FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1996
Commission file number 1-10984
BURLINGTON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1584586
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
3330 West Friendly Avenue, Greensboro, North Carolina 27410
(Address of principal executive offices)
(Zip Code)
(910) 379-2000
(Registrant's telephone number, including area code)
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
As of January 15, 1997, there were outstanding 55,735,068 shares of Common
Stock, par value $.01 per share, and 6,773,608 shares of Nonvoting Common Stock,
par value $.01 per share, of the registrant.
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations
(Amounts in thousands, except for per share amounts)
Three Three
months months
ended ended
December 28, December 30,
1996 1995
---------- ----------
Net sales......................................... $ 476,490 $ 512,694
Cost of sales..................................... 403,910 434,689
---------- ----------
Gross profit...................................... 72,580 78,005
Selling, administrative and general expenses...... 37,339 40,951
Amortization of goodwill.......................... 4,539 4,553
---------- ----------
Operating income before interest and taxes........ 30,702 32,501
Interest expense.................................. 14,636 16,301
Other expense (income) - net...................... (566) 289
---------- ----------
Income before income taxes........................ 16,632 15,911
Income tax expense:
Current......................................... 2,238 3,898
Deferred........................................ 5,009 3,540
---------- ----------
Total income tax expense...................... 7,247 7,438
---------- ----------
Income before extraordinary item.................. 9,385 8,473
Extraordinary item:
Loss from early extinguishment of debt,
net of income tax benefit of $454 for
the three months ended December 30, 1995....... - 697
---------- ----------
Net income........................................ $ 9,385 $ 7,776
========== ==========
Average common shares outstanding................. 62,976 65,143
Net income per common share:
Income before extraordinary item................ $ 0.15 $ 0.13
Extraordinary item.............................. - (0.01)
---------- ----------
$ 0.15 $ 0.12
========== ==========
1
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(Amounts in thousands)
December 28, September 28,
1996 1996
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents....................... $ 7,222 $ 15,392
Short-term investments.......................... 22,035 22,755
Customer accounts receivable after deductions
of $21,455 and $21,466 for the respective
dates for doubtful accounts, discounts,
returns and allowances........................ 298,837 342,390
Sundry notes and accounts receivable............ 5,487 6,608
Inventories..................................... 335,918 329,386
Prepaid expenses................................ 4,737 2,839
----------- -----------
Total current assets....................... 674,236 719,370
Fixed assets, at cost:
Land and land improvements...................... 34,262 34,332
Buildings....................................... 386,206 381,281
Machinery, fixtures and equipment............... 587,429 585,587
----------- -----------
1,007,897 1,001,200
Less accumulated depreciation and amortization.. 440,868 436,069
----------- -----------
Fixed assets - net......................... 567,029 565,131
Other assets:
Investments and receivables..................... 18,822 14,032
Intangibles and deferred charges................ 27,297 25,875
Net assets held for sale........................ 4,444 4,409
Excess of purchase cost over
net assets acquired............................ 552,586 557,125
----------- -----------
Total other assets......................... 603,149 601,441
----------- -----------
$ 1,844,414 $ 1,885,942
=========== ===========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings........................... $ 2,200 $ -
Long-term debt due currently.................... 470 1,720
Accounts payable and accrued expenses........... 148,800 196,583
Income taxes payable............................ 11,267 20,674
Deferred income taxes........................... 48,748 46,375
----------- -----------
Total current liabilities.................. 211,485 265,352
Long-term liabilities:
Long-term debt.................................. 842,715 837,136
Other........................................... 58,467 57,360
----------- -----------
Total long-term liabilities................ 901,182 894,496
Deferred income taxes........................... 112,810 110,174
Shareholders' equity:
Common stock issued............................. 684 684
Capital in excess of par value.................. 881,600 885,485
Accumulated deficit............................. (183,614) (192,999)
Currency translation adjustments................ (10,021) (9,263)
----------- -----------
688,649 683,907
Less unearned compensation...................... (256) (300)
Less cost of common stock held in treasury...... (69,456) (67,687)
----------- -----------
Total shareholders' equity................. 618,937 615,920
----------- -----------
$ 1,844,414 $ 1,885,942
=========== ===========
2
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Amounts in thousands)
Three Three
months months
ended ended
December 28, December 30,
1996 1995
---------- ---------
Cash flows from operating activities:
Net income......................................... $ 9,385 $ 7,776
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of fixed assets.. 15,724 16,239
Amortization of intangibles and deferred
debt expense................................. 4,733 5,540
Deferred income taxes.......................... 5,009 3,540
Loss from early extinguishment of debt......... - 1,151
Changes in assets and liabilities:
Customer accounts receivable - net......... 42,498 41,436
Sundry notes and accounts receivable....... 1,121 2,831
Inventories................................ (7,766) (9,822)
Prepaid expenses........................... (1,898) (1,240)
Accounts payable and accrued expenses...... (42,783) (29,564)
(Payment) receipt of financing fees............ 364 (343)
Change in interest payable..................... 2,648 2,851
Change in income taxes payable................. (9,407) 3,330
Other.......................................... (4,695) (3,281)
---------- ---------
Total adjustments......................... 5,548 32,668
---------- ---------
Net cash provided by operating activities.......... 14,933 40,444
---------- ---------
Cash flows from investing activities:
Capital expenditures............................... (19,460) (22,383)
Proceeds from sales of assets...................... 2,546 2,141
Investment in joint venture........................ (1,250) -
Change in investments.............................. (463) (472)
---------- ---------
Net cash used by investing activities.............. (18,627) (20,714)
---------- ---------
Cash flows from financing activities:
Net change in short-term borrowings................ 2,200 9,959
Repayments of long-term debt....................... (24,878) (560,237)
Proceeds from issuance of long-term debt........... 28,738 577,100
Purchase of treasury stock......................... (10,536) (45,002)
---------- ---------
Net cash used by financing activities.............. (4,476) (18,180)
---------- ---------
Net change in cash and cash equivalents............ (8,170) 1,550
Cash and cash equivalents at beginning of period... 15,392 10,507
---------- ---------
Cash and cash equivalents at end of period......... $ 7,222 $ 12,057
========== =========
3
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
As of and for the three months ended December 28, 1996
Note A.
With respect to interim quarterly financial data, which are unaudited, in
the opinion of Management, all adjustments necessary to a fair statement of the
results for such interim periods have been included. All adjustments were of a
normal recurring nature.
Note B.
Accounts of international subsidiaries are included as of dates three
months or less prior to that of the consolidated balance sheets.
Note C.
Income per common share is computed based on the weighted average number of
common shares outstanding during each period.
Note D.
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.
Note E.
Inventories are summarized as follows (dollar amounts in thousands):
December 28, September 28,
1996 1996
---------- ----------
Inventories at average cost:
Raw materials............................. $ 51,484 $ 49,481
Stock in process.......................... 96,368 96,836
Produced goods............................ 207,414 200,679
Dyes, chemicals and supplies.............. 23,762 23,100
---------- ----------
379,028 370,096
Less excess of average cost over LIFO..... 43,110 40,710
---------- ----------
Total................................. $ 335,918 $ 329,386
========== ==========
Note F.
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 Company's Employee Stock Ownership Plan
("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 was adequately covered by reserves and insurance
proceeds.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
General
Despite a slowdown in the denim markets, the Company began to experience during
the first quarter of its 1997 fiscal year some of the benefits of its
restructuring activities in the apparel products segment. The realignment of
certain apparel assets eliminated divisional losses while providing necessary
capacity to grow critical areas. In the interior furnishings area, results of
operations of the Carpet division were particularly strong.
The plan announced in June, 1996 to close the Knitted Fabrics division was
carried out with the phasing out of production through October, 1996. Sales of
the majority of the division's assets continued during the current period.
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
three months ended December 28, 1996 and December 30, 1995, respectively.
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.
Three Months Ended
--------------------------
December 28, December 30,
1996 1995
------------ ------------
(Dollar amounts in millions)
Net sales
Apparel products......................... $ 273.0 $ 300.4
Interior furnishings products............ 203.5 212.3
-------- --------
Total................................. $ 476.5 $ 512.7
======== ========
Operating income before interest and taxes
Apparel products......................... $ 17.9 $ 19.7
As a percentage of net sales........... 6.6% 6.6%
Interior furnishings products............ $ 12.8 $ 12.8
As a percentage of net sales........... 6.3% 6.0%
-------- --------
Total................................. $ 30.7 $ 32.5
As a percentage of net sales......... 6.4% 6.3%
======== ========
Operating income before interest, taxes,
depreciation and amortization (EBITDA)
Apparel products......................... $ 29.9 $ 32.6
As a percentage of net sales........... 11.0% 10.9%
Interior furnishings products............ $ 21.1 $ 21.3
As a percentage of net sales........... 10.4% 10.0%
-------- --------
Total................................ $ 51.0 $ 53.9
As a percentage of net sales........ 10.7% 10.5%
======== ========
RESULTS OF OPERATIONS
Comparison of Three Months ended December 28, 1996 and December 30, 1995.
Net sales for the first quarter of the 1997 fiscal year were $476.5
million, 7.1% lower than the $512.7 million recorded for the first quarter of
the 1996 fiscal year. Net sales of products for apparel markets for the first
5
<PAGE>
quarter of the 1997 fiscal year were $273.0 million, 9.1% lower than the $300.4
million recorded in the first quarter of the 1996 fiscal year. This reduction
was due primarily to the elimination of the volume produced and marketed by the
Knitted Fabrics division, which was closed. Net sales of products for interior
furnishings markets for the first quarter of the 1997 fiscal year were $203.5
million in comparison with the $212.3 million recorded in the first quarter of
the 1996 fiscal year. The change in sales of the interior furnishings segment
was mainly attributable to the JG Furniture division which was sold in April,
1996, and the lower volume experienced by the rugs operations. Total export
sales increased 12% over the comparable quarter of the prior year and
represented 11.6% of net sales.
Operating income before interest and taxes for the first quarter of the
1997 fiscal year was $30.7 million, a decrease of 5.5% from the $32.5 million
recorded in the first quarter of the 1996 fiscal year. Amortization of goodwill
was $4.5 million and $4.6 million in the first quarter of the 1997 and 1996
fiscal years, respectively. Operating income before interest and taxes for the
apparel products segment for the first quarter of the 1997 fiscal year was $17.9
million compared to $19.7 million recorded for the first quarter of the 1996
fiscal year. 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 operating losses in the current period.
Operating income before interest and taxes for the interior furnishings products
segment for the first quarter of the 1997 fiscal year was $12.8 million,
unchanged from the comparable quarter of the previous fiscal year.
Operating income before interest, taxes, depreciation and amortization
(EBITDA) for the first quarter of the 1997 fiscal year was $51.0 million, or
10.7% of sales, compared with $53.9 million, or 10.5% of sales, in the first
quarter of the 1996 fiscal year. EBITDA for the apparel products segment was
$29.9 million, or 11.0% of sales, in the first quarter of the 1997 fiscal year
compared with $32.6 million, or 10.9% of sales in the first quarter of the 1996
fiscal year. EBITDA for the interior furnishings products segment was $21.1
million, or 10.4% of sales, in the first quarter of the 1997 fiscal year in
comparison with $21.3 million, or 10.0% of sales, in the first quarter of the
1996 fiscal year.
Interest expense for the first quarter of the 1997 fiscal year was $14.6
million, or 3.1% of net sales, compared with $16.3 million, or 3.2% of net
sales, in the first quarter of the 1996 fiscal year. The decrease in interest
expense was due primarily to the lower level of debt outstanding.
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 quarter 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 three months of the 1997 fiscal year, the Company
generated $14.9 million of cash from operating activities and $2.5 million from
sales of assets and had net borrowings of long- and short-term debt of $6.1
million. Cash was primarily used as follows: $10.5 million for the repurchase of
Company common stock and $20.7 million for capital expenditures and investment
in joint venture. At December 28, 1996, total debt of the Company (consisting of
current and non-current portions of long-term debt and short-term borrowings)
was $845.4 million compared with $838.9 million at September 28, 1996 and $940.0
million at December 30, 1995.
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 possibly 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
6
<PAGE>
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 ("1995
Bank Credit Agreement") which expires in March, 2001. At January 24, 1997, the
Company had approximately $225.0 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 January 24, 1997, $162.1 million of commercial paper with
original maturities of up to 72 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 has
remaining capacity of $250 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.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Corporation did not file any reports on Form 8-K during the
quarter for which this Report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
By /s/ CHARLES E. PETERS, JR.
Charles E. Peters, Jr.
Date: January 30, 1997 Senior Vice President and
Chief Financial Officer
By /s/ AGUSTIN J. DIODATI
Date: January 30, 1997 Agustin J. Diodati
Vice President and
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> DEC-28-1996
<CASH> 7,222
<SECURITIES> 22,035
<RECEIVABLES> 320,292
<ALLOWANCES> 21,455
<INVENTORY> 335,918
<CURRENT-ASSETS> 674,236
<PP&E> 1,007,897
<DEPRECIATION> 440,868
<TOTAL-ASSETS> 1,844,414
<CURRENT-LIABILITIES> 211,485
<BONDS> 842,715
0
0
<COMMON> 684
<OTHER-SE> 618,253
<TOTAL-LIABILITY-AND-EQUITY> 1,844,414
<SALES> 476,490
<TOTAL-REVENUES> 476,490
<CGS> 403,910
<TOTAL-COSTS> 403,910
<OTHER-EXPENSES> 4,539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,636
<INCOME-PRETAX> 16,632
<INCOME-TAX> 7,247
<INCOME-CONTINUING> 9,385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,385
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
