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 July 3, 1999
------------------------------
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)
(336) 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 August 9, 1999, there were outstanding 52,458,761 shares of Common
Stock, par value $.01 per share, and 454,301 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 Nine Nine
months months months months
ended ended ended ended
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net sales $ 434,634 $ 511,033 $ 1,245,721 $ 1,510,690
Cost of sales 374,246 414,781 1,077,339 1,240,856
---------- ---------- ---------- ----------
Gross profit 60,388 96,252 168,382 269,834
Selling, general and
administrative expenses 34,247 37,713 107,446 109,758
Provision for doubtful accounts 3,231 (307) 4,828 1,085
Amortization of goodwill 4,449 4,539 13,360 13,618
Provision for restructuring 0 0 65,280 0
---------- ---------- ---------- ----------
Operating income (loss) before
interest and taxes 18,461 54,307 (22,532) 145,373
Interest expense 15,136 14,701 44,123 44,309
Equity in income of
joint ventures (2,912) (1,074) (4,813) (74)
Other expense (income) - net (2,342) (683) (6,920) (2,610)
---------- ---------- ---------- ----------
Income (loss) before income taxes 8,579 41,363 (54,922) 103,748
Income tax expense (benefit):
Current 2,599 11,887 3,184 32,043
Deferred 1,234 3,525 (22,938) 7,960
---------- ---------- ---------- ----------
Total income tax
expense (benefit) 3,833 15,412 (19,754) 40,003
---------- ---------- ---------- ----------
Net income (loss) $ 4,746 $ 25,951 $ (35,168)$ 63,745
========== ========== ========== ==========
Net income per common share:
Basic earnings (loss)
per share $ 0.09 $ 0.42 $ (0.63)$ 1.05
Diluted earnings (loss)
per share $ 0.09 $ 0.42 $ (0.63)$ 1.04
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(Amounts in thousands)
July 3, October 3,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 13,702 $ 18,163
Short-term investments 27,304 27,253
Customer accounts receivable after deductions
of $21,961 and $20,864 for the
respective dates for doubtful accounts,
discounts, returns and allowances 255,870 288,806
Sundry notes and accounts receivable 18,893 15,810
Inventories 320,523 322,548
Prepaid expenses 3,825 3,198
------------ ------------
Total current assets 640,117 675,778
Fixed assets, at cost:
Land and land improvements 35,301 39,374
Buildings 426,322 442,828
Machinery, fixtures and equipment 638,540 636,439
------------ ------------
1,100,163 1,118,641
Less accumulated depreciation and amortization 467,488 475,885
------------ ------------
Fixed assets - net 632,675 642,756
Other assets:
Investments and receivables 53,429 44,990
Intangibles and deferred charges 36,165 35,211
Excess of purchase cost over net assets acquired 497,079 514,152
------------ ------------
Total other assets 586,673 594,353
------------ ------------
$ 1,859,465 $ 1,912,887
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 0 $ 14,200
Long-term debt due currently 470 470
Accounts payable - trade 72,936 87,999
Sundry payables and accrued expenses 78,567 73,995
Income taxes payable 4,156 6,440
Deferred income taxes 31,076 44,576
------------ ------------
Total current liabilities 187,205 227,680
Long-term liabilities:
Long-term debt 870,103 801,486
Other 56,214 59,052
------------ ------------
Total long-term liabilities 926,317 860,538
Deferred income taxes 115,010 124,448
Shareholders' equity:
Common stock issued 684 684
Capital in excess of par value 884,338 884,685
Accumulated deficit (89,017) (53,849)
Accumulated other comprehensive income (loss) (15,936) (17,357)
Cost of common stock held in treasury (149,136) (113,942)
------------ ------------
Total shareholders' equity 630,933 700,221
------------ ------------
$ 1,859,465 $ 1,912,887
============ ============
See notes to consolidated financial statements.
2
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Amounts in thousands)
Nine Nine
months months
ended ended
July 3, June 27,
1999 1998
------------ ------------
Cash flows from operating activities:
Net income (loss) $ (35,168)$ 63,745
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization of fixed assets 48,156 49,391
Provision for doubtful accounts 4,828 1,085
Amortization of intangibles and
deferred debt expense 13,627 13,899
Equity in loss of joint ventures 2,427 0
Deferred income taxes (22,938) 7,960
Gain on disposal of assets (4,328) (512)
Provision for restructuring 65,280 0
Changes in assets and liabilities:
Customer accounts receivable - net 28,108 13,701
Sundry notes and accounts receivable (3,083) (6,169)
Inventories (8,529) (38,204)
Prepaid expenses (742) (618)
Accounts payable and accrued expenses (33,943) (24,759)
Change in income taxes payable (2,284) (2,976)
Other (15,459) (10,650)
------------ ------------
Total adjustments 71,120 2,148
------------ ------------
Net cash provided by operating activities 35,952 65,893
------------ ------------
Cash flows from investing activities:
Capital expenditures (104,945) (90,693)
Proceeds from sales of assets 48,982 5,196
Investment in joint ventures (5,366) (1,425)
Change in investments (575) 1,413
------------ ------------
Net cash used by investing activities (61,904) (85,509)
------------ ------------
Cash flows from financing activities:
Changes in short-term borrowings (14,200) 0
Repayments of long-term debt (28,960) (226,586)
Proceeds from issuance of long-term debt 100,000 215,559
Proceeds from exercise of stock options 0 24,492
Purchase of treasury shares (35,349) (356)
------------ ------------
Net cash provided by financing activities 21,491 13,109
------------ ------------
Net change in cash and cash equivalents (4,461) (6,507)
Cash and cash equivalents at beginning of period 18,163 17,863
------------ ------------
Cash and cash equivalents at end of period $ 13,702 $ 11,356
============ ============
See notes to consolidated financial statements.
3
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
As of and for the nine months ended July 3, 1999
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 certain international subsidiaries are included as of dates
three months or less prior to that of the consolidated balance sheets.
Note C.
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 D.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands):
Three Months Ended Nine Months Ended
--------------------- ---------------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Numerator:
Net income (loss)............... $ 4,746 $ 25,951 $(35,168) $ 63,745
Effect of dilutive securities:
Convertible note............... - - - 116
-------- -------- -------- --------
Numerator for diluted earnings
per share...................... $ 4,746 $ 25,951 $(35,168) $ 63,861
======== ======== ========= ========
Denominator:
Denominator for basic earnings per
share.......................... 53,381 61,738 55,718 60,470
Effect of dilutive securities:
Stock options.................. 1 712 - 703
Performance Unit awards........ 21 - - -
Nonvested stock................ 6 - 8 -
Convertible note............... - - - 249
-------- -------- -------- --------
Denominator for diluted earnings
per share...................... 53,409 62,450 55,726 61,422
======== ======== ======== =========
For the nine month period ended July 3, 1999, stock options and
Performance Unit Awards that could potentially dilute basic earnings per share
in the future were not included in the diluted earnings per share computation
because they would have been antidilutive. However, such securities were not
significant in these periods. During the first nine months of the 1999 fiscal
year, outstanding shares changed due to (i) the issuance of 13,779 shares of
treasury stock to settle Performance Unit awards and (ii) the purchase of
5,181,873 shares of treasury stock.
Note E.
Inventories are summarized as follows (dollar amounts in thousands):
July 3, October 3,
1999 1998
---------- ----------
Inventories at average cost:
Raw materials............................. $ 36,067 $ 40,594
Stock in process.......................... 90,985 98,922
Produced goods............................ 208,865 204,169
Dyes, chemicals and supplies.............. 20,902 22,358
---------- ----------
356,819 366,043
Less excess of average cost over LIFO..... 36,296 43,495
---------- ----------
Total................................. $ 320,523 $ 322,548
========== ==========
In the June 1999 quarter, the Company projected an annual liquidation
of prior years' LIFO inventory layers and recorded an after-tax profit of $0.5
million.
Note F.
Comprehensive income (loss) consists of net income (loss), foreign
currency translation adjustments and changes in unrealized gains and losses on
securities, and totaled $5,135,000 and $24,862,000 for the three months ended
July 3, 1999 and June 27, 1998, respectively, and $(33,747,000) and
$59,821,000 for the nine months ended July 3, 1999 and June 27, 1998,
respectively.
Note G.
In November, 1998, the Company sold the remaining assets of the
Burlington Madison Yarn division, including manufacturing facilities located
in Ranlo and St. Pauls, North Carolina, to Carolina Mills, Inc. The related
pre-tax gain of $2.7 million is included in the caption "Other expense
(income) - net" in the consolidated statements of operations.
Note H.
In November, 1998, the Company established a $105 million credit
facility with a group of banks. On that date, $57 million of proceeds from the
new agreement were used to repay loans under the Company's existing bank
credit agreement. Additional proceeds from this facility will be used to
finance the construction and working capital needs of the Company's Mexican
subsidiaries related to expansion projects in Mexico. The facility includes
terms and covenants similar to the existing bank credit agreement, except that
the outstanding balance on the third anniversary of the facility will convert
to a two-year term loan payable semi-annually in four equal installments.
Loans under the new facility are made directly to a new Mexican financing
subsidiary of the Company and are guaranteed by the Company.
<PAGE>
Note I.
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities --Deferral of the Effective Date
of FASB Statement No. 133." Reference is made to the Company's 1998 Annual
Report to Shareholders regarding SFAS No. 133. The Company is required to
adopt SFAS No. 133 no later than October 1, 2000, and has not yet determined
what its effect will be on the earnings and financial position of the Company.
Note J.
During the March quarter of 1999, the Company implemented a
comprehensive reorganization plan primarily related to its apparel fabrics
business. The apparel fabrics operations had been running at less than full
capacity during the preceding 9-12 month period, anticipating that the surge
of low-priced garment imports from Asia might only be the temporary result of
the Asian financial crisis. The Company views this situation to be more
permanent in nature and therefore decided to reduce its U.S. manufacturing
capacity accordingly and utilize only its most modern facilities to be
competitive. The major elements of the plan include:
(1) The combination of two businesses that have complementary product
lines and serve many of the same customers. The merger of the two---Burlington
Klopman Fabrics and Burlington Tailored Fashions---will create a fast,
responsive organization with an improved cost structure, called Burlington
PerformanceWear. Also, Burlington Global Denim and a portion of the former
Sportswear division have been combined to form Burlington CasualWear.
(2) The reduction of U.S. apparel fabrics capacity by approximately 25
percent and the reorganization of manufacturing assets, including overhead
reductions throughout the Company. Seven plants have been or will be closed or
sold by the dates indicated: one department in Raeford, North Carolina and one
plant in Forest City, North Carolina were closed in the March quarter; three
plants in North Carolina located in Cramerton (sold April 5, 1999),
Mooresville, and Statesville were closed during the June quarter and one plant
in Hillsville, Virginia was sold on June 24, 1999; one plant in Bishopville,
South Carolina and one plant located in Oxford, North Carolina will be closed
in phases through the March quarter 2000.
(3) The plan will result in the reduction of approximately 2,900
employees, with severance benefit payments to be paid over periods of up to
twelve months from the termination date depending on the employee's length of
service (reduction of approximately 2,025 employees as of July 3, 1999).
The cost of the reorganization was reflected in a restructuring charge,
before income taxes, of $65.3 million ($61.3 million applicable to the apparel
fabrics business) in the second fiscal quarter ended April 3, 1999. The
components of the restructuring charge included the establishment of a $20.1
million reserve for severance benefit payments, write-down of pension assets
of $7.4 million for curtailment and settlement losses, write-downs for
impairment of $35.6 million related to fixed assets ($2.3 million realized as
of July 3, 1999) resulting from the restructuring and a reserve of $2.2
million for lease cancellations and other exit costs expected to be paid
through September 2001. Assets that are no longer in use have been sold or are
held for sale at July 3, 1999, and were written down to their estimated fair
values less costs of sale. These assets continue to be included in the Fixed
Assets caption on the balance sheet in the amount of $16.3 million. Assets at
Bishopville and Oxford remaining in use and considered impaired based on
estimated future cash flows were written down by $2.7 million to their
estimated fair value of $3.5 million. The impaired assets continue to be
depreciated while in use. Cash costs of the reorganization are expected to be
substantially offset by cash receipts from asset sales and lower working
capital needs.
Other expenses related to the 1999 restructuring (including losses on
inventories of discontinued styles, relocation of employees and equipment, and
plant carrying and other costs) of approximately $33.0 million, before income
taxes, will be charged to operations as incurred. Through July 3, 1999, $20.7
million of such costs have been incurred and charged to operations, consisting
primarily of inventory losses and plant carrying costs.
Following is a summary of activity in the related 1999 restructuring
reserves (in millions):
Lease
Cancellations
Severance and Other
Benefits Exit Costs
---------- --------------
March 1999 restructuring charge....... $ 20.1 $ 2.2
Payments.............................. (1.5) (0.2)
------ -----
Balance at April 3, 1999.............. 18.6 2.0
Payments.............................. (5.7) (0.2)
------ -----
Balance at July 3, 1999............... $ 12.9 $ 1.8
====== =====
The Company has substantially completed all of the 1997 and 1996
restructuring efforts with the exception of the divestitures of certain
machinery and equipment and real estate. The carrying amount of such assets at
July 3, 1999, included in the Fixed Assets caption on the balance sheet, is
$17.3 million, and the Company does not anticipate any material adjustments to
this amount. On August 6, 1999, the Company sold one of the plants from the
Knits division for $8.5 million which approximated its carrying value.
The Company, through its Real Estate and Purchasing Departments, is
actively marketing the affected real estate and equipment currently available
for sale or to be available upon cessation of operations. The active plan to
sell the assets includes the preparation of a detailed property marketing
package to be used in working with real estate and used equipment brokers and
other channels including other textile companies, the local Chamber of
Commerce and Economic Development and the State Economic Development
Department. The Company anticipates that the divestitures of real estate and
equipment will be completed within 12 to 18 months from the date of closing.
However, the actual timing of the disposition of these properties may vary due
to their locations and market conditions.
<PAGE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Overview
The Company reported earnings per share for the June 1999 quarter of
$0.09 (diluted) compared to $0.42 (diluted) for the June 1998 quarter.
Excluding run-out costs associated with the 1999 reorganization of the
Company's apparel products segment, earnings per share were $0.19 (diluted)
for the June 1999 quarter. Net sales for the June 1999 quarter were $434.6
million, compared with $511.0 million for the June 1998 quarter. After
adjusting for businesses that have been sold or closed since last year, sales
declined 8.9 percent.
Fiscal year 1999 is viewed as a transition year for the apparel
segment. Operations have been affected by difficult market conditions as well
as the temporary inefficiencies that accompany a major reorganization. The
Company has taken aggressive action to size its U.S. capacity appropriately
while building new textile and garment making capacity in Mexico. The new
integrated apparel fabric and garment operations in Mexico are now coming on
line. Looking ahead, the Company remains confident that it is positioning
itself well to compete on a global basis.
Performance by Segment
The Company conducts its operations in two principal industry segments:
products for apparel markets and products for interior furnishings markets.
Reference is made to the Company's 1998 Annual Report to Shareholders
concerning Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information," that will be adopted
by the Company in its 1999 Annual Report to Shareholders. The following table
sets forth certain information about the segment results for the three and
nine months ended July 3, 1999 and June 27, 1998, respectively.
Three Months Ended Nine Months Ended
------------------- -------------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
(Dollar amounts in millions)
Net sales
Apparel products.................. $ 229.5 $ 297.7 $ 651.5 $ 889.1
Interior furnishings products..... 205.1 213.3 594.2 621.6
-------- -------- -------- --------
Total.......................... $ 434.6 $ 511.0 $1,245.7 $1,510.7
======== ======== ======== ========
Operating income (loss) before
interest, taxes and provision
for restructuring
Apparel products.................. $ (0.1) $ 29.5 $ (5.2) $ 86.7
As a percentage of net sales.... 0.0% 9.9% (0.8)% 9.8%
Interior furnishings products..... $ 18.6 $ 24.8 $ 48.0 $ 58.7
As a percentage of net sales.... 9.1% 11.6% 8.1% 9.4%
-------- -------- -------- --------
Total.......................... $ 18.5 $ 54.3 $ 42.8 $ 145.4
As a percentage of net sales.... 4.3% 10.6% 3.4% 9.6%
Provision for restructuring....... $ - $ - $ (65.3) $ -
------- ------- ------- --------
Total.......................... $ 18.5 $ 54.3 $ (22.5) $ 145.4
======== ======== ======== ========
<PAGE>
Results Of Operations
Restructuring Plan
During the March quarter of 1999, the Company implemented a
comprehensive reorganization plan primarily related to its apparel fabrics
business. The apparel fabrics operations had been running at less than full
capacity during the preceding 9-12 month period, anticipating that the surge
of low-priced garment imports from Asia might only be the temporary result of
the Asian financial crisis. The Company views this situation to be more
permanent in nature and therefore decided to reduce its U.S. manufacturing
capacity accordingly and utilize only its most modern facilities to be
competitive. The major elements of the plan include:
(1) The combination of two businesses that have complementary product
lines and serve many of the same customers. The merger of the two---Burlington
Klopman Fabrics and Burlington Tailored Fashions---will create a fast,
responsive organization with an improved cost structure, called Burlington
PerformanceWear. Also, Burlington Global Denim and a portion of the former
Sportswear division have been combined to form Burlington CasualWear.
(2) The reduction of U.S. apparel fabrics capacity by approximately 25
percent and the reorganization of manufacturing assets, including overhead
reductions throughout the Company. Seven plants have been or will be closed or
sold by the dates indicated: one department in Raeford, North Carolina and one
plant in Forest City, North Carolina were closed in the March quarter; three
plants in North Carolina located in Cramerton (sold April 5, 1999),
Mooresville, and Statesville were closed during the June quarter and one plant
in Hillsville, Virginia was sold on June 24, 1999; one plant in Bishopville,
South Carolina and one plant located in Oxford, North Carolina will be closed
in phases through the March quarter 2000.
(3) The plan will result in the reduction of approximately 2,900
employees, with severance benefit payments to be paid over periods of up to
twelve months from the termination date depending on the employee's length of
service (reduction of approximately 2,025 employees as of July 3, 1999).
The cost of the reorganization was reflected in a restructuring charge,
before income taxes, of $65.3 million ($61.3 million applicable to the apparel
fabrics business) in the second fiscal quarter ended April 3, 1999. The
components of the restructuring charge included the establishment of a $20.1
million reserve for severance benefit payments, write-down of pension assets
of $7.4 million for curtailment and settlement losses, write-downs for
impairment of $35.6 million related to fixed assets ($2.3 million realized as
of July 3, 1999) resulting from the restructuring and a reserve of $2.2
million for lease cancellations and other exit costs expected to be paid
through September 2001. Assets that are no longer in use have been sold or are
held for sale at July 3, 1999, and were written down to their estimated fair
values less costs of sale. These assets continue to be included in the Fixed
Assets caption on the balance sheet in the amount of $16.3 million. Assets at
Bishopville and Oxford remaining in use and considered impaired based on
estimated future cash flows were written down by $2.7 million to their
estimated fair value of $3.5 million. The impaired assets continue to be
depreciated while in use. Cash costs of the reorganization are expected to be
substantially offset by cash receipts from asset sales and lower working
capital needs.
<PAGE>
Other expenses related to the 1999 restructuring (including losses on
inventories of discontinued styles, relocation of employees and equipment, and
plant carrying and other costs) of approximately $33.0 million, before income
taxes, will be charged to operations as incurred. Through July 3, 1999, $20.7
million of such costs have been incurred and charged to operations, consisting
primarily of inventory losses and plant carrying costs.
The only exited activity included in the 1999 restructuring is the
Sportswear division which had net sales of $16.4 million and $29.9 million
during the first nine months of the 1999 and 1998 fiscal years, respectively,
and net operating loss before interest and taxes of $4.6 million and $0.4
million, respectively, for the same periods. Other plant shut-downs were due
to excess capacity, discontinuance of selected styles and transfer of
production to utilize more modern facilities. The effect of suspending
depreciation on all of the assets of the restructuring would be approximately
$6.5 million on an annual basis; however, depreciation is continued until
assets are taken out of service.
Following is a summary of activity in the related 1999 restructuring
reserves (in millions):
Lease
Cancellations
Severance and Other
Benefits Exit Costs
---------- -------------
March 1999 restructuring charge....... $ 20.1 $ 2.2
Payments.............................. (1.5) (0.2)
------ -----
Balance at April 3, 1999.............. 18.6 2.0
Payments.............................. (5.7) (0.2)
------ -----
Balance at July 3, 1999............... $ 12.9 $ 1.8
====== =====
The Company has substantially completed all of the 1997 and 1996
restructuring efforts with the exception of the divestitures of certain
machinery and equipment and real estate. The carrying amount of such assets at
July 3, 1999, included in the Fixed Assets caption on the balance sheet, is
$17.3 million, and the Company does not anticipate any material adjustments to
this amount. On August 6, 1999, the Company sold one of the plants from the
Knits division for $8.5 million which approximated its carrying value.
The Company, through its Real Estate and Purchasing Departments, is
actively marketing the affected real estate and equipment currently available
for sale or to be available upon cessation of operations. The active plan to
sell the assets includes the preparation of a detailed property marketing
package to be used in working with real estate and used equipment brokers and
other channels including other textile companies, the local Chamber of
Commerce and Economic Development and the State Economic Development
Department. The Company anticipates that the divestitures of real estate and
equipment will be completed within 12 to 18 months from the date of closing.
However, the actual timing of the disposition of these properties may vary due
to their locations and market conditions.
Comparison of Three Months ended July 3, 1999 and June 27, 1998.
Net sales for the third quarter of the 1999 fiscal year were $434.6
million, 15.0% lower than the $511.0 million recorded for the third quarter of
the 1998 fiscal year. Net sales of products for apparel markets for the third
quarter of the 1999 fiscal year were $229.5 million, 22.9% lower than the
$297.7 million recorded in the third quarter of the 1998 fiscal year.
Excluding $27.9 million sales reduction due to the exited portion of the
Sportswear business and the Burlington Madison Yarn division, a portion of
which has been sold and the remainder transferred to a joint venture, net
sales of products for apparel markets were 15.0% lower than in the prior year
period. This decrease was due to 12.0% lower volume and 3.0% lower prices. Net
sales of products for interior furnishings markets for the third quarter of
the 1999 fiscal year were $205.1 million, 3.8% lower than the $213.3 million
recorded in the third quarter of the 1998 fiscal year. This reduction was due
primarily to the absence of Burlington Madison Yarn division sales of $6.2
million in this segment. Total export sales increased 10.0% from the
comparable quarter of the prior year and represented 15.6% of net sales for
the current period compared to 12.1% of net sales in the prior period.
Operating income before interest and taxes for the third quarter of the
1999 fiscal year was $18.5 million compared to $54.3 million recorded in the
third quarter of the 1998 fiscal year. Amortization of goodwill was $4.4
million and $4.5 million in the third quarter of the 1999 and 1998 fiscal
years, respectively. Operating income (loss) before interest and taxes for the
apparel products segment for the third quarter of the 1999 fiscal year was
$(0.1) million compared to $29.5 million recorded for the third quarter of the
1998 fiscal year. This decrease was primarily due to $10.7 million in lower
margins resulting from lower volume and inefficiencies associated with
production levels, $6.1 million reduction due to price/mix, the absence of
$1.3 million of operating profits of the Burlington Madison Yarn division
which was sold or transferred to a joint venture, higher provisions for
doubtful accounts of $1.8 million, and $5.9 million of start-up costs related
to the Company's new Mexican operations, partially offset by lower raw
material costs of $5.0 million. Also, apparel segment results include costs of
$8.6 million associated with the apparel restructuring which have been charged
to operations, including inventory losses on discontinued styles, relocation
of employees and equipment and plant carrying and other costs. Operating
income before interest and taxes for the interior furnishings products segment
for the third quarter of the 1999 fiscal year was $18.6 million compared to
$24.8 million recorded for the third quarter of the 1998 fiscal year. This
decrease was due primarily to lower profits of $5.9 million resulting from
lower volume and inefficiencies associated with lower production levels, the
negative impact of product mix of $1.2 million and provision for doubtful
accounts of $1.8 million, partially offset by lower raw material costs of $4.0
million.
Interest expense for the third quarter of the 1999 fiscal year was $15.1
million, or 3.5% of net sales, compared with $14.7 million, or 2.9% of net
sales, in the third quarter of the 1998 fiscal year.
During the third quarter of the 1999 fiscal year, the Company recorded
equity in income of joint ventures of $2.9 million related to its textured
yarn joint venture operations with Unifi, Inc., its Mexican joint ventures
with Parkdale Mills and International Garment Processors, and its denim fabric
joint venture with Mafatlal Industries Limited in India, compared to $1.1
million in the third quarter of the 1998 fiscal year related to its joint
venture operation with Unifi, Inc. which commenced on May 30, 1998.
Other income for the third quarter of the 1999 fiscal year was $2.3
million consisting of a $1.4 million gain on the disposal of assets and
interest income of $0.9 million. Other income for the third quarter of the
1998 fiscal year was $0.7 million consisting of interest income.
Total income tax expense is different from the amounts obtained by
applying statutory rates to the income before income taxes primarily as a
result of amortization of nondeductible goodwill, which is partially offset by
the favorable tax treatment of export sales through a foreign sales
corporation.
Comparison of Nine Months ended July 3, 1999 and June 27, 1998.
Net sales for the first nine months of the 1999 fiscal year were $1,245.7
million, 17.5% lower than the $1,510.7 million recorded for the first nine
months of the 1998 fiscal year. Net sales of products for apparel markets for
the first nine months of the 1999 fiscal year were $651.5 million, 26.7% lower
than the $889.1 million recorded in the first nine months of the 1998 fiscal
year. Excluding $81.5 million sales reduction due to the exited portion of the
Sportswear business and the Burlington Madison Yarn division, which has been
sold or transferred to a joint venture, net sales of products for apparel
markets were 19.8% lower than in the prior year period. This decrease was due
primarily to 16.4% lower volume and 3.4% lower prices and product mix. Net
sales of products for interior furnishings markets for the first nine months
of the 1999 fiscal year were $594.2 million, 4.4% lower than the $621.6
million recorded in the first nine months of the 1998 fiscal year. This
reduction was due primarily to the absence of Burlington Madison Yarn division
sales of $18.7 million in this segment, lower volume of $16.6 million,
partially offset by higher selling prices of $8.7 million. Total export sales
increased 3.4% from the comparable period of the prior year and represented
15.0% of net sales for the current period compared to 12.0% of net sales in
the prior period.
Operating income before provision for restructuring, interest and taxes
for the first nine months of the 1999 fiscal year was $42.8 million compared
to $145.4 million recorded in the first nine months of the 1998 fiscal year.
Amortization of goodwill was $13.4 million and $13.6 million in the first nine
months of the 1999 and 1998 fiscal years, respectively. Operating income
(loss) before interest, taxes and provision for restructuring for the apparel
products segment for the first nine months of the 1999 fiscal year was $(5.2)
million compared to $86.7 million recorded for the first nine months of the
1998 fiscal year. This decrease was due primarily to $55.9 million lower
margins resulting from lower volume and inefficiencies associated with
production levels, $11.4 million reduction due to price/mix, the absence of
$5.0 million of operating income of the Burlington Madison Yarn division which
was sold or transferred to a joint venture, and start-up costs of $15.5
million related to the Company's new Mexican operations, partially offset by
lower raw material costs of $15.0 million. Also, apparel segment results
include costs of $20.5 million associated with the apparel restructuring which
have been charged to operations, including inventory losses on discontinued
styles, relocation of employees and equipment and plant carrying and other
costs. Operating income before interest and taxes for the interior furnishings
products segment for the first nine months of the 1999 fiscal year was $48.0
million compared to $58.7 million recorded for the first nine months of the
1998 fiscal year. This decrease was due primarily to lower volume and
inefficiencies associated with lower production levels in the amount of $12.6
million and provisions for doubtful accounts of $1.2 million, partially offset
by lower raw material costs of $7.5 million.
Interest expense for the first nine months of the 1999 fiscal year was
$44.1 million, or 3.5% of net sales, compared with $44.3 million, or 2.9% of
net sales, in the first nine months of the 1998 fiscal year.
During the first nine months of the 1999 fiscal year, the Company
recorded equity in income of joint ventures of $4.8 million related to its
textured yarn joint venture operations with Unifi, Inc., its Mexican joint
ventures with Parkdale Mills and International Garment Processors, and its
denim fabric joint venture with Mafatlal Industries Limited in India, compared
to $0.1 million in the first nine months of the 1998 fiscal year related to
the joint ventures with Unifi, Inc. and Mafatlal Industries.
Other income for the first nine months of the 1999 fiscal year was $6.9
million consisting of $4.3 million in gains on the disposal of assets and
interest income of $2.6 million. Other income for the first nine months of the
1998 fiscal year was $2.6 million consisting of interest income of $2.1
million and $0.5 million in gains on disposal of assets.
Total income tax expense is different from the amounts obtained by
applying statutory rates to the income before income taxes primarily as a
result of amortization of nondeductible goodwill, which is partially offset by
the favorable tax treatment of export sales through a foreign sales
corporation.
Liquidity and Capital Resources
During the first nine months of the 1999 fiscal year, the Company
generated $36.0 million of cash from operating activities and $49.0 million
from sales of assets, and had net borrowings of long- and short-term debt of
$56.8 million. Cash was primarily used for capital expenditures and investment
in joint ventures totaling $110.3 million, and $35.3 million for the purchase
of treasury shares. At July 3, 1999, total debt of the Company (consisting of
current and non-current portions of long-term debt and short-term borrowings)
was $870.6 million compared with $816.2 million at October 3, 1998 and $792.6
million at June 27, 1998.
The Company's principal uses of 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 and
working capital needs. The Company intends to fund its financial 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.
In August 1997, the Company issued $150.0 million principal amount of
7.25% notes due August 1, 2027 ("Notes Due 2027"). Proceeds from the sale were
used to prepay revolving loans under its bank credit agreement on the same
date. The Notes Due 2027 will be redeemable as a whole or in part at the
option of the Company at any time on or after August 2, 2007, and will also be
redeemable at the option of the holders thereof on August 1, 2007 in amounts
at 100% of their principal amount. In September 1995, the Company issued
$150.0 million principal amount of 7.25% notes due September 15, 2005 ("Notes
Due 2005"). The Notes Due 2005 are not redeemable prior to maturity. The Notes
Due 2027 and the Notes Due 2005 are unsecured and rank equally with all other
unsecured and unsubordinated indebtedness of the Company.
The Company has a $750.0 million unsecured revolving credit facility that
expires in March, 2001. At August 9, 1999, the Company had approximately
$445.0 million in unused capacity under this facility. The Company also
maintains $42.0 million in additional overnight borrowing availability under
bank lines of credit.
Loans under the bank credit agreement bear interest at either (i)
floating rates generally payable quarterly based on an adjusted Eurodollar
rate plus 0.275% or (ii) Eurodollar rates or fixed rates that 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 implied senior unsecured debt ratings. In the event that both
of the Company's debt ratings improve, the interest rate and facility fees
would be reduced. Conversely, deterioration in both of the Company's debt
ratings would increase the interest rate and facility fees. In June 1999,
Moody's lowered the Company's debt rating from Baa3 to Ba1; the Company's debt
rating by Standard & Poor's remains at BBB minus.
The 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 incurring 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.
On November 23, 1998, the Company established a $105 million credit
facility with a group of banks. On that date, $57 million of proceeds from the
facility were used to repay loans under the Company's existing bank credit
agreement. Additional proceeds from this facility will be used to finance the
construction and working capital needs of the Company's Mexican subsidiaries
related to the expansion projects in Mexico. The facility includes terms and
covenants similar to the $750.0 million bank credit agreement, except that the
outstanding balance on the third anniversary of the facility will convert to a
two-year term loan payable semi-annually in four equal installments. Loans
under the new facility are made directly to a new Mexican financing subsidiary
of the Company and are guaranteed by the Company. At August 9, 1999, the
Company had approximately $21.0 million in unused capacity under this
facility.
In December 1997, the Company established a five-year, $225.0 million
Trade Receivables Financing Agreement ("Receivables Facility") with a bank.
The amount of borrowings allowable under the Receivables Facility at any time
is a function of the amount of then-outstanding eligible trade accounts
receivable up to $225.0 million. Loans under the Receivables Facility bear
interest, with terms up to 270 days, at the bank's commercial paper dealer
rate plus 0.1875%. A commitment fee of 0.125% is charged on the unused portion
of the Receivables Facility. At August 9, 1999, $171.0 million in borrowings
under this facility with original maturities of up to 147 days was
outstanding.
Because the Company's obligations under the bank credit facilities and the
Receivables Facility 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.
Commodity Price Risk
Exposure to changes in commodity prices is managed primarily through
the Company's procurement practices. The Company enters into contracts to
purchase cotton under the Southern Mill Rules ratified and adopted by the
American Textile Manufacturers Institute, Inc. and American Cotton Shippers
Association. Under these contracts and rules, nonperformance by either the
buyer or seller may result in a net cash settlement of the difference between
the current market price of cotton and the contract price. If the Company
decided to refuse delivery of its open firm commitment cotton contracts at
July 3, 1999, and market prices of cotton decreased by 10%, the Company would
be required to pay a net settlement provision of approximately $20.6 million.
However, the Company has not utilized this net settlement provision in the
past, and does not anticipate using it in the future.
Year 2000
As the turn of the century approaches, much attention has been given to
a serious problem that exists in many computers and programs in use today, a
problem that arose from the earliest days of computing when systems had very
limited memory storage capacities. To save space and data entry time, only the
last two digits of a year were used when performing date calculations and,
consequently, these systems may not be able to properly recognize dates
beginning with the year 2000. Many of these programs are still in use today
throughout the world.
Like most owners of computer software, the Company has modified a
significant portion of its computer software to handle the Year 2000 problem.
Any date-reliant system is at risk. This includes information technology
applications and embedded systems such as heating and ventilation, security,
voice and data communications, ordering and supply, manufacturing and
distribution, labeling, bar coding, billing and paying. For several years the
Company has conducted a company-wide effort to prepare its computer systems
and applications to recognize dates later than December 31, 1999 in order to
continue to function properly. The Company has substantially completed this
portion of its project.
The Company also is dependent upon the successful efforts of its
customers and suppliers of goods, services and essential utilities to modify
their software and could be affected by the failure of one or more of these
efforts. The Company has communicated with most of its major suppliers and
customers and is following up with others. Efforts include the collection and
evaluation of voluntary representations made or provided by those parties
together with independent research. The goal of all these efforts is to reduce
business risk and avoid interruption of service. Although the Company will
continue to take reasonable care to gather information about external parties,
such information is not always provided voluntarily, is not otherwise
available, or may not be reliable.
Contingency plans and recovery procedures for Year 2000 problems have
been initiated dealing with potential problems ranging from systems failure to
failure of a utility or a supplier. The Company expects to finalize these
contingency plans and procedures during August 1999. Although the Company
expects its critical systems to be compliant, there can be no assurances that
the Company identifies all susceptible systems and will not be adversely
affected by the failure of an external party to adequately address the Year
2000 problem. A most reasonable likely worst case scenario might be loss of
electrical power to one or more of the Company's significant manufacturing or
information technology systems causing a delay or curtailment in the
production and/or distribution of goods, a delay or curtailment in the billing
and collection of revenues, an inability to maintain accounting records
accurately, and/or an inability to manage its financial resources, potentially
causing a material impact on the Company's results of operations and financial
position. In case of power failure at the Company's headquarters, which
includes the data center, there will be a switch to its diesel power generator
systems. A full supply of diesel fuel will be maintained from December 1, 1999
forward. In case of an extended power failure at one or more of the Company's
manufacturing facilities, production may be shifted, to the extent capacity is
available, to a similar facility in another area not impacted by power
interruption.
The Company recognizes the widespread impact of Year 2000 in its
systems and manufacturing facilities and is working toward compliance of all
software and office and manufacturing equipment, environmental systems,
telecommunications, utilities, safety and monitoring equipment and systems.
Total costs for addressing the Year 2000 issue are currently estimated to
reach approximately $14.5 million. These costs are expensed as incurred and
are being funded with cash from operations. As of July 3, 1999, the Company
had spent $13.2 million on the project since its inception. The Company views
Year 2000 as a company-wide business issue of the highest priority. The
Company is engaged in extensive efforts to provide a continuous, uninterrupted
flow of goods and services to customers.
Forward-Looking Statements
With the exception of historical information, the statements contained in
Management's Discussion and Analysis of Results of Operations and Financial
Condition and in other parts of this report include statements that are
forward-looking statements within the meaning of applicable federal securities
laws and are based upon the company's current expectations and assumptions,
which are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated. Such risks and
uncertainties include, among other things, global economic activity, the
success of the company's overall business strategy, the company's
relationships with its principal customers and suppliers, the success of the
company's expansion in other countries, the demand for textile products, the
cost and availability of raw materials and labor, the company's ability to
finance its capital expansion and modernization programs, the level of the
company's indebtedness and the exposure to interest rate fluctuations,
governmental legislation and regulatory changes, and the long-term
implications of regional trade blocs and the effect of quota phase-out and
lowering of tariffs under the WTO trade regime. Other risks and uncertainties
may also be described from time to time in the Company's other reports and
filings with the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
4 Rights Agreement dated as of December 3,
1997 (amended and restated as of February 4,
1999) between Burlington Industries, Inc.
and Wachovia Bank, N.A., as Rights Agent
(Rights Agent replaced by First Union
National Bank as of June 7, 1999)
(incorporated by reference from Exhibit 4.1
to Form 8-A/A filed by Burlington
Industries, Inc. on April 5, 1999).
10 Director Stock Plan.
27 Financial Data Schedule.
b) Reports on Form 8-K.
The Company filed a report on Form 8-K on April 5,
1999. The Item reported was "Item 5. Other Events".
<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.
Date: August 17, 1999 Charles E. Peters, Jr.
Senior Vice President and
Chief Financial Officer
BURLINGTON INDUSTRIES, INC.
DIRECTOR STOCK PLAN
1. Purpose.
The purpose of the Burlington Industries, Inc. Director Stock Plan (the
"Plan") is to enable Burlington Industries, Inc. (the "Corporation") to attract
and retain persons of outstanding competence to serve on the Corporation's Board
of Directors (the "Board") and to encourage and enable members of the Board
("Directors") who are not employees of the Corporation or a related corporation
to acquire or increase their proprietary interests in the Corporation in order
to promote a closer identification of their interests with those of the
Corporation and its shareholders, thereby further stimulating their efforts to
enhance the profitability, growth and shareholder value of the Corporation. This
purpose will be carried out through the grant of shares of the common stock of
the Corporation (the "Common Stock") to newly elected eligible Directors, the
annual grant of stock units to eligible Directors and the opportunity for
eligible Directors to defer receipt of all or a portion of their Cash Retainer
Fees and receive additional stock units in lieu thereof.
2. Administration of the Plan.
The Plan shall be administered by the Compensation and Benefits
Committee (the "Committee") of the Board. Any action of the Committee may be
taken by a written instrument signed by all of the members of the Committee and
any action so taken by written consent shall be as fully effective as if it had
been taken by a majority of the members at a meeting duly called and held.
Subject to the provisions of the Plan and to the extent necessary to preserve
the availability of an exemption under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for
transactions by persons subject to Section 16 of the Exchange Act, the Committee
shall have full and final authority, in its discretion, to take action with
respect to the Plan including, without limitation, the authority to (i)
determine the terms and provisions of Awards made pursuant to the Plan; (ii) to
establish, amend and rescind rules and regulations for the administration of the
Plan; and (iii) to construe and interpret the Plan, the rules and regulations,
and to make all other determinations deemed necessary or advisable for
administering the Plan.
3. Effective Date.
The effective date of the Plan shall be April 15, 1999 (the "Effective
Date").
4. Awards.
An Award under the Plan shall be in the form of Restricted Stock or
Units.
5. Eligibility.
An Award may be made only to a Director who is a Non-Employee Director
on the date of grant of the Award. For purposes of the Plan, a "Non-Employee
Director" means a Director who is not an employee or retiree of the Corporation
or a related corporation (except that retirees or former employees who have
engaged in subsequent unrelated employment may be considered Non-Employee
Directors in the discretion of the Committee).
<PAGE>
6. Restricted Stock Awards.
(a) Grant.
Each Non-Employee Director shall receive a one-time Award of 1,500
shares of Common Stock (the "Restricted Stock") upon initial election
or appointment to the Board. The Restricted Stock may be authorized but
unissued shares or treasury shares of Common Stock. The provisions of
this subsection may not be amended more than once every six months
other than to comport with changes in the U. S. Internal Revenue Code,
as amended, the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations under either thereof.
(b) Vesting.
Subject to the provisions of subsection (e) of this Section 6, a
Restricted Stock Award shall vest (become non-forfeitable) one year
from the date of grant of the Award. Certificates representing
Restricted Stock Awards shall be held by the Secretary of the
Corporation and distributed to Non-Employee Directors upon vesting of
the Award.
(c) Stockholder Rights.
At all times following the date the Award is granted, a Non-Employee
Director shall have all rights as a stockholder with respect to such
shares including, without limitation, the right to vote such shares as
provided in the Corporation's Certificate of Incorporation and the
right to receive any dividends on or distributions with respect to the
Common Stock.
(d) Restrictions.
Shares of Common Stock delivered to Non-Employee Directors under the
Plan may not be sold or transferred prior to the later of (i) such
Non-Employee Director's completion of his or her service as a
Non-Employee Director, or (ii) the date which is at least six months
after acquisition of the Restricted Stock Award. Prior to becoming
transferable as aforesaid, no Restricted Stock Award shall be
anticipated, assigned, attached, garnished, optioned or made subject to
any creditor's process, whether voluntarily or involuntarily or by
operation of law. Any act in violation of this subsection shall be
deemed void and without legal effect.
(e) Termination of Service.
If a Non-Employee Director terminated service as a Director prior to
vesting of the Restricted Stock Award other than by reason of death or
permanent physical or mental disability, such Director shall be
entitled to receive, on a pro rata basis, the portion of the Restricted
Stock Award attributable to such service through the Termination Date,
provided that if such termination is voluntary on the part of the
Non-Employee Director or is a removal of such Director for cause, all
rights to any unvested Restricted Stock Award shall be forfeited. If
such termination is caused by the Director's death or permanent
physical or mental disability, the unvested Restricted Stock Award
shall vest immediately, and the Director (or, in the case of death, his
or her designated beneficiary or, if none is named, the estate of the
Director) shall be entitled to receive the entire amount of such
Restricted Stock Award.
7. Units.
An Award of Units shall entitle the recipient to a cash-only payment
based on the value of the Common Stock. No actual shares of Common Stock shall
be issued in connection with Awards of Units under the Plan, and no participant
shall be entitled to receive shares of Common Stock pursuant to the grant of
awards hereunder. The number of Units credited to a Director's Account pursuant
to the Award of Units shall be fully vested at all times.
(a) Quarterly Grants.
Each Non-Employee Director who is a member of the Board at any time
during any fiscal quarter of the Corporation, beginning with the fiscal
quarter in which the Effective Date occurs, shall receive a quarterly
Award of Units (a "Quarterly Award") on the last day of each such the
fiscal quarter (a "Quarterly Award Date"). The number of Units
represented by each such Quarterly Award for each Non-Employee Director
shall be equal to that number of whole or fractional shares of the
Common Stock of the Corporation as may be purchased for $7,500 on the
Quarterly Award Date (or, with respect to the initial Quarterly Award
made for the fiscal quarter in which the Effective Date occurs,
$15,000), based on the Fair Market Value (as defined in Section 8 of
the Plan) of the shares.
(b) Deferred Retainer Award.
Each Non-Employee Director may elect to defer all or 50% of the
retainer fee payable in cash to the Director (the "Cash Retainer Fee")
by making a deferral election prior to the commencement of the calendar
period for which such Cash Retainer Fee is payable or, with respect to
Non-Employee Directors first elected after the beginning of a calendar
year, within 30 days of the date he or she becomes a Non-Employee
Director. Each Non-Employee Director who makes the deferral election
shall receive in lieu of the Cash Retainer Fee an Award of Units (the
"Deferred Retainer Award") on the Quarterly Award Date coincident with
or next following the date as of which a Cash Retainer Fee otherwise
would be paid. The Deferred Retainer Award shall equal the number of
whole or fractional shares of the Common Stock of the Corporation as
may be purchased for the amount of the deferred Cash Retainer Fee on
the Quarterly Award Date, based on the Fair Market Value of the shares
as determined on the Quarterly Award Date.
(c) Deferred Compensation Plan Election.
Amounts previously deferred by Non-Employee Directors who had elected
to defer payment of the Cash Retainer Fee pursuant to the Phantom Stock
Deferral option as defined in the Burlington Industries, Inc. Deferred
Compensation Plan for Non-Employee Directors shall be transferred to
such Directors' Accounts under the Plan. Any Non-Employee Directors who
previously deferred Cash Retainer Fees into the Cash Deferral option
under such plan or under any other deferred compensation plans
sponsored by the Corporation or its subsidiaries for its directors may
make a one-time election to transfer such account balance to this Plan.
Such election must be made by a Non-Employee Director on or within 30
days after the Effective Date or after the date such Director first is
elected to the Board. A Director who makes such election shall receive
as of the Quarterly Award Date coincident with or next following such
election a Deferred Retainer Award equal to that number of whole or
fractional shares of the Common Stock of the Corporation as may be
purchased for the amount of the transferred account balance of the
Director as of such Quarterly Award Date, based on the Fair Market
Value of the shares as determined on such Quarterly Award Date.
(d) Dividend Equivalent Awards.
Upon payment of any dividend with respect to the Common Stock, each
Non-Employee Director shall be granted an Award of Units ("Dividend
Equivalent Awards") calculated by (i) multiplying the number of Units
credited to a Non-Employee Director as of the record date for such
dividend by the dividend then paid on a share of the Common Stock, then
(ii) dividing that result by the closing price per share of Common
Stock on the New York Stock Exchange as reported in The Wall Street
Journal for the trading day prior to the date the dividend is paid (the
"Dividend Payment Date"). Dividend Equivalent Awards will be granted to
each Non-Employee Director as of the Quarterly Award Date coincident
with or next following the Dividend Payment Date to which the Dividend
Equivalent Award relates.
(e) Director's Accounts.
The Corporation shall establish an account for each Non-Employee
Director (individually, a "Director's Account") to which the number of
Units represented by each Quarterly Award, Deferred Retainer Award and
Dividend Equivalent Award shall be credited.
(f) Settlement.
Upon the date that the service of a Non-Employee Director as a member
of the Board is terminated for any reason (the "Termination Date"), the
Non-Employee Director (or the beneficiary in the event of the
Director's death) shall be entitled to settlement of the number of
Units credited to the Director's Account. The settlement shall occur on
the Quarterly Award Date which follows by at least six months the last
Award (other than a Dividend Equivalent Award) granted to the
Non-Employee Director (the "Payment Date").
The settlement shall be made in a cash lump sum payment (rounded to two
decimals) equal to the Fair Market Value per share of Common Stock as
determined on the Payment Date, multiplied by the number of Units then
credited to the Director's Account; provided, that the Non-Employee
Director may at least 90 days prior to the Termination Date elect to
receive the settlement in annual cash installments (rounded to two
decimals) for a period of up to ten years beginning on the Payment Date
and continuing on the Quarterly Award Date for the same quarter each
year during the payment period (an "Installment Payment Date"). The
amount of each annual installment payment shall be calculated by (x)
multiplying the Fair Market Value per share of Common Stock as
determined on the Installment Payment Date by the number of Units
credited to the Director's Account on the Payment Date (as increased by
the Units credited to the Director's Account for Dividend Equivalent
Awards and decreased by the number of Units for which payment has been
made since the Payment Date), then (y) dividing that result by the
number of installment payments remaining in the payment period
(including the installment payment due on such Installment Payment
Date).
<PAGE>
8. Fair Market Value.
For purposes of this Plan, the "Fair Market Value" per share of the
Common Stock shall equal the average price per share (rounded to four decimals)
of the last sale of such shares on the New York Stock Exchange as reported in
The Wall Street Journal for the last five trading days immediately preceding the
date for which value is to be determined, unless otherwise stated.
9. Non-transferability of Awards.
Awards shall not be transferable (including by pledge or hypothecation)
other than by will, the laws of intestate succession or pursuant to a qualified
domestic relations order (as defined by the Internal Revenue Code or Title I of
the Employee Retirement Income Security Act ("ERISA") or the rules thereunder).
The designation of a beneficiary does not constitute a transfer. To the extent
required pursuant to Rule 16b-3 under the Exchange Act or any successor statute
or rule, Awards granted under the Plan may not be settled or otherwise disposed
of for a period of six months from the date of grant of the Award.
10. Beneficiary.
Each Non-Employee Director may designate in writing a person or persons
as beneficiary, which beneficiary shall be entitled to receive settlement of
Awards to which the Non-Employee Director is otherwise entitled in the event of
death. In the absence of such designation by a Non-Employee Director, and in the
event of the Non-Employee Director's death, the estate of the Non-Employee
Director shall be treated as beneficiary for purposes of the Plan. The Committee
shall have sole discretion to approve the form or forms of such beneficiary
designation.
11. Tax Obligations.
To the extent required by applicable Federal, state or local law, the
recipient of any Award shall make arrangements satisfactory to the Corporation
for the satisfaction of any withholding, income or employment tax obligations
that may arise by reason of the Award.
12. Unfunded Plan.
The Plan is intended to be, for purposes of Titles I and IV of ERISA,
an unfunded plan for the benefit of a selected group of non-employee management
persons, and the Corporation shall not be required to segregate any assets that
may at any time be represented by Units made under the Plan. Any liability of
the Corporation to any person with respect to any Award made under the Plan
shall be based solely upon any contractual obligations that may be created
pursuant to the Plan, and no term or provision in the Plan shall be construed to
give any person any security, interest, lien or claim against any specific asset
of the Corporation. Neither a Non-Employee Director nor his beneficiary shall
have any rights under the Plan other than as a general creditor of the
Corporation.
13. Effect on Service.
Neither the adoption and operation of the Plan, nor the grant of Awards
hereunder, shall confer upon any Non-Employee Director any right to continue in
the service of the Corporation as a member of the Board or in any way affect the
right of the Corporation to terminate the service of the Non-Employee Director
at any time.
14. Amendment or Termination.
The Plan may be amended, suspended or terminated by action of the Board
at any time; provided, that (i) such amendment, suspension or termination shall
not, without the consent of a Director, adversely affect the rights of the
Director with respect to an Award previously granted; and (ii) in any event, no
amendment, suspension or termination shall operate to change any previously
established settlement date (as provided in Sections 10 and 18 herein). The term
of the Plan shall end on the effective date of termination of the Plan by the
Board.
15. Adjustment of Awards.
If there is any change in the shares of Common Stock because of a
merger, consolidation or reorganization involving the Corporation or a related
corporation, or if the Board declares a stock dividend or stock split
distributable in shares of Common Stock, or if there is a change in the capital
stock structure of the Corporation or a related corporation affecting the Common
Stock, the number of shares of Restricted Stock owned by a Director and the
number of Units credited to a Director's Account shall be correspondingly
adjusted, and the Committee shall make such adjustments to Awards or to any
provisions of this Plan as the Committee deems equitable to prevent dilution or
enlargement of Awards.
16. Applicable Law.
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of Delaware.
17. Change of Control.
(a) Accelerated Vesting/Settlement by Committee.
Notwithstanding any other provision of the Plan, the Committee shall
have the authority in its discretion to provide for the accelerated
vesting and/or settlement of Awards in the event of a Change of Control
or in the event of a determination by the Committee that a Change of
Control may occur.
(b) Accelerated Settlement Election.
Notwithstanding any other provision of the Plan, upon a Change of
Control, a Non-Employee Director may elect to obtain settlement of the
Units then credited to the Director's Account in the manner described
in Section 10, treating for this purpose the date of the Change of
Control as if it were the Termination Date of the Non-Employee
Director. An election by a Non-Employee Director to obtain settlement
pursuant to this Section 17 must be filed by the Non-Employee Director
with the Committee at least six months prior to the Payment Date. Such
an election will not affect the rights of the Non-Employee Director to
continue participation in accordance with the terms of this Plan
following the Change of Control.
<PAGE>
(c) Definition of "Change of Control".
(i) the Corporation is merged or consolidated or reorganized
into or with another corporation, person or entity, and as a
result of such merger, consolidation or reorganization less
than a majority of the combined voting power of the then
outstanding securities of such corporation, person or entity
immediately after such transaction are held in the aggregate
by the holders of Voting Stock (as that term is hereafter
defined) of the Corporation immediately prior to such
transaction;
(ii) the Corporation sells or otherwise transfers all or
substantially all of its assets to any other corporation,
person or entity, and less than a majority of the combined
voting power of the then-outstanding securities of such
corporation, person or entity immediately after such sale or
transfer is held in the aggregate by the holders of Voting
Stock of the Corporation immediately prior to such sale or
transfer;
(iii) there is a report filed on Schedule 13D or Schedule
14D-1 of the Securities Exchange Act of 1934, as amended (the
" Exchange Act") by a person other than a person that
satisfies the requirements of Rule 13d-1(b)(1) under the
Exchange Act for filing such report on Schedule 13G, which
report as filed discloses that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 under the
Exchange Act) of securities representing 12.5% or more of the
combined voting power of the then-outstanding securities
entitled to vote generally in the election of Directors
("Voting Stock");
(iv) the Corporation files a report or proxy statement with
the Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or Schedule
14A that a change in control of the Corporation has or may
have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction; or
(v) if during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Directors cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Corporation's stockholders, of each Director
first elected during such period was approved by a vote of at
least two-thirds of the Directors then still in office who
were Directors at the beginning of any such period.
Notwithstanding the foregoing provisions of Clause (iii) or
(iv) hereof, a Change of Control shall not be deemed to have
occurred for purposes of the Plan solely because (x) the
Corporation, (y) an entity in which the Corporation directly
or indirectly beneficially owns 50% or more of the voting
securities, or (z) any Corporation-sponsored employee stock
ownership plan or any other employee benefit plan of the
Corporation (or any trustee of any such plan on its behalf),
either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule
14D-1, or Form 8-K or Schedule 14A under the
<PAGE>
Exchange Act, disclosing beneficial ownership by it of shares
of Voting Stock, whether in excess of 12.5% or otherwise, or
because the Corporation reports that a Change of Control of
the Corporation has or may have occurred or will or may occur
in the future by reason of such beneficial ownership.
IN WITNESS WHEREOF, this Burlington Industries, Inc. Stock
Plan has been executed in behalf of the Corporation effective as of the 15th day
of April, 1999.
BURLINGTON INDUSTRIES, INC.
By: ________________________________
Chief Executive Officer
Attest:
- ---------------------------------
Secretary
[Corporate Seal]
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