PROSPECTUS SUPPLEMENT
(To Prospectus dated September 8, 1995)
$150,000,000
BURLINGTON INDUSTRIES, INC.
7.25% DEBENTURES DUE 2027
---------------
Interest payable February 1 and August 1
---------------
The Debentures will mature on August 1, 2027. The Debentures will be redeemable
as a whole or in part, at the option of the Company at any time on or after
August 2, 2007, at a redemption price equal to the greater of (i) 100% of the
principal amount of the Debentures and (ii) the sum of the present values of
the remaining scheduled payments of principal and interest thereon discounted
to the date of redemption on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Rate (as defined herein)
plus 15 basis points, plus, in either case, accrued and unpaid interest thereon
to the date of redemption. The Debentures will also be redeemable at the option
of the holders thereof on August 1, 2007 at 100% of their principal amount plus
accrued interest. The Debentures will be issued only in book-entry form through
the facilities of The Depository Trust Company (the "Depositary"). See
"Description of the Debentures."
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
PRICE 99.402% AND ACCRUED INTEREST
---------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
-------------- ------------------ ----------------
<S> <C> <C> <C>
Per Debenture ...... 99.402% .650% 98.752%
Total ............... $149,103,000 $975,000 $148,128,000
</TABLE>
- ------------
(1) Plus accrued interest from August 1, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting estimated expenses of $160,000 payable by the Company.
---------------
The Debentures are offered, subject to prior sale, when, as and if accepted
by the Underwriters and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of
the Debentures will be made on or about August 12, 1997 through the book-entry
facilities of the Depositary against payment therefor in immediately available
funds.
---------------
MORGAN STANLEY DEAN WITTER
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
August 7, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE DEBENTURES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
No person has been authorized by the Company or by any Underwriter or
dealer to give any information or to make any representations other than those
contained or incorporated by reference in this Prospectus Supplement or the
Prospectus and, if given or made, such information or representations must not
be relied upon as having been so authorized. Neither this Prospectus Supplement
nor the Prospectus constitutes an offer to sell or the solicitation of an offer
to buy any securities other than the securities described in this Prospectus
Supplement or an offer to sell or the solicitation of an offer to buy such
securities in any jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction. Neither the delivery of this Prospectus
Supplement and the accompanying Prospectus nor any sale made hereunder shall
under any circumstances imply that the information herein is correct as of any
date subsequent to the date hereof.
----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<S> <C>
Page
----
The Company ........................................................... S-3
Use of Proceeds ........................................................ S-3
Summary Historical Consolidated Financial Data .......................... S-4
Capitalization ........................................................ S-5
Management's Discussion and Analysis of
Results of Operations and Financial Condition ......................... S-6
Description of the Debentures ......................................... S-8
Underwriters ........................................................... S-10
</TABLE>
Prospectus
<TABLE>
<S> <C>
Available Information ................................................. 2
Incorporation of Certain Documents by Reference ...................... 2
The Company .......................................................... 3
Use of Proceeds ....................................................... 4
Ratio of Earnings to Fixed Charges .................................. 4
Description of Senior Debt Securities ............................... 4
Plan of Distribution ................................................. 20
Legal Opinions ....................................................... 21
Experts ............................................................. 21
</TABLE>
S-2
<PAGE>
THE COMPANY
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 for two industry segments:
apparel markets and interior furnishings markets. These markets accounted for
60.9% and 39.1%, respectively, of the Company's $2,182.3 million in net sales
in the 1996 fiscal year. The Company's businesses are organized in eight
divisions and one operating subsidiary, each of which essentially functions as
a stand-alone merchandising and manufacturing operation.
Products for Apparel Markets
The Company serves the apparel market through five divisions, each of
which manufactures a distinct product line in terms of end uses:
Menswear: As a leading manufacturer of woven wool worsted and worsted
blended fabrics, the Menswear Division's products are marketed to major
designers, manufacturers and retailers of men's, women's and uniform apparel.
In recent years, the Division has expanded its line of innovative fashion
fabrics to include unique luxury fabrics that complement its wool worsteds,
providing a more complete range of products for better apparel.
Klopman Fabrics: The Klopman Fabrics Division produces a highly
diversified range of specialty synthetic fabrics and blends for various end
uses, including men's and women's high performance sportswear, activewear,
outerwear, rainwear, medical barrier fabrics and flame retardant and other
fabrics used in commercial and residential furnishings.
Denim: Known as the nation's leading maker of value-added specialty denim
fabrics, the Denim Division helps keep denim at the forefront of fashion by
providing more than 60 styles of denim to all major jeans manufacturers and to
makers of other casual apparel.
Sportswear: The Burlington Sportswear Division, formed by the Company in
1996, produces 100% cotton and cotton/polyester blend woven and knitted fabrics
which it sells to manufacturers of better men's sportswear and uniforms.
Burlington Madison Yarn Company: A source for both textured and spun
synthetic yarns, the Burlington Madison Yarn Division engineers yarns to meet
the specifications of more than 300 customers, as well as other divisions of
the Company, which make fabric for apparel, home furnishings, industrial,
medical and automotive uses.
Products for Interior Furnishings Markets
In the interior furnishings market, the Company operates through one
division, which focuses on interior furnishings products and decorative
fabrics, and two divisions and one operating subsidiary, which serve distinct
segments of the floor covering market:
Burlington House: The world's leading producer of jacquard fabrics, the
Burlington House Division is a leading manufacturer of ready-made and
made-to-measure draperies, window coverings and coordinating bedroom ensembles,
mattress ticking and upholstery and decorative fabrics for use by makers of
furniture, bedroom ensembles, draperies and window coverings.
Lees: The Lees Division is a leading domestic manufacturer of tufted
synthetic carpet and carpet tiles for commercial uses such as office buildings,
institutions, airports, hotels, schools and health care facilities.
Burlington House Area Rugs: The Burlington House Area Rugs Division is a
major producer in the United States of tufted area and bath rugs for home use.
Marketing a changing variety of products to major retail chains, it offers
consumers fashion at affordable prices.
The Bacova Guild, Ltd.: This subsidiary markets printed accent rugs,
welcome mats and coordinated bath ensembles featuring its unique designs to
diverse market segments, including leading U.S. department stores, mail order
catalogs, mass merchants, specialty stores and international customers.
USE OF PROCEEDS
The net proceeds from the sale of the Debentures offered hereby (the
"Offering") will be used to repay a portion of the outstanding borrowings under
the revolving credit facility under the Credit Agreement dated as of September
30, 1988, as amended and restated as of November 8, 1995, among the Company and
the other parties signatory thereto (the "1995 Bank Credit Agreement").
S-3
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data of the Company as of and for the fiscal years ended September 28, 1996 and
September 30, 1995 and as of and for the nine-month periods ended June 28, 1997
and June 29, 1996. The summary historical consolidated financial data presented
below as of and for the fiscal years ended September 28, 1996 and September 30,
1995 are derived from consolidated financial statements of the Company, which
have been audited by Ernst & Young LLP, independent auditors. The summary
historical consolidated financial data presented below as of and for the
nine-month periods ended June 28, 1997 and June 29, 1996 are not audited, but
in the opinion of management are a fair presentation of such information. All
of the selected data presented below should be read in conjunction with, and
are qualified by reference to, "Management's Discussion and Analysis of Results
of Operations and Financial Condition" contained herein and incorporated by
reference into the accompanying Prospectus and the consolidated financial
statements of the Company and related notes incorporated by reference into the
accompanying Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended Fiscal Year Ended
--------------------------------- -------------------------------
June 28, June 29, September 28, September 30
1997 1996 1996 1995
--------------- --------------- --------------- -------------
(unaudited)
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ....................................... $ 1,567,241 $ 1,659,346 $ 2,182,347 $2,209,191
Operating income before interest and taxes ...... 106,341 110,095 147,390 174,498
Interest expense ................................. 44,840 49,033 65,936 56,294
Income tax expense .............................. 28,570 24,578 33,747 51,707
Income from continuing operations ............... 43,991 29,744 41,603 68,394
Income per common share from continuing
operations .................................... 0.71 0.47 0.66 1.05
Dividends per common share ..................... -- -- -- --
Balance Sheet Data:
Current assets ................................. $ 736,986 $ 763,554 $ 719,370 $ 732,837
Fixed assets--net .............................. 569,032 562,796 565,131 570,729
Total assets .................................... 1,906,147 1,939,208 1,885,942 1,931,731
Current liabilities .............................. 245,809 253,155 265,352 272,397
Long-term liabilities ........................... 931,011 978,216 894,496 932,227
Shareholders' equity ........................... 613,507 599,121 615,920 615,440
Current ratio .................................... 3.0 3.0 2.7 2.7
Total debt as % of capitalization ............... 58.7% 60.7% 57.7% 59.7%
Other Data:
Operating income before interest and taxes
(excluding restructuring provisions) ............ $ 118,399 $ 139,951 $ 177,246 $ 174,498
Capital expenditures and investment
in joint venture ................................. 63,792 60,098 81,374 101,876
Number of employees at period-end ............... 21,000 22,000 21,000 22,500
Cash interest coverage ratio ..................... 4.3 4.4 4.3 4.9
Ratio of earnings to fixed charges ............... 2.5 2.0 2.1 3.0
</TABLE>
S-4
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
consolidated capitalization of the Company as of June 28, 1997, and as adjusted
to give effect to the Offering and the application of proceeds therefrom,
assuming they had occurred on June 28, 1997. The financial data presented below
are not audited, but in the opinion of management are a fair presentation of
such information. This table should be read in conjunction with the
consolidated financial statements and notes thereto incorporated by reference
into the accompanying Prospectus.
<TABLE>
<CAPTION>
At June 28, 1997
----------------------------
Actual As Adjusted
------------- ------------
(Dollar amounts in
thousands)
<S> <C> <C>
Short-term debt:
Short-term borrowings ........................... $ 300 $ 300
Long-term debt due currently ..................... 470 470
---------- ----------
Total short-term debt ........................... $ 770 $ 770
========== ==========
Long-term debt:
1995 Bank Credit Agreement ..................... $ 520,000 $ 370,000
7.25% Debentures due 2027 ........................ -- 150,000
7 1/4% Notes due 2005 ........................... 149,909 149,909
Commercial Paper ................................. 191,982 191,982
Other .......................................... 9,452 9,452
---------- ----------
Total long-term debt ........................... 871,343 871,343
Less current portion of long-term debt ......... (470) (470)
---------- ----------
Noncurrent portion of long-term debt ............ 870,873 870,873
Shareholders' equity:
Common stock issued .............................. 684 684
Capital in excess of par value .................. 882,160 882,160
Accumulated deficit .............................. (149,008) (149,008)
Currency translation adjustments ............... (10,586) (10,586)
---------- ----------
723,250 723,250
Less cost of common stock held in treasury ...... (109,743) (109,743)
---------- ----------
Total shareholders' equity ..................... 613,507 613,507
---------- ----------
Total capitalization ........................... $1,484,380 1,484,380
========== ==========
</TABLE>
S-5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Results of Operations
Comparison of Nine Months ended June 28, 1997 and June 29, 1996.
Net sales for the first nine months of the 1997 fiscal year were $1,567.2
million, 5.6% lower than the $1,659.3 million recorded for the first nine
months of the 1996 fiscal year. Net sales of products for apparel markets for
the first nine months of the 1997 fiscal year were $943.3 million, 7.7% lower
than the $1,022.5 million recorded in the first nine months of the 1996 fiscal
year. This reduction was primarily due to the elimination of the volume
produced and marketed by the Knitted Fabrics division, which was closed in
June, 1996 and lower sales in the Denim division partially offset by higher
volume in the Klopman division. Net sales of products for interior furnishings
markets for the first nine months of the 1997 fiscal year were $623.9 million
in comparison with the $636.8 million recorded in the first nine months of the
1996 fiscal year. The change in sales of the interior furnishings segment was
mainly attributable to the sale of the J.G. Furniture and Advanced Textiles
operations and lower sales in the Burlington House and Area Rugs divisions
partially offset by higher activity in the Lees division. Total export sales
increased 12% over the comparable period of the prior year and represented
11.8% of net sales.
Operating income before interest and taxes for the first nine months of
the 1997 fiscal year was $106.3 million in comparison with $110.1 million
recorded in the same period of fiscal 1996. Amortization of goodwill was $13.6
million and $13.7 million in the first nine months of the 1997 and 1996 fiscal
years, respectively. Operating income before interest and taxes for the apparel
products segment for the first nine months of the 1997 fiscal year was $87.7
million compared to $100.4 million recorded for the first nine months of the
1996 fiscal year before the charges for closing the Knitted Fabrics division.
The factors accounting for the decrease in operating income of the apparel
products segment were lower profits of the Denim division partially offset by
the absence of Knitted Fabrics division operating losses in the current period.
Operating income before interest and taxes for the interior furnishings
products segment for the first nine months of the 1997 fiscal year was $39.4
million before the charges for restructuring activities, compared to $43.3
million recorded for the first nine months of the 1996 fiscal year. This
decrease was mainly attributable to the reduced level of operations in the
Burlington House and Area Rugs divisions partially offset by improved results
in the Lees division.
Interest expense for the first nine months of the 1997 fiscal year was
$44.8 million, or 2.9% of net sales, compared with $49.0 million, or 3.0% of
net sales, in the first nine months of the 1996 fiscal year. The decrease in
interest expense was due primarily to the lower level of debt outstanding.
Other income-net for the first nine months of the 1997 fiscal year was
$11.1 million, consisting principally of $9.1 million in gains on the disposal
of certain non-core operating assets and interest income. Other expense for the
first nine months of the 1996 fiscal year was $6.7 million, consisting
principally of: a $4.0 million provision for legal contingencies, a $2.3
million provision for loss on sale of a non-operating asset, a $1.3 million
loss on the sale of J.G. Furniture, and interest income.
An extraordinary loss from early extinguishment of debt--$1.2 million
before taxes, $0.7 million net of tax benefit, or $0.01 loss per share--was
recorded in the first nine months of the 1996 fiscal year. This resulted from
the write-off of deferred debt expense associated with the replacement of the
1994 Bank Credit Agreement in November, 1995.
Liquidity and Capital Resources
During the first nine months of the 1997 fiscal year, the Company generated
$70.0 million of cash from operating activities and $14.8 million from sales of
assets and had net borrowings of long- and short-term debt of $32.0 million.
Cash was primarily used as follows: $53.4 million for the repurchase of Company
common stock and $63.8 million for capital expenditures and investment in an
Indian joint venture. At June 28, 1997, total debt of the Company (consisting
of current and non-current portions of long-term debt and short-term
borrowings) was $871.6 million compared with $838.9 million at September 28,
1996 and $926.8 million at June 29, 1996.
S-6
<PAGE>
The Company's principal uses of funds for the next several years will be
for capital investments (including the funding of acquisitions and
participations in joint ventures), servicing of indebtedness and 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 under
the revolving credit facility of its 1995 Bank Credit Agreement and the
receivables-backed commercial paper program described below. The Company
believes that these sources of funds will be adequate to meet the Company's
foregoing needs.
The Company has a $750.0 million unsecured revolving credit facility
(under the 1995 Bank Credit Agreement) which expires in March, 2001. At July
25, 1997, the Company had approximately $240.0 million in unused capacity under
this 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 optional
floating rates based on the adjusted Eurodollar rate plus 0.275% or Eurodollar
rates or fixed rates which may be offered by lenders pursuant to the
competitive bid procedures under the Agreement. In addition, the entire amount
of the $750.0 million credit facility is subject to an annual facility fee of
0.15%. Changes in the Company's debt rating from current levels would increase
or decrease borrowing costs.
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 $225.0 million receivables-backed, A-1/D-1 rated commercial
paper program which is supported by a multi-bank liquidity facility expiring in
August 1998. At July 25, 1997, $180.2 million of commercial paper with original
maturities of up to 75 days was outstanding. There were no borrowings
outstanding at such date under the liquidity facility.
In September 1995, a $400 million senior debt shelf registration statement
was filed and became effective. The Company has utilized $150 million and,
after issuance of the Debentures, will have remaining capacity of $100 million
under this shelf registration.
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.
S-7
<PAGE>
DESCRIPTION OF THE DEBENTURES
The Debentures offered hereby will be issued under an Indenture, dated as
of September 1, 1995, between the Company and The Bank of New York, as
successor to Wachovia Bank of North Carolina, N.A., as Trustee, as supplemented
from time to time (the "Indenture"). The form of the Indenture was filed as an
exhibit to the Registration Statement of which the accompanying Prospectus is a
part. The following summary of certain provisions of the Indenture and of the
Debentures (referred to in the accompanying Prospectus as the "Offered Debt
Securities") supplements, and to the extent inconsistent therewith replaces,
the summaries of certain provisions of the Offered Debt Securities set forth in
the accompanying Prospectus, to which reference is hereby made. Such summary
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all provisions of the Indenture, including the
definitions therein of certain terms.
The Debentures will be unsecured obligations of the Company and will rank
equally with all other unsecured and unsubordinated indebtedness of the
Company. The Debentures offered hereby will be limited to $150,000,000
aggregate principal amount and will mature on August 1, 2027. Each Debenture
will bear interest at the rate of 7.25% per annum, computed on the basis of a
360-day year of twelve 30-day months, from August 1, 1997 or from the most
recent interest payment date to which interest has been paid or provided for,
payable semiannually on February 1 and August 1 of each year beginning on
February 1, 1998. Interest payable on any Debenture which is punctually paid or
duly provided for on any interest payment date shall be paid to the person in
whose name such Debenture is registered at the close of business on the January
15, or July 15, respectively, preceding such interest payment date.
The Debentures are to be issued only in registered form without coupons in
denominations of $1,000 and any multiple of $1,000. The Debentures will not be
entitled to any sinking fund. The Indenture contains covenants limiting certain
liens and sale and leaseback transactions. See "Description of Senior Debt
Securities--Limitations on Liens" and; "--Limitation on Sale and Leaseback
Transactions" in the accompanying Prospectus. In addition, the Debentures will
be subject to defeasance and covenant defeasance as provided in the
accompanying Prospectus.
Redemption
Redemption at the Option of the Holder
The Debentures will be redeemable on August 1, 2007 (the "Redemption
Date"), at the option of the holders thereof, at 100% of their principal
amount, together with interest payable to the date of redemption. Less than the
entire principal amount of any Debenture may be redeemed on the Redemption
Date, provided the principal amount which is to be redeemed is equal to $1,000
or an integral multiple of $1,000.
The Depositary or its nominee, as registered holder of the Debentures,
will be entitled to tender the Debentures on the Redemption Date for repayment.
During the period from and including June 1, 2007 to and including July 1,
2007, the Depositary will receive instructions from its participants (acting on
behalf of owners of beneficial interests in the Debentures) to tender the
Debentures for repayment under the Depositary's procedures. Such tenders for
repayment will be made by the Depositary, provided that the Depositary receives
instructions from tendering participants by Noon on July 1, 2007. The
Depositary will notify the Paying Agent by the close of business on such July 1
as to the aggregate principal amount of the Debentures, if any, for which the
Depositary shall have received instructions to tender for repayment. OWNERS OF
BENEFICIAL INTERESTS IN DEBENTURES WHO WISH TO EFFECTUATE THE TENDER AND
REPAYMENT OF SUCH DEBENTURES MUST INSTRUCT THEIR RESPECTIVE DEPOSITARY
PARTICIPANT OR PARTICIPANTS AT A REASONABLE PERIOD OF TIME IN ADVANCE OF JULY
1.
If at any time the use of a book-entry only system through the Depositary
(or any successor securities depositary) is discontinued with respect to the
Debentures, tenders for repayment of any Debenture on the Redemption Date shall
be made according to the following procedures. The Company must receive at the
principal office of the Paying Agent, during the period from and including June
1, 2007 to and including July 1, 2007 (i) the Debenture with the form entitled
"Option to Elect Repayment" on the reverse of the Debenture duly completed; or
(ii)(x) a telegram, telex, facsimile transmission or letter from a member of a
national securities exchange or the National Association of Securities Dealers,
Inc., or a commercial bank or a trust company in the United States of America,
setting forth the name of the registered holder of the Debenture, the principal
amount of the Debenture, the amount of the Debenture to be repaid, a statement
that the option to elect repayment is being exercised thereby and a guarantee
that the Debenture to be repaid, with the form entitled "Option to Elect
Repayment" on the reverse of the Debenture duly completed, will be received by
the Company not later than five business days after the date of such telegram,
telex, facsimile transmission or letter; and (y) such Debenture and form duly
completed are received by the Company by such fifth business day. Any such
notice
S-8
<PAGE>
received by the Company during the period from and including such June 1 to and
including such July 1 shall be irrevocable. All questions as to the validity,
eligibility (including time or receipt) and the acceptance of any Debenture for
repayment will be determined by the Company, whose determination will be final
and binding.
For all puposes of this section, if such July 1 is not a business day, it
shall be deemed to refer to the next succeeding business day.
Redemption at the Option of the Company
The Debentures will be redeemable as a whole or in part, at the option of
the Company at any time on or after August 2, 2007 (a "Company Redemption
Date"), at a redemption price equal to the greater of (i) 100% of the principal
amount of the Debentures to be redeemed and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest thereon
discounted to the Company Redemption Date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15
basis points, plus, in either case, accrued and unpaid interest on the
principal amount being redeemed to the date of redemption.
"Treasury Rate" means, with respect to any Company Redemption Date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Company Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Debentures to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Debentures. "Independent Investment Banker" means one of
the Reference Treasury Dealers appointed by the Trustee after consultation with
the Company.
"Comparable Treasury Price" means, with respect to any Company Redemption
Date, (i) the average of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) on the
third business day preceding such Company Redemption Date, as set forth in the
daily statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, (A) the
average of the Reference Treasury Dealer Quotations for such Company Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any Company Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such Company Redemption Date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Salomon
Brothers Inc and their respective successors; provided, however, that if any of
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer.
Notice of any redemption by the Company will be mailed at least 30 days
but not more than 60 days before any Company Redemption Date to each holder of
Debentures to be redeemed.
Unless the Company defaults in payment of the redemption price, on and
after any Company Redemption Date interest will cease to accrue on the
Debentures or portions thereof called for redemption.
Book-Entry Procedures
Upon issuance, all Debentures will be represented by a fully registered
global debenture (the "Global Debenture"). The Global Debenture will be
deposited with, or on behalf of, the Depositary, and registered in the name of
the Depositary or a nominee thereof. Unless and until it is exchanged in whole
or in part for Debentures in definitive form, the Global Debenture may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary.
A further description of the Depositary's procedures with respect to the
Global Debenture is set forth in the Prospectus under "Description of Senior
Debt Securities--Book Entry Debt Securities."
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of Debentures set forth opposite their respective
names below:
<TABLE>
<CAPTION>
Principal
Amount of
Name Debentures
- ------------------------------------------ -------------
<S> <C>
Morgan Stanley & Co. Incorporated ...... $ 50,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................... 50,000,000
Salomon Brothers Inc ..................... 50,000,000
-------------
Total ................................. $150,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Debentures are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all the
Debentures if any are taken.
The Underwriters propose initially to offer part of the Debentures
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of .40% of the principal amount of the Debentures. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of .25% of
the principal amount of the Debentures to certain other dealers. After the
initial offering of the Debentures, the offering price and other selling terms
may from time to time be varied by the Underwriters.
In order to facilitate the offering of the Debentures, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Debentures. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Debentures for
their own account. In addition, to cover overallotments or to stabilize the
price of the Debentures, the Underwriters may bid for, and purchase, the
Debentures in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Debentures in the offering, if the syndicate repurchases previously distributed
Debentures in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Debentures above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company does not intend to apply for listing of the Debentures on a
national securities exchange but has been advised by the Underwriters that they
currently intend to make a market in the Debentures as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in the Debentures and any such market making may be discontinued at any
time at the sole discretion of the Underwriters. Accordingly, no assurance can
be given as to the liquidity of, or trading markets for, the Debentures.
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