Registration Statement on Form S-1, File No.
33-45149, filed on March 5, 1992).
10.21(c) Letter agreement dated October 25, 1993, with respect to the
Stockholder Agreement (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended September 30, 1995).
10.22 Receivables Purchase Agreement dated as of March 26, 1992, as
amended and restated as of August 17, 1994, among B.I.
Funding, Inc. ("BIF"), the Corporation, B.I. Transportation,
Inc. ("BIT") and Burlington Fabrics Inc. ("Fabrics")
(incorporated by reference from the Corporation's Form 8-K
Report dated August 18, 1994).
10.23 Amended and Restated Liquidity Agreement dated as of August
17, 1994, among BIF, certain financial institutions as
Liquidity Lenders, and Scotiabank, as the Liquidity Agent for
the Liquidity Lenders (incorporated by reference from the
Corporation's Form 8-K Report dated August 18, 1994).
10.24 Facility Agreement dated as of December 18, 1992, as amended
and restated as of August 17, 1994, among BIF, the
Corporation, as Servicer, and Scotiabank, as Liquidity Agent
and Collateral Agent (incorporated by reference from the
Corporation's Form 8-K Report dated August 18, 1994).
10.25(a) Form of Commercial Paper Dealer Agreement between the
Corporation, BIF and dealers of BIF securities ("Dealer
Agreement") (incorporated by reference from the Form 10-Q
Quarterly Report for Burlington Equity for the fiscal quarter
ended January 2, 1993).
10.25(b) Amendment No. 1 to the Dealer Agreement (incorporated by
reference from the Corporation's Form 8-K Report dated August
18, 1994).
10.26(a) Depositary and Issuing and Paying Agent Agreement dated
December 18, 1992, between Chemical and BIF ("DIPA Agreement")
(incorporated by reference from the Form 10-Q Quarterly Report
for Burlington Equity for the fiscal quarter ended January 2,
1993).
10.26(b) Amendment No. 1 dated as of August 17, 1994, to the DIPA
Agreement (incorporated by reference from the Corporation's
Form 8-K Report dated August 18, 1994).
10.27(a) Amended and Restated Subordination Agreement, Consent and
Acknowledgment, dated as of December 18, 1992, among Fabrics,
the Corporation, BIT, BIF and Scotiabank, as Liquidity and
Collateral Agent ("Subordination Agreement") (incorporated by
reference from the Form 10-Q Quarterly Report for Burlington
Equity for the fiscal quarter ended January 2, 1993).
10.27(b) Amendment No. 1 dated as of August 17, 1994, to the
Subordination Agreement (incorporated by reference from the
Corporation's Form 8-K Report dated August 18, 1994).
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Corporation's 1996 Annual Report to
Shareholders expressly incorporated by reference.
22 List of subsidiaries of the Corporation.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
<PAGE>
Schedule II
BURLINGTON INDUSTRIES INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
(Amounts in Thousands)
Additions
------------------------------
Charged
(Credited)
Balance at to Costs Charged Balance
Beginning and to Other at Close
Description of Period Expenses Accounts Deductions of Period
----------- ---------- --------- -------- ---------- ---------
Fiscal year ended September 28, 1996
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 4,226 $ 6,457 $ - $ 4,487 (2) $ 6,154
42 (3)
Discounts............ 1,022 (113)(1) - - 909
Returns and
allowances.......... 13,974 429 (1) - - 14,403
------- ------- --- ------- -------
$19,222 $ 6,773 $ - $ 4,529 $21,466
======= ======= === ======= =======
Fiscal year ended September 30, 1995
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 4,001 $10,382 $103(4) $10,184 (2) $ 4,226
76 (3)
Discounts............ 995 27 (1) - - 1,022
Returns and
allowances.......... 12,250 1,559 (1) 165(4) - 13,974
------- ------- --- ------- -------
$17,246 $11,968 $268 $10,260 $19,222
======= ======= ==== ======= =======
Fiscal year ended October 1, 1994
- ---------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 4,157 $ 1,624 $ - $ 1,719 (2) $ 4,001
61 (3)
Discounts............ 1,009 (14) (1) - - 995
Returns and
allowances.......... 12,546 (296) (1) - - 12,250
------- ------- --- ------- -------
$17,712 $ 1,314 $ - $ 1,780 $17,246
======= ======= ==== ======= =======
(1) Represents net increase (decrease) in required reserves.
(2) Uncollectible accounts receivable written off, net of recoveries.
(3) Represents changes in reserves due to foreign exchange fluctuation.
(4) Represents increase attributable to acquisition.
S-1
Exhibit 10.12
AGREEMENT, made and entered into as of the 5th day of July, 1996,
between BURLINGTON INDUSTRIES, INC., a Delaware corporation (hereinafter
sometimes referred to as the "Corporation"), party of the first part, and Lynn
L. Lane (hereinafter referred to as "Employee"), party of the second part,
W I T N E S S E T H :
WHEREAS, the Corporation and Employee desire to enter into an Employment
Agreement effective August 5, 1996;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
contained, the Corporation and Employee hereby agree as follows:
l. The Corporation agrees to employ or to cause one or more of its
subsidiary companies to employ Employee and Employee agrees to serve the
Corporation and such of the Corporation's subsidiary companies as may be
designated by the Corporation upon the terms hereinafter set forth.
2. The employment of Employee hereunder shall commence August 5, 1996
and continue for a period ending August 4, 1998, unless earlier terminated under
the provisions of this Agreement.
3. Employee agrees to serve the Corporation and such of the
Corporation's subsidiary companies as may be designated by the Corporation,
faithfully and to the best of Employee's ability under the direction of the
Board of Directors of the Corporation and of such subsidiary companies, devoting
Employee's entire time, energy and skill during regular business hours to such
employment, and to perform from time to time such services, advisory or
otherwise and act in such office or capacity for the Corporation and for any of
its subsidiary companies as said Board of Directors shall request.
4. The Corporation agrees to pay, or cause one or more of its subsidiary
companies to pay, to Employee during the period of the term hereof salary for
Employee's services at the rate (the "Annual Rate") of One Hundred Sixty
Thousand Dollars ($160,000) per annum, payable in equal monthly or other
installments in accordance with the general practice of the Corporation.
5. The Corporation may from time to time pay additional compensation to
certain executives when and if authorized by the Board of Directors or the
appropriate Committee of the Board of Directors of the Corporation. It is
expressly understood that the amount and payment of any additional compensation
if made in the case of Employee is entirely in the discretion of the
Corporation, and nothing herein shall be construed as a promise or obligation to
pay any additional compensation to Employee whatsoever. If sums are paid to
Employee as additional compensation in any year, such payment shall not create
an obligation to pay additional compensation to Employee in any past or
succeeding year, and the Corporation and its subsidiary companies shall not be
obligated to pay to Employee any additional compensation by reason of the
payment of additional compensation to other Employees in any year for any reason
whatsoever. No payments to Employee of additional compensation, if any, shall
reduce or be applied against the salary to be paid to Employee pursuant to
Paragraph 4 hereof.
6. If, during the term of this Agreement, Employee shall become
physically or mentally incapable of fully performing services required of
Employee in accordance with Employee's obligations under Paragraph 3 of this
Agreement, and such incapacity is, or may reasonably be expected to exist, for
more than two months in the aggregate during any period of twelve consecutive
months, as shall be determined by a physician mutually agreed upon by the
Corporation and Employee (or Employee's legal representative if Employee is
incapable of making such determination), which determination shall be final and
conclusive, the Corporation may, upon notice to Employee, terminate this
Agreement and Employee's employment hereunder, and upon such termination,
Employee shall be entitled to receive and shall be paid compensation for a
period of 90 days next following the date of such notice of termination, at the
Annual Rate set forth in Paragraph 4 above, and compensation for the next 90
days at one half of the Annual Rate. Employee agrees to accept such payments in
full discharge and release of the Corporation, its subsidiaries and their
management, of and from any and all further obligations and liabilities to
Employee under Paragraph 4 hereof.
7. (a) The Corporation may in its sole discretion at any time terminate
Employee's employment under this Agreement, whether for cause or without cause.
(b) In the event of a voluntary termination of employment by
Employee for "good reason," or an involuntary termination of employment of
Employee without cause, Employee shall receive as soon as practicable following
such termination a lump sum payment in cash equal to the greater of (A) the
present value of the salary that would have been payable under Paragraph 4 above
during the remainder of the term of this Agreement had Employee not been
terminated, or (B) the present value of one year's salary at the Annual Rate
then in effect. For purposes of this Paragraph 7, (i) all present value
calculations shall be determined using the short term applicable federal rate in
effect at the time of computation as determined by the Internal Revenue Service
for purposes of Section 1274(d) of the Internal Revenue Code, and (ii) "good
reason" shall mean a material breach of this Agreement involving the
Corporation's failure to pay compensation due under the terms of this Agreement.
(c) In the event of an involuntary termination for cause,
Employee shall be entitled to payments under Clause 7(b)(B) so long as the
conduct giving rise to such termination was not, in the Corporation's sole
judgment, willful.
(d) In the event that Employee's employment is terminated by the
Corporation or the Employee for any reason other than those set forth in
subparagraphs (b) and (c) above, the Corporation shall have no further
obligation to Employee hereunder.
(e) Upon termination of Employee's employment for any reason,
Employee's rights under all of the benefit plans of the Corporation shall be
governed by the terms of such plans and not by the provisions of this Agreement.
(f) By entering into this Agreement, Employee waives all rights
under the Corporation's Severance Policy for so long as this Agreement is in
effect.
(g) Notwithstanding any other provisions of this Agreement,
Employee's obligations under Paragraphs 9 and 10 of this Agreement shall survive
the termination or expiration of this Agreement.
8. Any notice to be given by Employee hereunder shall be sent to the
Corporation at its offices, 3330 West Friendly Avenue, Greensboro, North
Carolina 274l0, and any notice from the Corporation to Employee shall be sent to
Employee at the address set forth under Employee's signature below. Either party
may change the address to which notices are to be sent by notifying the other in
writing of such changes in accordance with the terms hereof.
9. Employee expressly agrees, as further consideration hereof and as a
condition to the performance by the Corporation and its subsidiary companies of
their obligations hereunder, that while employed by the Corporation or its
subsidiary companies and during a period of six months following termination of
Employee's employment, Employee will not directly or indirectly render advisory
services to or become employed by or participate or engage in any business
materially competitive with any of the businesses of the Corporation and its
subsidiary companies (Employee hereby acknowledging that Employee has had access
in Employee's executive capacity to material information about all of the
Corporation's businesses) without the written consent of the Corporation first
had and obtained.
10. Employee agrees that, both during and after Employee's employment
hereunder, Employee will not disclose to any person unless authorized to do so
by the Corporation, any of the Corporation's trade secrets or other information
which is confidential or secret. Trade secrets or confidential information shall
mean information which has not been made available by the Corporation to the
public, including but not limited to business plans, product or market
development studies, plans or surveys; designs and patterns; inventions, secret
processes and developments; any cost data, including labor costs, material
costs, and any data that is a factor in costs; price, source or utilization data
on raw materials, fibers, machinery, equipment and other manufacturing supplies;
technical improvements, designs, procedures and methods developed by the
Corporation; any data pertaining to sales volume by location or by product
category; customer lists; production methods other than those licensed by
outside companies; compensation practices; and profitability, margins, asset
values, or other information relating to financial statements.
Employee acknowledges that the disclosure of the Corporation's
trade secrets or confidential information to unauthorized persons would
constitute a clear threat to the business of the Corporation, and that the
failure of the Employee to abide by the terms of Paragraphs 9 and 10 will
entitle the Corporation to exercise any or all remedies available to it in law
or equity, including without limitation, an injunction prohibiting a breach of
these provisions.
IN WITNESS WHEREOF, Burlington Industries, Inc. has caused this
Agreement to be executed in its corporate name by its corporate officer
thereunto duly authorized, and Lynn L. Lane has hereunto set her hand and seal,
as of the day and year first above written.
BURLINGTON INDUSTRIES, INC.
By_________________________
Charles E. Peters, Jr.
Senior Vice President
_______________________(L.S.)
Lynn L. Lane
Exhibit 10.19(b)
AMENDMENT TO THE BURLINGTON INDUSTRIES, INC.
1995 EQUITY INCENTIVE PLAN
The second sentence of Paragraph 5(a) of the Burlington Industries,
Inc. 1995 Equity Incentive Plan is hereby amended, effective as of November 1,
1996, to read in its entirety as follows:
"Each of the members of the Committee shall at all
times during service as a member of the Committee
qualify with respect to the Plan as a "Non-Employee
Director" within the meaning of Rule 16b-3 under the
Exchange Act and as an "outside director" within the
meaning of Section 162(m) of the Code."
Exhibit 10.20(b)
January 1, 1997
Mr. Frank S. Greenberg
Dear Frank:
This letter will confirm our understanding of the arrangements under which you
are to provide consulting services for Burlington Industries, Inc. ("Burlington"
or the "Company"). The terms of this arrangement are set out below.
1. You will render services as an independent private consultant to
Burlington at times and places deemed mutually agreeable. In your consulting
activities for the Company, you will report to George Henderson or his
designated representative.
2. Your services will be rendered as needed over the period of January
1, 1997 through December 31, 1997 (the "Consulting Period").
3. It is understood that during the Consulting Period, the Company will
pay you an annual retainer fee of $100,000.00, payable pro rata in arrears on a
monthly basis, for your commitment to provide consulting time to the Company.
For all consulting days requested and provided, by mutual agreement, the Company
will also pay you at the rate of $4,000.00 per day, provided that the annual
aggregate amount of per diem fees will not exceed $100,000.00. An invoice for
services rendered shall be submitted by the 5th day of each month for the
preceding month's services.
4. This Agreement can be terminated at any time during the period by
yourself upon the provision of ninety (90) days written notice. This Agreement
may be extended beyond the Consulting Period upon the mutual agreement and
written consent of the parties.
5. It is understood that the Company will reimburse you for air travel, or
any other reasonable travel expense to and from the location of your assignment,
including lodging, meals, travel, and miscellaneous expenses as provided by the
Burlington expense report policy. All such expenses are to be submitted on a
monthly basis, covered by a properly completed and signed Burlington expense
report form. You acknowledge and agree that you will not be covered by
Burlington's business travel/accident insurance policies when traveling in
performance of the services being rendered hereunder.
6. During the period hereof, you shall remain free to undertake both
professional and consulting agreements with other parties, provided, however,
that you will not become employed by or render advisory or consulting services
to any competitor (present or potential) of Burlington without our prior written
consent and approval. If you accept full time employment by a person or entity
other than Burlington during the period hereof or become employed by or perform
any services for a competitor without our consent, this Agreement will
automatically terminate. Your commitments hereunder with respect to refraining
from providing services to any competitor (or become employed thereby) are
separate from and independent of other non-compete, non-disclosure obligations
which you may have under any employment or benefit arrangement with the Company,
and no consent to provide services to a competitor under this Agreement or
cancellation of this Agreement shall affect in any way any such other
obligation, or be deemed to consent to any potential violation thereof.
7. You recognize and confirm your continuing obligation, notwithstanding
any provision of this Agreement to the contrary, to maintain confidential all
information, operations or situations treated by Burlington as secret and/or
confidential which became known to you during the course of your employment
prior to the date of this Agreement. You recognize that in working with us under
this Agreement it will be necessary to disclose to you and expose you to
information, operations, and situations which we treat as confidential. You
agree accordingly to keep these matters, any trade secrets and the scope of your
work with us entirely secret and confidential until made public by Burlington.
8. You recognize and confirm, notwithstanding any provision of this
Agreement to the contrary, that all improvements, inventions, designs and useful
ideas conceived or made by you during your past employment with Burlington which
relate in any way to Burlington's business shall be disclosed promptly in
writing, drawing or other tangible form to Burlington and shall be its exclusive
property. All improvements, inventions, designs and useful ideas and other works
of authorship conceived or made by you in connection with your performance of
services under this Agreement shall be disclosed promptly in writing, drawing or
other tangible form to Burlington and shall be its exclusive property. All such
property described herein shall be assigned or conveyed to Burlington. You agree
further to execute all necessary applications and assignments with respect to
such property which we may prepare at our own expense. There will be no
additional costs or charges to the Company for the assignment or conveyance of
such rights or applications, if any, to the Company.
9. You acknowledge and agree that Burlington has no obligation to pay you
severance pay or any other compensation not expressly provided for herein by
virtue of your performance of services under this Agreement.
10. It is understood and agreed that the services to be rendered by you
under this Agreement shall be rendered by you as an independent
contractor/consultant and you will not be deemed an employee of Burlington
Industries, Inc. or any of its subsidiaries, and as such you will not be covered
under any of the Company's employee benefit programs, except those for which you
may have become eligible by virtue of your previous employment with Burlington.
11. Burlington will deduct applicable FICA and income taxes from payments
for services rendered under this Agreement.
12. You hereby represent that, to your knowledge, there are no impediments
or preexisting obligations which could prevent or impair your ability to perform
the terms of this Agreement. In the event you are unable to perform your
obligations hereunder by reason of such impediments or preexisting obligations,
then Burlington shall be released from all obligations under this Agreement.
13. This integrated document (as it may be amended or extended from time to
time pursuant to paragraph 4 herein) constitutes the entire Agreement concerning
your consulting activities for Burlington, as addressed herein; and it
supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning all the services covered herein.
14. Your obligations under paragraphs 7 and 8 will survive the expiration or
termination of this Agreement.
If the foregoing confirms our understanding, would you please sign and return to
us the enclosed duplicate original of this letter.
Sincerely,
BURLINGTON INDUSTRIES, INC.
By_________________________
George W. Henderson, III
President and Chief
Executive Officer
Confirmed and Agreed to:
- ------------------------------
Frank S. Greenberg
Date Signed___________________
Exhibit 12
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Computation of Ratio of Earnings
to Fixed Charges
(Amounts in thousands)
Fiscal Year Ended
--------------------------------------
September 28, September 30, October 1,
1996 1995 1994
------------ ------------ ----------
Income before income taxes ............. $ 75,350 $ 120,101 $ 169,281
Interest expense ....................... 65,936 56,294 49,841
Imputed interest on rent expense ....... 5,006 4,636 4,020
--------- --------- ---------
Total earnings ................. $ 146,292 $ 181,031 $ 223,142
--------- --------- ---------
Interest expense ....................... $ 65,936 $ 56,294 $ 49,841
Imputed interest on rent expense ....... 5,006 4,636 4,020
--------- --------- ---------
Total fixed charges ............ $ 70,942 $ 60,930 $ 53,861
--------- --------- ---------
Ratio of earnings to fixed charges ..... 2.1 3.0 4.1
========= ========= =========
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Burlington Industries, Inc. and Subsidiary Companies
Overview
Although the Company's markets remained difficult in fiscal year 1996, a
number of objectives were accomplished to prepare the Company for growth and to
set the stage for better results in the future. During the year, the balance
sheet was strengthened, non-core, noncontributing assets were disposed of, the
Knitted Fabrics division was closed and a new unit, Burlington Sportswear, was
established.
Operational results for the year were essentially flat. Sales were
slightly lower and operating earnings before non-recurring items were slightly
higher than last year. Sales were lower as a consequence of lower unit volumes
being only partially offset by a better mix of products and price. Operating
earnings were helped by a better mix of products and price, stabilizing raw
materials costs and reduced bad debt expenses.
During 1996, the Company announced that it would close the Knitted
Fabrics division, which had experienced difficulties for a number of years. This
resulted in a pre-tax charge of $29.9 million and an inventory write-down of
$3.7 million included in cost of sales for a total charge of $33.6 million, or
$0.33 per share. (See Note B - Restructuring Activities.)
Burlington Sportswear, a new business unit specializing in fine cotton
fabrics for casual shirts and pants, was formed in 1996. Its products will serve
the better men's sportswear and uniform markets.
Also during the year the Company announced the sale of non-core,
noncontributing assets as well as provided for legal contingencies; the net
effect of these actions was a $4.7 million ($0.07 per share) after-tax loss.
During the year, $193.1 million in cash was generated by operating
results and $8.8 million by asset sales. This money was primarily used to invest
$81.4 million in capital expenditures and a joint venture, repurchase 3.4
million shares of stock for $45.0 million and to reduce debt by $73.5 million.
The Company's operating performance in the 1995 fiscal year was hurt by
significantly higher raw material prices which could not be offset quickly by
higher selling prices or a richer mix of the Company's products. The resulting
squeeze on profit margins, particularly in apparel products, was the principal
source of the downturn in the Company's operating performance during that year.
In addition, results suffered from charges of $10.4 million for doubtful
accounts incurred during the year, losses incurred by the Knitted Fabrics
division, the impact of operating capacity losses and severance charges
resulting from employment reductions.
PERFORMANCE BY SEGMENT: The Company conducts its operations in two
principal industry segments: products for apparel markets and products for
interior furnishings markets. The following table sets forth certain information
about the segment results for the fiscal years ended September 28, 1996,
September 30, 1995 and October 1, 1994. Because of the existence of significant
non-cash expenses, such as depreciation of fixed assets and amortization of
intangible assets, the Company believes that operating income before interest,
taxes, depreciation and amortization ("EBITDA"), which is set forth in the table
below with respect to each segment, contributes to a better understanding of the
Company's ability to satisfy its debt obligations and to utilize cash for other
purposes. EBITDA should not be considered in isolation from or as a substitute
for operating income before interest and taxes, cash flow from operating
activities and other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles.
Fiscal Fiscal Fiscal
(dollar amounts in millions) 1996 1995 1994
------ ------ ------
Net sales
Apparel products $ 1,328.3 $ 1,347.1 $ 1,331.5
Interior furnishings products 854.0 862.1 795.6
-------- -------- --------
Total $ 2,182.3 $ 2,209.2 $ 2,127.1
======== ======== ========
Operating income before interest and taxes
Apparel products $ 121.7 $ 107.1 $ 151.5
As a percentage of net sales 9.2% 8.0% 11.4%
Interior furnishings products $ 55.6 $ 67.4 $ 60.2
As a percentage of net sales 6.5% 7.8% 7.6%
Loss on closing of division $ (29.9) $ - $ -
Provision for restructuring $ - $ - $ (7.5)
------- -------- --------
Total $ 147.4 $ 174.5 $ 204.2
As a percentage of net sales 6.8% 7.9% 9.6%
======= ======== ========
Operating income before interest, taxes,
depreciation and amortization (EBITDA)
Apparel products $ 174.0 $ 160.5 $ 204.1
As a percentage of net sales 13.1% 11.9% 15.3%
Interior furnishings products $ 90.6 $ 101.0 $ 90.2
As a percentage of net sales 10.6% 11.7% 11.3%
------- -------- --------
EBITDA before loss on closing/
restructuring $ 264.6 $ 261.5 $ 294.3
As a percentage of net sales 12.1% 11.8% 13.8%
Loss on closing of division $ (29.9) $ - $ -
Provision for restructuring $ - $ - $ (7.5)
------- -------- --------
EBITDA after loss on closing/
restructuring $ 234.7 $ 261.5 $ 286.8
======= ======== ========
Results of Operations
Comparison of Fiscal Years ended September 28, 1996 and September 30, 1995
NET SALES: Net sales for the 1996 fiscal year were $2,182.3 million, a decrease
of 1.2% from the $2,209.2 million recorded in the 1995 fiscal year. Exports
totaled $213 million and $161 million in the 1996 and 1995 fiscal years,
respectively (an increase of 32.3%).
Products for Apparel Markets: Net sales of products for apparel markets
for the 1996 fiscal year were $1,328.3 million, 1.4% lower than net sales of
$1,347.1 million for the 1995 fiscal year. Lower unit volumes from the Menswear
and Knitted Fabrics divisions were only partially offset by improvements in
selling price and product mix.
Products for Interior Furnishings Markets: Net sales of products for
interior furnishings markets for the 1996 fiscal year were $854.0 million, a
decrease of 0.9% from the $862.1 million recorded in the 1995 fiscal year. Lower
unit volumes resulting from a Residential Carpets division strategy to
streamline its product line, the difficult business environment faced by the
rugs divisions and the sale of a non-core business were only partially offset by
enhancements to product mix and higher selling prices.
OPERATING INCOME BEFORE INTEREST AND TAXES: Operating income before
interest and taxes for the 1996 fiscal year was $147.4 million. Before the
charges for closing the Knitted Fabrics division, operating income before
interest and taxes for the 1996 fiscal year was $181.0 million in comparison
with $174.5 million recorded in the 1995 fiscal year. Amortization of goodwill
was $18.2 million and $18.1 million in the 1996 and 1995 fiscal years,
respectively.
Products for Apparel Markets: Operating income before interest and taxes
for the apparel products segment before the charges for closing the Knitted
Fabrics division for the 1996 fiscal year was $125.4 million, up 17.1% from the
$107.1 million recorded for the 1995 fiscal year. The principal factors leading
to this increase were improvements in selling price and product mix and lower
bad debts, offset by lower unit volume, operating capacity inefficiencies and
wage increases. Better operating earnings were achieved by the Denim, Klopman
and Menswear divisions.
Products for Interior Furnishings Markets: Operating income before
interest and taxes for the interior furnishings products segment for the 1996
fiscal year was $55.6 million, down 17.5% from the $67.4 million recorded in the
1995 fiscal year. Manufacturing inefficiencies resulting from lower unit volume,
wage increases and severance costs associated with manpower reductions more than
offset the benefit of better product mix and higher selling prices. Good results
in the Burlington House and Lees divisions were offset by slower business
activity in the area rugs divisions.
Operating income before interest, taxes, depreciation and amortization
(EBITDA) was $234.7 million for the 1996 fiscal year. EBITDA, before the loss on
closing the Knitted Fabrics division and an associated inventory write-down of
$3.7 million, was $268.3 million, up 2.6% from EBITDA of $261.5 million in the
1995 fiscal year. As a percentage of net sales, EBITDA, before deducting the
Knitted Fabrics division closing charges in fiscal 1996, was 12.3% for the 1996
fiscal year compared with 11.8% for the 1995 fiscal year.
EBITDA for the apparel products segment, before the loss on closing the
Knitted Fabrics division and an associated inventory write-down of $3.7 million,
was $177.7 million, or 13.4% of sales, in the 1996 fiscal year, compared with
$160.5 million, or 11.9% of sales, in the 1995 fiscal year. EBITDA for the
interior furnishings segment was $90.6 million, or 10.6% of sales, in the 1996
fiscal year, in comparison with $101.0 million, or 11.7% of sales, in the 1995
fiscal year.
Selling, administrative and general expenses totaled $166.3 million, or
7.6% of net sales, in the 1996 fiscal year, compared with $162.5 million, or
7.4% of net sales, in the 1995 fiscal year. The increase was mainly attributable
to the new Bacova operation which was acquired during fiscal year 1995.
The Company recorded provisions for doubtful accounts of $6.5 million
and $10.4 million in the 1996 and 1995 fiscal years, respectively, resulting
primarily from bankruptcies which occurred in those periods.
INTEREST EXPENSE: Interest expense for the 1996 fiscal year was $65.9
million, or 3.0% of net sales, compared with $56.3 million, or 2.5% of net sales
in the 1995 fiscal year. The increase in interest expense was primarily the
result of lengthening maturities and higher rates partially offset by lower
average debt.
OTHER EXPENSE (INCOME): Other expense for the 1996 fiscal year was $6.1
million consisting principally of $4.0 million for legal contingencies, $2.3
million loss on sale of a non-operating asset and $1.3 million loss on sale of
J.G. Furniture partially offset by interest income. Other income of $1.9 million
for fiscal year 1995 consisted primarily of interest income.
INCOME TAX EXPENSE AND EXTRAORDINARY ITEMS: Income tax expense of $33.7
million was recorded for the 1996 fiscal year in comparison with $51.7 million
for fiscal year 1995. The extraordinary loss of $0.7 million for the 1996 fiscal
year resulted from the early extinguishment of debt net of income tax benefit of
$0.5 million (principally the write-off of unamortized bank financing costs).
NET INCOME AND NET INCOME PER SHARE: Net income for the 1996 fiscal year
was $40.9 million, or $0.65 per share, in comparison with $68.4 million, or
$1.05 per share, for the 1995 fiscal year. Net income for the 1996 fiscal year
included $25.0 million ($0.40 per share) of non-recurring expenses, consisting
of an after-tax charge of $20.3 million ($0.33 per share) for the closing of the
Knitted Fabrics division and an after-tax provision of $4.7 million ($0.07 per
share) for legal contingencies, the sale of the J.G. Furniture division and the
sale of a non-operating asset. In addition, there was an extraordinary loss of
$0.01 per share for the early extinguishment of debt.
Comparison of Fiscal Years ended September 30, 1995 and October 1, 1994
NET SALES: Net sales for the 1995 fiscal year were $2,209.2 million, an increase
of 3.9% over the $2,127.1 million recorded in the 1994 fiscal year. Exports
totaled $161 million and $131 million in the 1995 and 1994 fiscal years,
respectively (an increase of 22.9%).
Products for Apparel Markets: Net sales of products for apparel markets
for the 1995 fiscal year were $1,347.1 million, 1.2% higher than net sales of
$1,331.5 million for the 1994 fiscal year. A small reduction in the unit volume
of sales was more than offset by improvements in selling prices and product mix.
Products for Interior Furnishings Markets: Net sales of products for
interior furnishings markets for the 1995 fiscal year were $862.1 million, an
increase of 8.4% from the $795.6 million recorded in the 1994 fiscal year.
Higher volume and, to a lesser extent, enhanced product mix were the main
factors contributing to the increase in sales in this segment.
OPERATING INCOME BEFORE INTEREST AND TAXES: Operating income before
interest and taxes for the 1995 fiscal year was $174.5 million in comparison
with $204.2 million recorded in the 1994 fiscal year, after deducting the 1994
provision for restructuring of $7.5 million. Amortization of goodwill was $18.1
million and $17.5 million in the 1995 and 1994 fiscal years, respectively.
Products for Apparel Markets: Operating income before interest and taxes
for the apparel products segment for the 1995 fiscal year was $107.1 million,
down 29.3% from the $151.5 million recorded for the 1994 fiscal year before the
$7.5 million Knitted Fabrics restructuring provision. The principal factors
causing this decrease were a significant increase in raw material prices
partially offset by improvements in selling prices and product mix and cost-
reduction initiatives, unusually high provisions for doubtful accounts and
operating capacity losses.
Products for Interior Furnishings Markets: Operating income before
interest and taxes for the interior furnishings products segment for the 1995
fiscal year was $67.4 million, up 12.0% over the $60.2 million recorded in
fiscal 1994. Significant improvement in results of operations of the Carpet
division and strong performance by the Burlington House division were the major
contributors to the results of this segment. Improvements in product mix,
selling prices and volume were partially offset by increases in raw material
prices.
Operating income before interest, taxes, depreciation and amortization
(EBITDA) was $261.5 million for the 1995 fiscal year, down 11.1% from EBITDA of
$294.3 million before the $7.5 million restructuring provision recorded in the
1994 fiscal year. As a percentage of net sales, EBITDA, before deducting the
restructuring provision in fiscal 1994, was 11.8% for the 1995 fiscal year
compared with 13.8% for the 1994 fiscal year. After the restructuring provision,
EBITDA was $286.8 million for the 1994 fiscal year.
EBITDA for the apparel products segment was $160.5 million, or 11.9% of
sales, in the 1995 fiscal year, compared with $204.1 million, or 15.3% of sales,
in the 1994 fiscal year before the restructuring provision. EBITDA for the
interior furnishings segment was $101.0 million, or 11.7% of sales, in the 1995
fiscal year, in comparison with $90.2 million, or 11.3% of sales, in the 1994
fiscal year.
Selling, administrative and general expenses totaled $162.5 million, or
7.4% of net sales, in the 1995 fiscal year, compared with $151.3 million, or
7.1% of net sales, in the 1994 fiscal year. The increase was mainly attributable
to the new Bacova operation, abnormal expenses related to cost-reduction
programs and higher advertising expense.
The Company recorded a provision for doubtful accounts of $10.4 million
in the 1995 fiscal year, compared with $1.6 million in the 1994 fiscal year.
Included in the fiscal 1995 amount were charges of approximately $8.1 million
related to bankruptcies of two apparel customers.
INTEREST EXPENSE: Interest expense for the 1995 fiscal year was $56.3
million, or 2.5% of net sales, compared with $49.8 million, or 2.3% of net sales
in the 1994 fiscal year. The increase in interest expense was principally due to
higher interest rates.
OTHER EXPENSE (INCOME): Other income for the 1995 fiscal year was $1.9
million, consisting principally of interest income. Other income for the 1994
fiscal year was $14.9 million, consisting of: $31.2 million gain on sale of
assets, a $12.1 million charge for legal and environmental contingencies, a $5.9
million charge for write-down of non-operating assets, and interest income. The
gain on sale of assets was due primarily to the sale by the Company of its
Decorative Prints division on April 29, 1994 for $63.9 million in cash.
INCOME TAX EXPENSE AND EXTRAORDINARY ITEMS: Income tax expense of $51.7
million was recorded for the 1995 fiscal year in comparison with $70.0 million
for fiscal year 1994. The extraordinary loss of $4.3 million for the 1994 fiscal
year resulted from the early extinguishment of debt net of income tax benefit of
$2.8 million (principally the write-off of unamortized bank financing costs).
NET INCOME AND NET INCOME PER SHARE: Net income for the 1995 fiscal year
was $68.4 million, or $1.05 per share, in comparison with $95.0 million, or
$1.40 per share, for the 1994 fiscal year. Net income for the 1994 fiscal year
included a net non-recurring gain of $5.9 million, or $0.08 per share, stemming
from the sale of the Decorative Prints division and other assets less charges
for legal and environmental contingencies, provision for restructuring and
write-down of non-operating assets, and an extraordinary loss of $4.3 million,
or $0.06 per share, resulting from the early extinguishment of debt.
Legal and Environmental Contingencies
As described more fully in Note O to the consolidated financial
statements, various claims and suits have been made or filed against the
Company. The Company has made provisions in its financial statements for
litigation based on the Company's assessment of the possible outcome of such
litigation, including the possibility of settlement, and related legal fees and
costs. It is not possible with certainty to determine the ultimate liability, if
any, of the Company in any of these matters, but in the opinion of management
their outcome should have no material adverse effect upon the financial
condition or results of operations of the Company.
The Company and certain of its current and former direct and indirect
corporate predecessors, subsidiaries and divisions have been identified by the
United States Environmental Protection Agency, by the environmental agencies in
several states and by private parties as potentially responsible parties at a
number of hazardous waste disposal sites under the Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("Superfund") and comparable
state laws and, as such, may be liable for the cost of cleanup and other
remedial activities at these sites. The Company may also have liability for such
matters pursuant to contractual obligations relating to divested property or
with respect to sites which may be identified in the future. With respect to
certain of these sites, other persons have also been identified as potentially
responsible parties, and in such circumstances the responsibility for cleanup
and other remedial activities is typically shared among such parties based on an
allocation formula. The Company is also involved in remedial responses and
voluntary environmental cleanups at other sites which are not currently the
subject of proceedings of any kind under Superfund or comparable state laws. The
Company has established reserves in its financial statements for such
environmental liabilities, including related legal fees and other transaction
costs, in the aggregate amount of approximately $6.6 million. The provision for
environmental liabilities is based on the Company's estimate of allocations of
liability among potentially responsible parties (and the likelihood of
contribution by such parties), information concerning the scope of
contamination, estimated remediation costs, estimated transaction costs and
other factors. The Company has also recorded $1.3 million for estimated
recoveries under insurance policies to the extent that coverage for such claims
has been acknowledged by the relevant insurer and for estimated recoveries from
third parties. No provision has been made for liabilities that may be incurred
with respect to sites which may be identified in the future because insufficient
basis exists for making informed estimates in such cases. It is not possible
with certainty to determine the ultimate liability of the Company with respect
to these matters, but in the opinion of management their outcome should have no
material adverse effect on the financial condition or results of operations of
the Company, generally either because estimates of the maximum potential
liability at these sites are not material or because liability will be shared
with many other potentially responsible parties.
Liquidity and Capital Resources
During the 1995 and 1996 fiscal years, the Company took steps to
strengthen its capital structure and enhance the flexibility of its financial
resources going forward. During the last quarter of the 1995 fiscal year, a $400
million senior debt shelf registration statement was filed and became effective,
and the Company used $150 million of its capacity in a public offering of
10-year senior, non-callable notes on September 26, 1995. The proceeds of this
offering were used to repay term loans under the Company's 1994 Bank Credit
Agreement. The notes received investment grade ratings from each of the two
major credit rating agencies, which underscored the continued improvement in the
Company's credit standing. In November 1995, the Company entered into a new $750
million bank credit facility which reduces borrowing costs compared to the 1994
bank credit facility, and further enhances the Company's financial flexibility.
At September 28, 1996, total debt of the Company (consisting of current and
non-current portions of long-term debt and short-term borrowings) was $838.9
million compared with $913.0 million at September 30, 1995. The ratio of debt to
total capital declined from 59.7% at the beginning of fiscal year 1996 to 57.7%
at fiscal year end.
The Company's principal uses for funds during the next several years
will be for capital investments (including the funding of acquisitions and
participations in joint ventures), repayment and servicing of indebtedness,
working capital needs and the repurchase of shares of Company common stock. The
Company intends to fund such needs principally from net cash provided by
operating activities and, to the extent necessary, from funds provided by the
credit facilities described in this section. The Company believes that these
sources of funds will be adequate to meet the Company's foregoing needs.
The net cash generated by the Company from operating activities during
the 1996 fiscal year amounted to $193.1 million; additionally $8.8 million was
provided from sales of assets and $3.8 million from the exercise of stock
options. Cash generated in this manner was primarily used for: $81.4 million of
capital expenditures and investment in joint venture, $45.0 million for the
repurchase of Company common stock and net repayments of long- and short-term
debt of $73.5 million. Shares of Company common stock purchased during the 1996
fiscal year are expected to be used during the next several years principally to
satisfy Company obligations to contribute stock under its employee incentive
plans and will, accordingly, minimize further future cash outlays for these
purposes.
During the 1996 fiscal year, investment in capital expenditures and a
joint venture totaled $81.4 million, compared to $101.9 million in the 1995
fiscal year. The Company anticipates that the level of capital expenditures for
fiscal year 1997 could total approximately $135 million, principally for growth
and modernization of U.S. and Mexican plants.
On September 26, 1995, the Company issued $150.0 million principal
amount of 7.25% Notes due September 15, 2005 (the "Notes") at a price of 99.926%
plus accrued interest. The Notes are unsecured and rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Notes are not
redeemable prior to maturity. Proceeds from the sale of the Notes were used to
prepay $150.0 million of outstanding term loans under the 1994 Bank Credit
Facility.
On November 8, 1995, the Company entered a new $750.0 million unsecured
Revolving Credit Facility ("1995 Bank Credit Agreement") which replaced in its
entirety the Term Loan and Revolving Credit Facility under the 1994 Bank Credit
Agreement. The new facility maintains the existing maturity of all revolving
loans and letters of credit at March 31, 2001, thereby eliminating the
amortization of term loans required under the 1994 Bank Credit Agreement. On
November 20, 1995, the Company borrowed $510.0 million under the new Revolving
Credit Facility and repaid all loans under the 1994 Bank Credit Agreement. At
November 8, 1996, the Company had approximately $235.0 million in unused
capacity under the new Revolving Credit Facility. The Company also maintains
$27.0 million in additional overnight borrowing availability under bank lines of
credit.
Loans under the 1995 Bank Credit Agreement bear interest at either (i)
floating rates generally payable quarterly based on the Adjusted Eurodollar Rate
plus 0.275% or (ii) Eurodollar rates or fixed rates which may be offered from
time to time by a Lender pursuant to a competitive bid request submitted by the
Company, payable up to 360 days. In addition, the Company pays an annual
facility fee of 0.15%. The interest rate and the facility fee are based on the
Company's current implied senior unsecured debt ratings of BBB minus and Baa3.
In the event that the Company's Debt Ratings improve, the interest rate and
facility fees would be reduced. Conversely, a deterioration in the Company's
Debt Ratings would increase the interest rate and facility fees.
The 1995 Bank Credit Agreement imposes various limitations on the
liquidity of the Company. The Agreement requires the Company to maintain minimum
interest coverage and maximum leverage ratios and a specified level of net
worth. In addition, the Agreement limits dividend payments, stock repurchases,
leases, the incurrence of additional indebtedness by consolidated subsidiaries,
the creation of additional liens and the making of investments in non-U.S.
persons and restricts the Company's ability to enter into certain merger,
liquidation or asset sale or purchase transactions.
The Company also has in effect, through its wholly-owned subsidiary,
B.I. Funding, Inc., a receivables-backed commercial paper program which is
supported by a multi-bank liquidity facility. The maximum amount of commercial
paper issuances or borrowings thereunder is $225.0 million. At November 8, 1996,
$150.5 million of commercial paper with original maturities of up to 70 days was
outstanding. There were no borrowings at such date under the liquidity facility.
Because the Company's obligations under the 1995 Bank Credit Agreement
and commercial paper program bear interest at floating rates, the Company is
sensitive to changes in prevailing interest rates. The Company uses derivative
instruments to manage its interest rate exposure, rather than for trading
purposes.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations
For the fiscal years ended September 28, 1996,
September 30, 1995, and October 1, 1994
(amounts in thousands, except for per share amounts)
1996 1995 1994
---------- ---------- ----------
Net sales............................. $2,182,347 $2,209,191 $2,127,067
Cost of sales......................... 1,814,160 1,843,752 1,744,880
---------- ---------- ----------
Gross profit.......................... 368,187 365,439 382,187
Selling, administrative and
general expenses.................... 166,283 162,504 151,322
Provision for doubtful accounts....... 6,457 10,382 1,625
Amortization of goodwill.............. 18,201 18,055 17,498
Loss on closing of division........... 29,856 - -
Provision for restructuring........... - - 7,500
---------- ---------- ----------
Operating income before
interest and taxes.................. 147,390 174,498 204,242
Interest expense...................... 65,936 56,294 49,841
Other expense (income) - net.......... 6,104 (1,897) (14,880)
---------- ---------- ----------
Income before income taxes............ 75,350 120,101 169,281
Income tax expense:
Current............................. (36,822) (31,706) (46,697)
Deferred............................ 3,075 (20,001) (23,285)
---------- ---------- ----------
Total income tax expense.......... (33,747) (51,707) (69,982)
---------- ---------- ----------
Income before
extraordinary item.................. 41,603 68,394 99,299
Extraordinary item:
Loss from early extinguishment
of debt, net of income tax
benefit of $454 in 1996 and
$2,770 in 1994..................... (697) - (4,261)
---------- ---------- ----------
Net income............................ $ 40,906 $ 68,394 $ 95,038
========== ========== ==========
Average common shares
outstanding......................... 63,231 65,273 67,974
Net income per common share:
Income before
extraordinary item................. $ 0.66 $ 1.05 $ 1.46
Extraordinary item.................. (0.01) - (0.06)
---------- ---------- ----------
$ 0.65 $ 1.05 $ 1.40
========== ========== ==========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(amounts in thousands)
September 28, September 30,
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents....................... $ 15,392 $ 10,507
Short-term investments.......................... 22,755 22,821
Customer accounts receivable after deductions
of $21,466 and $19,222 for the respective
dates for doubtful accounts, discounts,
returns and allowances........................ 342,390 337,389
Sundry notes and accounts receivable............ 6,608 17,245
Inventories..................................... 329,386 342,659
Prepaid expenses................................ 2,839 2,216
----------- -----------
Total current assets....................... 719,370 732,837
Fixed assets, at cost:
Land and land improvements...................... 34,332 34,499
Buildings....................................... 381,281 371,268
Machinery, fixtures and equipment............... 585,587 576,919
----------- -----------
1,001,200 982,686
Less accumulated depreciation and amortization.. 436,069 411,957
----------- -----------
Fixed assets - net......................... 565,131 570,729
Other assets:
Investments and receivables..................... 14,032 17,365
Intangibles and deferred charges................ 25,875 31,910
Net assets held for sale........................ 4,409 4,351
Excess of purchase cost over
net assets acquired............................ 557,125 574,539
----------- -----------
Total other assets......................... 601,441 628,165
----------- -----------
$ 1,885,942 $ 1,931,731
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings........................... $ - $ 323
Long-term debt due currently.................... 1,720 34,686
Accounts payable - trade....................... 93,688 103,314
Sundry payables and accrued expenses............ 102,895 76,714
Income taxes payable............................ 20,674 9,403
Deferred income taxes........................... 46,375 47,957
----------- -----------
Total current liabilities.................. 265,352 272,397
Long-term liabilities:
Long-term debt.................................. 837,136 878,005
Other........................................... 57,360 54,222
----------- -----------
Total long-term liabilities................ 894,496 932,227
Deferred income taxes........................... 110,174 111,667
Shareholders' equity:
Common stock issued (Note H).................... 684 684
Capital in excess of par value.................. 885,485 893,439
Accumulated deficit............................. (192,999) (233,905)
Currency translation adjustments................ (9,263) (5,822)
----------- -----------
683,907 654,396
Less unearned compensation...................... (300) (2,492)
Less cost of common stock held in treasury...... (67,687) (36,464)
----------- -----------
Total shareholders' equity................. 615,920 615,440
----------- -----------
$ 1,885,942 $ 1,931,731
=========== ===========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
For the fiscal years ended September 28, 1996,
September 30, 1995 and October 1, 1994
(amounts in thousands)
1996 1995 1994
-------- --------- --------
Cash flows from operating activities:
Net income..................................... $ 40,906 $ 68,394 $ 95,038
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
fixed assets.............................. 66,942 66,646 63,023
Provision for doubtful accounts............ 6,457 10,382 1,625
Amortization of intangibles................ 18,201 18,055 17,498
Amortization of deferred debt expense...... 3,852 2,678 1,906
Deferred income taxes...................... (3,075) 20,001 23,285
Non-cash compensation...................... 2,248 2,255 2,084
(Gain) loss on disposal of assets
and other expense......................... 7,641 - (10,848)
Loss from early extinguishment of debt..... 1,151 - 7,031
Loss on closing of division/restructuring.. 29,856 - 7,500
Changes in assets and liabilities:
Customer accounts receivable - net..... (16,165) 8,331 (38,734)
Sundry notes and accounts receivable... 10,203 (7,511) (1,322)
Inventories............................ 9,561 (12,645) (27,618)
Prepaid expenses....................... (627) 51 801
Accounts payable and accrued expenses.. 3,694 (15,910) 2,757
Payment of financing fees.................. (444) (3,848) (6,996)
Change in interest payable................. 3,257 (1,222) 4,419
Change in income taxes payable............. 11,273 (7,252) 12,525
Other...................................... (1,806) 4,159 2,994
-------- --------- ---------
Total adjustments..................... 152,219 84,170 61,930
-------- --------- ---------
Net cash provided by operating activities...... 193,125 152,564 156,968
-------- --------- ---------
Cash flows from investing activities:
Capital expenditures........................... (79,174) (101,876) (98,869)
Payment for purchase of business,
net of cash acquired......................... - (12,022) -
Proceeds from sales of assets.................. 8,785 6,472 67,454
Investment in joint venture.................... (2,200) - -
Change in investments.......................... (957) (3,073) (557)
-------- --------- ---------
Net cash used by investing activities.......... (73,546) (110,499) (31,972)
-------- --------- ---------
Cash flows from financing activities:
Net change in short-term borrowings............ (274) (1,136) (16,332)
Repayments of long-term debt................... (600,708) (211,966) (837,029)
Proceeds from issuance of long-term debt....... 527,478 197,818 757,361
Proceeds from exercise of stock options........ 3,848 73 -
Purchase of treasury stock..................... (45,038) (37,858) (11,302)
-------- --------- ---------
Net cash used by financing activities.......... (114,694) (53,069) (107,302)
-------- --------- ---------
Net change in cash and cash equivalents........ 4,885 (11,004) 17,694
Cash and cash equivalents at beginning
of period..................................... 10,507 21,511 3,817
-------- --------- ---------
Cash and cash equivalents at end of period..... $ 15,392 $ 10,507 $ 21,511
======== ========= =========
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Burlington Industries, Inc. and Subsidiary Companies
Note A - Organization
On February 3, 1994, Burlington Industries Equity Inc. (Equity) merged with and
into its wholly-owned subsidiary, Burlington Industries, Inc. (Industries). As a
result of such merger, Equity's subsidiaries became direct wholly-owned
subsidiaries of Industries. The consolidated statements of operations and cash
flows for the 1994 period represent the consolidated results of operations and
cash flows of Equity and its subsidiaries through the date of merger on February
3, 1994 combined with the consolidated results of operations and cash flows of
Industries and its subsidiaries from the date thereafter.
Note B - Restructuring Activities
The Knitted Fabrics division experienced operating difficulties for a number of
years. In the fourth quarter of 1994, a $7.5 million provision for restructuring
was taken to provide for the costs of facilities closure and further staff
reduction following similar efforts undertaken in 1993. The Company's efforts to
return the division to profitability were not successful. On June 5, 1996, the
Company announced its plan to close the Knitted Fabrics division which resulted
in a $29.9 million pre-tax charge in the third quarter of the 1996 fiscal year.
In addition, the closing resulted in an inventory write-down of $3.7 million
included in cost of sales. Combining these charges, the closing of the division
resulted in a pre-tax charge of $33.6 million, $20.3 million after income taxes,
or $0.33 per share. Two of the division's manufacturing facilities were closed
and offered for sale. Its other facility will be utilized by Burlington
Sportswear, a new business unit serving the better men's sportswear and uniform
markets. Production of the Knitted Fabrics division was phased out during
September and October, 1996, and it is anticipated that sales of the majority of
the division's assets will be completed within a two-year period. The components
of the 1996 charge include estimated costs of $12.7 million for severance and
other benefits related to approximately 1,150 employees, $8.3 million for
divestitures of machinery and equipment, $8.0 million for divestitures of real
estate, and $0.8 million for cancellation of leases. Costs of closing the
division paid through September 28, 1996 were $7.8 million. Operating results of
the Knitted Fabrics division before any charges related to the restructuring
were as follows (in millions):
1996 1995 1994
--------- --------- ---------
Net sales ........................ $ 108.2 $ 134.1 $ 147.9
Net operating loss before
interest and taxes ............. $ (17.2) $ (17.9) $ (19.2)
Note C - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include the accounts of the
Company and all its subsidiaries. The accounts of foreign subsidiaries have been
included on the basis of fiscal periods ended no more than three months prior to
the dates of the consolidated balance sheets. Investments in affiliates in which
the Company owns 20 to 50 percent of the voting stock are accounted for using
the equity method. All significant intercompany accounts and transactions have
been eliminated.
Cash equivalents: Cash and cash equivalents include time deposits and other
short-term investments with an original maturity of three months or less.
Inventories: Inventories are valued at the lower of cost or market. Cost of
substantially all components of textile inventories in the United States is
determined using the dollar value Last-in, First-out (LIFO) method. All other
inventories are valued principally at average cost.
Fixed assets: Depreciation and amortization of fixed assets is calculated over
the estimated useful lives of the related assets principally using the
straight-line method.
Excess of purchase cost over net assets acquired: The excess of purchase cost
over net assets acquired is amortized as goodwill using the straight-line method
over not more than 40 years. The accumulated amortization of goodwill was
$163,586,000 and $145,385,000 at September 28, 1996 and September 30, 1995,
respectively.
Deferred debt expense: Deferred debt expense is amortized over the lives of the
related debt as an adjustment to interest expense.
Revenue recognition: In general, the Company recognizes revenues from product
sales when units are shipped.
Research expenditures: Expenditures for research and development are expensed as
incurred. Total expenditures for research and development aggregated $13,482,000
and $17,082,000 and $18,903,000 in the 1996, 1995 and 1994 fiscal years,
respectively.
Income per common share: Income per common share is computed based on the
weighted average number of common shares outstanding during each period.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification: Certain prior period amounts have been reclassified to conform
to current presentations.
Fiscal year: The Company uses a 52 - 53 week fiscal year.
Other: During 1995, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and No. 123,
"Accounting for Stock-Based Compensation", and in 1996 Statement No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". The Company will adopt these accounting standards in 1997 and
does not expect that adoption will have a material impact on its financial
statements.
Note D - Inventories
Inventories are summarized as follows (in thousands):
1996 1995
--------- ---------
Inventories at average cost:
Raw materials................................ $ 49,481 $ 51,676
Stock in process............................. 96,836 104,661
Produced goods............................... 200,679 214,718
Dyes, chemicals and supplies................. 23,100 22,059
--------- ---------
370,096 393,114
Less excess of average cost over LIFO........ 40,710 50,455
--------- ---------
Total.................................... $ 329,386 $ 342,659
========= =========
Inventories valued using the LIFO method comprised approximately 90% and 88% of
consolidated inventories at September 28, 1996 and September 30, 1995,
respectively.
Note E - Sundry Payables and Accrued Expenses
Sundry payables and accrued expenses consist of the following (in thousands):
1996 1995
--------- ---------
Sundry accounts payable......................... $ 2,156 $ 7,323
Accrued expenses:
Payroll and employee benefits............... 58,555 34,692
Taxes, other than income taxes.............. 9,597 9,472
Interest.................................... 12,464 8,816
Other....................................... 20,123 16,411
--------- ---------
Total................................... $ 102,895 $ 76,714
========= =========
Note F - Long-term Debt
Long-term debt consists of the following (in thousands):
1996 1995
--------- ---------
1995 Bank Credit Agreement........................... $ 525,000 $ -
1994 Bank Credit Agreement -
Term Loan Facility................................. - 305,000
Revolving Credit Facility.......................... - 240,000
Commercial Paper..................................... 144,221 193,032
Senior Debt Securities............................... 149,900 149,889
Other indebtedness with various rates and maturities. 19,735 24,770
--------- ---------
838,856 912,691
Less long-term debt due currently.................... 1,720 34,686
--------- ---------
Total.............................................. $ 837,136 $ 878,005
========= =========
Bank Financing: On November 8, 1995, the Company entered into an unsecured
credit agreement ("1995 Bank Credit Agreement"), consisting of a $750.0 million
Revolving Credit Facility with a final maturity on March 31, 2001. The Agreement
provides for the issuance of letters of credit by the fronting bank in an
outstanding aggregate face amount not to exceed $75.0 million, provided that at
no time shall the aggregate principal amount of Revolving Loans together with
the aggregate face amount of such letters of credit issued, exceed $750.0
million. At September 28, 1996, letters of credit outstanding issued by the
fronting bank were approximately $0.2 million, and the unused portion of the
revolving facility commitment was approximately $224.8 million. Additional
overnight borrowings up to $27.0 million are also available under bank lines of
credit.
Loans under the 1995 Bank Credit Agreement bear interest at either (i) floating
rates generally payable quarterly based on the Adjusted Eurodollar Rate plus
0.275% or (ii) Eurodollar rates or fixed rates which may be offered from time to
time by a Lender pursuant to a competitive bid request submitted by the Company,
payable up to 360 days. In addition, the Company pays an annual facility fee of
0.15%. The interest rate and the facility fee are based on the Company's current
senior unsecured debt ratings of BBB minus and Baa3. In the event that the
Company's Debt Ratings improve, the interest rate and facility fees would be
reduced. Conversely, a deterioration in the Company's Debt Ratings would
increase the interest rate and facility fees. At September 28, 1996, the average
bank financing interest rate was 5.92%. See Note Q for information on financial
instruments utilized to manage interest rate exposure.
The 1995 Bank Credit Agreement imposes various limitations on the liquidity of
the Company. The Agreement requires the Company to maintain minimum interest
coverage and maximum leverage ratios and a specified level of net worth. In
addition, the Agreement limits dividend payments, stock repurchases, leases, the
incurrence of additional indebtedness by domestic subsidiaries, the creation of
additional liens and the making of investments in foreign entities and restricts
the Company's ability to enter into certain merger, liquidation or asset sale or
purchase transactions.
On November 20, 1995, the Company borrowed $510.0 million under the 1995 Bank
Credit Agreement to repay all $505.0 million principal amount of outstanding
indebtedness under the 1994 Bank Credit Agreement and recorded a related charge
from early extinguishment of debt of $0.7 million (net of income taxes) during
the 1996 fiscal year. On May 18, 1994, the Company utilized proceeds from the
1994 Bank Credit Agreement to repay all $740.0 million principal amount of
outstanding indebtedness of Industries under its 1993 Bank Credit Agreement, and
on August 17, 1994, amended its commercial paper facility (described below), and
recorded related charges from early extinguishment of debt totalling $4.3
million (net of income taxes) during the 1994 fiscal year.
Commercial Paper Facility: B.I. Funding, Inc., a wholly-owned subsidiary of the
Company, has established a $225.0 million A-1/D-1 rated commercial paper
facility ("CP Facility") backed by a $225.0 million Receivables-Backed Liquidity
Facility ("Liquidity Facility") established with a group of banks. The Company's
commercial paper borrowings generally have original maturities of up to 75 days.
The Company has the intent and ability to maintain the commercial paper
borrowings on a long-term basis with ongoing liquidity support provided by the
Liquidity Facility. Accordingly, commercial paper borrowings have been
classified as long-term debt. There were no borrowings outstanding at September
28, 1996, September 30, 1995 or October 1, 1994 under the Liquidity Facility,
which expires on August 31, 1998. The amount of borrowings allowable under the
CP Facility and the Liquidity Facility at any time is a function of the amount
of then outstanding eligible trade accounts receivable of B.I. Funding, Inc. up
to $225.0 million. A commitment fee of 0.20% is charged on the unused portion of
the Liquidity Facility.
Senior Debt Securities: On September 26, 1995, the Company sold through a public
offering $150.0 million principal amount of 7.25% unsecured senior debt
securities due September 15, 2005 pursuant to a $400.0 million shelf
registration filed with the Securities and Exchange Commission. The Senior Debt
Securities were issued at a discount to yield 7.26%. The net proceeds from the
sale were the principal source of funds used to prepay $150.0 million of term
loans under the 1994 Bank Credit Agreement on the same date. Interest on the
Senior Debt Securities is payable semi-annually on March 15 and September 15.
The Senior Debt Securities are not redeemable prior to maturity and are not
entitled to any sinking fund. The indenture to the Senior Debt Securities
contains covenants limiting certain liens and sale and leaseback transactions.
Maturities: As of September 28, 1996, aggregate annual maturities of long-term
debt for the next five years are $1.7 million in 1997, $145.9 million in 1998,
$1.7 million in 1999, $1.6 million in 2000 and $525.5 million in 2001.
Note G - Leases
Minimum commitments for rental expenditures under noncancellable operating
leases are as follows (in thousands):
1997............................................. $ 15,029
1998............................................. 11,736
1999............................................. 8,894
2000............................................. 6,770
2001............................................. 5,444
Later years...................................... 26,083
---------
73,956
Less sublease income............................. 25
---------
Total minimum lease payments................ $ 73,931
=========
Approximately 38% of the operating leases pertain to real estate. The remainder
covers a variety of machinery and equipment. Certain operating leases,
principally for office facilities, contain escalation clauses for increases in
operating costs, property taxes and insurance. For the 1996, 1995 and 1994
fiscal years, rental expense for all operating leases was $20,023,000,
$18,542,000 and $16,079,000, respectively. Sublease income was not material in
any of these years.
Note H - Shareholders' Equity
Shares of the Company's voting and nonvoting common stock, par value $.01 per
share, authorized, issued and outstanding at September 28, 1996 and September
30, 1995, respectively, were as follows:
Shares Shares Shares
September 28, 1996 Authorized Issued Outstanding
------------------ ----------- ---------- -----------
Common Stock.................. 200,000,000 61,366,741 55,852,652
Nonvoting Common Stock........ 15,000,000 7,026,708 7,026,708
----------- ---------- ----------
215,000,000 68,393,449 62,879,360
=========== ========== ==========
Shares Shares Shares
September 30, 1995 Authorized Issued Outstanding
------------------ ----------- ---------- -----------
Common Stock.................. 200,000,000 53,406,782 50,119,029
Nonvoting Common Stock........ 15,000,000 14,986,667 14,986,667
----------- ---------- ----------
215,000,000 68,393,449 65,105,696
=========== ========== ==========
All shares have similar rights and privileges except for voting rights. Holders
of Nonvoting Common Stock are entitled, subject to certain limitations, to
exchange such shares for Common Stock.
On September 28, 1996 and September 30, 1995, the Company had 30,000,000 shares
of preferred stock authorized, par value $.01 per share, none of which were
issued and outstanding.
On December 19 and 20, 1995, the Company purchased 3,428,571 shares of Nonvoting
Common Stock from a shareholder group in a privately-negotiated transaction.
Immediately thereafter, these shares were converted to voting Common Stock held
as treasury stock. During the 1996 fiscal year, outstanding shares also changed
due to (i) the purchase of 3,047 additional shares of treasury stock; (ii) the
issuance of 233,076 shares of treasury stock to the ESOP Plan (see Note N);
(iii) the issuance of 581,393 shares of treasury stock to settle Performance
Unit Awards (see below); (iv) the issuance of 337,813 shares of treasury stock
for exercise of stock options; and (v) the issuance of 53,000 shares for other
transactions.
Under the Company's various Equity Incentive Plans the following were issued and
are outstanding as of September 28, 1996: (i) 65,000 restricted shares and (ii)
6,203,293 options with an exercise price range of $8.397 to $21.930 and which
expire from March 19, 2002 to October 1, 2005 except for 210,538 options which
expire on December 31, 1997. These restricted shares and options are all vested
(with the exception of 2,195,142 options which vest November 13, 2000, unless
vesting is accelerated to November 13, 1998 under three-year performance
objectives). Under these plans 1,185,763 shares of Common Stock are reserved to
settle Performance Unit Awards currently outstanding and 464,965 shares to
settle additional future awards remain available. Unamortized deferred
compensation expense with respect to restricted common shares granted is being
amortized over the vesting term of such restricted shares.
<PAGE>
Changes in shareholders' equity of the Company for fiscal 1994, 1995 and 1996
are (dollar amounts in thousands):
<TABLE>
<CAPTION>
Capital
in Currency Treasury
Common excess of Accumulated translation Unearned shares,
Stock par value deficit adjustment compensation at cost Total
------ --------- ----------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance October 2, 1993........... $ 683 $ 881,357 $(397,337) $ 6,488 $(6,725) $ (251) $484,215
Purchase of treasury stock........ (11,302) (11,302)
Issuance of treasury stock........ 2 65 67
Awards issued under
Equity Incentive Plans........... 6,795 6,795
Amortization of unearned
compensation..................... 2,084 2,084
Forfeiture of restricted shares... 325 (325) -
Net income for the period......... 95,038 95,038
Translation adjustment............ (2,533) (2,533)
------ --------- ----------- ----------- ------------ --------- --------
Balance October 1, 1994........... 683 888,154 (302,299) 3,955 (4,316) (11,813) 574,364
Purchase of treasury stock........ (37,858) (37,858)
Issuance of treasury stock........ (1,163) 13,333 12,170
Awards issued under
Equity Incentive Plans........... 1 6,375 (557) 5,819
Amortization of unearned
compensation..................... 2,255 2,255
Exercise of stock options......... 73 73
Forfeiture of restricted shares... 126 (126) -
Net income for the period......... 68,394 68,394
Translation adjustment............ (9,777) (9,777)
------ --------- ----------- ----------- ------------ --------- --------
Balance September 30, 1995........ 684 893,439 (233,905) (5,822) (2,492) (36,464) 615,440
Purchase of treasury stock........ (45,038) (45,038)
Issuance of treasury stock........ (10,862) (116) 9,730 (1,248)
Awards issued under
Equity Incentive Plans........... 3,205 3,205
Amortization of unearned
compensation..................... 2,248 2,248
Exercise of stock options......... (297) 4,145 3,848
Forfeiture of restricted shares... 60 (60) -
Net income for the period......... 40,906 40,906
Translation adjustment............ (3,441) (3,441)
------ --------- ----------- ----------- ------------ --------- --------
Balance September 28, 1996........ $ 684 $ 885,485 $ (192,999) $ (9,263) $ (300) $(67,687) $615,920
====== ========= =========== =========== ============ ========= ========
</TABLE>
<PAGE>
Note I - Other Expense (Income) - Net
Other expense (income) - net consists of the following (in thousands):
1996 1995 1994
-------- -------- --------
Loss (gain) on sale of assets - net.. $ 3,651 $ - $(31,192)
Provision for legal and
environmental contingencies........ 3,990 - 12,113
Provision for non-operating
asset write-downs.................. - - 5,856
Interest income...................... (2,583) (2,133) (1,749)
Other................................ 1,046 236 92
-------- -------- --------
Total........................... $ 6,104 $ (1,897) $(14,880)
======== ======== ========
On April 27, 1996, the Company sold its J.G. Furniture operation for $1.1
million in cash and $3.6 million in securities. J.G. Furniture had sales of
$17.4 million and $19.8 million during the 1995 and 1994 fiscal years,
respectively. Additionally, the Company recorded a charge for $2.3 million in
1996 on the sale of a non-operating asset. On April 29, 1994, the Company sold
its Decorative Prints division for $63.9 million in cash for a gain of $30.0
million. Additionally, the Company recorded a gain of $1.5 million in the 1994
fiscal year related to the sale of assets held for investment. The Company
recorded charges of $4.0 million and $12.1 million in the 1996 and 1994 fiscal
years, respectively, for legal and environmental contingencies (see Note O), and
$5.9 million in 1994 for the write-down of non-operating assets to their
expected net realizable value.
Note J - Income Taxes
Income tax expense consists of (in thousands):
1996 1995 1994
-------- -------- --------
Current:
United States.......................... $ 36,375 $ 31,418 $ 46,232
Foreign................................ 447 288 465
-------- -------- --------
Total current 36,822 31,706 46,697
Deferred:
United States.......................... (3,716) 18,582 22,753
Foreign................................ 641 1,419 532
-------- -------- --------
Total deferred.................... (3,075) 20,001 23,285
-------- -------- --------
$ 33,747 $ 51,707 $ 69,982
======== ======== ========
Income tax expense is different from the amount computed by applying the U.S.
federal income tax rate of 35% to income before income taxes as follows (in
thousands):
1996 1995 1994
-------- -------- --------
U.S. tax at statutory rate.................. $ 26,373 $ 42,035 $ 59,248
Goodwill amortization with no tax benefit... 6,212 6,166 6,157
State income taxes, net of federal benefit.. 1,465 3,622 6,544
Other....................................... (303) (116) (1,967)
-------- -------- --------
$ 33,747 $ 51,707 $ 69,982
======== ======== ========
At September 28, 1996, the Company had $40.4 million of deferred tax assets and
$196.9 million of deferred tax liabilities which have been netted for
presentation purposes. At September 30, 1995, the Company had $37.2 million of
deferred tax assets and $196.8 million of deferred tax liabilities which have
been netted for presentation purposes. Operating loss and tax credit
carryforwards with related tax benefits of $2.7 million (net of $2.9 million
valuation allowance) at September 28, 1996, and $3.4 million (net of $2.9
million valuation allowance) at September 30, 1995, expire from 1997 to 2008.
Deferred tax liabilities at September 28, 1996 and September 30, 1995 consist of
the following (in thousands):
1996 1995
--------------------- ---------------------
Current Noncurrent Current Noncurrent
-------- --------- -------- ---------
Fixed assets.............. $ - $ 104,187 $ - $ 104,397
Inventory valuation....... 60,142 - 60,142 -
Accruals, allowances
and other............... (13,188) 8,142 (11,550) 10,066
Operating loss and tax
credit carryforwards.... (579) (2,155) (635) (2,796)
-------- --------- -------- ---------
Total................ $ 46,375 $ 110,174 $ 47,957 $ 111,667
======== ========= ======== =========
Note K - Supplemental Disclosures of Cash Flow Information
(in thousands) 1996 1995 1994
-------- -------- --------
Interest paid - net................... $ 56,244 $ 52,705 $ 41,767
======== ======== ========
Income taxes paid - net............... $ 25,089 $ 38,973 $ 42,232
======== ======== ========
The Company's noncash investing and financing activities not disclosed elsewhere
included the issuance of convertible notes in the amount of $12.2 million
related to the acquisition of The Bacova Guild, Ltd. during the 1995 fiscal year
and exchange of equipment for notes receivable in the amount of $2.9 million
during the 1995 fiscal year.
Note L - Retirement Benefits
The Company's U.S. defined benefit pension plan provides benefits to most of its
U.S. employees and certain employees in foreign countries, based on their
compensation over their working careers. The funding policy for this plan is to
contribute annually the amount recommended by the plan's actuary. Employees also
contribute a percentage of their compensation. Participants become fully vested
at the end of five years of service.
The following sets forth the funded status of the plan (in thousands):
1996 1995
--------- ---------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $(260,261) in 1996 and
$(260,391) in 1995................................... $(273,994) $(276,339)
--------- ---------
Projected benefit obligation for service rendered
to date.............................................. (310,992) (314,079)
Less plan assets at fair value, primarily listed
stocks and bonds, short-term investment funds and
insurance company contracts.......................... 298,346 278,840
--------- ---------
Projected benefit obligation in excess of
plan assets.......................................... (12,646) (35,239)
Unrecognized prior service cost....................... 625 823
Unrecognized net loss................................. 34,652 58,216
--------- ---------
Pension asset recognized in the balance sheet......... $ 22,631 $ 23,800
========= =========
During the 1996 and 1994 fiscal years, the plan made cash lump sum payments to
the former member employees of divested divisions. Curtailment and settlement
losses of $3.7 million in 1996 and $2.2 million in 1994 were recognized and
offset against reserves established at the time of the divestitures.
Net pension cost included the following components for the 1996, 1995 and 1994
fiscal years (in thousands):
1996 1995 1994
-------- -------- --------
Service cost - benefits earned during the
period...................................... $ 7,991 $ 4,385 $ 6,668
Interest cost on projected benefit
obligation.................................. 24,093 24,148 22,304
Return on assets, net of deferred (gain)
loss of $(19,579) in 1996, $(20,361) in
1995 and $7,923 in 1994..................... (22,686) (20,270) (20,503)
Amortization:
Unrecognized prior service cost............. 163 541 550
Unrecognized losses......................... 2,928 3,892 3,228
-------- -------- --------
Net pension cost............................. $ 12,489 $ 12,696 $ 12,247
======== ======== ========
The following assumptions were used at each measurement date:
1996 1995 1994
-------- -------- --------
Discount rate.................................. 8.0 % 7.75% 8.0%
Long-term rate of return on plan assets........ 8.5% 8.5% 8.5%
Long-term rate of increase in compensation..... 3.75% 3.75% 3.75%
Pension cost for all plans, including those of foreign subsidiaries, was
$12,940,000, $13,112,000 and $12,805,000 for the 1996, 1995 and 1994 fiscal
years, respectively.
Note M - Other Postretirement Benefit Plans
In addition to the Company's pension plan, the Company has two defined benefit
postretirement medical plans available to most of its U.S. employees who elect
participation and one life insurance defined benefit postretirement plan
covering only certain employees. The medical plans include a health care plan
for employees electing early retirement between the ages of 55 and 65 and a
Medicare supplement plan for retired employees age 65 and older. The medical
plans are contributory, with retiree contributions adjusted annually, and
contain other cost-sharing features such as deductibles and coinsurance. The
life insurance plan is non-contributory and was closed to new members in 1973.
The Company's policy is to fund the cost of the medical plans and the life
insurance plan as expenses are incurred. The Company has adopted SFAS NO. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions", which
requires that the cost of such benefits be accrued over the employees' service
lives. The Company's annual postretirement benefit costs are not significant.
The following table shows the three plans' combined funded status reconciled
with the amounts recognized in the Company's balance sheets as of September 28,
1996 and September 30, 1995 (in thousands) and assumptions:
1996 1995
------------------ ------------------
Life Life
Medical Insurance Medical Insurance
Plans Plan Plans Plan
-------- -------- -------- --------
Accumulated postretirement benefit
obligation:
Retirees............................. $ (955) $ (5,028) $ (126) $ (5,276)
Fully eligible active plan
participants........................ (2,241) - (1,872) -
Other active plan participants....... (2,530) - (2,050) -
-------- -------- -------- --------
(5,726) (5,028) (4,048) (5,276)
Plan assets at fair value, primarily
bonds................................ 249 2,399 265 2,510
-------- -------- -------- --------
Accumulated postretirement benefit
obligation in excess of plan assets.. (5,477) (2,629) (3,783) (2,766)
Unrecognized net (gain) loss.......... 3,266 (551) 559 (485)
-------- -------- -------- --------
Accrued postretirement benefit cost... $ (2,211) $ (3,180) $ (3,224) $ (3,251)
======== ======== ======== ========
Discount rate......................... 8.0% 8.0% 7.75% 7.75%
Long-term rate of return on plan
assets............................... 8.5% 8.5% 8.5% 8.5%
The annual rate of increase in health care expenses was 7% in the 1996 and 1995
fiscal years. This rate was assumed to be 7% for the 1997 fiscal year and to
decrease gradually to 6% in 2004 and remain at that level thereafter.
Note N - Employee Stock Ownership Plan
The Company's Employee Stock Ownership Plan ("ESOP") is an individual account,
defined contribution plan designed to be qualified under the relevant provisions
of the Internal Revenue Code of 1986, as amended (the "Code"). The ESOP is
designed to invest primarily in the Company's stock. The Internal Revenue
Service has issued a favorable determination letter stating that the ESOP
qualifies under the Code and that the ESOP Trust is exempt from tax.
All salaried and hourly employees of Industries and participating affiliates who
complete a minimum period of service are eligible to participate in the ESOP.
The ESOP Plan also provides for 100% vesting after one year of participating
service and for distributions of shares allocated to participant accounts at the
time of termination of employment with the Company.
Pursuant to a Board-established formula linked to the Company's annual operating
results, a contribution of 922,052 shares of Common Stock valued at $9.3 million
was made to the ESOP for fiscal year 1994, a contribution of 483,076 shares of
Common Stock valued at $5.7 million was made to the ESOP for fiscal year 1995,
and a contribution of Common Stock valued at $5.2 million will be made to the
ESOP for fiscal year 1996. Such amounts have been charged to operations in the
1994, 1995 and 1996 fiscal years, respectively.
Note O - Contingencies
In June 1992, a class action entitled Atwood et al. v. Burlington Industries
Equity Inc. et al. (Civ. Act. No. 2:92CV00716) was commenced on behalf of all
participants in the ESOP. The defendants included the Company and certain of its
officers, directors and employees, Morgan Stanley & Co., and the independent
trustee of the ESOP. The complaint alleged certain causes of action for breach
of fiduciary duties under the Employee Retirement Income Security Act and
violation of the securities laws and state common law principally in connection
with the 1989 sale of Company stock to the ESOP. On October 28, 1996, all claims
in the lawsuit were settled pursuant to a court-approved agreement. The
Company's portion of the settlement is adequately covered by reserves, including
the provision made in 1996 (See Note I) and insurance proceeds.
The Company and certain of its current and former direct and indirect corporate
predecessors, subsidiaries and divisions have been identified by the United
States Environmental Protection Agency, by the environmental agencies in several
states and by private parties as potentially responsible parties at a number of
hazardous waste disposal sites under the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("Superfund") and comparable state laws
and, as such, may be liable for the cost of cleanup and other remedial
activities at these sites. The Company may also have liability for such matters
pursuant to contractual obligations relating to divested property or with
respect to sites which may be identified in the future. With respect to certain
of these sites, other persons have also been identified as potentially
responsible parties, and in such circumstances the responsibility for cleanup
and other remedial activities is typically shared among such parties based on an
allocation formula. The Company is also involved in remedial responses and
voluntary environmental cleanups at other sites which are not currently the
subject of proceedings of any kind under Superfund or comparable state laws. The
Company has established reserves in its financial statements for such
environmental liabilities, including related legal fees and other transaction
costs, in the aggregate amount of $6.6 million. The provision for environmental
liabilities is based on the Company's estimate of allocations of liability among
potentially responsible parties (and the likelihood of contribution by such
parties), information concerning the scope of contamination, estimated
remediation costs, estimated transaction costs and other factors. The Company
has also recorded $1.3 million for estimated recoveries under insurance policies
to the extent that coverage for such claims has been acknowledged by the
relevant insurer and for estimated recoveries from third parties.
The Company and its subsidiaries also have sundry claims and other lawsuits
pending against them and also have certain guarantees which were made in the
ordinary course of business. It is not possible to determine with certainty the
ultimate liability, if any, of the Company in any of the matters referred to in
this Note O, but in the opinion of management, their outcome should have no
material adverse effect upon the financial condition or results of operations of
the Company.
Note P - Segment and Other Information
The Company is one of the largest and most diversified manufacturers of textile
products in the world. It is a leading developer, marketer and manufacturer of
fabrics and other textile products utilized in a wide variety of apparel and
interior furnishings end uses. The Company operates in two areas: products for
apparel markets and products for interior furnishings markets. Sales, operating
income, identifiable assets, depreciation and amortization and capital
expenditures for these segments are as follows:
1996 1995 1994
-------- -------- --------
(dollars in millions)
Net sales
Apparel................................ $1,328.3 $1,347.1 $1,331.5
Interior furnishings................... 854.0 862.1 795.6
-------- -------- --------
Total........................... $2,182.3 $2,209.2 $2,127.1
======== ======== ========
Operating income
Apparel................................ $ 121.7 $ 107.1 $ 151.5
Interior furnishings................... 55.6 67.4 60.2
Loss on closing of division............ (29.9) - -
Provision for restructuring............ - - (7.5)
-------- -------- --------
Total........................... 147.4 174.5 204.2
Interest expense......................... 65.9 56.3 49.8
Other expense (income) - net............. 6.1 (1.9) (14.9)
-------- -------- --------
Income before income taxes............... $ 75.4 $ 120.1 $ 169.3
======== ======== ========
Operating margin
Apparel................................ 9.2% 8.0% 11.4%
Interior furnishings................... 6.5 7.8 7.6
---- ---- ----
Total........................... 6.8% 7.9% 9.6%
==== ==== ====
Identifiable assets
Apparel................................ $1,091.8 $1,130.4 $1,178.1
Interior furnishings................... 734.2 748.8 667.0
Corporate.............................. 55.5 48.2 56.9
Assets held for sale................... 4.4 4.3 5.1
-------- -------- --------
Total........................... $1,885.9 $1,931.7 $1,907.1
======== ======== ========
Depreciation and amortization
Apparel................................ $ 52.3 $ 53.4 $ 52.6
Interior furnishings................... 35.0 33.6 30.0
-------- -------- --------
Total........................... $ 87.3 $ 87.0 $ 82.6
======== ======== ========
Capital expenditures
Apparel................................ $ 48.6 $ 55.4 $ 67.7
Interior furnishings................... 30.6 46.5 31.2
-------- -------- --------
Total........................... $ 79.2 $ 101.9 $ 98.9
======== ======== ========
The Company primarily markets its products to approximately 13,800 customers in
the United States. The Company also markets its products to customers in Canada,
Mexico, Latin America, Europe and the Pacific Rim countries. For the 1996 fiscal
year, no single customer represented more than 10% of the Company's net sales,
and the Company's 10 largest customers accounted for approximately 27% of net
sales.
Note Q - Financial Instruments
The Company utilizes interest rate agreements and foreign exchange contracts to
manage interest rate and foreign currency exposures. The principal objective of
such contracts is to minimize the risks and/or costs associated with financial
and global operating activities. The Company does not utilize financial
instruments for trading or other speculative purposes. The counterparties to
these contractual arrangements are a diverse group of major financial
institutions with which the Company also has other financial relationships. The
Company is exposed to credit loss in the event of nonperformance by these
counterparties. However, the Company does not anticipate nonperformance by the
other parties, and no material loss would be expected from their nonperformance.
INTEREST RATE INSTRUMENTS: The Company enters into interest rate swap, cap,
floor and collar agreements to reduce the impact of changes in interest rates on
its floating rate debt. The swap agreements are contracts to exchange floating
rate for fixed interest payments periodically over the life of the agreements
without the exchange of the underlying notional amounts. The notional amounts of
interest rate agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. For interest rate
instruments that effectively hedge interest rate exposures, the net cash amounts
paid or received on the agreements are accrued and recognized as an adjustment
to interest expense. If an arrangement is replaced by another instrument and no
longer qualifies as a hedge instrument, then it is marked to market and carried
on the balance sheet at fair value.
As of September 28, 1996 and September 30, 1995, the Company had the
following interest rate instruments in effect (notional amounts in millions; the
cap, swap, floor and collar rates are based on 3-month LIBOR):
1996
------------------------------------------
Notional Strike
Amount Rate Period
-------- ------- -----------
Interest rate caps $100 9.50% 04/96-04/97
300 7.00 10/96-10/97
300 9.50 10/96-10/97
200 10.00 10/96-10/97
Interest rate swaps $200 7.37% 10/95-10/00
Interest rate collars $ 50 4.75% 10/96-10/97
7.00
50 5.03 10/96-10/97
7.00
Interest rate floors $100 5.50% 01/96-10/96
250 5.25 01/96-10/96
300(a) 5.60 10/96-10/97
(a) Entered into on October 3, 1996.
1995
------------------------------------------
Notional Strike
Amount Rate Period
-------- ------- -----------
Interest rate caps $300 5.50% 10/94-10/95
500 4.50 10/94-10/95
350 6.00 10/95-10/96
150 9.50 10/95-10/96
100 9.50 04/96-04/97
300 9.50 10/96-10/97
200 10.00 10/96-10/97
Interest rate swaps $200 7.37% 10/95-10/00
25 5.92 10/95-10/96
Interest rate collars $100 5.42% 10/95-10/96
6.00
50 4.75 10/96-10/97
7.00
FOREIGN EXCHANGE INSTRUMENTS: The Company enters into forward currency exchange
contracts in the regular course of business to manage its exposure against
foreign currency fluctuations on sales, raw material and fixed asset purchase
transactions denominated in foreign currencies. Foreign currency receivables
which have forward exchange contracts are recorded in U.S. dollars at the
applicable forward rate. The foreign exchange contracts on receivables ($19.8
million and $10.4 million at September 28, 1996 and September 30, 1995,
respectively) require the Company to exchange British pounds, German marks,
French francs, Canadian dollars and Italian lira for U.S. dollars and generally
mature within three months. Forward exchange contracts related to raw material
and fixed asset purchase transactions are recognized as adjustments to the bases
of the underlying assets. At September 28, 1996, the Company had $4.8 million of
forward currency exchange contracts maturing in one to six months which related
to purchases of wool and machinery denominated in Australian dollars, German
marks and French francs, compared to $8.2 million at September 30, 1995. At
September 28, 1996 and September 30, 1995, deferred gains and losses on foreign
exchange contracts are not material to the consolidated financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and assumptions were
used in estimating the indicated fair values of financial instruments:
Cash and Cash Equivalents: The carrying amount approximates fair value because
of the short maturity of those instruments.
Short-term Investments: The fair values are estimated based on quoted market
prices for these or similar instruments.
Long-term Investments and Receivables: The fair values are estimated based on
one of the following methods: (i) quoted market prices; (ii) current rates for
similar issues; (iii) recent transactions for similar issues; or (iv) present
value of expected cash flows.
Short-term and Long-term Debt: The fair value is estimated based on current
rates offered for similar debt. At September 28, 1996, long-term debt with a
carrying value of $838.9 million had an estimated fair value of $834.9 million.
Interest Rate Instruments: The fair values are the estimated amounts that the
Company would receive or pay to terminate the agreements at the reporting date,
taking into account current interest rates and the current credit worthiness of
the counterparties. At September 28, 1996 and September 30, 1995, the carrying
amounts of these instruments were a $0.2 million liability and a $5.7 million
asset, respectively. At September 28, 1996, the Company estimates it would have
paid $7.2 million and at September 30, 1995 would have paid $7.7 million to
terminate the agreements.
Foreign Currency Contracts: The fair values of foreign currency contracts (used
for hedging purposes) are estimated by obtaining quotes from brokers. At
September 28, 1996 and September 30, 1995, there were no carrying amounts
related to foreign currency contracts in the consolidated balance sheets.
Foreign currency contracts to receive $15.1 million had an estimated fair value
to receive $15 million at September 28, 1996, compared to foreign currency
contracts to receive $2.2 million with an estimated fair value to receive $2.4
million at September 30, 1995.
It is estimated that the carrying value of the Company's other financial
instruments approximated fair value at September 28, 1996 and September 30,
1995.
Note R - Quarterly Results of Operations (unaudited)
The Company's unaudited quarterly results of operations are presented below (in
thousands, except for per share data).
Fiscal 1996 Quarters
December March June September
--------- -------- -------- ---------
Net sales.............................. $512,694 $572,081 $574,571 $523,001
Cost of sales.......................... 434,689 471,760 471,697 436,014
Income tax expense..................... (7,438) (14,884) (2,256) (9,169)
Income before extraordinary item (a)... 8,473 20,701 570 11,859
Extraordinary item..................... (697) - - -
Net income............................. $ 7,776 $ 20,701 $ 570 $ 11,859
PER SHARE DATA
Income before extraordinary item (a)... $ 0.13 $ 0.33 $ 0.01 $ 0.19
Extraordinary item..................... (0.01) - - -
--------- -------- -------- -------
Net income............................. $ 0.12 $ 0.33 $ 0.01 $ 0.19
COMMON STOCK PRICES
High................................. 14 1/4 13 1/4 14 7/8 14 1/2
Low.................................. 11 11 3/8 11 1/4 9 7/8
Fiscal 1995 Quarters
December March June September
--------- -------- -------- ---------
Net sales.............................. $514,836 $583,423 $581,983 $528,949
Cost of sales.......................... 432,026 480,614 483,694 447,418
Income tax expense..................... (11,589) (16,265) (13,963) (9,890)
Net income............................. $ 12,846 $ 22,180 $ 19,496 $ 13,872
NET INCOME PER SHARE................... $ 0.19 $ 0.34 $ 0.30 $ 0.21
COMMON STOCK PRICES
High................................. 10 5/8 12 11 7/8 13 5/8
Low.................................. 9 1/4 9 5/8 10 1/8 11 1/4
(a) June quarter 1996 includes a $20.3 million loss on closing the Knitted
Fabrics division and $4.7 million for certain other non-recurring charges,
each net of income taxes.
<PAGE>
STATISTICAL REVIEW
Burlington Industries, Inc. and Subsidiary Companies
(dollar amounts in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
1996 1995 1994 1993(c) 1992(b)(c)
---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales..................... $2,182,347 $2,209,191 $2,127,067 $2,057,943 $2,065,908
Operating income before
interest and taxes........... 147,390 174,498 204,242 214,141 198,495
Interest expense.............. 65,936 56,294 49,841 93,389 160,217
Income tax expense (benefit).. 33,747 51,707 69,982 58,514 (33,816)
Income (loss) from continuing
operations................... 41,603 68,394 99,299 68,445 (68,005)
Income (loss) per common share
from continuing operations... 0.66 1.05 1.46 1.00 (1.88)
Dividends per common share.... - - - - -
FINANCIAL POSITION AT YEAR END
Current assets................ $ 719,370 $ 732,837 $ 733,538 $ 664,552 $ 471,585
Fixed assets - net............ 565,131 570,729 544,800 529,310 530,008
Total assets.................. 1,885,942 1,931,731 1,907,148 1,854,320 1,741,864
Current liabilities........... 265,352 272,397 315,468 314,265 284,595
Long-term liabilities......... 894,496 932,227 915,884 948,960 924,977
Shareholders' equity.......... 615,920 615,440 574,364 484,215 448,212
Current ratio................. 2.7 2.7 2.3 2.1 1.7
Total debt as % of
capitalization............... 57.7% 59.7% 61.3% 67.5% 68.2%
OTHER DATA
EBITDA (a)..................... $ 264,637 $ 261,454 $ 294,347 $ 323,964 $ 316,174
EBITDA margin(a)............... 12.1% 11.8% 13.8% 15.7% 15.3%
Capital expenditures........... $ 79,174 $ 101,876 $ 98,869 $ 80,590 $ 62,423
Number of employees at
year end...................... 21,000 22,500 23,800 23,600 23,400
Cash interest coverage
ratio......................... 4.3 4.9 6.1 4.0 2.5
</TABLE>
(a) EBITDA: Operating income before interest, taxes, depreciation and
amortization (excluding loss on closing of division and restructuring
provisions). EBITDA should not be considered in isolation from or as a
substitute for operating income before interest and taxes, cash flow from
operating activities and other consolidated income or cash flow statement
data prepared in accordance with generally accepted accounting principles.
(b) Fiscal year 1992 represents a 53-week period. All other fiscal years
presented represent a 52-week period.
(c) Restated for the adoption of SFAS No. 109, "Accounting for Income Taxes".
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Burlington Industries, Inc.
We have audited the accompanying consolidated balance sheets of Burlington
Industries, Inc. and Subsidiary Companies as of September 28, 1996 and September
30, 1995, and the related consolidated statements of operations and cash flows
for each of the three years in the period ended September 28, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Burlington Industries, Inc. and Subsidiary Companies at September 28, 1996 and
September 30, 1995, and the consolidated results of their operations and their
cash flows, for each of the three years in the period ended September 28, 1996,
in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Greensboro, North Carolina
November 1, 1996
Exhibit 22
SUBSIDIARIES
Set forth below is a list of all subsidiaries of Burlington Industries, Inc.
(the "Corporation")* and, as to each person named, the percentage of voting
securities owned, or other bases of control, by its immediate parent.
Percentage of Voting
State or Power Represented by
Jurisdiction Securities Owned by
of the Corporation on
Name Incorporation September 28, 1996
- ----------------------- ------------- ---------------------
Burlington Fabrics Inc. Delaware 100%
B.I. Funding, Inc. Delaware 100%
- ----------------------------
* The names of 15 domestic subsidiaries (4 of which are inactive) and 8
foreign subsidiaries (one of which is inactive) have been omitted
because, considered in the aggregate, they would not constitute a
significant subsidiary. All of the foregoing subsidiaries are included
in the consolidated financial statements of the Corporation.
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Burlington Industries, Inc. and Subsidiary Companies of our report dated
November 1, 1996, included in the 1996 Annual Report to Shareholders of
Burlington Industries, Inc.
Our audits also included the financial statement schedule of Burlington
Industries, Inc. and Subsidiary Companies listed in the accompanying index to
financial statements. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-95350) of Burlington Industries, Inc. and in the related
Prospectus of our report dated November 1, 1996, with respect to the
consolidated financial statements incorporated herein by reference and our
report included in the above paragraph with respect to the financial statement
schedule included in this Annual Report (Form 10-K) of Burlington Industries,
Inc.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-49894) pertaining to the Burlington Industries, Inc. 1992
Equity Incentive Plan and the Burlington Industries, Inc. Equity Incentive Plan
and (Form S-8 No. 333-9501) pertaining to the Burlington Industries, Inc. 1995
Equity Incentive Plan of Burlington Industries, Inc. of our report dated
November 1, 1996, with respect to the consolidated financial statements
incorporated herein by reference and our report included in the above paragraph
with respect to the financial statement schedule included in this Annual Report
(Form 10-K) of Burlington Industries, Inc.
/s/Ernst & Young LLP
Greensboro, North Carolina
December 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 15,392
<SECURITIES> 22,755
<RECEIVABLES> 363,856
<ALLOWANCES> 21,466
<INVENTORY> 329,386
<CURRENT-ASSETS> 719,370
<PP&E> 1,001,200
<DEPRECIATION> 436,069
<TOTAL-ASSETS> 1,885,942
<CURRENT-LIABILITIES> 265,352
<BONDS> 837,136
0
0
<COMMON> 684
<OTHER-SE> 615,236
<TOTAL-LIABILITY-AND-EQUITY> 1,885,942
<SALES> 2,182,347
<TOTAL-REVENUES> 2,182,347
<CGS> 1,814,160
<TOTAL-COSTS> 1,814,160
<OTHER-EXPENSES> 48,057
<LOSS-PROVISION> 6,457
<INTEREST-EXPENSE> 65,936
<INCOME-PRETAX> 75,350
<INCOME-TAX> 33,747
<INCOME-CONTINUING> 41,603
<DISCONTINUED> 0
<EXTRAORDINARY> (697)
<CHANGES> 0
<NET-INCOME> 40,906
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
