UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 1999
Commission file number 1-10984
BURLINGTON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1584586
(State of incorporation) ( I.R.S. Employer
Identification No.)
3330 West Friendly Avenue
Greensboro, N.C. 27410
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 379-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, New York Stock Exchange
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 6, 1999, the aggregate market value of Registrant's voting stock
held of record by nonaffiliates of Registrant was approximately $185,275,232
(based upon the closing composite price on the New York Stock Exchange on that
date), excluding Treasury shares and, without acknowledging affiliate status,
513,195 shares held beneficially by Directors and executive officers as a group.
As of December 6, 1999, there were outstanding 51,623,604 shares of Registrant's
Common Stock, par value $.01 per share, and 454,301 shares of Registrant's
Nonvoting Common Stock, par value $.01 per share.
Documents Incorporated by Reference
Portions of Registrant's 1999 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV hereof.
Portions of Registrant's Proxy Statement dated December 15, 1999 in connection
with its Annual Meeting of Stockholders to be held on February 3, 2000 are
incorporated by reference into Part III hereof.
<PAGE>
PART I
Item 1. Business
General
The Corporation is one of the world's largest and most diversified
manufacturers of softgoods for apparel and interior furnishings. It is a leading
developer, marketer and manufacturer of fabrics and other textile products used
in a wide variety of apparel and interior furnishings end uses. The Corporation
is organized in three industry segments: PerformanceWear, CasualWear and
Interior Furnishings. References herein to the "Corporation" mean Burlington
Industries, Inc. ("Burlington") and its subsidiaries, and, where relevant, its
participation in joint venture companies.
During the 1999 fiscal year, the Corporation announced and implemented
a comprehensive reorganization plan primarily related to its apparel fabrics
businesses. The principal components of the plan included the combination of its
apparel fabrics related businesses into two units (Burlington PerformanceWear
and Burlington CasualWear) and the reduction of its U.S. apparel fabrics
capacity by approximately 25% by closing plants and streamlining production
within remaining facilities. See Management's Discussion and Analysis of Results
of Operations and Financial Condition - "1999 Restructuring Plan", and Note B of
the Notes to Consolidated Financial Statements in the Corporation's 1999 Annual
Report to Shareholders. In Mexico, the Corporation commenced operations in two
new state-of-the-art apparel fabric manufacturing facilities, brought to full
capacity a joint venture cotton yarn manufacturing facility and expanded
significantly its garment manufacturing capacity through the acquisition of a
denim jeans facility and the start-up of a men's slacks facility. Construction
of a joint venture denim jeans finishing facility in Mexico was also completed,
providing the Corporation with the integrated capacity of converting raw cotton
into shelf-ready, customer-labeled jeans, all in Mexico.
As of October 2, 1999, the Corporation operated 23 U.S. manufacturing
plants in six states and five manufacturing plants and two garment assembly
plants in Mexico. It also held a 50% interest in three joint ventures: one in
India with one manufacturing plant and two in Mexico, each with one
manufacturing plant, and held a minority interest in a U.S. yarn manufacturing
venture. At October 2, 1999, the Corporation employed approximately 18,500
persons, not counting joint venture employees.
Products for Apparel Markets
Burlington PerformanceWear
- --------------------------
The Corporation is a leading manufacturer of woven worsted and worsted blend
fabrics, as well as woven synthetic fabrics made with 100% polyester, 100% nylon
and polyester or nylon blended with wool, rayon, lycra or other fibers, supplied
to manufacturers of a wide variety of apparel, activewear and barrier products.
Burlington PerformanceWear is organized to service the needs of eight distinct
customer groups:
o Collections: An array of fabrics targeted at the fashion, comfort and
performance apparel needs of the "better" women's market.
o Menswear - Clothing: Fabrics of worsted wool, synthetics and blends
designed for the increasingly diverse needs in men's jackets, suits and
formal wear.
o Menswear - Trousers: Fabrics across the fiber spectrum for use in men's
slacks and shorts, from business to casual application.
o Womens Wear: A breadth of fabric styles for a wide variety of end-uses
in the "moderate" women's market.
o Raeford(R): An extensive product line, from tailored fabrics to
performance fabrics, for uniform and career apparel.
o ActiveWear: High-tech, performance fabrics with waterproof, water
repellent, breathable and moisture management characteristics used by
makers of outerwear and high performance sportswear and activewear.
o Shirtings: Yarn dyed woven cotton shirting fabrics, delivered in fabric
form or the finished shirt, tailored to customer specifications.
o Barrier Products: Performance fabrics for the reusable health care market
and contamination control environments. Lightweight, reusable, protective
barrier fabrics under the Maxima(R) brand name are marketed to makers of,
among other things, clothing worn by hospital personnel and by industrial
workers who are required to work in clean and static-free environments.
As part of its strategy to focus more resources on the finished product
end of the softgoods pipeline, the Corporation disposed of the assets of its
Burlington Madison Yarn division in 1998 - 1999. The division was a major
supplier of textured and spun synthetic yarns. On May 30, 1998, the division's
textured polyester yarn manufacturing assets, along with the textured polyester
yarn assets of Unifi, Inc., were transferred into a newly-formed company. The
Corporation holds a minority interest in the venture, which is managed by Unifi.
In November 1998, the remaining assets of the division were sold to Carolina
Mills. The Corporation entered into long-term yarn supply agreements with each
of these entities.
Burlington CasualWear
- ---------------------
The Corporation is a leading manufacturer of denim fabrics, focusing on fashion,
value-added, specialty products. It produces a diversified product line that
services the major brands with innovative and engineered products for denim
customization. From plants in the United States, Mexico and India, it is a major
supplier to all segments of the branded, designer and private label business.
The India denim plant is a 50/50 joint venture with Mafatlal Industries Limited,
and the Mexico cotton yarn plant is a 50/50 joint venture with Parkdale Mills
Incorporated.
Each of the apparel fabric businesses also offers customers the option of
purchasing fabrics in the form of customer-specified garments. During 1998, the
Corporation commenced a multi-year effort to expand its direct garment-making
capabilities through the construction or acquisition in Mexico of wholly-owned
facilities and through the purchase of sewing services from contractors or joint
ventures. To date, the Corporation has acquired a jeans sewing plant and started
up operations in a slacks sewing facility. It also has entered into a 50/50
joint venture ownership arrangement with International Garment Processors, a
leader in denim jeans processing. The venture commenced operation in late 1999
in a new facility in the State of Chihuahua, Mexico. When coupled with its yarn
and fabric facilities in Mexico, the Corporation is able to convert raw
materials to shelf-ready denim, worsted and worsted wool blend, and woven
yarn-dyed cotton garments totally within Mexico.
Products for Interior Furnishings Markets
- -----------------------------------------
Fabrics and related products. The Corporation is a leading manufacturer of
ready-made and made-to-measure draperies, window coverings and coordinating
bedroom ensembles, mattress ticking, upholstery fabrics, and decorative fabrics
for use by makers of products for the home, office, hospitality and healthcare.
The product lines consist of:
o ready-made and made-to-measure draperies, coordinating bedroom
ensembles and table linens sold under the Burlington House(R) name
to department and specialty stores, under the American
Lifestyle(TM) name to discount stores and on a private label basis
to several major retailers;
o woven jacquard mattress ticking (primarily damasks) sold to all
major domestic manufacturers of mattresses for both the residential
and institutional markets;
o woven jacquard and textured fabrics for residential upholstered
furniture which are marketed to a broad range of furniture
manufacturers; and
o woven jacquard and other decorative fabrics and flame resistant
fabrics used by manufacturers of home, office, hospitality and
healthcare products (bedding, window coverings, draperies, panel
fabric and upholstery fabric).
Floor Accents. The Corporation is a leading producer in the United States
of tufted area and bath rugs for home use, sold primarily under the Burlington
House(R) name to department and specialty stores and the American Lifestyle(TM)
name to discount stores. It is a leading producer of printed accent rugs and
welcome mats sold under the Bacova(R) name. It markets these products, in
addition to fully coordinated bath ensembles, to diverse market segments that
include the leading U.S. department stores, mail order catalogs, mass merchants,
specialty stores and international customers.
Carpets. The Corporation is a leading domestic manufacturer of tufted
synthetic carpet for commercial uses, comprised of broadloom carpet, carpet
tiles and six-foot vinyl-backed carpet. It produces and sells a wide variety of
standard and custom commercial carpet products under the Corporation's Lees(R)
brand name primarily for use in offices, institutions, airports, hotels,
schools, stores and health care facilities. The Corporation's commercial carpet
products are sold in the middle to high priced segments of the commercial carpet
market, and are marketed through dealers primarily to architects, designers and
commercial builders, as well as directly to end users.
The Corporation developed and patented a yarn dyeing process that permits
the production of carpeting that resists staining and fading on a permanent
basis. Products incorporating this dyeing technology, which are marketed under
the Duracolor(R) name in the commercial market, represent a major portion of
current carpet sales. The Corporation also has developed and markets a
proprietary thermoplastic carpet backing process for commercial carpets, known
as Unibond(R), which enhances the carpet's durability.
The Corporation's yarn dyeing capability facilitates the offering of
carpeting in a wide range of colors. Through its Colorfax(R) program, the
Corporation offers customers the ability to order sample yardage manufactured to
their exact color specifications. Such samples are generally deliverable within
72 hours after receipt of the specifications.
Financial Information Concerning Industry Segments
Reference is made to Note O to the Notes to Consolidated Financial
Statements in the Corporation's 1999 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning industry segments
for the Corporation's 1999, 1998 and 1997 fiscal years.
Exports
The Corporation's exports were 14.3% of revenues in fiscal year 1999, with
export sales of $236 million; of these sales, $122 million were to Mexico and
Canada. The Corporation's export sales were $237 million in fiscal year 1998 and
$239 million in fiscal year 1997.
Operations
The Corporation's domestic operations are organized primarily by product
category, and intercompany sales are minimal. Products are distributed through
direct sales except in a few cases, mainly export sales, where products are sold
through independent agents or distributors.
The Corporation's corporate headquarters, principal sales and
merchandising offices and principal staff operations are located in Greensboro,
North Carolina. The Corporation maintains domestic sales offices in New York
City and other major cities in the United States.
Manufacturing
The Corporation is a vertically integrated manufacturer in many of its
product areas. Generally, raw fibers are purchased and spun into yarn, or
filament yarns are purchased and processed. Yarns, whether produced by the
Corporation or purchased, are dyed in some cases, and then are woven, or tufted
into fabric or carpet. Fabric is then sold either as greige (unfinished) goods
or in dyed and finished form, or further processed into finished home furnishing
or apparel products. Residential and commercial interior furnishings products
are further processed and packaged for sale to retailers.
"Just-in-time" manufacturing techniques, which reduce in-process
inventories, floor space requirements and the time required to process a
particular order, are used in most facilities. Programs to link customers and
suppliers of the Corporation by means of electronic data transmission are also
in place in all businesses. These programs improve efficiency and reduce lead
times by improving communication, planning and processing times at the various
stages of production. They also assist the Corporation in working effectively
with manufacturers to coordinate their operations with the demands of retailers
and, as such, are an important part of the domestic textile industry's "Quick
Response" program designed to improve its competitive position vis-a-vis
imports.
Year 2000
Considerable attention has been focused upon potential disruptions that
could result from certain computer programs' inability to recognize the year
2000. See "Year 2000" in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" in the Corporation's 1999 Annual Report to
Shareholders for information concerning the impact of this issue on the
Corporation and its efforts to address it.
Raw Materials
The Corporation uses many types of fiber, both natural (principally wool
and cotton) as well as manufactured (polyester, nylon, polypropylene, acrylic,
rayon, Tencel(R) and acetate), in the manufacture of its textile products. Total
raw material costs were 30.4% of net sales in the 1999 fiscal year, 31.1% of net
sales in the 1998 fiscal year and 33.4% of net sales in the 1997 fiscal year.
The Corporation believes that future price levels for all fibers will depend
primarily upon supply and demand conditions, general inflation, U. S. and
foreign government fiscal policies and agricultural programs, relative currency
values, and prices of underlying raw materials such as petroleum.
Generally, the Corporation has had no difficulty in obtaining raw
materials. Wool and man-made fibers are available from a wide variety of sources
both domestically and abroad. Cotton is available from a wide variety of
domestic sources. Other materials, such as dyes and chemicals, are generally
available, but, as in the case of raw materials, continued availability is
dependent to varying degrees upon the adequacy of petroleum supplies. The
Corporation purchases essentially all its raw materials and dyes.
Research and Development
Textile manufacturers generally focus their research and development
efforts on product development rather than basic research. Major innovations in
the textile industry have come primarily from fiber producers (microdenier
fiber, for example) or machinery manufacturers (high speed shuttleless looms).
While breakthroughs by textile manufacturers in fabric development have occurred
(for example, the Corporation's Duracolor(R) carpets using stain-resistant
technology), generally, textile makers have enhanced their competitiveness
through continual development and refinement of products to meet or create
consumer needs (for example, the Corporation's use of microdenier fibers in a
wide range of apparel and other applications). Accordingly, with few exceptions,
basic research and development expenditures have not been as significant a
component of textile manufacturing success as expenditures on design innovation
or capability and on capital equipment that increase the range of end products
and enhance productivity.
The Corporation is a leader in developing new applications and end uses
for synthetic fibers, such as fabrics made with microdenier filament yarn, a
yarn made from fiber thinner than silk. These products combine a natural
appearance and touch with the performance characteristics of synthetic fibers.
The Corporation's microdenier fabrics are currently being used in men's and
women's apparel fabrics, activewear, protective medical clothing and in home
furnishings. The Corporation is the leading domestic producer of microdenier
fabrics made from 100% polyester and polyester blended with wool or rayon.
Basic research and development responsibility is located in each product
area and focused on specific process and product development needs. Total
expenditures for research, product development, productivity enhancements,
enhanced styling and market samples aggregated $50.9 million in the 1999 fiscal
year, $58.9 million in the 1998 fiscal year and $57.3 million in the 1997 fiscal
year. Included in these amounts are research and development expenditures which
totaled $12.1 million in the 1999 fiscal year ($8.1 million in the
PerformanceWear segment, $0.2 million in the CasualWear segment and $3.8 million
in the Interior Furnishings segment), compared with $14.9 million and $11.8
million in the 1998 and 1997 fiscal years, respectively.
In November 1999, the Corporation increased its ownership interest to 51%
in AvantGarb, LLC, a California start-up company developing novel chemistry for
fabric applications. The Corporation believes that the application of
AvantGarb's research to the next generation of textile products is potentially
very promising but remains highly experimental at this point.
Trademarks and Patents
The Corporation owns or has the right to use all trademarks and tradenames
that it believes are material to the operation of its business. The Corporation
markets its products under a variety of trademarks and tradenames, principally
utilizing variations of the Burlington(R) name. Certain products are marketed
under nationally recognized names such as Lees(R) for commercial carpets,
Klopman(R) for fabrics or Bacova(R) for mats and rugs.
From time to time, the Corporation's product development efforts have
resulted in new processes or products, some of which have been patented.
Examples of Burlington-developed technology include the Xalt(TM) family of
composite, laminate fabrics used in activewear and Duracolor(R) carpets,
manufactured using stain-resistant technology with respect to which the
Corporation has obtained patents. Because the Corporation's business is not
dependent to any significant degree upon patents and licenses (with the possible
exception of the patented stain resistant carpet technology in the case of the
interior furnishings segment), the loss of any patents or licenses now held by
the Corporation would not have a material adverse effect upon its business or
results of operations.
The Corporation derives licensing income (approximately $2.9 million in
the 1999 fiscal year) from licenses of the Corporation's technology and from
licenses of the Burlington(R) name, principally to manufacturers of socks and
hosiery products in the United States and Europe.
Competition
The global and United States textile industries are highly competitive. No
one firm dominates the United States market and many companies compete only in
limited segments of the textile market. Certain of the Corporation's products
also compete with non-textile products. Textile competition is based in varying
degrees on price, product styling and differentiation, quality, response time
and customer service. The importance of each of these factors depends upon the
needs of particular customers and the degree of fashion risk inherent in the
product.
Imports of foreign-made textile and apparel products are a significant
source of competition for most sectors of the domestic textile industry. The
U.S. Government has attempted to regulate the growth of certain textile and
apparel imports through tariffs and bilateral agreements which establish quotas
on imports from lesser-developed countries that historically account for
significant shares of U.S. imports. Despite these efforts, imported apparel and
apparel textile fabrics, which represent the area of heaviest import
penetration, represent in excess of 60% of the U.S. market, up from less than
approximately 24% in 1975.
U.S. retailers' and apparel manufacturers' sourcing decisions are affected
by numerous factors, including relative labor and raw material costs, lead
times, political instability and infrastructure deficiencies of newly
industrializing countries, fluctuating currency exchange rates, individual
government policies and international agreements regarding textile and apparel
trade. As evidence of the impact of these factors, sourcing of textile and
apparel imports for goods shipped into the United States -- once dominated
primarily by Hong Kong, Taiwan and Korea -- has been shifting to other
lower-cost producer countries such as The People's Republic of China, the
Philippines, Mexico and countries in the Caribbean Basin. The Corporation
believes that changing cost structures, delivery lead times, political
uncertainty and infrastructure deficiencies associated with many of these
producers have caused importers to reassess the degree of reliance placed upon
certain of these sources, and to reconsider the importance of the reliability of
manufacturing sources closer to point of sale. In addition to these factors, the
U.S. Government's policies designed to benefit Mexico and the Caribbean Basin,
through favored quota and tariff treatment, have accelerated the shift in
production of garments to sources in this hemisphere, indirectly benefiting U.S.
textile producers.
Under the North American Free Trade Agreement ("NAFTA") with Mexico and
Canada, there are no textile/apparel quotas between the United States and either
Mexico or Canada for products that meet certain origin criteria. Tariffs among
the three countries are either already zero or are being phased out. There are
provisions in NAFTA that give Mexican apparel makers incentives to use fabric
made in the United States. Because the Corporation is a major U.S. apparel
fabrics manufacturer and a resident, diversified textile manufacturer in Mexico,
the Corporation believes that NAFTA is advantageous to the Corporation. In
addition, the U.S. "807" tariff program benefits U.S. textile producers whose
cut fabrics are incorporated into garments assembled in Caribbean countries
before returning to U.S. markets, where duty is charged on only the value added
in assembling the garments.
The impact of the economic factors and legislative/treaty provisions
described above are apparent in the rapid growth of U.S. apparel imports from
the Caribbean Basin, Canada and Mexico. Apparel imports from the Caribbean Basin
and Mexico have grown from 6.5% of total apparel imports in 1984 to 39.2% in
1999, surpassing imports from the Far East. Mexico has now become the largest
exporter of apparel to the U.S., surpassing China.
Also of significance to domestic textile and apparel companies is the
ultimate impact of multilateral agreements intended to liberalize global trade.
The World Trade Organization ("WTO") established under GATT in January 1995 has
responsibility for overseeing international trade in manufactured goods,
agriculture, intellectual property and services. The WTO will oversee the
phaseout of textile and apparel quotas over a ten-year period through 2004. In
addition, tariffs on textile/apparel products will be reduced (but not
eliminated) over the same ten-year period. After the end of the ten years,
textile/apparel trade would revert to regular GATT rules that would prohibit
quotas and most other non-tariff barriers. The Clinton Administration is also
engaged in discussions with a number of countries or trading blocs with the
intent of further liberalizing trade, although "fast track" authority to
negotiate new agreements was denied by Congress. The Administration recently
announced an agreement with China (which is subject to Congressional approval)
to facilitate its admission to the WTO and access to the more liberal trade
regime currently being phased in.
During 1999, legislation was introduced, but failed to pass by the 1999
adjournment date, relating to trade between the U.S. and Sub-Saharan African
nations, trade between the U.S. and the Caribbean Basin countries, and reduction
of U.S. wool fabric tariffs. If enacted, versions of these bills could have a
negative impact on the Corporation. The bills in various forms are likely to
continue to be considered in 2000, and the Corporation cannot predict the
ultimate impact, if any, on it of legislation and regulation which could emerge
from Congress.
Over the years, the Corporation has attempted to offset the negative
impact of increased imports by focusing on product lines and markets that are
less vulnerable to import penetration. Capital expenditures and systems
improvements have centered on strengthening value-added product strategies and
on increasing productivity, lowering costs and improving quality. The
Corporation also has introduced manufacturing techniques such as "just-in-time"
and "Quick Response" and created electronic data links with customers and
suppliers, thereby shortening lead times and improving service. The Corporation
also is investing in apparel fabric and garment manufacturing and processing
facilities in Mexico and India in response to the forces affecting global
textile and apparel trade which have been described above.
The long-run success of the Corporation will be influenced in varying
degrees by its response to legislation and administrative actions restricting or
liberalizing trade among world textile producing and consuming countries such as
NAFTA and the GATT/WTO changes, the effectiveness of anti-dumping and
countervailing duty remedies and of enforcement activities by the U.S.
Government, the value of the United States dollar in relation to other
currencies and world economic developments generally. The Corporation's success
also will be affected by the ability of certain of the Corporation's apparel
fabrics customers to remain competitive, the success of the Corporation's global
diversification, modernization and cost-reduction efforts and, most importantly,
the ongoing ability of the Corporation to produce innovative, quality products
to satisfy specific customer needs at competitive costs.
Employees
The number of persons employed by the Corporation in both its domestic and
foreign operations, excluding joint ventures, as of October 2, 1999, was
approximately 18,500. The Corporation's workforce in the United States is not
represented by labor unions. All wage employees in the Corporation's Mexican
operations (approximately 2,900 persons) are represented by labor unions.
Customers
The Corporation primarily markets its products to approximately 8,700
customers in the United States. The Corporation also markets its products to
customers in Canada, Mexico, Central and South America, Europe, Africa,
Australia and Asian countries. For the 1999 fiscal year, no single customer
represented more than 10% of the Corporation's net sales, and the Corporation's
10 largest customers accounted for approximately 26% of net sales.
Backlog
The Corporation's business generally is characterized by very short
forward order positions. The backlog of orders at any time is not material,
since most orders are deliverable within a few months. The backlog of forward
orders, after eliminating sales within the Corporation, was approximately 14.4%
of annual net sales at the end of the 1999 fiscal year, compared with
approximately 13.6% of annual net sales at the end of the 1998 fiscal year,
virtually all of which was expected to be shipped within less than a year.
Backlog at the end of the 1999 fiscal year for the PerformanceWear segment was
20.6% of annual net sales of the segment, for the CasualWear segment was 19.7%
of annual net sales of the segment, and for the Interior Furnishings segment was
8.1% of annual net sales of the segment.
Governmental Regulation
The Corporation is subject to various Federal, state and local laws and
regulations limiting the production, discharge, storage, handling and disposal
of a variety of substances, particularly the Federal Clean Water Act, the
Federal Clean Air Act, the Resource Conservation and Recovery Act, the Federal
Comprehensive Environmental Response, Compensation and Liability Act as amended
by the Superfund Amendment and Reauthorization Act of 1986, and other Federal,
state and local laws and regulations for the protection of public health and the
environment. The Corporation is presently engaged in a number of environmental
remediation plans and has reported dispositions of waste that could result in
future remediation obligations. The Corporation cannot with certainty assess at
this time the impact of future emission standards and enforcement practices
under the 1990 Clean Air Act upon its operations or capital expenditure
requirements. Reference is also made to the discussion of "Legal and
Environmental Contingencies" under "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in the Corporation's 1999 Annual
Report to Shareholders, which is incorporated herein by reference.
The Corporation's operations also are governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Act and regulations thereunder which, among other things,
establish cotton dust, formaldehyde, asbestos and noise standards, and regulate
the use of hazardous chemicals in the workplace. The Corporation uses numerous
chemicals, including resins containing formaldehyde, in processing some of its
products. Although the Corporation does not use asbestos in the manufacture of
its products, some of its facilities contain some structural asbestos.
The Corporation believes that it has complied in all material respects
with the foregoing environmental or health and safety laws or regulations and
does not believe that future compliance with such laws or regulations will have
a material adverse effect on its results of operations or financial condition.
Item 2. Properties
As of October 2, 1999, the Corporation operated 23 manufacturing plants in
the United States, of which 12 were located in North Carolina, six in Virginia,
two in Arkansas and one each in Mississippi, South Carolina and Tennessee. All
but two of these plants are owned in fee. The aggregate floor area of these
manufacturing plants in the United States is approximately 10.3 million square
feet. The Corporation's international operations include five textile
manufacturing plants, two garment assembly plants, a joint venture yarn plant
and a joint venture garment processing plant, all in Mexico, and a joint venture
fabric plant in India.
Of the Corporation's manufacturing plants (including the two garment
assembly plants), 13 are used principally in the PerformanceWear segment, four
are used in the CasualWear segment, and 13 are used in the Interior Furnishings
segment. In addition, the Corporation has eight manufacturing plants not
currently in operation. The Corporation's U.S. plants generally operate on a
three-shift basis for five-, six- or seven-day weeks during 49 weeks per year,
or fewer weeks per year during curtailments. The Corporation considers its
plants and equipment to be in excellent condition.
The corporate headquarters building in Greensboro, North Carolina,
containing approximately 430,000 square feet, was completed and occupied in
1971. The building is located on property occupied under a 99-year ground lease
that began in 1969.
Item 3. Legal Proceedings
The Corporation and its subsidiaries have sundry claims and other lawsuits
pending against them and also have made certain guarantees in the ordinary
course of business. It is not possible to determine with certainty the ultimate
liability, if any, of the Corporation in any of the matters referred to in this
item, but in the opinion of management, their outcome should have no material
adverse effect upon the financial condition or results of operations of the
Corporation.
Item 4. Submission of Matters to a Vote of Security Holders
At the Corporation's 1999 Annual Meeting of Stockholders on February 4,
1999, the stockholders voted to elect George W. Henderson, III, David I.
Margolis and W. Barger Tygart as Directors for a three-year term; to approve
Burlington's 1998 Equity Incentive Plan to provide long-term equity incentives
to officers and key employees of the Corporation; and to select Ernst & Young
LLP as independent public accountants for the 1999 fiscal year. The votes
received for each such matter were as follows:
Against or Broker
Matter For Withheld Abstain Non-Votes
Mr. Henderson 47,759,794 139,039 0 N/A
Mr. Margolis 47,766,124 132,709 0 N/A
Mr. Tygart 47,765,932 132,901 0 N/A
1998 Equity Incentive Plan 46,475,166 1,342,930 80,737 0
Ernst & Young LLP 47,786,254 57,212 55,366 N/A
Executive Officers of the Corporation
The Corporation's executive officers are listed below.
Name Age Position
George W. Henderson, III 51 Director, Chairman of the Board and
Chief Executive Officer
Abraham B. Stenberg 64 Director and Vice Chairman
John D. Englar 52 Director, Senior Vice President,
Corporate Development and Law
Charles E. Peters, Jr. 47 Senior Vice President and Chief
Financial Officer
John P. Ganley 45 President, Burlington House Division
Lawrence F. Himes 52 President, Burlington PerformanceWear
Division
Bernard J. Leonard 60 President, Burlington CasualWear
Division
James R. McCallum 44 President, Lees Carpet Division
Judith J. Altman 41 Vice President and Chief
Information Officer
James M. Guin 56 Vice President, Human Resources
and Public Relations
George C. Waldrep, Jr. 60 Group Vice President
Robert A. Wicker 55 Vice President and General Counsel
Carl J. Hawk 58 Controller
Alice Washington Grogan 43 Corporate Secretary and
Associate General Counsel
Mr. Henderson has been Chairman of the Board of the Corporation since
February 1998, and Chief Executive Officer since 1995. Prior thereto, he was
President and Chief Operating Officer of the Corporation (from 1993).
Mr. Stenberg has been Vice Chairman of the Corporation since November
1997. Prior thereto, he was an Executive Vice President of the Corporation (from
1993) and Chief Operating Officer of the Burlington Interior Furnishings Group
(from 1995).
Mr. Englar has been Senior Vice President, Corporate Development and Law
of the Corporation since 1995. Prior thereto, he was Senior Vice President,
Finance and Law (from 1993) and Chief Financial Officer of the Corporation (from
1994).
Mr. Peters has been Senior Vice President and Chief Financial Officer of
the Corporation since 1995. He was Senior Vice President-Finance of Boston
Edison Company from 1991 until joining Burlington.
Mr. Ganley has been President of the Burlington House Division since 1997.
Prior thereto, he was President of the Burlington House Floor Accents Division
(1996 - 1997) and President of the Lees Carpets Division of the Corporation
(1994 - 1997).
Mr. Himes has been President of the Burlington PerformanceWear Division
and its predecessor, the Burlington Menswear Division, since 1998. Prior
thereto, he was President and a Director of Precision Fabrics Group, Inc. (from
1988).
Mr. Leonard has been President of the Burlington CasualWear Division and
its predecessor, the Burlington Global Denim Division, since 1989.
Mr. McCallum was named President of the Lees Carpets Division of the
Corporation in June 1999. Prior thereto, he was Executive Vice President, Sales
and Marketing (1997 - 1999), and Vice President, Operations (1994 - 1997), of
the Lees Carpets Division.
Ms. Altman has been Vice President and Chief Information Officer of the
Corporation since September 1998. Prior thereto, she was Senior Director of
Information Systems with Polo/Ralph Lauren (from 1995) and Vice President of New
Product Development of CMS, Inc. (from 1994 to 1995).
Mr. Guin has been Vice President, Human Resources and Public Relations,
since 1996. Prior thereto, he was Director of Human Resources for the
Corporation (from 1993 through 1995).
Mr. Waldrep has been a Group Vice President of the Corporation for more
than five years.
Mr. Wicker has been Vice President and General Counsel of the Corporation
since 1995. Prior thereto, he was Associate General Counsel of the Corporation
(from 1992).
Mr. Hawk was elected Controller of Burlington in November 1999. Prior
thereto, he was Director of Accounting of the Corporation (from 1990).
Ms. Grogan has been Corporate Secretary and Associate General Counsel of
the Corporation since October 1998. Prior thereto, she was Corporate Secretary
(from 1992) and Counsel (from 1989) of Wachovia Corporation.
Executive officers of the Corporation are elected by, and serve at the
discretion of, its Board of Directors. None of the executive officers or
Directors of the Corporation is related by blood, marriage or adoption to any
other executive officer or Director of the Corporation.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to Note S to the Notes to Consolidated Financial
Statements in the Corporation's 1999 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning the composite high
and low sales prices for the Corporation's Common Stock for each fiscal quarter
of fiscal years 1999 and 1998. The Corporation's common stock is traded on the
New York Stock Exchange.
As of November 10, 1999, there were approximately 1,695 holders of record
of the Corporation's common stock and one holder of record of the Corporation's
nonvoting common stock.
The Corporation has not paid any cash dividends on its common stock during
fiscal years 1999 and 1998. The Corporation's bank credit agreements place
annual limitations on the payment of cash dividends on the Corporation's common
stock and on stock repurchases. Under such agreements, the Corporation may not
pay dividends or repurchase stock in an aggregate amount in any fiscal year, on
a cumulative basis since the beginning of such fiscal year through such time, in
an amount exceeding 50% of Consolidated Net Income (as defined in such bank
credit agreements) for the preceding fiscal year; however, in addition, the
Corporation may repurchase stock in an aggregate amount not to exceed $200
million during the term of such agreements.
Item 6. Selected Financial Data
The information required by this Item is set forth in the table entitled
"Statistical Review" in the Corporation's 1999 Annual Report to Shareholders,
and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Corporation's 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item is set forth under the subheading
"Risk Management" on page 15 in the Corporation's 1999 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Report of the Corporation's
Independent Auditors, required by this Item are incorporated herein by reference
to the Corporation's 1999 Annual Report to Shareholders. See Item 14 for a list
of those financial statements and the pages of the Corporation's 1999 Annual
Report to Shareholders from which they are incorporated.
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page No.
Burlington Industries, Inc. and Subsidiary Companies:
II. Valuation and Qualifying Accounts. S-1
All other schedules have been omitted because they are not applicable, not
required or because the required information is included in the consolidated
financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is set forth under the captions
"Information about Nominees and Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Corporation's Proxy Statement dated
December 15, 1999 and is incorporated herein by reference.
Information with respect to the Corporation's executive officers is
included in Part I of this Report.
Item 11. Executive Compensation
The information required by this Item is set forth under the captions
"Compensation of Directors"; "Report of the Compensation and Benefits Committee
on Executive Compensation"; "Executive Compensation"; and "Stock Performance
Graph" in the Corporation's Proxy Statement dated December 15, 1999 and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Corporation's Proxy Statement dated December 15, 1999 and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The information contained in the Corporation's 1999 Annual Report
to Shareholders under the captions and on the pages indicated
below is incorporated herein by reference:
Report of Ernst & Young LLP, Independent Auditors (page 38)
Consolidated Statements of Operations - for the fiscal
years ended October 2, 1999, October 3, 1998 and September
27, 1997 (page 18)
Consolidated Balance Sheets - as of October 2, 1999 and
October 3, 1998 (page 19)
Consolidated Statements of Shareholders' Equity - for the
fiscal years ended September 27, 1997, October 3, 1998 and
October 2, 1999 (page 20)
Consolidated Statements of Cash Flows - for the fiscal
years ended October 2, 1999, October 3, 1998, and September
27, 1997 (page 21)
Notes to Consolidated Financial Statements (pages 22 to 36)
2. Financial Statement Schedules
The financial statement schedule listed under Item 8 is filed as a
part of this Report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are
filed as a part of this Report.
(b) The Corporation did not file any reports on Form 8-K for the last
quarter of fiscal year 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Corporation has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
Date: December 15, 1999
By /s/ George W. Henderson, III
---------------------------------
George W. Henderson, III
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Corporation and in the capacities and on the dates indicated.
Signature Title Date
/s/ George W. Henderson, III Director, Chairman of the December 15, 1999
- ---------------------------- Board and Chief Executive
George W. Henderson, III Officer
(Principal Executive Officer)
/s/ Charles E. Peters, Jr. Senior Vice President and December 15, 1999
- ---------------------------- Chief Financial Officer
Charles E. Peters, Jr. (Principal Financial Officer)
/s/ Carl J. Hawk Controller December 15, 1999
- ---------------------------- (Principal Accounting Officer)
Carl J. Hawk
/s/ Jerald A. Blumberg Director December 15, 1999
- ----------------------------
Jerald A. Blumberg
/s/ John D. Englar Director December 15, 1999
- ----------------------------
John D. Englar
/s/ David I. Margolis Director December 15, 1999
- ----------------------------
David I. Margolis
/s/ John G. Medlin, Jr. Director December 15, 1999
- ----------------------------
John G. Medlin, Jr.
/s/ Nelson Schwab III Director December 15, 1999
- ----------------------------
Nelson Schwab III
/s/ Abraham B. Stenberg Director December 15, 1999
- ----------------------------
Abraham B. Stenberg
/s/ Theresa M. Stone Director December 15, 1999
- ----------------------------
Theresa M. Stone
/s/ W. Barger Tygart Director December 15, 1999
- ----------------------------
W. Barger Tygart
<PAGE>
Index to Exhibits
(Item 14(a)(3))
Exhibit
No. Description
3.1 Restated Certificate of Incorporation of the Corporation
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994).
3.2 Bylaws of the Corporation (incorporated by reference from the
Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 29, 1997).
4.1 Credit Agreement dated as of September 30, 1988, as amended
and restated as of November 8, 1995, among the Corporation,
the Lenders listed therein, Chemical Bank, Bank of America,
N.A., The Bank of Nova Scotia ("Scotiabank"), Chase Bank,
First Union National Bank ("First Union"), NationsBank, N.A.
and Wachovia Bank, N.A. ("Wachovia"), as Managing Agents,
Chase Bank (as successor to Chemical Bank), as Administrative
Agent, and Scotiabank, as Fronting Bank (incorporated by
reference from the Corporation's Special Report on Form 8-K
dated November 9, 1995).
4.2 Form of Rights Agreement dated as of December 3, 1997 (amended
and restated as of February 4, 1999), between the Corporation
and First Union (as successor to Wachovia), as Rights Agent
(incorporated by reference from Exhibit 4.1 to the
Corporation's Registration Statement on Form 8-A/A filed on
April 5, 1999).
NOTE: Pursuant to the provisions of Item
601(b)(4)(iii) of Regulation S-K, the Corporation hereby
undertakes to furnish to the Commission upon request copies of
other instruments pursuant to which various entities hold
long-term debt of the Corporation or its consolidated or
unconsolidated subsidiaries, none of which instruments governs
indebtedness exceeding 10% of the total assets of the
Corporation and its subsidiaries on a consolidated basis.
10.1 Indenture of Lease dated February 26, 1969, between Blanche S.
Benjamin and Edward B. Benjamin, and a predecessor to the
Corporation, including the amendment thereto (incorporated by
reference from Burlington Holdings Inc.'s ("Burlington
Holdings") Registration Statement on Form S-1, File No.
33-16437, filed on August 12, 1987).
10.2 1994 Deferred Compensation Plan (incorporated by reference
from the Annual Report on Form 10-K for Burlington Industries
Equity Inc. ("Burlington Equity") for the fiscal year ended
October 2, 1993). (Management contract or compensatory plan,
contract or arrangement.)
10.3 Form of Stock Purchase Agreement dated as of March 19, 1992,
between Burlington Equity and The Equitable Life Assurance
Society of the United States and its affiliates (incorporated
by reference from Amendment No. 6 to Burlington Equity's
Registration Statement on Form S-1, File No. 33-45149, filed
on March 19, 1992). (Management contract or compensatory plan,
contract or arrangement.)
10.4 Description of Supplemental Pre-Retirement and Post-Retirement
Benefits Plan, as amended, and form of participant agreement
(incorporated by reference from the Annual Report on Form 10-K
for Burlington Equity for the fiscal year ended October 2,
1993). (Management contract or compensatory plan, contract or
arrangement.)
10.5 Benefits Equalization Plan, as amended and restated on July
28, 1994 (incorporated by reference from the Corporation's
Annual Report on Form 10-K for the fiscal year ended October
1, 1994). (Management contract or compensatory plan, contract
or arrangement.)
10.6 Burlington Industries Capital Inc. ("Capital") Equity
Incentive Plan (amending the Burlington Holdings Equity
Incentive Plan) (incorporated by reference from the Annual
Report on Form 10-K for Capital for the fiscal year ended
September 30, 1989). (Management contract or compensatory
plan, contract or arrangement.)
10.7 Burlington Equity Amended and Restated Equity Incentive Plan
(the "1990 Incentive Plan") dated as of January 16, 1992
(incorporated by reference from the Annual Report on Form 10-K
for Burlington Equity for the fiscal year ended October 2,
1993). (Management contract or compensation plan, contract or
arrangement.)
10.8(a) Burlington Equity 1992 Equity Incentive Plan ("1992 Incentive
Plan") (incorporated by reference from Amendment No. 3 to
Burlington Equity's Registration Statement on Form S-1, File
No. 33-45149, filed on March 5, 1992). (Management contract or
compensatory plan, contract or arrangement.)
10.8(b) Amendments to the 1992 Incentive Plan, effective as of July
22, 1992 (incorporated by reference from the Annual Report on
Form 10-K for Burlington Equity for the fiscal year ended
October 3, 1992). (Management contract or compensatory plan,
contract or arrangement.)
10.8(c) Forms of agreements under 1992 Incentive Plan (incorporated by
reference from the Annual Report on Form 10-K for Burlington
Equity for the fiscal year ended October 3, 1992). (Management
contract or compensatory plan, contract or arrangement.)
10.8(d) Forms of amendments to agreements under 1992 Incentive Plan,
effective as of July 28, 1993 (incorporated by reference from
the Annual Report on Form 10-K for Burlington Equity for the
fiscal year ended October 2, 1993). (Management contract or
compensatory plan, contract or arrangement.)
10.9(a) 1995 Equity Incentive Plan ("1995 Incentive Plan")
(incorporated by reference from Exhibit A to the Corporation's
Proxy Statement dated December 18, 1995). (Management contract
or compensatory plan, contract or arrangement.)
10.9(b) Amendment to 1995 Incentive Plan, effective as of November 1,
1995 (incorporated by reference from the Annual Report on Form
10-K for the fiscal year ended September 28, 1996).
(Management contract or compensatory plan, contract or
arrangement).
10.9(c) Form of agreement under 1995 Incentive Plan (incorporated by
reference from the Corporation's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 30, 1996). (Management
contract or compensatory plan, contract or arrangement.)
10.9(d) Form of agreement under 1995 Incentive Plan. (Management
contract or compensatory plan, contract or arrangement.)
10.10 Agreement dated as of January 1, 1998, between the Corporation
and George W. Henderson, III, incorporated by reference from
the Corporation's Annual Report on Form 10-K for the fiscal
year ended October 3, 1998. (Management contract or
compensatory plan, contract or arrangement.)
10.11 Agreement dated as of January 1, 1998, between the Corporation
and Abraham B. Stenberg, incorporated by reference from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended October 3, 1998. (Management contract or compensatory
plan, contract or arrangement.)
10.12 Agreement dated as of January 1, 1998, between the Corporation
and John D. Englar, incorporated by reference from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended October 3, 1998. (Management contract or compensatory
plan, contract or arrangement.)
10.13 Agreement dated as of January 1, 1998, between the Corporation
and Charles E. Peters, Jr., incorporated by reference from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended October 3, 1998. (Management contract or compensatory
plan, contract or arrangement.)
10.14 Agreement dated as of January 1, 1998, between the Corporation
and John P. Ganley. (Management contract or compensatory plan,
contract or arrangement.)
10.15(a) 1998 Equity Incentive Plan (incorporated by reference from the
Corporation's Proxy Statement dated December 18, 1998).
(Management contract or compensatory plan, contract or
arrangement)
10.15(b) Forms of agreements under 1998 Equity Incentive Plan.
(Management contract or compensatory plan, contract or
arrangement.)
10.16 Director Stock Plan (incorporated by reference from the
Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 3, 1999). (Management contract or
compensatory plan, contract or arrangement.)
10.17(a) Stockholder Agreement ("Stockholder Agreement") dated as of
October 23, 1990, among Burlington Equity and the other
parties listed on the signature pages thereof (incorporated by
reference from the Annual Report on Form 10-K for Burlington
Industries Capital Inc. for the fiscal year ended September
29, 1990).
10.17(b) Amendment dated January 17, 1992, to the Stockholder Agreement
(incorporated by reference from Amendment No. 3 to Burlington
Equity's Registration Statement on Form S-1, File No.
33-45149, filed on March 5, 1992).
10.17(c) Letter agreement dated October 25, 1993, with respect to the
Stockholder Agreement (incorporated by reference from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended September 30, 1995).
10.18 Amended and Restated Receivables Purchase Agreement dated as
of December 10, 1997, among B.I. Funding, Inc. ("BIF"), the
Corporation, B.I. Transportation, Inc. ("BIT"), Burlington
Apparel Services Company ("BASC"), Burlington International
Services Company ("BISC"), Burlington Fabrics Inc. ("Fabrics")
and The Bacova Guild, Ltd. ("Bacova")(incorporated by
reference from the Corporation's Annual Report on Form 10-K
for the fiscal year ended September 27, 1997).
10.19 Amended and Restated Facility Agreement dated as of December
10, 1997, among BIF, the Corporation, as Servicer, and
Wachovia, as Agent and Collateral Agent (incorporated by
reference from the Corporation's Annual Report on Form 10-K
for the fiscal year ended September 27, 1997).
10.20 Loan Agreement dated as of December 10, 1997, among BIF,
certain financial institutions as Liquidity Lenders, Blue
Ridge Asset Funding Corporation, as Conduit Lender, and
Wachovia, as Agent for the Lenders (incorporated by reference
from the Corporation's Annual Report on Form 10-K for the
fiscal year ended September 27, 1997).
10.21 Security Agreement dated as of December 10, 1997, among BIF
and Wachovia, as Agent and Collateral Agent (incorporated by
reference from the Corporation's Annual Report on Form 10-K
for the fiscal year ended September 27, 1997).
10.22 Amended and Restated Subordination Agreement, Consent and
Acknowledgment, dated as of December 10, 1997, among BIF, the
Corporation, BIT, BASC, BISC, Fabrics, Bacova and Wachovia, as
Agent and Collateral Agent (incorporated by reference from the
Corporation's Annual Report on Form 10-K for the fiscal year
ended September 27, 1997).
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Corporation's 1999 Annual Report to
Shareholders expressly incorporated by reference.
21 List of subsidiaries of the Corporation.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
<PAGE>
Schedule II
BURLINGTON INDUSTRIES INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
(Amounts in Thousands)
Additions
Charged
(Credited)
Balance at to Costs Charged Balance
Beginning and to Other at Close
Description of Period Expenses Accounts Deductions of Period
- ---------------------- ---------- --------- -------- ---------- ---------
Fiscal year ended October 2, 1999
- ---------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 3,629 $ 5,482 $ - $ 5,353 (2) $ 3,771
(13)(3)
Discounts............ 788 95 (1) - - 883
Returns and
allowances.......... 16,447 (2,843)(1) - - 13,604
------- ------- --- ------- -------
$20,864 $ 2,734 $ - $ 5,340 $18,258
======= ======= === ======= =======
Fiscal year ended October 3, 1998
- ---------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 5,439 $ 1,677 $ - $ 3,377 (2) $ 3,629
110 (3)
Discounts............ 921 (133) (1) - - 788
Returns and
allowances.......... 14,328 2,119 (1) - - 16,447
------- ------- ---- ------- -------
$20,688 $ 3,663 $ - $ 3,487 $20,864
======= ======= ==== ======= =======
Fiscal year ended September 27, 1997
- ------------------------------------
Deducted from customer
accounts receivable:
Doubtful accounts.... $ 6,154 $ 3,478 $ - $ 4,184 (2) $5,439
9 (3)
Discounts............ 909 12 (1) - - 921
Returns and
allowances.......... 14,403 (75) (1) - - 14,328
------- ------- ---- ------- -------
$21,466 $ 3,415 $ - $ 4,193 $20,688
======= ======= ==== ======= =======
(1) Represents net increase (decrease) in required reserves.
(2) Uncollectible accounts receivable written off, net of recoveries.
(3) Represents changes in reserves due to foreign exchange fluctuation.
S-1
OPTION AWARD AGREEMENT ("Agreement") dated as of _____________, between
BURLINGTON INDUSTRIES, INC., a Delaware corporation (the "Company"), and the
other party signatory hereto (the "Participant").
WHEREAS, the Participant is a key employee of the Company or one of its
subsidiaries, joint ventures or affiliates and, upon the terms and subject to
the conditions hereinafter set forth, the Company desires to provide the
Participant with an incentive to remain in its employ and to increase
Participant's interest in the success of the Company by granting Participant the
option awards herein described (the "Awards") pursuant to the Company's 1995
Equity Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. Incorporation of Plan; Definitions.
Awards granted hereunder are subject in their entirety to the terms and
conditions of the Plan, which are incorporated herein by reference. The terms
used in this Agreement that are not defined herein shall have the definitions
assigned to them in the Plan.
2. Options.
(a) Grant of Options. The Company hereby grants to the
Participant, effective as of the date hereof (the "Grant Date"),
options (the "Options") to purchase the number of shares of Common
Stock of the Company specified on Exhibit A hereof, such Options to be
exercisable at the exercise price per share (the "Option Price") set
forth on Exhibit A. The shares issuable upon exercise of Options are
hereinafter referred to as the "Option Shares".
(b) Vesting. The Options shall vest and become exercisable on
the date or dates set forth on Exhibit A hereto (the "Vesting Date"),
unless previously vested, forfeited or adjusted in accordance with the
provisions of Section 7 or 8 hereof. The Options shall not be
exercisable following the date which shall be the tenth anniversary of
the Grant Date (the "Option Term").
(c) Exercise of Options; Restrictions on Stock Purchased.
(i) Notice. Subject to the conditions set forth
below, the Participant may exercise all or any portion of the
Options (to the extent vested) by giving written notice to the
Company's Director of Benefits or Director of Compensation and
Benefits at 336-379-2076. The date of exercise of the Options
with respect to the number of shares of Common Stock specified
in the notice shall be the date on which the conditions
provided in paragraph (ii) below and Sections 3 and 6 herein
are satisfied.
(ii) Payment. Prior to the delivery to the
Participant of a certificate evidencing shares of Common Stock
in respect of which all or a portion of the Options shall have
been exercised (which certificate shall bear a legend
evidencing such limitations on transfer, if any, as may be
applicable to such shares (a "Certificate")), the Participant
shall have paid to the Company the Option Price of all shares
of Common Stock purchased pursuant to such exercise of the
Options in cash or via a broker-assisted cashless exercise
transaction, or, with the consent of the Committee (which
consent shall be granted in the sole discretion of the
Committee), in shares of Common Stock already owned by the
Participant (valued at the then Fair Market Value), through
withholding of Common Stock subject to the Option with a value
equal to the exercise price, in other property acceptable to
the Committee or in any combination of cash, shares of Common
Stock or such other property, or such other manner of
settlement of the Option Price as the Committee shall
determine.
(iii) Other Provisions. Notwithstanding the
foregoing, the Committee may also permit the exercise of
Options through such other procedures as the Committee shall
in its discretion approve.
(d) Status of Options. The Options granted hereby are not
intended to qualify as Incentive Stock Options.
3. Registration of Shares.
No Award which is exercisable or payable in shares of Common
Stock and granted under this Agreement shall be exercisable or payable, nor
shall any shares of Common Stock be issued pursuant to the exercise or vesting
of any Award granted under this Agreement, unless the shares of Common Stock
subject to such Award have been registered under the Securities Act or the
Company has determined that an exemption from registration under the Securities
Act is available and applicable.
4. Restrictions on Transfer.
Subject to Section 8(b) of the Plan, Options shall not be
transferable prior to vesting other than by will or the laws of descent and
distribution, by a qualified legal representative in the event of disability or
incompetence, or pursuant to a qualified domestic relations order as defined in
the Code and Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder.
5. Rights as a Stockholder.
(a) Stockholder Rights. The Participant shall have no rights
as a stockholder with respect to any shares of Common Stock issuable
hereunder until a certificate or certificates evidencing such shares
shall have been issued to or in the name of the Participant, and no
adjustment shall be made for dividends or distributions or other rights
in respect of any share for which the record date is prior to the date
upon which the Participant shall become the holder of record thereof.
With respect to shares so issued to or in the name of the Participant,
the Participant shall have all rights of a holder of Common Stock as to
such shares, including the right to receive dividends and the right to
vote in accordance with the Company's Certificate of Incorporation.
(b) Dividends and Distributions. Any shares of Common Stock
received by the Participant as a result of a stock dividend on the
shares issued hereunder or a stock distribution to Participant as the
holder of such shares shall be subject to the same restrictions as the
shares issued hereunder and all references to shares issued hereunder
shall be deemed to include such additional shares of Common Stock.
6. Withholding of Taxes.
The Company and its subsidiaries shall have the right, before a
certificate for any shares of Common Stock is delivered to the Participant, to
require the Participant in connection with any Award to remit to the Company or
the applicable subsidiary employer an amount sufficient to satisfy any Federal,
state or local tax withholding requirements. Prior to the determination by the
Company or its subsidiary of such withholding liability, such individual may
make an irrevocable election to satisfy, in whole or in part, such obligation to
remit taxes by directing the Company to withhold shares of Common Stock that
would otherwise be received by the Participant. Such election may be denied by
the Committee in its discretion or may be made subject to certain conditions
specified by the Committee, including, without limitation, conditions intended
to avoid the imposition of liability against the Participant under Section 16(b)
of the Exchange Act. In addition, in the discretion of the Committee, the
Company may make available for delivery a lesser number of shares, in
satisfaction of such taxes, assessments or other governmental charges. At the
discretion of the Committee, the Participant acknowledges that the Company may
deduct or withhold amounts owing with respect to taxes under this Award from any
payment or distribution to Participant whether or not pursuant to the Plan.
7. Consequences of Termination of Employment.
(a) Termination of Employment Defined. For purposes of this
Award and the Plan, the employment of the Participant shall be deemed
terminated if the Participant is no longer employed as a salaried
employee by the Company or any of its subsidiaries, joint ventures or
affiliates.
(b) Death, Retirement or Permanent Disability; Change of
Control. If termination is without Cause or the Participant terminates
voluntarily for Good Reason and such termination, in either case, takes
place within two years after the occurrence of a Change of Control or
if termination occurs by reason of death, Retirement or Permanent
Disability and such termination occurs prior to the Vesting Date of the
Participant's Options, all of the unvested Options shall vest and
become exercisable immediately upon the effectiveness of such
termination. All vested Options shall be exercisable for the period of
one year following any termination by reason of death, three years
following any termination after a Change of Control described in this
paragraph (b), and the shorter of five years or the remainder of the
Option Term following Permanent Disability or Retirement, and, if not
so exercised, shall expire.
(c) Termination For or Without Cause; Voluntary Termination
With or Without Good Reason; Forfeiture in Event of Certain Activities.
If the Participant's employment is terminated for or without Cause or
if the Participant voluntarily terminates employment with or without
Good Reason (and any such termination does not occur within two years
after a Change of Control), or if Participant engages in certain
activities described below, then the following shall result; provided,
however, that the Committee may, in its sole discretion, accelerate the
vesting of any Awards (and payment thereunder) which would otherwise be
forfeited as described below:
(i) If such termination occurs prior to the date that
an Option (or any portion thereof) has become vested, the
unvested portion of such Option shall be deemed cancelled as
of the date of such termination without payment therefor and
the Company shall have no further obligation with respect
thereto.
(ii) If such termination is a voluntary termination
without Good Reason and occurs on or following the date an
Option (or any portion thereof) has become vested, vested
Options then outstanding shall continue to remain outstanding
and be subject to the applicable provisions of the Plan,
except that such Options must be exercised during the shorter
of the 90-day period following such termination or the
remainder of the Option Term.
(iii) If termination is without Cause or if the
Participant voluntarily terminates with Good Reason and such
termination occurs on or following the date an Option (or any
portion thereof) has become vested, vested Options then
outstanding shall continue to remain outstanding and be
subject to the applicable provisions of the Plan and this
Agreement, except that such Options must be exercised within
the shorter of three years following such termination or the
remainder of the Option Term.
(iv) If at any time during the period ending one year
after the last date the Option Award hereunder is exercisable
under the terms of this Agreement, Participant is terminated
for Cause or engages in any activity in competition with any
activity of the Company, or any activity inimical, contrary or
harmful to the interests of the Company as determined by the
Committee, in the case of officers or division presidents, or
by the management salary committee, in the case of other
Participants, including, but not limited to (a) conduct
related to Participant's employment, for which either criminal
or civil penalties against Participant could be sought, (b)
violation of Company policies, including, without limitation,
a knowing violation of the Company's insider trading policy,
(c) within the one-year period following termination of
employment with the Company, accepting employment with or
serving as a consultant, advisor or in any other capacity to a
person or entity (including self- employment or ownership)
that is in competition with or acting against the interests of
the Company, including employing or recruiting any present,
former or future employee of the Company, (d) disclosing or
misusing any confidential or proprietary information or
material concerning the Company, or (e) participating in, or
assisting, a hostile takeover attempt of the Company, then (1)
this Option Award shall terminate effective as of the date on
which Participant first enters into such activity (the
"Forfeiture Date"), unless terminated sooner by operation of
another term or condition of this Agreement or the Plan, and
(2) any gain (the difference between the exercise price and
the fair market value of one share of Common Stock on the date
of exercise, times the number of Options exercised) realized
from exercising all or a portion of any Option Award within
the one-year period immediately preceding the Forfeiture Date,
shall be immediately paid by Participant to the Company
(irrespective of subsequent market increase or decrease).
(d) By accepting this Agreement, Participant consents to a
deduction from any amounts the Company owes Participant from time to
time (including amounts owed as wages or other compensation, fringe
benefits or vacation pay, as well as any other amounts owed to
Participant by the Company), to the extent of the amounts Participant
owes the Company under paragraph (c)(iv) above. Whether the Company
elects to make any deduction or set-off in whole or in part, if the
Company does not recover by means of deduction or set-off the full
amount owed it, calculated as set forth above, Participant agrees to
pay immediately the unpaid balance to the Company.
(e) Definitions. For purposes of this Section 7, the following
definitions shall be applicable:
(i) A termination for "Cause" means a termination of
employment with the Company or any of the Company's
subsidiaries or joint ventures which, as determined by the
Committee, is by reason of (x) the commission by the
Participant of a felony or a perpetration by the Participant
of a dishonest act, material misrepresentation or common law
fraud against the Company or any subsidiary, joint venture or
other affiliate thereof, (y) any other act or omission which
is injurious to the financial condition or business reputation
of the Company or any subsidiary, joint venture or other
affiliate thereof, or (z) the willful failure or refusal of
the Participant to substantially perform the material duties
of the Participant's position with the Company or any of the
Company's subsidiaries, joint ventures or affiliates;
(ii) "Good Reason" means, with respect to the
Participant, (x) "good reason" as defined in an employment
agreement applicable to the Participant, or (y) if the
Participant does not have an employment agreement that defines
"good reason", (A) a failure to promptly pay compensation due
and payable to the Participant in connection with his or her
employment, (B) a material adverse change in the Participant's
position with the Company or any of the Company's
subsidiaries, joint ventures or affiliates, or (C) the
assignment to the Participant of duties materially and
adversely inconsistent with the Participant's position at the
time of such assignment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
(iii) "Permanent Disability" shall be defined in the
same manner as such term or a similar term is defined in the
long-term disability policy maintained by the Company or any
of the Company's subsidiaries or joint ventures for the
Participant and in effect on the date of the Participant's
termination of employment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
provided, however, that the relevant condition must continue
for six consecutive months before being deemed a "Permanent
Disability"; and
(iv) "Retirement" means resignation or termination of
employment after attainment of the Participant's sixty-fifth
birthday, unless the Committee determines otherwise in its
sole discretion.
<PAGE>
8. Certain Adjustments; Disputes.
(a) Effect of Reorganization. Subject to the provisions of
Section 14 of the Plan and Section 7 hereof, in the event that (i) the
Company is merged or consolidated with another corporation, (ii) all or
substantially all the assets of the Company are acquired by another
corporation, person or entity, (iii) the Company is reorganized,
dissolved or liquidated, or (iv) the division or subsidiary for which
the Participant performs services is sold, merged, consolidated,
reorganized or liquidated (each such event in (i), (ii), (iii), or (iv)
being hereinafter referred to as a "Reorganization Event"), or (v) the
Board shall propose that the Company enter into a Reorganization Event,
then the Committee shall make adjustments to provide each Participant
with a benefit equivalent to that to which the Participant would have
been entitled had such Reorganization Event not occurred.
(b) Dilution and other Adjustments. In the event of a stock
dividend, stock split, recapitalization, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially
below fair market value or other similar event affecting the Common
Stock, the Committee shall make any or all of the following adjustments
that in its discretion it deems necessary or advisable to provide the
Participant with a benefit equivalent to that to which Participant
would have been entitled had such event not occurred: (i) adjust the
number of Awards granted to the Participant, (ii) adjust the Option
Price of any Options, and (iii) make any other adjustments, or take
such action, as the Committee, in its discretion, deems appropriate.
Such adjustments shall be conclusive and binding for all purposes.
(c) Disputes. The Committee's authority to interpret and
construe the Plan and this Agreement, and resolve any dispute
hereunder, shall be final, conclusive and binding on all persons.
9. Amendment of this Agreement.
This Agreement may be amended only by a writing signed by both parties.
10. Miscellaneous.
(a) No Rights to Grants or Continued Service. Except as
expressly provided for herein, the Participant shall have no claim or
right to be granted an Award under the Plan, nor shall Participant have
a right to receive payment of an Award in any form other than as the
Committee shall approve. Neither the Plan nor any action taken
hereunder shall be construed as giving the Participant any right to be
retained in the employ or service of the Company.
(b) Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of New
York.
(c) Binding Obligation; Survival; Assignment. The Participant
hereby represents that this Agreement has been duly executed and
delivered by the Participant and constitutes a legal, valid and binding
obligation of the Participant, enforceable against the Participant in
accordance with its terms.
(d) Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or sent by
certified or registered mail, return receipt requested, postage
prepaid, addressed, if to the Participant, to his or her attention at
the mailing address set forth at the foot of this Agreement (or to such
other address as shall have been specified to the Company in writing)
and, if to the Company, to it at 3330 West Friendly Avenue, Greensboro,
North Carolina 27410, Attention: Corporate Secretary. All such notices
shall be conclusively deemed to be received and shall be effective, if
sent by hand delivery, upon receipt, or if sent by registered or
certified mail, on the fifth day after the day on which such notice is
mailed.
(e) Other Matters. This Agreement and the other related
agreements expressly referred to herein set forth the entire agreement
and understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all such counterparts
shall together constitute one and the same agreement. The headings of
sections and subsections herein are included solely for convenience of
reference and shall not affect the meaning of any of the provisions of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Participant has executed this
Agreement, both as of the date and year first above written.
BURLINGTON INDUSTRIES, INC. PARTICIPANT
By___________________________ _____________________________
James M. Guin Name:
Vice President, Human Relations Address:
and Public Relations
AGREEMENT, made and entered into as of the 1st day of January, 1998,
between BURLINGTON INDUSTRIES, INC., a Delaware corporation (hereinafter
sometimes referred to as the "Corporation"), and John P. Ganley (hereinafter
referred to as "Executive").
WHEREAS, the Corporation and Executive desire to enter into an
Employment Agreement effective January 1, 1998, this Agreement to supersede in
its entirety the present employment agreement, if any, between the parties;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
contained, the Corporation and Executive hereby agree as follows:
l. The Corporation agrees to employ Executive, and Executive agrees to
serve the Corporation, upon the terms hereinafter set forth.
2. The employment of Executive hereunder shall commence January 1, 1998
and continue until December 31, 1999, unless earlier terminated under the
provisions of Paragraphs 6, 7 or 8 of this Agreement.
3. Executive agrees to serve the Corporation faithfully and to the best
of his ability under the direction of the Board of Directors of the Corporation,
devoting his entire time, energy and skill during regular business hours
performing the duties assigned by the Board.
4. The Corporation agrees to pay to Executive during the period of the
term hereof salary for his services at the rate (the "Annual Rate", which Annual
Rate shall refer to any subsequent increase in the rate of compensation of
Executive granted by the Corporation during the term of this Agreement) of Two
Hundred Fifty Thousand Dollars ($250,000) per annum, payable in equal monthly or
other more frequent installments in accordance with the general practice of the
Corporation for salaried senior employees.
5. The Corporation may from time to time pay additional incentive
compensation to certain executives when and if authorized by the Board of
Directors or the appropriate Committee of the Board of Directors of the
Corporation. Executive is deemed to be a valuable executive of the Corporation
and will be considered for payment of such incentive compensation in all years
that the Board determines that such compensation should be paid to senior and
key employees generally. It is expressly understood that the amount of any
additional compensation is entirely in the discretion of the Corporation, and
nothing herein shall be construed as a promise or obligation to pay any
additional compensation to Executive whatsoever. If sums are paid to Executive
as additional compensation in any year, such payment shall not create an
obligation to pay additional compensation to Executive in any past or succeeding
year. No payments to Executive of additional compensation, if any, shall reduce
or be applied against the salary to be paid to Executive pursuant to Paragraph 4
hereof.
6. If, during the term of this Agreement, Executive shall become
physically or mentally incapable of fully performing services required of him in
accordance with his obligations under Paragraph 3 of this Agreement, and such
incapacity is, or may reasonably be expected to exist, for more than two months
in the aggregate during any period of twelve consecutive months, as shall be
determined by a physician mutually agreed upon by the Corporation and Executive
(or Executive's legal representative if Executive is incapable of making such
determination), which determination shall be final and conclusive, the
Corporation may, upon notice to Executive, terminate this Agreement and his
employment hereunder, and upon such termination, Executive shall be entitled to
receive (i) cash compensation at the Annual Rate for a period of six months and
(ii) shall receive benefits as provided under Paragraph 7(b)(iii) below for such
six-month period. Executive agrees to accept such payment in full discharge and
release of the Corporation, its subsidiaries and their management, of and from
any and all further obligations and liabilities to him under Paragraph 4 hereof
(including any liability for payments under the Corporation-funded disability
insurance program).
7. (a) The Corporation may in its sole discretion at any time terminate
Executive's employment under this Agreement, whether for cause or without cause.
(b) Other than under the circumstances described in paragraph 8
below, in the event of (1) an involuntary termination of employment of Executive
without Cause, (2) a voluntary termination of employment by Executive for Good
Reason, or (3) the sale of a subsidiary or a division (a "Business") of the
Corporation that employs Executive or in connection with which he is employed,
in which he is not offered reasonably comparable employment in the Business or
with the Corporation (or any of their respective affiliates) following such
sale, Executive shall receive (in lieu of any payment under the Corporation's
Severance Policy), as soon as practicable following such termination:
(i) salary accrued through the date of termination at the Annual
Rate;
(ii) a lump sum payment in cash equal to (x) the salary that would
have been payable under Paragraph 4 above during the Severance Period (as
defined below) plus (y) an amount (the "Bonus Equivalent") equal to the number
of years in the Severance Period times the amount established, for the year
during which such termination occurs, as the Executive's target incentive
payment under the Corporation's annual cash incentive plan approved by the Board
of Directors with respect to such year; and
(iii) either (x) Executive shall continue, to the extent permitted
by applicable law, as a participating member or beneficiary in all of the
benefit and welfare plans of the Corporation in which Executive participated
immediately prior to the date of termination or (y) the Corporation shall fund
substantially equivalent benefits to the extent participation in such plans is
not permissible, and Executive shall be guaranteed service credit in such plans
(including, without limitation, for vesting purposes of the Supplemental
Executive Retirement Plan), in either case (x) or (y) for the period equal to
the Severance Period. Executive's rights under this Clause (iii) shall cease
when Executive commences other employment and obtains coverage under other plans
on a substantially similar basis to those of the Corporation.
Except as expressly provided in this subparagraph 7(b), in all other respects,
Executive's rights under all of the benefit plans of the Corporation shall be
governed by the terms of such plans and not by the provisions of this Agreement.
(c) In the event of an involuntary termination for Cause, Executive
shall only be entitled to payments under the Severance Policy and only if the
conduct giving rise to such termination was not, in the Corporation's sole
judgment, willful.
(d) In the event that Executive's employment is terminated by the
Corporation or the Executive for any reason other than those set forth in
Paragraph 6 above, subparagraphs 7(b) or 7(c) or Paragraph 8 below, the
Corporation shall have no further obligation to Executive hereunder or under the
Severance Policy.
(e) Notwithstanding any other provisions of this Agreement,
Executive's obligations under Paragraphs 9 and 10 of this Agreement shall
survive the termination or expiration of this Agreement.
8. (a) If within two years following a Change of Control, the
employment of Executive hereunder is terminated by the Corporation without
Cause, or is terminated by Executive for Good Reason, in either case other than
by reason of death or disability, the Corporation shall promptly (not later than
30 days) pay to Executive a lump sum payment in cash equal to (i) the then
salary of Executive at the Annual Rate times the number of years in the
Severance Period, plus (ii) the Bonus Equivalent times the number of years in
the Severance Period. In addition, following such termination of employment,
Executive shall continue for the number of years in the Severance Period, in the
manner set forth in subparagraph 7(b)(iii) above, to participate in, or the
Corporation shall fund substantially equivalent benefits, under the welfare and
benefit plans of the Corporation.
(b) In the event that the payment by the Corporation of the payments
required in the preceding Paragraph would result in the Executive becoming
subject to the imposition of an excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended, then the amount of payments made hereunder
shall be reduced to an amount which would maximize the after-tax payments to the
Executive of such amount. The determination of such reduction amount, if any,
shall be made by the Executive, with the advice of Executive's tax or financial
advisor.
9. Executive expressly agrees, as further consideration hereof and as a
condition to the performance by the Corporation and its subsidiary companies of
their obligations hereunder, that while employed by the Corporation or its
subsidiary companies and (1) during a period of six months following termination
of his employment, and (2) only in the event that Executive is receiving
severance payments and/or benefits under Paragraph 7(b) during the further
period commencing on the day following such six-month period and continuing
until the last day of the Severance Period, Executive will not directly or
indirectly render advisory services to or become employed by or participate or
engage in any business materially competitive with any of the businesses of the
Corporation and its subsidiary companies (Executive hereby acknowledging that
Executive has had access in his executive capacity to material information about
all of the Corporation's businesses) without first obtaining the written consent
of the Corporation. The period of non-competition established in clause (2)
above may be shortened, at the election of the Executive evidenced by a written
relinquishment satisfactory to the Corporation, of any remaining right to
severance payments under this Agreement, to a period ending on the last date as
of which such severance payments are earned.
10. Executive agrees that, both during and after his employment hereunder,
he will not disclose to any person unless authorized to do so by the
Corporation, any of the Corporation's trade secrets or other information which
is confidential or secret. Trade secrets or confidential information shall mean
information which has not been made available by the Corporation to the public,
including but not limited to strategic and business plans, product or market
development studies, plans or surveys; designs and patterns; inventions, secret
processes and developments; any cost data, including labor costs, material
costs, and any data that is a factor in costs; price, source or utilization data
on raw materials, fibers, machinery, equipment and other manufacturing supplies;
technical improvements, designs, procedures and methods developed by the
Corporation; any data pertaining to sales volume by location or by product
category; customer lists; production methods other than those licensed by
outside companies; compensation practices; and profitability, margins, asset
values, or other information relating to financial statements.
Executive acknowledges that the disclosure of the Corporation's trade
secrets or confidential information to unauthorized persons would constitute a
clear threat to the business of the Corporation, and that the failure of the
Executive to abide by the terms of Paragraphs 9 and 10 will entitle the
Corporation to exercise any or all remedies available to it in law or equity,
including without limitation, an injunction prohibiting a breach of these
provisions or suit for restitution.
11. The following capitalized terms used in this Agreement shall have
the meanings set forth below:
(i) "Severance Policy" means the policy providing for severance
payments to salaried employees set forth in the Corporation's Policy Manual as
in effect on the date of Executive's termination of employment.
(ii) A termination for "Cause" means a termination of employment
with the Corporation or any of the subsidiaries or joint ventures which, as
determined by the Corporation, is by reason of (A) the commission by the
Executive of a felony or a perpetration by the Executive of a dishonest act,
material misrepresentation or common law fraud against the Corporation or any
subsidiary, joint venture or other affiliate thereof, (B) any other act or
omission which is injurious to the financial condition or business reputation of
the Corporation or any subsidiary, joint venture or other affiliate thereof, or
(C) the willful failure or refusal of the Executive to substantially perform the
material duties of the Executive's position with the Corporation or any of the
Corporation's subsidiaries, joint ventures or affiliates.
(iii) "Good Reason" means (A) a failure to promptly pay compensation
due and payable to the Executive in connection with his or her employment, (B) a
reduction in Executive's level of compensation (other than changes to incentive
or benefit plans affecting all executives) of the Corporation in a similar
manner, (C) unless agreed to by Executive, the assignment to the Executive of
duties inconsistent with the Executive's position as such duties were
immediately prior to such assignment which results in a diminution of such
position, authority, duties or responsibilities, or (D) a change in the
employment requirements of Executive which, in the view of the Compensation and
Benefits Committee of the Corporation's Board of Directors, subjects Executive
to an unfair change of circumstances.
(iv) "Severance Period" shall mean, for the purposes of Paragraph
7, the one year period commencing on the date of termination, and for the
purposes of Paragraph 8, the two year period commencing on the date of
termination.
(v) "Change of Control" means that any of the following events
shall have occurred:
(A) 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 securities entitled to vote generally in the election of
Directors of the Corporation ("Voting Stock") immediately prior to such
transaction;
(B) 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;
(C) If during any period of two consecutive years,
individuals who at the beginning of any such period constitute the Directors of
the Corporation 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 of the Corporation first elected during such
period was approved by a vote of at least two-thirds of the Directors of the
Corporation then still in office who were Directors of the Corporation at the
beginning of any such period.
12. Any notice to be given by Executive hereunder shall be sent to the
Corporation at its offices, 3330 West Friendly Avenue, Greensboro, North
Carolina 274l0, and any notice from the Corporation to Executive shall be sent
to Executive at the address set forth under his signature below. Either party
may change the address to which notices are to be sent by notifying the other in
writing of such changes in accordance with the terms hereof.
IN WITNESS WHEREOF, Burlington Industries, Inc. has caused this
Agreement to be executed in its corporate name by its duly authorized corporate
representative thereunto duly authorized, and Executive has hereunto set his
hand and seal, as of the day and year first above written.
BURLINGTON INDUSTRIES, INC.
By
------------------------
George W. Henderson, III
President and Chief
Executive Officer
------------------------ (L.S.)
John P. Ganley
OPTION AWARD AGREEMENT ("Agreement") dated as of _____________, between
BURLINGTON INDUSTRIES, INC., a Delaware corporation (the "Company"), and the
other party signatory hereto (the "Participant").
WHEREAS, the Participant is a key employee of the Company or one of its
subsidiaries, joint ventures or affiliates and, upon the terms and subject to
the conditions hereinafter set forth, the Company desires to provide the
Participant with an incentive to remain in its employ and to increase
Participant's interest in the success of the Company by granting Participant the
option awards herein described (the "Awards") pursuant to the Company's 1998
Equity Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. Incorporation of Plan; Definitions.
Awards granted hereunder are subject in their entirety to the terms and
conditions of the Plan, which are incorporated herein by reference. The terms
used in this Agreement that are not defined herein shall have the definitions
assigned to them in the Plan.
2. Options.
(a) Grant of Options. The Company hereby grants to the
Participant, effective as of the date hereof (the "Grant Date"),
options (the "Options") to purchase the number of shares of Common
Stock of the Company specified on Exhibit A hereof, such Options to be
exercisable at the exercise price per share (the "Option Price") set
forth on Exhibit A. The shares issuable upon exercise of Options are
hereinafter referred to as the "Option Shares".
(b) Vesting. The Options shall vest and become exercisable on
the date or dates set forth on Exhibit A hereto (the "Vesting Date"),
unless previously vested, forfeited or adjusted in accordance with the
provisions of Section 7 or 8 hereof. The Options shall not be
exercisable following the date which shall be the tenth anniversary of
the Grant Date (the "Option Term").
(c) Exercise of Options; Restrictions on Stock Purchased.
(i) Notice. Subject to the conditions set forth
below, the Participant may exercise all or any portion of the
Options (to the extent vested) by giving written notice to the
Company's Director of Benefits or Director of Compensation and
Benefits at 336-379-2076. The date of exercise of the Options
with respect to the number of shares of Common Stock specified
in the notice shall be the date on which the conditions
provided in paragraph (ii) below and Sections 3 and 6 herein
are satisfied.
(ii) Payment. Prior to the delivery to the
Participant of a certificate evidencing shares of Common Stock
in respect of which all or a portion of the Options shall have
been exercised (which certificate shall bear a legend
evidencing such limitations on transfer, if any, as may be
applicable to such shares (a "Certificate")), the Participant
shall have paid to the Company the Option Price of all shares
of Common Stock purchased pursuant to such exercise of the
Options in cash or via a broker-assisted cashless exercise
transaction, or, with the consent of the Committee (which
consent shall be granted in the sole discretion of the
Committee), in shares of Common Stock already owned by the
Participant (valued at the then Fair Market Value), through
withholding of Common Stock subject to the Option with a value
equal to the exercise price, in other property acceptable to
the Committee or in any combination of cash, shares of Common
Stock or such other property, or such other manner of
settlement of the Option Price as the Committee shall
determine.
(iii) Other Provisions. Notwithstanding the
foregoing, the Committee may also permit the exercise of
Options through such other procedures as the Committee shall
in its discretion approve.
(d) Status of Options. The Options granted hereby are not
intended to qualify as Incentive Stock Options.
3. Registration of Shares.
No Award which is exercisable or payable in shares of Common Stock and
granted under this Agreement shall be exercisable or payable, nor shall any
shares of Common Stock be issued pursuant to the exercise or vesting of any
Award granted under this Agreement, unless the shares of Common Stock subject to
such Award have been registered under the Securities Act or the Company has
determined that an exemption from registration under the Securities Act is
available and applicable.
4. Restrictions on Transfer.
Subject to Section 8(b) of the Plan, Options shall not be transferable
prior to vesting other than by will or the laws of descent and distribution, by
a qualified legal representative in the event of disability or incompetence, or
pursuant to a qualified domestic relations order as defined in the Code and
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder.
5. Rights as a Stockholder.
(a) Stockholder Rights. The Participant shall have no rights
as a stockholder with respect to any shares of Common Stock issuable
hereunder until a certificate or certificates evidencing such shares
shall have been issued to or in the name of the Participant, and no
adjustment shall be made for dividends or distributions or other rights
in respect of any share for which the record date is prior to the date
upon which the Participant shall become the holder of record thereof.
With respect to shares so issued to or in the name of the Participant,
the Participant shall have all rights of a holder of Common Stock as to
such shares, including the right to receive dividends and the right to
vote in accordance with the Company's Certificate of Incorporation.
(b) Dividends and Distributions. Any shares of Common Stock
received by the Participant as a result of a stock dividend on the
shares issued hereunder or a stock distribution to Participant as the
holder of such shares shall be subject to the same restrictions as the
shares issued hereunder and all references to shares issued hereunder
shall be deemed to include such additional shares of Common Stock.
6. Withholding of Taxes.
The Company and its subsidiaries shall have the right, before a
certificate for any shares of Common Stock is delivered to the Participant, to
require the Participant in connection with any Award to remit to the Company or
the applicable subsidiary employer an amount sufficient to satisfy any Federal,
state or local tax withholding requirements. Prior to the determination by the
Company or its subsidiary of such withholding liability, such individual may
make an irrevocable election to satisfy, in whole or in part, such obligation to
remit taxes by directing the Company to withhold shares of Common Stock that
would otherwise be received by the Participant. Such election may be denied by
the Committee in its discretion or may be made subject to certain conditions
specified by the Committee, including, without limitation, conditions intended
to avoid the imposition of liability against the Participant under Section 16(b)
of the Exchange Act. In addition, in the discretion of the Committee, the
Company may make available for delivery a lesser number of shares, in
satisfaction of such taxes, assessments or other governmental charges. At the
discretion of the Committee, the Participant acknowledges that the Company may
deduct or withhold amounts owing with respect to taxes under this Award from any
payment or distribution to Participant whether or not pursuant to the Plan.
7. Consequences of Termination of Employment.
(a) Termination of Employment Defined. For purposes of this
Award and the Plan, the employment of the Participant shall be deemed
terminated if the Participant is no longer employed as a salaried
employee by the Company or any of its subsidiaries, joint ventures or
affiliates.
(b) Death, Retirement or Permanent Disability; Change of
Control. If termination is without Cause or the Participant terminates
voluntarily for Good Reason and such termination, in either case, takes
place within two years after the occurrence of a Change of Control or
if termination occurs by reason of death, Retirement or Permanent
Disability and such termination occurs prior to the Vesting Date of the
Participant's Options, all of the unvested Options shall vest and
become exercisable immediately upon the effectiveness of such
termination. All vested Options shall be exercisable for the period of
one year following any termination by reason of death, three years
following any termination after a Change of Control described in this
paragraph (b), and the shorter of five years or the remainder of the
Option Term following Permanent Disability or Retirement, and, if not
so exercised, shall expire.
(c) Termination For or Without Cause; Voluntary Termination
With or Without Good Reason; Forfeiture in Event of Certain Activities.
If the Participant's employment is terminated for or without Cause or
if the Participant voluntarily terminates employment with or without
Good Reason (and any such termination does not occur within two years
after a Change of Control), or if Participant engages in certain
activities described below, then the following shall result; provided,
however, that the Committee may, in its sole discretion, accelerate the
vesting of any Awards (and payment thereunder) which would otherwise be
forfeited as described below:
(i) If such termination occurs prior to the date that
an Option (or any portion thereof) has become vested, the
unvested portion of such Option shall be deemed cancelled as
of the date of such termination without payment therefor and
the Company shall have no further obligation with respect
thereto.
(ii) If such termination is a voluntary termination
without Good Reason and occurs on or following the date an
Option (or any portion thereof) has become vested, vested
Options then outstanding shall continue to remain outstanding
and be subject to the applicable provisions of the Plan,
except that such Options must be exercised during the shorter
of the 90-day period following such termination or the
remainder of the Option Term.
(iii) If termination is without Cause or if the
Participant voluntarily terminates with Good Reason and such
termination occurs on or following the date an Option (or any
portion thereof) has become vested, vested Options then
outstanding shall continue to remain outstanding and be
subject to the applicable provisions of the Plan and this
Agreement, except that such Options must be exercised within
the shorter of three years following such termination or the
remainder of the Option Term.
(iv) If at any time during the period ending one year
after the last date the Option Award hereunder is exercisable
under the terms of this Agreement, Participant is terminated
for Cause or engages in any activity in competition with any
activity of the Company, or any activity inimical, contrary or
harmful to the interests of the Company as determined by the
Committee, in the case of officers or division presidents, or
by the management salary committee, in the case of other
Participants, including, but not limited to (a) conduct
related to Participant's employment, for which either criminal
or civil penalties against Participant could be sought, (b)
violation of Company policies, including, without limitation,
a knowing violation of the Company's insider trading policy,
(c) within the one-year period following termination of
employment with the Company, accepting employment with or
serving as a consultant, advisor or in any other capacity to a
person or entity (including self- employment or ownership)
that is in competition with or acting against the interests of
the Company, including employing or recruiting any present,
former or future employee of the Company, (d) disclosing or
misusing any confidential or proprietary information or
material concerning the Company, or (e) participating in, or
assisting, a hostile takeover attempt of the Company, then (1)
this Option Award shall terminate effective as of the date on
which Participant first enters into such activity (the
"Forfeiture Date"), unless terminated sooner by operation of
another term or condition of this Agreement or the Plan, and
(2) any gain (the difference between the exercise price and
the fair market value of one share of Common Stock on the date
of exercise, times the number of Options exercised) realized
from exercising all or a portion of any Option Award within
the one-year period immediately preceding the Forfeiture Date,
shall be immediately paid by Participant to the Company
(irrespective of subsequent market increase or decrease).
(d) By accepting this Agreement, Participant consents to a
deduction from any amounts the Company owes Participant from time to
time (including amounts owed as wages or other compensation, fringe
benefits or vacation pay, as well as any other amounts owed to
Participant by the Company), to the extent of the amounts Participant
owes the Company under paragraph (c)(iv) above. Whether the Company
elects to make any deduction or set-off in whole or in part, if the
Company does not recover by means of deduction or set-off the full
amount owed it, calculated as set forth above, Participant agrees to
pay immediately the unpaid balance to the Company.
(e) Definitions. For purposes of this Section 7, the following
definitions shall be applicable:
(i) A termination for "Cause" means a termination of
employment with the Company or any of the Company's
subsidiaries or joint ventures which, as determined by the
Committee, is by reason of (x) the commission by the
Participant of a felony or a perpetration by the Participant
of a dishonest act, material misrepresentation or common law
fraud against the Company or any subsidiary, joint venture or
other affiliate thereof, (y) any other act or omission which
is injurious to the financial condition or business reputation
of the Company or any subsidiary, joint venture or other
affiliate thereof, or (z) the willful failure or refusal of
the Participant to substantially perform the material duties
of the Participant's position with the Company or any of the
Company's subsidiaries, joint ventures or affiliates;
(ii) "Good Reason" means, with respect to the
Participant, (x) "good reason" as defined in an employment
agreement applicable to the Participant, or (y) if the
Participant does not have an employment agreement that defines
"good reason", (A) a failure to promptly pay compensation due
and payable to the Participant in connection with his or her
employment, (B) a material adverse change in the Participant's
position with the Company or any of the Company's
subsidiaries, joint ventures or affiliates, or (C) the
assignment to the Participant of duties materially and
adversely inconsistent with the Participant's position at the
time of such assignment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
(iii) "Permanent Disability" shall be defined in the
same manner as such term or a similar term is defined in the
long-term disability policy maintained by the Company or any
of the Company's subsidiaries or joint ventures for the
Participant and in effect on the date of the Participant's
termination of employment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
provided, however, that the relevant condition must continue
for six consecutive months before being deemed a "Permanent
Disability"; and
(iv) "Retirement" means resignation or termination of
employment after attainment of the Participant's sixty-fifth
birthday, unless the Committee determines otherwise in its
sole discretion.
<PAGE>
8. Certain Adjustments; Disputes.
(a) Effect of Reorganization. Subject to the provisions of
Section 7 hereof, in the event that (i) the Company is merged or
consolidated with another corporation, (ii) all or substantially all
the assets of the Company are acquired by another corporation, person
or entity, (iii) the Company is reorganized, dissolved or liquidated,
or (iv) the division or subsidiary for which the Participant performs
services is sold, merged, consolidated, reorganized or liquidated (each
such event in (i), (ii), (iii), or (iv) being hereinafter referred to
as a "Reorganization Event"), or (v) the Board shall propose that the
Company enter into a Reorganization Event, then the Committee shall
make adjustments to provide each Participant with a benefit equivalent
to that to which the Participant would have been entitled had such
Reorganization Event not occurred.
(b) Dilution and other Adjustments. In the event of a stock
dividend, stock split, recapitalization, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially
below fair market value or other similar event affecting the Common
Stock, the Committee shall make any or all of the following adjustments
that in its discretion it deems necessary or advisable to provide the
Participant with a benefit equivalent to that to which Participant
would have been entitled had such event not occurred: (i) adjust the
number of Awards granted to the Participant, (ii) adjust the Option
Price of any Options, and (iii) make any other adjustments, or take
such action, as the Committee, in its discretion, deems appropriate.
Such adjustments shall be conclusive and binding for all purposes.
(c) Disputes. The Committee's authority to interpret and
construe the Plan and this Agreement, and resolve any dispute
hereunder, shall be final, conclusive and binding on all persons.
9. Amendment of this Agreement.
This Agreement may be amended only by a writing signed by both parties.
10. Miscellaneous.
(a) No Rights to Grants or Continued Service. Except as
expressly provided for herein, the Participant shall have no claim or
right to be granted an Award under the Plan, nor shall Participant have
a right to receive payment of an Award in any form other than as the
Committee shall approve. Neither the Plan nor any action taken
hereunder shall be construed as giving the Participant any right to be
retained in the employ or service of the Company.
(b) Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of
Delaware.
(c) Binding Obligation; Survival; Assignment. The Participant
hereby represents that this Agreement has been duly executed and
delivered by the Participant and constitutes a legal, valid and binding
obligation of the Participant, enforceable against the Participant in
accordance with its terms.
(d) Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or sent by
certified or registered mail, return receipt requested, postage
prepaid, addressed, if to the Participant, to his or her attention at
the mailing address set forth at the foot of this Agreement (or to such
other address as shall have been specified to the Company in writing)
and, if to the Company, to it at 3330 West Friendly Avenue, Greensboro,
North Carolina 27410, Attention: Corporate Secretary. All such notices
shall be conclusively deemed to be received and shall be effective, if
sent by hand delivery, upon receipt, or if sent by registered or
certified mail, on the fifth day after the day on which such notice is
mailed.
(e) Other Matters. This Agreement and the other related
agreements expressly referred to herein set forth the entire agreement
and understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all such counterparts
shall together constitute one and the same agreement. The headings of
sections and subsections herein are included solely for convenience of
reference and shall not affect the meaning of any of the provisions of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Participant has executed this
Agreement, both as of the date and year first above written.
BURLINGTON INDUSTRIES, INC. PARTICIPANT
By___________________________ _____________________________
James M. Guin Name:
Vice President, Human Relations Address:
and Public Relations
PERFORMANCE SHARE AWARD AGREEMENT ("Agreement") dated as of
_____________, between BURLINGTON INDUSTRIES, INC., a Delaware corporation (the
"Company"), and the other party signatory hereto (the "Participant").
WHEREAS, the Participant is a key employee of the Company or one of its
subsidiaries, joint ventures or affiliates and, upon the terms and subject to
the conditions hereinafter set forth, the Company desires to provide the
Participant with an incentive to remain in its employ and to increase
Participant's interest in the success of the Company by granting Participant the
equity incentive awards herein described (the "Awards") pursuant to the
Company's 1998 Equity Incentive Plan (the "Plan");
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. Incorporation of Plan; Definitions.
Awards granted hereunder are subject in their entirety to the terms and
conditions of the Plan, which are incorporated herein by reference. The terms
used in this Agreement that are not defined herein shall have the definitions
assigned to them in the Plan.
2. Performance Shares.
(a) Grant of Award. The Company hereby grants to the
Participant, effective as of the Grant Date, Performance Shares having
the terms and conditions set forth below and in attached Exhibit A.
(b) Determination of Award. The Performance Shares granted
hereby shall entitle the Participant to receive the number of shares of
Common Stock determined with reference to attaining the performance
goals (the "Performance Goals") for the Performance Period set forth in
Exhibit A. Determination of accomplishment of Performance Goals will be
made as promptly as possible following the date of measurement
indicated on Exhibit A (the "Date of Measurement") and shall be subject
to the approval of the Committee, which determination shall be
conclusive and binding. At such time, the Committee shall certify in
writing that the Performance Goals and any other material terms have
been satisfied (a "Written Certification"), and shall record in its
records the award shares so achieved (the "Award Shares").
(c) Vesting and Payment. After the Committee's Written
Certification is recorded, unless earlier forfeited, vested or adjusted
in accordance with the provisions of Section 7 or 8 hereof, the right
to payment of the Award Shares shall vest as set forth on Exhibit A. As
promptly as practicable following the Date of Measurement, the
Participant shall be entitled to receive such number of shares of
Common Stock as shall be determined based on achievement of the
Performance Goals set forth on Exhibit A. The Committee, in its sole
discretion, may decide to satisfy Performance Share Awards partially or
wholly in cash.
3. Registration of Shares.
No Award which is exercisable or payable in shares of Common Stock and
granted under this Agreement shall be exercisable or payable, nor shall any
shares of Common Stock be issued pursuant to the exercise or vesting of any
Award granted under this Agreement, unless the shares of Common Stock subject to
such Award have been registered under the Securities Act or the Company has
determined that an exemption from registration under the Securities Act is
available and applicable.
4. Restrictions on Transfer.
Subject to Section 8(b) of the Plan, Performance Shares shall not be
transferable prior to vesting other than by will or the laws of descent and
distribution, by a qualified legal representative in the event of disability or
incompetence, or pursuant to a qualified domestic relations order as defined in
the Code and Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder.
5. Rights as a Stockholder.
(a) Stockholder Rights. The Participant shall have no rights
as a stockholder with respect to any shares of Common Stock issuable
hereunder until a certificate or certificates evidencing such shares
shall have been issued to or in the name of the Participant, and no
adjustment shall be made for dividends or distributions or other rights
in respect of any share for which the record date is prior to the date
upon which the Participant shall become the holder of record thereof.
With respect to shares so issued to or in the name of the Participant,
the Participant shall have all rights of a holder of Common Stock as to
such shares, including the right to receive dividends and the right to
vote in accordance with the Company's Certificate of Incorporation.
(b) Dividends and Distributions. Any shares of Common Stock
received by the Participant as a result of a stock dividend on the
shares issued hereunder or a stock distribution to Participant as the
holder of such shares shall be subject to the same restrictions as the
shares issued hereunder and all references to shares issued hereunder
shall be deemed to include such additional shares of Common Stock.
<PAGE>
6. Withholding of Taxes.
The Company and its subsidiaries shall have the right, before a
certificate for any shares of Common Stock is delivered to the Participant, to
require the Participant in connection with any Award to remit to the Company or
the applicable subsidiary employer an amount sufficient to satisfy any Federal,
state or local tax withholding requirements. Prior to the determination by the
Company or its subsidiary of such withholding liability, such individual may
make an irrevocable election to satisfy, in whole or in part, such obligation to
remit taxes by directing the Company to withhold shares of Common Stock that
would otherwise be received by the Participant. Such election may be denied by
the Committee in its discretion or may be made subject to certain conditions
specified by the Committee, including, without limitation, conditions intended
to avoid the imposition of liability against the Participant under Section 16(b)
of the Exchange Act. In addition, in the discretion of the Committee, the
Company may make available for delivery a lesser number of shares, in
satisfaction of such taxes, assessments or other governmental charges. At the
discretion of the Committee, the Participant acknowledges that the Company may
deduct or withhold amounts owing with respect to taxes under this Award from any
payment or distribution to Participant whether or not pursuant to the Plan.
7. Consequences of Termination of Employment.
(a) Termination of Employment Defined. For purposes of this
Award and the Plan, the employment of the Participant shall be deemed
terminated if the Participant is no longer employed as a salaried
employee by the Company or any of its subsidiaries, joint ventures or
affiliates.
(b) Death, Retirement or Permanent Disability; Change of
Control. If termination is without Cause or the Participant terminates
voluntarily for Good Reason and such termination, in either case, takes
place within two years after the occurrence of a Change of Control or
if termination occurs by reason of death, Retirement or Permanent
Disability, and such termination occurs prior to the end of the
Performance Period for the Participant's Performance Shares, the
Performance Shares shall vest and the amount of the Award Shares to be
paid shall be determined based on Total Shareholder Return achieved as
of the date of such termination under the Performance Goals set forth
in Exhibit A. Any such Award Shares shall be paid immediately following
such determination.
(c) Termination For or Without Cause; Voluntary Termination
With Or Without Good Reason; Forfeiture in Event of Certain Activities.
If the Participant's employment is terminated for or without Cause or
if the Participant voluntarily terminates employment with or without
Good Reason (and any such termination does not occur within two years
after a Change of Control), or if Participant engages in certain
activities described below, then the following shall result; provided,
however, that the Committee may, in its sole discretion, accelerate the
vesting of any Awards (and payment thereunder) which would otherwise be
forfeited as described below:
(i) If such termination occurs prior to the end of
the Performance Period and is a termination without Cause or
if the Participant voluntarily terminates with Good Reason,
the Performance Shares shall vest and the amount of the Award
Shares to be paid shall be determined based on Total
Shareholder Return achieved as of the date of such termination
under the Performance Goals set forth in Exhibit A. Any such
Award Shares shall be paid immediately following such
determination.
(ii) If such termination occurs prior to the end of
the Performance Period and the Participant terminates
voluntarily without Good Reason or such termination is for
Cause, any unvested and unpaid Performance Shares shall be
deemed cancelled as of the date of such termination and the
Company shall have no further obligation with respect thereto.
(d) By accepting this Agreement, Participant consents to a
deduction from any amounts the Company owes Participant from time to
time (including amounts owed as wages or other compensation, fringe
benefits or vacation pay, as well as any other amounts owed to
Participant by the Company). Whether the Company elects to make any
deduction or set-off in whole or in part, if the Company does not
recover by means of deduction or set-off the full amount owed it,
calculated as set forth above, Participant agrees to pay immediately
the unpaid balance to the Company.
(e) Definitions. For purposes of this Section 7, the following
definitions shall be applicable:
(i) A termination for "Cause" means a termination of
employment with the Company or any of the Company's
subsidiaries or joint ventures which, as determined by the
Committee, is by reason of (x) the commission by the
Participant of a felony or a perpetration by the Participant
of a dishonest act, material misrepresentation or common law
fraud against the Company or any subsidiary, joint venture or
other affiliate thereof, (y) any other act or omission which
is injurious to the financial condition or business reputation
of the Company or any subsidiary, joint venture or other
affiliate thereof, or (z) the willful failure or refusal of
the Participant to substantially perform the material duties
of the Participant's position with the Company or any of the
Company's subsidiaries, joint ventures or affiliates;
<PAGE>
(ii) "Good Reason" means, with respect to the
Participant, (x) "good reason" as defined in an employment
agreement applicable to the Participant, or (y) if the
Participant does not have an employment agreement that defines
"good reason", (A) a failure to promptly pay compensation due
and payable to the Participant in connection with his or her
employment, (B) a material adverse change in the Participant's
position with the Company or any of the Company's
subsidiaries, joint ventures or affiliates, or (C) the
assignment to the Participant of duties materially and
adversely inconsistent with the Participant's position at the
time of such assignment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
(iii) "Permanent Disability" shall be defined in the
same manner as such term or a similar term is defined in the
long-term disability policy maintained by the Company or any
of the Company's subsidiaries or joint ventures for the
Participant and in effect on the date of the Participant's
termination of employment with the Company or any of the
Company's subsidiaries, joint ventures or other affiliates;
provided, however, that the relevant condition must continue
for six consecutive months before being deemed a "Permanent
Disability"; and
(iv) "Retirement" means resignation or termination of
employment after attainment of the Participant's sixty-fifth
birthday, unless the Committee determines otherwise in its
sole discretion.
8. Certain Adjustments; Disputes.
(a) Effect of Reorganization. Subject to the provisions of
Section 7 hereof, in the event that (i) the Company is merged or
consolidated with another corporation, (ii) all or substantially all
the assets of the Company are acquired by another corporation, person
or entity, (iii) the Company is reorganized, dissolved or liquidated,
or (iv) the division or subsidiary for which the Participant performs
services is sold, merged, consolidated, reorganized or liquidated (each
such event in (i), (ii), (iii), or (iv) being hereinafter referred to
as a "Reorganization Event"), or (v) the Board shall propose that the
Company enter into a Reorganization Event, then the Committee shall
make adjustments to provide each Participant with a benefit equivalent
to that to which the Participant would have been entitled had such
Reorganization Event not occurred.
(b) Dilution and other Adjustments. In the event of a stock
dividend, stock split, recapitalization, exchange of shares, warrants
or rights offering to purchase Common Stock at a price substantially
below fair market value or other similar event affecting the Common
Stock, the Committee shall make any or all of the following adjustments
that in its discretion it deems necessary or advisable to provide the
Participant with a benefit equivalent to that to which Participant
would have been entitled had such event not occurred: (i) adjust the
number of Awards granted to the Participant, and (ii) make any other
adjustments, or take such action, as the Committee, in its discretion,
deems appropriate. Such adjustments shall be conclusive and binding for
all purposes.
(c) Disputes. The Committee's authority to interpret and
construe the Plan and this Agreement, and resolve any dispute
hereunder, shall be final, conclusive and binding on all persons.
9. Amendment of this Agreement.
This Agreement may be amended only by a writing signed by both parties.
10. Miscellaneous.
(a) No Rights to Grants or Continued Service. Except as
expressly provided for herein, the Participant shall have no claim or
right to be granted an Award under the Plan, nor shall Participant have
a right to receive payment of an Award in any form other than as the
Committee shall approve. Neither the Plan nor any action taken
hereunder shall be construed as giving the Participant any right to be
retained in the employ or service of the Company.
(b) Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of
Delaware.
(c) Binding Obligation; Survival; Assignment. The Participant
hereby represents that this Agreement has been duly executed and
delivered by the Participant and constitutes a legal, valid and binding
obligation of the Participant, enforceable against the Participant in
accordance with its terms.
(d) Notices. All notices and other communications provided for
herein shall be in writing and shall be delivered by hand or sent by
certified or registered mail, return receipt requested, postage
prepaid, addressed, if to the Participant, to his or her attention at
the mailing address set forth at the foot of this Agreement (or to such
other address as shall have been specified to the Company in writing)
and, if to the Company, to it at 3330 West Friendly Avenue, Greensboro,
North Carolina 27410, Attention: Corporate Secretary. All such notices
shall be conclusively deemed to be received and shall be effective, if
sent by hand delivery, upon receipt, or if sent by registered or
certified mail, on the fifth day after the day on which such notice is
mailed.
(e) Other Matters. This Agreement and the other related
agreements expressly referred to herein set forth the entire agreement
and understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all such counterparts
shall together constitute one and the same agreement. The headings of
sections and subsections herein are included solely for convenience of
reference and shall not affect the meaning of any of the provisions of
this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Participant has executed this
Agreement, both as of the date and year first above written.
BURLINGTON INDUSTRIES, INC. PARTICIPANT
By___________________________ _____________________________
James M. Guin Name:
Vice President, Human Relations Address:
and Public Relations
Exhibit 12
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Computation of Ratio of Earnings
to Fixed Charges (Deficiency of Earnings
Available to Cover Fixed Charges)
(Amounts in thousands)
Fiscal Year Ended
-------------------------------------------
October 2, October 3, September 27,
1999 1998 1997
------------- -------------- --------------
Income (loss) before income taxes $ (47,349) $ 130,012 $ 96,371
Interest expense 58,420 59,544 60,062
Imputed interest on rent expense 5,510 5,096 4,938
------------- -------------- --------------
Total earnings $ 16,581 $ 194,652 $ 161,371
------------- -------------- --------------
Interest expense $ 58,420 $ 59,544 $ 60,062
Imputed interest on rent expense 5,510 5,096 4,938
------------- -------------- --------------
Total fixed charges $ 63,930 $ 64,640 $ 65,000
------------- -------------- --------------
Ratio of earnings to fixed charges N/A 3.0 2.5
============== ==============
Deficiency of earnings available
to cover fixed charges $ 47,349 N/A N/A
=============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Burlington Industries, Inc. and Subsidiary Companies
Overview
Fiscal year 1999 was a difficult year throughout most of the textile and apparel
industry, and for the Company, it was in sharp contrast to a near-record 1998
fiscal year. 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.
The apparel products businesses (approximately 53% of sales), like the
rest of the U.S. apparel products industry, were adversely affected by a surge
of Asian garment imports and worldwide over-capacity. During 1999, the Company
streamlined its business and put new capabilities in place. In the United
States, the apparel fabrics operations were consolidated into the Company's most
modern plants. In Mexico, the Company completed the core of its growth
initiatives, including two new fabric plants, two garment facilities, a joint
venture cotton yarn facility and a joint venture jeans laundry, all part of an
integrated system that enables the Company to offer full garment service to its
customers. The interior furnishings business (approximately 46% of total company
sales) experienced relatively good activity in 1999 and is well positioned for
growth. A number of new products were introduced during the year and two
divisions were combined to create a more comprehensive product line in floor
accents and bath accessories.
Net sales were $1,651.7 million for the 1999 fiscal year (52 weeks),
compared with $2,010.4 million in fiscal year 1998 (53 weeks). On an adjusted
basis, comparable sales of continuing businesses were down approximately 11.0%.
As a result of the restructuring and run-out costs associated with the
reorganization, primarily related to the Company's apparel fabrics business,
there was a net loss of $31.5 million, or $0.57 per share (diluted), for the
1999 fiscal year, compared with fiscal year 1998 net income of $80.5 million, or
$1.32 per share (diluted).
Looking ahead, the Company believes performance will improve in all of
its businesses in 2000, with one exception: the CasualWear business, which
represents approximately 16% of total company sales, will be negatively affected
until the oversupply problem in denim begins to improve. However, the denim
business is well positioned, with competitive products and the most modern
facilities in North America.
PERFORMANCE BY SEGMENT: The Company conducts its operations in three
principal operating segments: PerformanceWear, CasualWear and Interior
Furnishings. The Company evaluates performance and allocates resources based on
profit or loss before interest, amortization of goodwill, restructuring charges,
certain unallocated corporate expenses, and income taxes. The following table
sets forth certain information about the segment results for the fiscal years
ended October 2, 1999, October 3, 1998 and September 27, 1997.
1999 1998 1997
-------- -------- --------
(53-week
year)
Net sales
PerformanceWear........ $ 611.7 $ 852.3 $ 930.9
CasualWear............. 257.1 342.1 340.4
Interior Furnishings... 758.0 792.2 790.6
Other.................. 36.0 39.4 51.1
-------- -------- --------
1,662.8 2,026.0 2,113.0
Less:
Intersegment sales.... (11.1) (15.6) (22.3)
-------- ------- --------
$1,651.7 $2,010.4 $2,090.7
======== ======== ========
Income (loss) before income taxes
PerformanceWear........ $ 18.4 $ 90.0 $ 121.4
CasualWear............. (2.9) 38.0 13.8
Interior Furnishings... 78.0 88.0 51.1
Other.................. 1.9 2.5 2.5
-------- -------- --------
Total reportable
segments............ 95.4 218.5 188.8
Corporate expenses..... (12.3) (14.7) (14.8)
Goodwill amortization.. (17.8) (18.1) (18.2)
Restructuring charges.. (62.1) - (12.1)
Interest expense....... (58.4) (59.5) (60.1)
Other (expense)
income - net......... 7.9 3.8 12.8
-------- -------- --------
$ (47.3)$ 130.0 $ 96.4
======== ======== ========
<PAGE>
Results of Operations
Comparison of Fiscal Years ended October 2, 1999 and October 3, 1998
1999 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 had complementary product
lines and serve many of the same customers. The merger of the two---Burlington
Klopman Fabrics and Burlington Tailored Fashions--created an 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 in April 1999), Mooresville,
and Statesville were closed during the June quarter and one plant in Hillsville,
Virginia was sold in June 1999; one plant in Bishopville, South Carolina and one
plant located in Oxford, North Carolina are being closed in phases to be
completed during 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 12
months from the termination date depending on the employee's length of service
(reduction of approximately 2,200 employees as of October 2, 1999).
The cost of the reorganization was reflected in a restructuring charge, before
income taxes, of $62.1 million ($58.5 million applicable to the apparel fabrics
business) recorded in the second fiscal quarter ended April 3, 1999, as adjusted
by $3.2 million in the fourth quarter of 1999. The components of the 1999
restructuring charge included the establishment of a $19.0 million reserve for
severance benefit payments, write-down of pension assets of $3.2 million for
curtailment and settlement losses, write-downs for impairment of $37.7 million
related to fixed assets 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 have been sold, or are held for sale at October 2,
1999 and are no longer in use, were written down to their estimated fair values
less costs of sale. These assets held for sale continue to be included in the
Fixed Assets caption on the balance sheet in the amount of $14.5 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 October 2, 1999, $27.1
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
Payments.............................. (3.6) (0.1)
Adjustments........................... (1.1) -
------ -----
Balance at October 2, 1999............ $ 8.2 $ 1.7
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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.
NET SALES: Net sales for the 1999 fiscal year were $1,651.7 million,
17.8% lower than the $2,010.4 million recorded for the 1998 fiscal year (a
53-week year). Exports totaled $236 million and $237 million in the 1999 and
1998 fiscal years, respectively.
PerformanceWear: Net sales for the PerformanceWear segment for the 1999
fiscal year were $611.7 million, 28.2% lower than the $852.3 million recorded in
the 1998 fiscal year. Excluding $79.6 million sales reduction due to the exited
portion of the Burlington Madison Yarn division, which has been sold or
transferred to a joint venture, net sales of products for the PerformanceWear
segment were 21.0% lower than in the prior year. This decrease was due primarily
to 17.8% lower volume and 3.1% lower prices and product mix.
CasualWear: Net sales for the CasualWear segment for the 1999 fiscal
year were $257.1 million, 24.8% lower than the $342.1 million recorded in the
1998 fiscal year. Excluding $22.6 million sales reduction due to the
sold/discontinued portion of the Sportswear business, net sales of products for
the CasualWear segment were 20.6% lower than in the prior year. This decrease
was due primarily to 19.1% lower volume and 1.4% lower prices and product mix.
Interior Furnishings: Net sales of products for interior furnishings
markets for the 1999 fiscal year were $758.0 million, 4.3% lower than the $792.2
million recorded in the 1998 fiscal year. This reduction was due primarily to
the absence of Burlington Madison Yarn division sales of $20.7 million in this
segment, lower volume of $25.2 million, partially offset by improved selling
prices and mix of $11.7 million.
SEGMENT INCOME: Total reportable segment income for the 1999 fiscal
year was $95.4 million compared to $218.5 million for the 1998 fiscal year.
PerformanceWear: Income of the PerformanceWear segment for the 1999
fiscal year was $18.4 million compared to $90.0 million recorded for the 1998
fiscal year. This decrease was due primarily to $40.3 million lower margins
resulting from lower volume and inefficiencies associated with production
levels, $16.9 million reduction due to price/mix, increased provisions for
doubtful accounts of $2.0 million, and start-up costs of $11.0 million related
to the Company's new Mexican operations, partially offset by lower raw material
costs of $14.9 million and lower selling, general and administrative expenses of
$3.9 million resulting from personnel reductions related to the 1999
restructuring. Also, PerformanceWear segment results include costs of $17.4
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. Segment results for
1999 include $9.4 million equity in income of the Company's textured yarn joint
venture, compared to $11.3 million for 1998 which represents four months of the
joint venture activity and eight months of the Burlington Madison Yarn textured
business as a separate division.
CasualWear: Income (loss) of the CasualWear segment for the 1999 fiscal
year was $(2.9) million compared to $38.0 million recorded for the 1998 fiscal
year. This decrease was due primarily to $22.7 million lower margins resulting
from lower volume and inefficiencies associated with production levels and
start-up costs of $8.9 million related to the Company's new Mexican operations,
partially offset by lower selling, general and administrative expenses of $0.9
million resulting from personnel reductions related to the 1999 restructuring.
Also, CasualWear segment results include costs of $9.4 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. Segment results for 1999 include losses of
$3.0 million related to joint venture activity, compared to joint venture losses
of $1.2 million in 1998.
Interior Furnishings: Income of the interior furnishings products
segment for the 1999 fiscal year was $78.0 million compared to $88.0 million
recorded for the 1998 fiscal year. This decrease was due primarily to lower
volume and inefficiencies associated with lower production levels in the amount
of $18.2 million, increased provisions for doubtful accounts of $1.8 million and
increased selling expenses of $2.6 million, partially offset by lower raw
material costs of $13.0 million.
CORPORATE EXPENSES: General corporate expenses not included in segment
results were $12.3 million for the 1999 fiscal year compared to $14.7 million in
the 1998 fiscal year. The decrease from the prior year period is attributable
mainly to lower compensation expense resulting from cost reductions and
restructuring.
OPERATING INCOME BEFORE INTEREST AND TAXES: Before the 1999 provision
for restructuring, operating income before interest and taxes for the 1999
fiscal year was $58.9 million compared to $182.8 million for the 1998 fiscal
year. After the 1999 provision for restructuring, operating loss before interest
and taxes for the 1999 fiscal year was $3.2 million. Amortization of goodwill
was $17.8 million and $18.1 million in the 1999 and 1998 fiscal years,
respectively.
INTEREST EXPENSE: Interest expense for the 1999 fiscal year was $58.4
million, or 3.5% of net sales, compared with $59.5 million, or 3.0% of net
sales, in the 1998 fiscal year. The effect of higher borrowing levels in 1999
were offset by lower interest rates and the impact of the one extra week in the
1998 fiscal year.
OTHER EXPENSE (INCOME): Other income for the 1999 fiscal year was $7.9
million consisting principally of $4.3 million in gains on the disposal of
assets and interest income of $3.5 million. Other income for the 1998 fiscal
year was $3.8 million consisting principally of interest income of $3.4 million
and $0.5 million in gains on disposal of assets.
INCOME TAX EXPENSE (BENEFIT): Income tax benefit of $(15.9) million was
recorded for the 1999 fiscal year in comparison with income tax expense of $49.6
million for fiscal year 1998. 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.
NET INCOME AND EARNINGS PER SHARE: Net income (loss) for the 1999
fiscal year was $(31.5) million, or $(0.57) per share (diluted), in comparison
with $80.5 million, or $1.32 per share (diluted), for the 1998 fiscal year. Net
loss for the 1999 fiscal year included a net charge of $(0.98) per share
resulting from the 1999 restructuring provision and related run-out costs
included in cost of sales.
Comparison of Fiscal Years ended October 3, 1998 and September 27, 1997
1997 Restructuring Plan
During the June 1997 quarter, the Company recorded a $12.1 million pre-tax
provision for restructuring associated with reducing staff, consolidation of
certain yarn facilities and exiting the residential carpet product line. The
staff reduction included severance costs of $5.2 million related to 215
employees. The components of the yarn manufacturing restructuring charge
included costs of $1.3 million for severance related to 286 employees, $2.2
million for divestitures of machinery and equipment, and $1.4 million for
divestitures of real estate. Costs related to exiting the residential carpet
product line included primarily $1.2 million for severance related to 70
employees. In addition, exiting the residential carpet product line resulted in
an inventory write-down and other claims of $4.9 million included in cost of
sales. Combining these charges, the restructuring activities resulted in a 1997
pre-tax charge of $17.0 million, $10.3 million after income taxes, or $0.17 per
share. Net sales of the residential carpet product line were $38.7 million
during the 1996 fiscal year, and net operating loss before interest, taxes and
restructuring charges was $8.4 million during the same period. The Company has
substantially completed all of the 1997 restructuring efforts with the exception
of the divestitures of certain machinery and equipment and real estate. The
carrying amount of such assets at October 2, 1999, included in the Fixed Assets
caption on the balance sheet, is $8.8 million, and the Company does not
anticipate any material adjustments to this amount. See Note B to the
consolidated financial statements.
NET SALES: Net sales for the 1998 fiscal year (a 53-week year) were
$2,010.4 million, a decrease of 3.8% from the $2,090.7 million recorded in the
1997 fiscal year. Exports totaled $237 million and $239 million in the 1998 and
1997 fiscal years, respectively.
PerformanceWear: Net sales for the PerformanceWear segment for the 1998
fiscal year were $852.3 million, 8.4% lower than net sales of $930.9 million for
the 1997 fiscal year. This reduction was primarily due to 7.9% lower volume and
the transfer of the textured yarn business to a joint venture in May 1998.
CasualWear: Net sales for the CasualWear segment for the 1998 fiscal
year were $342.1 million, compared to net sales of $340.4 million for the 1997
fiscal year. This increase was primarily due to 8.6% higher volume in the Denim
business, partially offset by 34.7% lower volume in the Sportswear division.
Interior Furnishings: Net sales of products for interior furnishings
markets for the 1998 fiscal year were $792.2 million, compared to $790.6 million
recorded in the 1997 fiscal year. The change in sales of the interior
furnishings segment was mainly attributable to 4.5% increased volume in
continuing operations which offset 0.9% lower price/mix and $25.9 million
reductions due to the closure in 1997 of the residential carpet product line.
SEGMENT INCOME: Total reportable segment income for the 1998 fiscal
year was $218.5 million compared to $188.8 million for the 1997 fiscal year.
PerformanceWear: Income of the PerformanceWear segment for the 1998
fiscal year was $90.0 million compared to $121.4 million recorded for the 1997
fiscal year. This decrease was due primarily to $40.1 million lower margins
resulting from lower volume and inefficiencies associated with production
levels, partially offset by $11.2 million of margin improvements due to
price/mix.
CasualWear: Income of the CasualWear segment for the 1998 fiscal year
was $38.0 million compared to $13.8 million recorded for the 1997 fiscal year.
This increase was due primarily to $14.0 million higher margins resulting from
higher volume and production levels and lower raw material costs of $9.9
million.
Interior Furnishings: Income of the interior furnishings products
segment for the 1998 fiscal year was $88.0 million, compared to $51.1 million
recorded in the 1997 fiscal year. This increase was mainly attributable to $20.5
million higher margins resulting from $18.1 million higher volume and $2.4
million better product mix, the absence of $10.1 million of losses related to
the residential carpet product line, including inventory write-downs and other
claims of $4.9 million, and the absence of a $3.8 million charge for closing a
yarn spinning plant.
CORPORATE EXPENSES: General corporate expenses not included in segment
results were $14.7 million for the 1998 fiscal year compared to $14.8 million in
the 1997 fiscal year.
OPERATING INCOME BEFORE INTEREST AND TAXES: Operating income before
interest and taxes for the 1998 fiscal year was $182.8 million compared to
$143.6 million for the 1997 fiscal year. Before the 1997 provision for
restructuring, the 1997 charge for exiting the residential carpet product line
and the 1997 charge for closing a yarn spinning plant, operating income before
interest and taxes for the 1997 fiscal year was $164.4 million. Amortization of
goodwill was $18.1 million and $18.2 million in the 1998 and 1997 fiscal years,
respectively.
INTEREST EXPENSE: Interest expense for the 1998 fiscal year was $59.5
million, or 3.0% of net sales, compared with $60.1 million, or 2.9% of net sales
in the 1997 fiscal year. The decrease is principally due to lower borrowing
levels during 1998, partially offset by the inclusion of interest charges for a
53-week period in 1998 compared to a 52-week period for the 1997 fiscal year.
OTHER EXPENSE (INCOME): Other income for the 1998 fiscal year was $3.8
million consisting principally of interest income of $3.4 million and $0.5
million in gains on disposal of assets. Other income for the 1997 fiscal year
was $12.8 million consisting principally of $9.5 million in gains on the
disposal of certain non-core operating assets and interest income of $3.0
million.
INCOME TAX EXPENSE: Income tax expense of $49.6 million was recorded
for the 1998 fiscal year in comparison with $37.7 million for fiscal year 1997.
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.
NET INCOME AND EARNINGS PER SHARE: Net income for the 1998 fiscal year
was $80.5 million, or $1.32 per share (diluted), in comparison with $58.7
million, or $0.95 per share (diluted), for the 1997 fiscal year. Net income for
the 1997 fiscal year included a net charge of $0.12 per share for one-time costs
associated with various streamlining actions, including reducing staff,
consolidation of yarn facilities and exiting the residential carpet product
line, offset by gains on sales of Sedgefield Specialties and Advanced Textiles,
Inc.
Liquidity and Capital Resources
During the 1999 fiscal year, the Company generated $66.7 million of cash from
operating activities and $55.9 million from sales of assets, and had net
borrowings of long- and short-term debt of $67.9 million. Cash was primarily
used for capital expenditures and investment in joint ventures totaling $146.9
million, and $42.0 million for the purchase of treasury shares. Shares of
Company common stock purchased are expected to be used during the next several
years in part to satisfy Company obligations to contribute stock under its
employee incentive plans and potential acquisitions, and will, accordingly,
minimize further future cash outlays for such purposes. At October 2, 1999,
total debt of the Company (consisting of current and non-current portions of
long-term debt and short-term borrowings) was $881.4 million compared with
$816.2 million at October 3, 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 below. The
Company believes that these sources of funds will be adequate to meet the
Company's foregoing needs.
During the 1999 fiscal year, investment in capital expenditures and
joint ventures totaled $146.9 million, compared to $147.7 million in the 1998
fiscal year and $99.3 million in the 1997 fiscal year. The Company anticipates
that the level of capital expenditures and joint venture investments for fiscal
year 2000 could total approximately $100 million to $120 million, principally
for growth and modernization of U.S. and Mexican plants.
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 $550.0 million unsecured revolving credit facility that
expires in March 2001. At November 5, 1999, the Company had approximately $248.0
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 0.40% 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 0.225%. 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.
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 $105.0 million credit
facility with a group of banks. On that date, $57.0 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 $550.0 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 semiannually in four equal installments. Loans under
the new facility are made directly to a Mexican financing subsidiary of the
Company and are guaranteed by the Company. At November 5, 1999, the Company had
approximately $10.0 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 November 5, 1999, $164.3 million in borrowings under this facility
with remaining maturities of up to 117 days was outstanding.
Risk Management
Interest Rate Risk
Because the Company's obligations under the bank credit agreements and
the receivables-backed financing programs bear interest at floating rates, the
Company is sensitive to changes in prevailing interest rates. The Company uses
derivative instruments to manage its long-term debt interest rate exposure,
rather than for trading purposes. Interest rate movements also affect the value
and returns on the Company's investment securities. A 10% increase or decrease
in market interest rates that affect the Company's financial instruments would
not have a material impact on earnings or cash flows during the next fiscal
year, and would not materially affect the fair value of the company's financial
instruments.
Foreign Currency Risk
In order to reduce the risk of foreign currency exchange rate
fluctuations, the Company follows a policy of hedging substantially all
transactions denominated in a currency other than the functional currencies
applicable to each of its various entities. The instruments used for hedging are
readily marketable exchange-traded forward contracts with banks. The changes in
market value of such contracts have a high correlation to the price changes in
the currency of the related hedged transactions. The potential impact on
earnings, cash flows or fair value for such net currency position resulting from
a 10% increase or decrease in foreign currency exchange rates on each individual
currency would not be material.
Commodity Price Risk
The Company uses many types of fiber, both natural and man-made, in the
manufacture of its textile products. The Company believes that future price
levels for all fibers will depend primarily upon supply and demand conditions,
weather conditions, general inflation, domestic and foreign governmental
regulations and agricultural programs, and prices of underlying raw materials
such as petroleum. The Company manages its exposure to changes in commodity
prices primarily through its procurement practices (foreign exchange contracts
are utilized to offset the impact of currency fluctuations on wool purchases).
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 October 2, 1999, and market prices of cotton decreased by
10%, the Company would be required to pay a net settlement provision of
approximately $5.2 million. However, the Company has not utilized this net
settlement provision in the past, and does not anticipate using it in the
future.
Legal and Environmental Contingencies
The Company and its subsidiaries have sundry claims and other lawsuits pending
against them and also have certain guarantees that were made in the ordinary
course of business. The Company has made provisions in its financial statements
for litigation based on the Company's assessment of the possible outcome of such
litigation, including the possibility of settlement, and related legal fees and
costs.
Also, the Company and certain of its current and former direct and
indirect corporate predecessors, subsidiaries and divisions have been identified
by the United States Environmental Protection Agency, by the environmental
agencies in several states and by private parties as potentially responsible
parties ("PRPs") at 19 hazardous waste disposal sites under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("Superfund") and
comparable state laws and, as such, may be liable for the cost of cleanup and
other remedial activities at these sites. With respect to certain of these
sites, other persons have also been identified as potentially responsible
parties, and in such circumstances the responsibility for cleanup and other
remedial activities is typically shared among such parties based on an
allocation formula. The Company is currently involved in remedial activities at
three of these sites under federal laws. It is also involved in environmental
cleanups at 16 other sites under state laws. The Company may also be liable for
environmental contingencies at 25 other sites pursuant to contractual
obligations resulting from divested property or with respect to environmental
cleanups that may be identified in the future. The Company has established
reserves in its financial statements for such environmental liabilities in the
aggregate amount of $3.5 million at October 2, 1999, estimated to be paid
primarily over the next five years. The provision for environmental liabilities
is based on the Company's estimate of allocations of liability among potentially
responsible parties (and the likelihood of contribution by such parties),
information concerning the scope of contamination, estimated remediation costs,
estimated transaction costs and other factors.
It is not possible with certainty to determine the ultimate liability
of the Company with respect to the matters described in the preceding
paragraphs, but in the opinion of management their outcome should have no
material adverse effect on the financial condition or results of operations of
the Company.
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.
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 modified a significant portion of
its computer software to handle the Year 2000 problem. 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 completed dealing with potential problems ranging from systems failure to
failure of a utility or a supplier. 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 potential 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 $15.5 million. These costs are expensed as incurred and are being
funded with cash from operations. As of October 2, 1999, the Company had spent
$15.1 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.
Conversion to the Euro Currency
Various member countries of the European Union in which the Company
conducts its business adopted the Euro as their single currency on January 1,
1999. National currencies will continue to exist as legal tender and may
continue to be used in commercial transactions through January 1, 2002, at which
time Euro notes and coins will be issued. By July 2002, the respective national
currencies will be withdrawn. During this transition period, permanent rates of
exchange between the members' national currency and the Euro will be established
and banking, finance and foreign exchange markets will convert to the Euro. The
Euro conversion has not impacted the Company, and the Company does not expect
the conversion to have a material adverse effect on its financial condition or
results of operations.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which was required to be adopted
in fiscal years beginning after June 15, 1999. In July, the FASB issued SFAS No.
137, which delayed the effective date of SFAS No. 133 for one year. Under the
statement, all derivatives will be required to be recognized on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through income. See Note A to the consolidated financial statements. The
Company has not yet determined what the effect of SFAS No. 133 will be on the
earnings and financial position of the Company.
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 forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
represent management's current expectations or beliefs as to the future and are
subject to risks and uncertainties that could affect the Company's actual future
results and that could cause those results to differ materially from the
expectations or beliefs expressed in the forward-looking statements. Such risks
and uncertainties include, but are not limited to: the outlook for global
economic activity and its impact upon the Company's businesses; the demand for
textile products; the possible imbalances between consumer demand and
inventories of the Company's customers; the Company's relationships with its
principal customers and suppliers, including its and their success in addressing
the Year 2000 computer problem; cost and availability of raw materials and
labor; the success of the Company's value-added product strategy; the Company's
strategic plans to expand its global sourcing capabilities, which include the
delivery of garment packages; the Company's ability to finance its capital
expansion and modernization programs (including the terms of the renewal of its
revolving credit facility which expires in March 2001), and the level of the
Company's indebtedness and the exposure to interest rate fluctuations;
governmental legislation and regulatory changes that impose higher costs, or
greater restrictions, on the Company's operations and that alter the existing
regulation of international trade; and the long-term implications of the current
development of regional trade blocs and the effect of the anticipated
elimination of quotas and lowering of tariffs under the GATT trade regime by
2005 or as a result of the Seattle round of GATT trade discussions commencing in
December 1999. 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>
CONSOLIDATED STATEMENTS OF OPERATIONS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
For the 52 weeks ended October 2, 1999, the 53 weeks ended October 3, 1998 and
the 52 weeks ended September 27, 1997
(Amounts in thousands, except for per share amounts)
1999 1998 1997
------------ ------------ ------------
Net sales $ 1,651,689 $ 2,010,414 $ 2,090,683
Cost of sales 1,426,311 1,659,485 1,758,698
------------ ------------ ------------
Gross profit 225,378 350,929 331,985
Selling, general and administrative
expenses 143,171 148,383 154,648
Provision for doubtful accounts 5,482 1,677 3,478
Amortization of goodwill 17,810 18,100 18,158
Provision for restructuring 62,069 0 12,058
------------ ------------ ------------
Operating income (loss)
before interest and taxes (3,154) 182,769 143,643
58,420 59,544 60,062
Equity in income of joint ventures (6,357) (2,980) 0
Other expense (income) - net (7,868) (3,807) (12,790)
------------ ------------ ------------
Income (loss) before income taxes (47,349) 130,012 96,371
Income tax expense (benefit):
Current 4,163 38,681 33,048
Deferred (20,018) 10,879 4,625
------------ ------------ ------------
Total income tax (expense) benefit (15,855) 49,560 37,673
------------ ------------ ------------
Net income (loss) $ (31,494) $ 80,452 $ 58,698
============ ============ ============
Net income per common share:
Basic earnings (loss) per share $ (0.57) $ 1.33 $ 0.96
Diluted earnings (loss) per share $ (0.57) $ 1.32 $ 0.95
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
As of October 2, 1999 and October 3, 1998
(Amounts in thousands)
1999 1998
------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 17,402 $ 16,222
Short-term investments 18,307 12,729
Customer accounts receivable after deductions
of $18,258 and $20,864 for the
respective dates for doubtful accounts,
discounts, returns and allowances 251,781 288,806
Sundry notes and accounts receivable 23,444 15,810
Inventories 317,554 322,548
Prepaid expenses 5,371 3,198
------------- -----------
Total current assets 633,859 659,313
Fixed assets, at cost:
Land and land improvements 31,807 39,374
Buildings 419,569 442,828
Machinery, fixtures and equipment 644,765 636,439
------------- -----------
1,096,141 1,118,641
Less accumulated depreciation and amortization 454,909 475,885
------------- -----------
Fixed assets - net 641,232 642,756
Other assets:
Investments and receivables 68,103 61,455
Intangibles and deferred charges 40,452 35,211
Excess of purchase cost over net assets acquired 492,629 514,152
------------- -----------
Total other assets 601,184 610,818
------------- -----------
$ 1,876,275 $ 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 80,176 87,999
Sundry payables and accrued expenses 79,612 73,995
Income taxes payable 1,166 6,440
Deferred income taxes 40,171 44,576
------------- -----------
Total current liabilities 201,595 227,680
Long-term liabilities:
Long-term debt 880,957 801,486
Other 57,657 59,052
------------- -----------
Total long-term liabilities 938,614 860,538
Deferred income taxes 106,817 124,448
Shareholders' equity:
Common stock issued (Note H) 684 684
Capital in excess of par value 884,347 884,685
Accumulated deficit (85,343) (53,849)
Accumulated other comprehensive income (loss) (14,658) (17,357)
Cost of common stock held in treasury (155,781) (113,942)
------------- -----------
Total shareholders' equity 629,249 700,221
------------- -----------
$ 1,876,275 $ 1,912,887
============= ===========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
For the 52 weeks ended September 27, 1997, the 53 weeks ended October 3, 1998
and the 52 weeks ended October 2, 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Accumulated
Capital in other Treasury
Common excess of Accumulated comprehensive shares,
Stock par value deficit income (loss) at cost Total
--------- ----------- ------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance September 28, 1996 $ 684 $ 885,185 $ (192,999) $ (9,263) $ (67,687) $ 615,920
Net income for the period 58,698 58,698
Translation adjustments (948) (948)
---------
Comprehensive income 57,750
Purchase of treasury stock (53,419) (53,419)
Issuance of treasury stock (4,613) 8,890 4,277
Awards issued under Equity
Incentive Plans 2,082 2,082
Amortization of unearned
compensation 176 176
Exercise of stock options (224) 3,933 3,709
Tax benefit on stock options 231 231
--------- ----------- ------------- -------------- ------------ ------------
Balance September 27, 1997 684 882,837 (134,301) (10,211) (108,283) 630,726
Net income for the period 80,452 80,452
Translation adjustments (7,146) (7,146)
---------
Comprehensive income 73,306
Purchase of treasury stock (38,747) (38,747)
Issuance of treasury stock (2,285) 2,436 151
Amortization of unearned
compensation 125 125
Exercise of stock options (1,254) 25,746 24,492
Conversion of note 1,199 4,906 6,105
Tax benefit on stock options 4,063 4,063
--------- ----------- ------------- -------------- ------------ ------------
Balance October 3, 1998 684 884,685 (53,849) (17,357) (113,942) 700,221
Net loss for the period (31,494) (31,494)
Translation adjustments 1,084 1,084
Unrealized gain on securities
(net of income taxes of $870) 1,615 1,615
---------
Comprehensive income (loss) (28,795)
Purchase of treasury stock (41,994) (41,994)
Issuance of treasury stock (378) 155 (223)
Amortization of unearned
compensation 40 40
--------- ----------- ------------- -------------- ------------ ------------
Balance October 2, 1999 $ 684 $ 884,347 $ (85,343) $ (14,658) $ (155,781) $ 629,249
========= =========== ============= ============== ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
For the 52 weeks ended October 2, 1999, the 53 weeks ended October 3, 1998 and
the 52 weeks ended September 27, 1997
(Amounts in thousands)
1999 1998 1997
---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (31,494)$ 80,452 $ 58,698
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
of fixed assets 64,757 68,375 66,742
Provision for doubtful accounts 5,482 1,677 3,478
Amortization of intangibles and
deferred debt expense 18,170 18,455 18,600
Equity in loss of joint ventures 3,052 0 0
Deferred income taxes (20,018) 10,879 4,625
Gain on disposal of assets (4,328) (512) (11,821)
Provision for restructuring 62,069 0 12,058
Changes in assets and liabilities:
Customer accounts receivable - net 31,543 40,974 6,400
Sundry notes and accounts receivable (7,634) (7,114) (154)
Inventories (5,560) (14,877) 11,478
Prepaid expenses (2,288) (479) 120
Accounts payable and accrued expenses (29,174) (39,577) (3,404)
Change in income taxes payable 726 (5,903) 1,821
Other (18,577) (14,969) (2,361)
---------- ---------- -----------
Total adjustments 98,220 56,929 107,582
---------- ---------- -----------
Net cash provided by operating activities 66,726 137,381 166,280
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (141,539) (140,333) (96,500)
Proceeds from sales of assets 55,884 10,559 20,672
Investment in joint ventures (5,366) (7,375) (2,750)
Change in investments (451) (233) (2,817)
---------- ---------- -----------
Net cash used by investing activities (91,472) (137,382) (81,395)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings (14,200) 14,200 0
Repayments of long-term debt (36,880) (217,606) (200,472)
Proceeds from issuance of long-term debt 119,000 216,021 167,768
Proceeds from exercise of stock options 0 24,492 3,709
Purchase of treasury stock (41,994) (38,747) (53,419)
---------- ---------- -----------
Net cash provided (used) by
financing activities 25,926 (1,640) (82,414)
---------- ---------- -----------
Net change in cash and cash equivalents 1,180 (1,641) 2,471
Cash and cash equivalents at
beginning of period 16,222 17,863 15,392
---------- ---------- -----------
Cash and cash equivalents at end of period $ 17,402 $ 16,222 $ 17,863
========== ========== ===========
See notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
Burlington Industries, Inc. and Subsidiary Companies
Note A - Summary of Significant Accounting Policies
Consolidation: The consolidated financial statements include the accounts of the
Company and all its subsidiaries. The accounts of foreign subsidiaries have been
included on the basis of fiscal periods ended no more than three months prior to
the dates of the consolidated balance sheets. Investments in affiliates in which
the Company owns 20 to 50 percent of the voting stock are generally accounted
for using the equity method. The Company has an ownership interest in an
affiliated limited liability company of approximately 15 percent that is
accounted for using the equity method because the Company has significant
influence over the operations of the entity, including control of 40 percent of
the Board and certain additional rights that require unanimous votes to pass.
All significant intercompany accounts and transactions have been eliminated.
Cash equivalents: Cash and cash equivalents include time deposits and other
short-term investments with an original maturity of three months or less.
Investments: The Company classifies all of its investments as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported as a component of shareholders'
equity in comprehensive income (loss), net of income taxes. Investments
available for current operations are classified in the consolidated balance
sheet as current assets; investments held for long-term purposes are classified
as noncurrent assets. Interest income and realized gains and losses on
securities are included in "Other expense (income) - net" in the consolidated
statements of operations. The cost of securities sold is based on the specific
identification method.
Inventories: Inventories are valued at the lower of cost or market. Cost of
substantially all components of textile inventories in the United States is
determined using the dollar value Last-in, First-out (LIFO) method. All other
inventories are valued principally at average cost.
Fixed assets: Depreciation and amortization of fixed assets is calculated over
the estimated useful lives of the related assets principally using the
straight-line method: 15 to 20 years for land improvements, 15 to 50 years for
buildings and 5 to 15 years for machinery, fixtures and equipment.
Excess of purchase cost over net assets acquired: The excess of purchase cost
over net assets acquired is amortized as goodwill using the straight-line method
over not more than 40 years. The accumulated amortization of goodwill was
$217,654,000 and $199,844,000 at October 2, 1999 and October 3, 1998,
respectively. In connection with the transfer of certain assets of the
Burlington Madison Yarn division to a joint venture in fiscal year 1998 and the
sale of the remaining assets in fiscal year 1999, excess of purchase cost over
net assets acquired was reduced by $6.7 million and $3.7 million in 1998 and
1999, respectively.
<PAGE>
Impairment of long-lived assets: When circumstances indicate, the Company
evaluates the recoverability of its long-lived assets by comparing estimated
future undiscounted cash flows with the asset's carrying amount to determine if
a write-down to market value or discounted cash flow is required.
Deferred debt expense: Deferred debt expense is amortized over the lives of the
related debt as an adjustment to interest expense.
Revenue recognition: Sales are recorded upon shipment or designation of specific
goods for later shipment at customers' request with related risk of ownership
passing to such customers.
Research expenditures: Expenditures for research and development are expensed as
incurred. Total expenditures for research and development aggregated
$12,090,000, $14,934,000 and $11,841,000 in the 1999, 1998 and 1997 fiscal
years, respectively.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification: Certain prior period amounts have been reclassified to conform
to current presentations.
Fiscal year: The Company uses a 52 - 53 week fiscal year. The fiscal year ended
October 3, 1998 represents a 53-week period.
Other: In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which was required to be adopted
in fiscal years beginning after June 15, 1999. In July, the FASB issued SFAS No.
137, which delayed the effective date of SFAS No. 133 for one year. The
statement permits early adoption as of the beginning of any fiscal quarter after
its issuance. The Company expects to adopt the new statement effective October
1, 2000. Under the statement, all derivatives will be required to be recognized
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities, or
firm commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. Under the statement, any
ineffective portion of a derivative's change in fair value must be immediately
recognized in earnings. The Company has not yet determined what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.
<PAGE>
Note B - Restructuring Activities
In June 1996, the Company announced its plan to close the Knitted Fabrics
division, which resulted in a $29.9 million pre-tax charge in the 1996 fiscal
year. In addition, the closing resulted in an inventory write-down of $3.7
million included in cost of sales. Combining these charges, the closing of the
division resulted in a pre-tax charge of $33.6 million, $20.3 million after
income taxes, or $0.33 per share. Production of the Knitted Fabrics division was
phased out during September and October 1996. The components of the 1996 charge
include costs of $12.7 million for severance and other benefits related to
approximately 1,150 employees, $8.3 million for divestitures of machinery and
equipment, $8.0 million for divestitures of real estate, and $0.8 million for
cancellation of leases. Net sales of the Knitted Fabrics division were $108.2
million during the 1996 fiscal year, and net operating loss before interest,
taxes and restructuring charges was $17.2 million during the same period.
During the June 1997 quarter, the Company recorded a $12.1 million pre-tax
provision for restructuring associated with reducing staff, consolidation of
certain yarn facilities and exiting the residential carpet product line. The
staff reduction included severance costs of $5.2 million related to 215
employees. The components of the yarn manufacturing restructuring charge
included costs of $1.3 million for severance related to 286 employees, $2.2
million for divestitures of machinery and equipment, and $1.4 million for
divestitures of real estate. Costs related to exiting the residential carpet
product line included primarily $1.2 million for severance related to 70
employees. In addition, exiting the residential carpet product line resulted in
an inventory write-down and other claims of $4.9 million included in cost of
sales. Combining these charges, the restructuring activities resulted in a 1997
pre-tax charge of $17.0 million, $10.3 million after income taxes, or $0.17 per
share. Net sales of the residential carpet product line were $38.7 million
during the 1996 fiscal year, and net operating loss before interest, taxes and
restructuring charges was $8.4 million during the same period.
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 severance adjustment during fiscal year 1997 was
substantially offset by higher than expected losses on dispositions of
equipment. The carrying amount of such assets at October 2, 1999, included in
the Fixed Assets caption on the balance sheet, is $8.8 million, and the Company
does not anticipate any material adjustments to this amount.
Following is a summary of activity in the 1997 and 1996 restructuring reserves
(in millions):
<PAGE>
Lease
Cancellations
Severance and Other
Benefits Exit Costs
--------- -------------
June 1996 restructuring charge........ $ 12.7 $ 0.8
Payments.............................. (5.1) -
------ -----
Balance at September 28, 1996......... 7.6 0.8
June 1997 restructuring charge........ 7.7 0.8
Payments.............................. (7.6) (0.6)
Adjustments........................... (1.4) -
----- -----
Balance at September 27, 1997......... 6.3 1.0
Payments.............................. (5.3) (0.5)
------ -----
Balance at October 3, 1998............ 1.0 0.5
Payments.............................. (1.0) (0.3)
Adjustments........................... - (0.2)
----- -----
Balance at October 2, 1999............ $ - $ -
====== =====
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 had complementary product
lines and serve many of the same customers. The merger of the two--Burlington
Klopman Fabrics and Burlington Tailored Fashions--created an 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 in April 1999), Mooresville,
and Statesville were closed during the June quarter and one plant in Hillsville,
Virginia was sold in June 1999; one plant in Bishopville, South Carolina and one
plant located in Oxford, North Carolina are being closed in phases to be
completed during 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 12
months from the termination date depending on the employee's length of service
(reduction of approximately 2,200 employees as of October 2, 1999).
The cost of the reorganization was reflected in a restructuring charge, before
income taxes, of $62.1 million ($58.5 million applicable to the apparel fabrics
business) recorded in the second fiscal quarter ended April 3, 1999, as adjusted
by $3.2 million in the fourth quarter of 1999. The components of the 1999
restructuring charge included the establishment of a $19.0 million reserve for
severance benefit payments, write-down of pension assets of $3.2 million for
curtailment and settlement losses, write-downs for impairment of $37.7 million
related to fixed assets 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 have been sold, or are held for sale at October 2,
1999 and are no longer in use, 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 $14.5 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 October 2, 1999, $27.1
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
Payments.............................. (3.6) (0.1)
Adjustments........................... (1.1) -
------ -----
Balance at October 2, 1999............ $ 8.2 $ 1.7
====== =====
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.
Note C - Investments
The Company's investments in marketable securities at October 2, 1999 consisted
of U.S. municipal bonds due after five years through ten years, international
bond funds, equity securities and money market funds with an amortized cost
basis of $20.3 million, $3.7 million, $4.4 million and $8.3 million,
respectively. The aggregate estimated fair value was $39.2 million, including
gross unrealized gains of $2.8 million and gross unrealized losses of $0.3
million. The Company's investments in marketable securities at October 3, 1998
consisted of U.S. municipal bonds due after five years through ten years,
international bond funds, equity securities and money market funds with an
amortized cost basis of $20.4 million, $3.7 million, $4.5 million and $6.6
million, respectively. The aggregate estimated fair value approximated amortized
cost at October 3, 1998. Proceeds from sales of available-for-sale securities
were $19.8 million and $20.2 million during the 1999 and 1998 fiscal years,
respectively, and gross purchases were $20.7 million and $24.4 million,
respectively. Gross gains (losses) realized on these sales in fiscal year 1999
and 1998 were not significant. Approximately $23.3 million of marketable
securities are required to be maintained in conjunction with insurance programs.
The following is combined summarized unaudited financial information of the
Company's investments in affiliates that are accounted for on the equity method
(in millions):
1999 1998 1997
-------- -------- --------
Earnings data:
Revenue............................. $ 453.5 $ 194.2 $ -
Gross profit........................ 27.6 13.1 -
Net income (loss)................... 0.9 3.5 -
Balance sheet data:
Current assets...................... $ 102.2 $ 68.8
Noncurrent assets................... 221.0 228.5
Current liabilities................. 38.2 12.5
Noncurrent liabilities.............. 37.2 19.6
The earnings data above includes the earnings recorded by the Company's textured
yarn joint venture combined with the results of other affiliates reporting
losses. Under the terms of the textured yarn joint venture agreement, the
Company is entitled to receive the first $9.4 million of earnings for the first
five years of operations. Subsequent to this five-year period, earnings are to
be allocated based on ownership percentages. The Company purchased raw materials
in the amount of $42.1 million from these affiliates during the 1999 fiscal
year.
Note D - Inventories
Inventories are summarized as follows (in thousands):
1999 1998
--------- ---------
Inventories at average cost:
Raw materials................................ $ 34,468 $ 40,594
Stock in process............................. 88,042 98,922
Produced goods............................... 207,804 204,169
Dyes, chemicals and supplies................. 21,269 22,358
--------- ---------
351,583 366,043
Less excess of average cost over LIFO........ 34,029 43,495
--------- ---------
Total.................................... $ 317,554 $ 322,548
========= =========
Inventories valued using the LIFO method comprised approximately 90% and 91% of
consolidated inventories at October 2, 1999 and October 3, 1998, respectively.
Liquidation of prior years' LIFO inventory layers in the 1999 fiscal year did
not materially affect cost of sales in that period.
Note E - Sundry Payables and Accrued Expenses
Sundry payables and accrued expenses consisted of the following (in thousands):
1999 1998
--------- ---------
Sundry accounts payable......................... $ 3,880 $ 3,346
Accrued expenses:
Payroll and employee benefits............... 48,891 44,264
Taxes, other than income taxes.............. 8,735 8,648
Interest.................................... 4,413 6,078
Other....................................... 13,693 11,659
--------- ---------
Total................................... $ 79,612 $ 73,995
========= =========
<PAGE>
Note F - Long-term Debt
Long-term debt consisted of the following (in thousands):
1999 1998
---------- ----------
1995 Bank Credit Agreement........................... $ 319,000 $ 294,000
1998 Bank Credit Agreement........................... 94,000 -
Receivables Facility................................. 165,157 204,058
Senior Debentures due 2005........................... 149,931 149,921
Senior Debentures due 2027........................... 149,299 149,208
Other indebtedness with various rates and maturities. 4,040 4,769
---------- ----------
881,427 801,956
Less long-term debt due currently.................... 470 470
---------- ----------
Total.............................................. $ 880,957 $ 801,486
========== ==========
Bank Financing: The Company has an unsecured credit agreement ("1995 Bank Credit
Agreement"), consisting of a $550.0 million Revolving Credit Facility with a
final maturity on March 31, 2001. The Agreement provides for the issuance of
letters of credit by the fronting bank in an outstanding aggregate face amount
not to exceed $75.0 million, provided that at no time shall the aggregate
principal amount of Revolving Loans, together with the aggregate face amount of
such letters of credit issued, exceed $550.0 million. At October 2, 1999,
letters of credit outstanding issued by the fronting bank were approximately
$3.7 million, and the unused portion of the revolving facility commitment was
approximately $227.3 million. Additional overnight borrowings up to $42.0
million are also available under bank lines of credit.
Loans under the 1995 Bank Credit Agreement bear interest at either (i) floating
rates generally payable quarterly based on the Adjusted Eurodollar Rate plus
0.40% 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
0.225%. 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. At October 2, 1999, the average interest
rate under this agreement was 5.84%.
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 and stock repurchases (equal to
50% of the previous fiscal year's domestic net income less any after-tax gain or
loss on asset sales outside the ordinary course of business), leases, the
incurrence of additional indebtedness by domestic subsidiaries, the creation of
additional liens and the making of investments in foreign entities and restricts
the Company's ability to enter into certain merger, liquidation or asset sale or
purchase transactions.
In November, 1998, the Company established a $105 million credit facility with a
group of banks ("1998 Bank Credit Agreement"). On that date, $57 million of
proceeds from the new agreement were used to repay loans under the 1995 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 1995 Bank Credit Agreement, except that the outstanding
balance on the third anniversary of the facility will convert to a two-year term
loan payable semiannually in four equal installments. At October 2, 1999, the
average interest rate under this agreement was 6.52%. Loans under the 1998 Bank
Credit Agreement are made directly to a Mexican financing subsidiary of the
Company and are guaranteed by the Company.
Receivables-Backed Financing: 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. The Company has the intent and
ability to maintain the receivables-backed borrowings on a long-term basis.
Accordingly, receivables-backed borrowings have been classified as long-term
debt.
Senior Debentures: In August 1997, the Company issued, through a public
offering, $150.0 million principal amount of 7.25% unsecured senior debentures
due August 1, 2027 ("Senior Debentures Due 2027"). The securities were issued
under an indenture (the "Indenture") dated as of September 1, 1995 pursuant to a
shelf registration filed with the Securities and Exchange Commission, under
which $100.0 million of debt securities may still be issued. The Indenture
contains covenants limiting certain liens and sale and leaseback transactions.
The Senior Debentures Due 2027 were issued at a discount to yield 7.335%.
Interest on the Senior Debentures Due 2027 is payable semiannually on February 1
and August 1. The Senior Debentures 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 at a
price equal to the greater of 100% of the principal amount redeemed or the sum
of the present values of the remaining scheduled payments of principal and
interest thereon. The Senior Debentures Due 2027 will also be redeemable at the
option of the holders thereof on August 1, 2007 in amounts at 100% of their
principal amount.
The Company also has outstanding $150.0 million principal amount of 7.25%
unsecured senior debentures due September 15, 2005 ("Senior Debentures Due
2005") under the Indenture. The Senior Debentures Due 2005 were issued at a
discount to yield 7.26%. Interest on the Senior Debentures Due 2005 is payable
semiannually on March 15 and September 15, and the debentures are not redeemable
prior to maturity and are not entitled to any sinking fund.
Maturities: As of October 2, 1999, aggregate annual maturities of long-term debt
for the next five years are $0.5 million in 2000, $319.5 million in 2001, $0.0
million in 2002, $165.2 million in 2003 and $94.0 million in 2004.
See Note P for information on financial instruments utilized to manage interest
rate exposure.
Note G - Leases
Minimum commitments for rental expenditures under noncancellable operating
leases are as follows (in thousands):
2000............................................. $ 15,695
2001............................................. 10,615
2002............................................. 6,887
2003............................................. 4,323
2004............................................. 2,235
Later years...................................... 5,438
--------
Total minimum lease payments............... $ 45,193
=========
Approximately 27% of the operating leases pertain to real estate. The remainder
covers a variety of machinery and equipment. Certain operating leases,
principally for office facilities, contain escalation clauses for increases in
operating costs, property taxes and insurance. For the 1999, 1998 and 1997
fiscal years, rental expense for all operating leases was $22,038,000,
$20,384,000, and $19,751,000, respectively. Sublease income was not material in
any of these years.
Note H - Shareholders' Equity
Shares of the Company's voting and nonvoting common stock, par value $.01 per
share, authorized, issued and outstanding at October 2, 1999 and October 3,
1998, respectively, were as follows:
Shares Shares Shares
October 2, 1999 Authorized Issued Outstanding
--------------- ----------- ---------- -----------
Common Stock.................. 200,000,000 67,939,148 51,611,431
Nonvoting Common Stock........ 15,000,000 454,301 454,301
----------- ---------- ----------
215,000,000 68,393,449 52,065,732
=========== ========== ==========
Shares Shares Shares
October 3, 1998 Authorized Issued Outstanding
--------------- ----------- ---------- -----------
Common Stock.................. 200,000,000 67,689,148 57,687,155
Nonvoting Common Stock........ 15,000,000 704,301 704,301
----------- ---------- -----------
215,000,000 68,393,449 58,391,456
=========== ========== ===========
All shares have similar rights and privileges except for voting rights. Holders
of Nonvoting Common Stock are entitled, subject to certain limitations, to
exchange such shares for Common Stock.
On October 2, 1999 and October 3, 1998, the Company had 30,000,000 shares of
preferred stock authorized, par value $.01 per share, none of which were issued
and outstanding. On December 3, 1997, the Board of Directors of the Company
approved the adoption of a Stockholder Rights Plan. Under the Stockholder Rights
Plan, Preferred Stock Purchase Rights were distributed as a dividend at the rate
of one Right for each share of Common Stock held as of the close of business on
December 15, 1997. Each Right will entitle a stockholder to a Unit consisting of
a portion of a newly issued share of Junior Participating Preferred Stock of the
Company, at an exercise price of $50.00 per Unit, subject to adjustment from
time to time to prevent dilution. The Rights will not initially be exercisable.
The Rights will become exercisable only if another person acquires beneficial
ownership of 15 percent or more of the Company's voting Common Stock or
commences a tender offer that would result in such person beneficially owning 15
percent or more of the Company's voting Common Stock. If any person becomes the
beneficial owner of 15 percent or more of the Company's voting Common Stock, or
if a holder of 15 percent or more of the Company's voting Common Stock engages
in certain other acquisition transactions, then each outstanding Right (other
than Rights owned by such 15 percent stockholder) will entitle its holder to
purchase, at the Right's then-current exercise price, units of the Company's
Junior Participating Preferred Stock having a market value equal to twice the
then-current exercise price. The Rights expire on December 4, 2007, unless
earlier redeemed. The Company may generally redeem the Rights at $.01 per right
at any time until the tenth day following public announcement that a person has
acquired 15 percent or more of the Company's voting Common Stock.
During the 1999 fiscal year, the Company exchanged 250,000 shares of Nonvoting
Common Stock for voting Common Stock. During the 1999 fiscal year, outstanding
shares also changed due to (i) the purchase of 6,339,503 additional shares of
treasury stock and (ii) the issuance of 13,779 shares of treasury stock to
settle Performance Unit awards (see Note Q).
The components of accumulated other comprehensive income (loss), net of related
tax, at October 2, 1999 and October 3, 1998 are as follows (in thousands):
1999 1998
-------- ---------
Foreign currency translation adjustments........ $(16,273) $(17,357)
Unrealized gains (losses) on securities......... 1,615 -
-------- ---------
$(14,658) $(17,357)
Note I - Other Expense (Income) - Net
Other expense (income) - net consisted of the following (in thousands):
1999 1998 1997
-------- -------- --------
Gain on sale of assets - net......... $ (4,328) $ (512) $ (9,487)
Interest income...................... (3,523) (3,408) (2,991)
Other................................ (17) 113 (312)
--------- -------- --------
Total........................... $ (7,868) $ (3,807) $(12,790)
======== ======== ========
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, for a pre-tax gain of $2.7 million. Net sales of this
division were $58.4 million during the 1998 fiscal year, and net operating
income before interest and taxes was $1.3 million during the same period. Also
during fiscal year 1999, the Company sold two idle plant facilities and recorded
pre-tax gains on the sales of $1.6 million. During the 1997 fiscal year, the
Company sold Advanced Textiles, Inc. (a small fiberglass business) for $4.6
million in cash and $4.1 million in securities and recognized a pre-tax gain of
$4.8 million from the sale. Also during the 1997 fiscal year, the Company sold
its Sedgefield chemical business for cash and recognized a pre-tax gain of $4.3
million from the sale. These businesses had combined sales of $5.3 million
during the 1997 fiscal year.
<PAGE>
Note J - Income Taxes
The sources of income (loss) before income taxes were as follows (in thousands):
1999 1998 1997
-------- -------- --------
United States............................... $(48,168) $125,764 $ 89,987
Foreign..................................... 819 4,248 6,384
-------- -------- --------
Total $(47,349) $130,012 $ 96,371
========= ======== ========
Income tax expense consisted of (in thousands):
1999 1998 1997
-------- -------- --------
Current:
United States.......................... $ 3,923 $ 39,228 $ 32,799
Foreign................................ 240 (547) 249
-------- -------- --------
Total current 4,163 38,681 33,048
Deferred:
United States.......................... (20,149) 10,174 4,048
Foreign................................ 131 705 577
-------- -------- --------
Total deferred.................... (20,018) 10,879 4,625
--------- -------- --------
$(15,855) $ 49,560 $ 37,673
======== ======== ========
Income tax expense is different from the amount computed by applying the U.S.
federal income tax rate of 35% to income before income taxes as follows (in
thousands):
1999 1998 1997
-------- -------- --------
U.S. tax at statutory rate.................. $(16,572) $ 45,504 $ 33,730
Goodwill charges with no tax benefits....... 7,318 6,119 6,140
State income taxes, net of federal effect... (3,349) 1,888 1,712
Foreign Sales Corporation................... (3,166) (3,581) (2,865)
Other....................................... (86) (370) (1,044)
--------- --------- --------
$(15,855) $ 49,560 $ 37,673
======== ======== ========
At October 2, 1999, the Company had $39.7 million of deferred tax assets and
$186.7 million of deferred tax liabilities that have been netted for
presentation purposes. At October 3, 1998, the Company had $37.1 million of
deferred tax assets and $206.1 million of deferred tax liabilities that have
been netted for presentation purposes. Operating loss and tax credit
carryforwards with related tax benefits of $2.4 million (net of $4.0 million
valuation allowance) at October 2, 1999, and $1.3 million (net of $2.9 million
valuation allowance) at October 3, 1998, expire from 2003 to 2014. Net deferred
tax liabilities at October 2, 1999 and October 3, 1998 consisted of the
following (in thousands):
1999 1998
-------------------- --------------------
Current Noncurrent Current Noncurrent
-------- ---------- -------- ----------
Fixed assets.............. $ - $ 92,881 $ - $ 110,439
Inventory valuation....... 60,142 - 60,142 -
Accruals, allowances
and other............... (17,564) 13,936 (15,020) 14,782
Tax credit and state
operating loss
carryforwards........... (2,407) - (546) (773)
-------- --------- -------- ---------
Total................ $ 40,171 $ 106,817 $ 44,576 $ 124,448
======== ========= ======== =========
<PAGE>
Note K - Supplemental Disclosures of Cash Flow Information
(in thousands) 1999 1998 1997
-------- -------- --------
Interest paid - net................... $ 57,835 $ 56,118 $ 56,565
======== ======== ========
Income taxes paid - net............... $ 2,811 $ 45,131 $ 37,086
======== ======== ========
On May 30, 1998, the Company formed a joint venture with Unifi, Inc. of
Greensboro, North Carolina, to manufacture and market textured polyester yarns.
Each of the partners transferred its textured yarn manufacturing assets into a
newly-formed limited liability company. Under the agreement, Unifi owns a
majority ownership interest and manages the business, while the Company owns a
minority interest. The noncash transfer of assets from the Company's Burlington
Madison Yarn division included $24.6 million of inventory, fixed assets and
excess of purchase cost over net assets acquired for an equity investment.
Note L - Retirement and Other Postretirement Benefits
The Company's U.S. defined benefit pension plan provides benefits to most of its
U.S. employees and certain employees in foreign countries, based on their
compensation over their working careers. The funding policy for this plan is to
contribute annually an amount based on the recommendation of the plan's actuary.
Employees also contribute a percentage of their compensation. Participants
become fully vested at the end of five years of service.
In addition, the Company has a health care plan for employees electing early
retirement between the ages of 55 and 65 and a Medicare supplement plan for
retired employees age 65 and older. These plans are available to most of the
Company's U.S. employees who elect participation. The Company also has a life
insurance plan that was closed to new members in 1973. The Company's policy is
to fund the cost of the medical plans and the life insurance plan as expenses
are incurred. The cost of postretirement benefits are accrued over the
employees' service lives.
Postretirement
Pension Benefits Benefits
------------------- -------------------
1999 1998 1999 1998
--------- --------- -------- --------
(in thousands)
Change in benefit obligations:
Balance at beginning of year....... $(354,986)$(337,730) $(14,323) $(13,241)
Service cost....................... (7,832) (7,520) (379) (248)
Interest cost...................... (21,238) (24,722) (1,305) (1,045)
Contributions by plan participants. (10,727) (12,553) (5,983) (5,778)
Benefits paid...................... 37,233 58,864 8,146 8,063
Actuarial gains (losses)........... 29,227 (31,325) (3,935) (2,074)
Curtailment gains (losses)......... (4,995) - 1,025 -
Settlements........................ 49,151 - - -
--------- --------- -------- --------
Balance at end of year............. (284,167) (354,986) (16,754) (14,323)
--------- --------- -------- --------
Change in fair value of plan assets:
Balance at beginning of year....... 327,754 349,069 2,843 2,365
Actual return on plan assets, net
of plan expenses.................. 58,803 14,996 (468) (428)
Contributions by employer.......... 8,000 10,000 1,963 3,191
Contributions by plan participants. 10,727 12,553 5,983 5,778
Benefits paid...................... (37,233) (58,864) (8,146) (8,063)
Settlements........................ (49,151) - - -
--------- --------- -------- --------
Balance at end of year............. 318,900 327,754 2,175 2,843
--------- --------- -------- --------
Funded status........................ 34,733 (27,232) (14,579) (11,480)
Unrecognized prior service cost...... 125 313 - -
Unrecognized net (gain) loss......... (2,185) 59,678 9,598 7,041
--------- --------- -------- --------
Net amount recognized in the
consolidated balance sheet......... $ 32,673 $ 32,759 $ (4,981) $ (4,439)
========= ========= ======== ========
Pension plan assets consist primarily of listed stocks and bonds and short-term
investment funds. Postretirement benefit plan assets consist primarily of bonds.
The fiscal year 1999 pension plan curtailment losses were recognized as
components of the 1999 restructuring provision or the gain on disposition of the
Burlington Madison Yarn division in accordance with SFAS No. 88, "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits." The curtailment gain in the postretirement benefit
plans resulting from the 1999 restructuring plan was not recognized in earnings
but rather reduced the unrecognized net loss in that plan in accordance with
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Components of net benefit expense and assumptions at the fiscal year
end measurement dates for the plans were as follows for the 1999, 1998 and 1997
fiscal years:
Postretirement
Pension Benefits Benefits
------------------------ -------------------------
1999 1998 1997 1999 1998 1997
-------- ------- ------- ------- ------- -------
(dollar amounts in thousands)
Service cost............ $ 7,832 $ 7,520 $ 7,354 $ 379 $ 248 $ 204
Interest cost........... 21,238 24,722 25,128 1,305 1,045 1,085
Expected return on plan
assets, net of plan
expenses............... (26,399)(28,069)(24,077) 413 549 481
Amortization:
Unrecognized prior
service cost.......... 138 156 156 - - -
Unrecognized losses.... 99 - 1,982 763 328 312
-------- ------- ------- ------- ------- -------
Net expense............. $ 2,908 $ 4,329 $10,543 $ 2,860 $ 2,170 $ 2,082
======== ======= ======= ======= ======= =======
Discount rate........... 7.75% 6.75% 7.75% 7.75% 6.75% 7.75%
Long-term rate of return
on plan assets......... 8.5% 8.5% 8.5% 8.5% 8.5% 8.5%
Long-term rate of
compensation increase.. 3.75% 3.75% 3.75% N/A N/A N/A
For the postretirement benefit plans, the assumed annual rate of increase in
health care expenses was 6% in the 1999 and 1998 fiscal years. This rate was
assumed to remain at 6% after fiscal year 1999. A one percentage point increase
in the assumed health care cost trend rate would have increased the Accumulated
Projected Benefit Obligation (APBO) by $1.0 million at October 2, 1999 and
increased the aggregate service and interest cost components of postretirement
benefit expense for fiscal year 1999 by $0.2 million. A one percentage point
decrease in the assumed health care cost trend rate would have decreased the
APBO by $0.9 million at October 2, 1999 and decreased the aggregate service and
interest cost components of postretirement benefit expense for fiscal year 1999
by $0.1 million.
Note M - Defined Contribution Plans
Effective January 1, 1999, the Company instituted a 401(k) Savings Plan for all
U.S. employees (and certain employees in foreign countries) with one or more
years of service. The Company discontinued making contributions to its Employee
Stock Ownership Plan ("ESOP") after the 1998 plan year, and the ESOP was merged
into the 401(k) Savings Plan. The 401(k) Savings Plan provides for Company
contributions of cash and/or Common Stock on a sliding scale based on the level
of the employee's contribution. During the 1999 fiscal year, cash contributions
of $7.8 million were made to the 401(k) Savings Plan and charged to operations.
Pursuant to a Board-established formula linked to the Company's annual operating
results, cash contributions of $5.3 million and $3.1 million were made to the
ESOP and charged to operations for fiscal years 1998 and 1997, respectively.
Note N - Contingencies
The Company and its subsidiaries have sundry claims and other lawsuits pending
against them and also have certain guarantees that were made in the ordinary
course of business. The Company has made provisions in its financial statements
for litigation based on the Company's assessment of the possible outcome of such
litigation, including the possibility of settlement, and related legal fees and
costs.
Also, the Company and certain of its current and former direct and indirect
corporate predecessors, subsidiaries and divisions have been identified by the
United States Environmental Protection Agency, by the environmental agencies in
several states and by private parties as potentially responsible parties
("PRPs") at 19 hazardous waste disposal sites under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("Superfund") and
comparable state laws and, as such, may be liable for the cost of cleanup and
other remedial activities at these sites. With respect to certain of these
sites, other persons have also been identified as potentially responsible
parties, and in such circumstances the responsibility for cleanup and other
remedial activities is typically shared among such parties based on an
allocation formula. The Company is currently involved in remedial activities at
three of these sites under federal laws. It is also involved in environmental
cleanups at 16 other sites under state laws. The Company may also be liable for
environmental contingencies at 25 other sites pursuant to contractual
obligations resulting from divested property or with respect to environmental
cleanups that may be identified in the future.
The Company has established the following aggregate reserves in its financial
statements for such environmental liabilities, estimated to be paid primarily
over the next five years. The provision for environmental liabilities is based
on the Company's estimate of allocations of liability among potentially
responsible parties (and the likelihood of contribution by such parties),
information concerning the scope of contamination, estimated remediation costs,
estimated transaction costs and other factors.
(In millions)
Balance at September 27, 1997......... $ 5.7
Payments.............................. (1.0)
Balance at October 3, 1998............ 4.7
Payments.............................. (1.2)
-------
Balance at October 2, 1999............ $ 3.5
=======
It is not possible to determine with certainty the ultimate liability of the
Company in these matters, if any, but in the opinion of management, their
outcome should have no material adverse effect upon the financial condition or
results of operations of the Company.
Note O - Segment and Other Information
The Company is one of the largest and most diversified manufacturers of softgood
products in the world. It is a leading developer, marketer and manufacturer of
fabrics and other textile products utilized in a wide variety of apparel and
interior furnishings end uses.
In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." The Company has three
reportable segments under SFAS No. 131 that are based on its internal
organizational structure: PerformanceWear, CasualWear and Interior Furnishings.
The PerformanceWear segment includes woven synthetic fabrics, worsted and
worsted wool blend fabrics and apparel, and yarn operations that supply
PerformanceWear products. The CasualWear segment consists of denim and woven
cotton and cotton blend fabrics and apparel. Products included in the Interior
Furnishings segment are fabrics for upholstery, window coverings, bedroom
ensembles, and mattress ticking; bath, area and accent rugs; and tufted
synthetic carpet and carpet tiles for commercial uses. The "Other" category
includes transportation and miscellaneous ancillary operations.
Sales, income (loss) before income taxes and identifiable assets for the
Company's reportable segments are presented below (in millions). The Company
evaluates performance and allocates resources based on profit or loss before
interest, amortization of goodwill, restructuring charges, certain unallocated
corporate expenses, and income taxes. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. Intersegment sales and transfers are recorded at cost and
are primarily related to transportation operations included in the "Other"
category.
1999 1998 1997
-------- -------- --------
(53-week
year)
Net Sales
PerformanceWear........ $ 611.7 $ 852.3 $ 930.9
CasualWear............. 257.1 342.1 340.4
Interior Furnishings... 758.0 792.2 790.6
Other.................. 36.0 39.4 51.1
-------- -------- --------
1,662.8 2,026.0 2,113.0
Less:
Intersegment sales.... (11.1) (15.6) (22.3)
-------- -------- --------
$1,651.7 $2,010.4 $2,090.7
======== ======== ========
Income (Loss) before
Income Taxes
PerformanceWear........ $ 18.4 $ 90.0 $ 121.4
CasualWear............. (2.9) 38.0 13.8
Interior Furnishings... 78.0 88.0 51.1
Other.................. 1.9 2.5 2.5
-------- -------- --------
Total reportable
segments............ 95.4 218.5 188.8
Corporate expenses..... (12.3) (14.7) (14.8)
Goodwill amortization.. (17.8) (18.1) (18.2)
Restructuring charges.. (62.1) - (12.1)
Interest expense....... (58.4) (59.5) (60.1)
Other (expense)
income - net......... 7.9 3.8 12.8
-------- -------- --------
$ (47.3)$ 130.0 $ 96.4
======== ======== ========
Total Assets
PerformanceWear........ $ 542.6 $ 584.9 $ 556.3
CasualWear............. 301.3 282.1 234.5
Interior Furnishings... 440.4 437.9 454.4
Other.................. 66.9 60.7 59.3
Corporate (including
goodwill)............. 525.1 547.3 569.2
-------- -------- --------
$1,876.3 $1,912.9 $1,873.7
======== ======== ========
The following items are included in income (loss) before income taxes:
1999 1998 1997
-------- -------- --------
Equity in Income (Loss) of
Equity Method Investees
PerformanceWear........ $ 9.4 $ 4.2 $ -
CasualWear............. $ (3.0)$ (1.2) $ -
Depreciation and Amortization
PerformanceWear........ $ 25.7 $ 29.8 $ 28.9
CasualWear............. 12.7 11.9 10.5
Interior Furnishings... 23.5 24.3 24.4
Other.................. 0.5 0.6 0.8
Corporate.............. 2.4 1.7 2.1
-------- -------- --------
$ 64.8 $ 68.3 $ 66.7
======== ======== ========
The following items are included in the determination of identifiable assets:
1999 1998 1997
-------- -------- --------
Investments in Equity
Method Investees
PerformanceWear........ $ 10.9 $ 12.4 $ -
CasualWear............. $ 16.4 $ 11.1 $ 5.0
Capital Expenditures
PerformanceWear........ $ 67.3 $ 61.6 $ 43.4
CasualWear............. 57.3 55.7 28.2
Interior Furnishings... 16.3 20.5 19.1
Other.................. - - 0.2
Corporate.............. 0.6 2.5 5.6
-------- -------- --------
$ 141.5 $ 140.3 $ 96.5
======== ======== ========
The Company primarily markets its products to approximately 8,700 customers in
the United States. The Company also markets its products to customers in Canada,
Mexico, Central and South America, Europe, Africa, Australia, and Asian
countries. For the 1999 fiscal year, no single customer represented more than
10% of the Company's net sales, and the Company's 10 largest customers accounted
for approximately 26% of net sales. The following table presents sales and
long-lived asset information by geographic area as of and for the fiscal year
ended 1999, 1998 and 1997 (in millions). The geographic sales dollars are
determined generally based on the ultimate destination of the product.
1999 1998 1997
----------- ----------- ---------
Net Sales:
United States......... $ 1,415.6 $ 1,773.5 $ 1,851.4
Foreign............... $ 236.1 $ 236.9 $ 239.3
Long-lived Assets:
United States......... $ 548.3 $ 585.8 $ 559.4
Foreign............... $ 92.9 $ 56.9 $ 25.2
Note P - Financial Instruments
The Company utilizes interest rate agreements and foreign exchange contracts to
manage interest rate and foreign currency exposures. The principal objective of
such contracts is to minimize the risks and/or costs associated with financial
and global operating activities. The Company does not utilize financial
instruments for trading or other speculative purposes. The counterparties to
these contractual arrangements are a diverse group of major financial
institutions with which the Company also has other financial relationships.
These counterparties expose the Company to the risk of credit loss in the event
of nonperformance. However, the Company does not anticipate nonperformance by
the other parties, and no material loss would be expected from their
nonperformance.
INTEREST RATE INSTRUMENTS: The Company enters into interest rate swap agreements
to reduce the impact of changes in interest rates on all or a portion of its
floating rate debt. The swap agreements are contracts to exchange variable rate
for fixed interest payments periodically over the life of the agreements without
the exchange of the underlying notional amounts. The notional amounts of
interest rate agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss. The net cash amounts
paid or received on swap agreements are accrued and recognized as an adjustment
to interest expense. If an arrangement is replaced by another instrument and no
longer qualifies as a hedge instrument, then it is marked to market and carried
on the balance sheet at fair value.
As of October 2, 1999 and October 3, 1998, the Company had the
following interest rate swap instruments in effect (the variable rates are based
on three-month LIBOR):
Notional
Amount Fixed
(millions) Rate Period
---------- ----- -----------
$200 7.37% 10/95-10/00
50 6.10% 11/97-11/04
50 5.72% 01/98-01/05
FOREIGN EXCHANGE INSTRUMENTS: The Company enters into forward currency
exchange contracts in the regular course of business to manage its exposure
against foreign currency fluctuations on sales, raw material and fixed asset
purchase transactions denominated in foreign currencies. Foreign currency
receivables that have forward exchange contracts are recorded in U.S. dollars at
the applicable forward rate. The foreign exchange contracts on receivables,
$17.4 million at October 2, 1999, require the Company to exchange British
pounds, Italian lira and Euro currencies for U.S. dollars and mature in one to
ten months. The foreign exchange contracts on receivables at October 3, 1998
($29.7 million) required the Company to exchange British pounds, German marks,
French francs, Canadian dollars, Spanish pesetas and Italian lira for U.S.
dollars and matured in one to eight months. Forward exchange contracts related
to raw material and fixed asset purchase transactions are recognized as
adjustments to the bases of the underlying assets. At October 2, 1999, the
Company had $6.2 million of forward currency exchange contracts maturing in one
to four months related to purchases of wool and fixed assets denominated in
Australian dollars, Italian lira and Euro currencies, compared to $31.1 million
at October 3, 1998. At October 2, 1999 and October 3, 1998, deferred gains and
losses on foreign exchange contracts are not material to the consolidated
financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS: It is estimated that the carrying value of
the Company's financial instruments approximated fair value at October 2, 1999
and October 3, 1998, unless indicated otherwise below. The following methods and
assumptions were used in estimating the fair values of financial instruments:
Cash and Cash Equivalents: The carrying amount approximates fair value because
of the short maturity of those instruments.
Short-term Investments: The fair values are estimated based on quoted market
prices for these or similar instruments.
Long-term Investments and Receivables: The fair values are estimated based on
one of the following methods: (i) quoted market prices; (ii) current rates for
similar issues; (iii) recent transactions for similar issues; or (iv) present
value of expected cash flows.
Short-term and Long-term Debt: The fair value is estimated by obtaining quotes
from brokers or based on current rates offered for similar debt. At October 2,
1999, long-term debt with a carrying value of $881.4 million had an estimated
fair value of $795.5 million. At October 3, 1998, long-term debt with a carrying
value of $802.0 million had an estimated fair value of $804.3 million.
Interest Rate Instruments: The fair values are the estimated amounts that the
Company would receive or pay to terminate the agreements at the reporting date,
taking into account current interest rates and the current creditworthiness of
the counterparties. At October 2, 1999 and October 3, 1998, the carrying amounts
of these instruments were a $0.9 million liability and a $0.7 million liability,
respectively. At October 2, 1999 and October 3, 1998, the Company estimates it
would have paid $1.6 and $16.0 million to terminate the agreements,
respectively.
Foreign Currency Contracts: The fair values of foreign currency contracts (used
for hedging purposes) are estimated by obtaining quotes from brokers. At October
2, 1999 and October 3, 1998, carrying amounts related to foreign currency
contracts in the consolidated balance sheets were not material. At October 2,
1999, foreign currency contracts to pay $6.2 million had an estimated fair value
of $6.1 million, and foreign currency contracts to receive $17.4 million had an
estimated fair value of $17.6 million. At October 3, 1998, foreign currency
contracts to pay $31.1 million had an estimated fair value of $27.8 million, and
foreign currency contracts to receive $29.7 million had an estimated fair value
of $31.6 million.
Note Q - Stock-Based Compensation
Under the Company's various Equity Incentive Plans, the Company is authorized to
award restricted shares of the Company's common stock, options to purchase
common stock, or Performance Unit/Share awards that are dependent upon
achievement of specified performance goals and are payable in common stock and
cash. Stock options granted generally have a maximum term of 10 years. Under
these plans at October 2, 1999, 85,368 shares of common stock are reserved to
settle Performance Unit/Share awards currently outstanding and 2,736,145 shares
to settle additional future awards remain available.
<PAGE>
A summary of the Company's stock option activity and related information
follows:
1999 1998 1997
----------------- ----------------- -----------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
(000) Price (000) Price (000) Price
------- --------- ------- --------- ------- ---------
Outstanding at
beginning of year..... 3,689 $11.79 5,754 $11.58 6,203 $11.57
Granted................ 1,093 9.15 253 14.78 27 11.70
Exercised.............. - - (2,136) 11.46 (323) 11.41
Forfeited.............. (274) 10.83 (182) 13.07 (153) 11.68
------ ------ ------
Outstanding at
end of year........... 4,508 $11.21 3,689 $11.79 5,754 $11.58
====== ====== ======
Exercisable at end
of year............... 3,313 $11.58 3,447 $ 8.40 3,483 $11.57
Per share weighted-average
fair value of options
granted during the year.. $5.47 $6.66 $5.24
The following table summarizes information about stock options outstanding at
October 2, 1999:
Options Outstanding Options Exercisable
------------------------------------ -------------------
Weighted- Weighted-
Range of Weighted-Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices (000) Contractual Life Price (000) Price
- --------------- -------- ---------------- --------- -------- --------
$ 5.38 to 11.00 1,509 7.3 $ 9.44 531 $ 9.98
$11.63 to 13.63 2,707 4.7 $11.66 2,700 $11.65
$14.00 to 21.93 292 6.8 $16.17 82 $19.49
------ ------
4,508 5.7 $11.21 3,313 $11.58
====== ======
The Company has elected to follow Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees." Under APB 25, no compensation
expense is recognized for the Company's employee stock options because the
exercise price of the options equals the market price of the underlying stock on
the date of grant. Total compensation cost charged (credited) to income related
to restricted share and Performance Unit awards was $0.0 million, $(0.8)
million, and $4.3 million for the 1999, 1998 and 1997 fiscal years,
respectively.
The following pro forma information regarding net income (loss) and net income
(loss) per share is required when APB 25 accounting is elected, and was
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS No. 123, "Accounting for Stock-Based
Compensation." The fair values for these options were estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rates of 4.82%, 5.84%, and
6.12% for fiscal year 1999, 1998 and 1997, respectively; volatility factors of
the expected market price of the Company's common stock of 0.49 for 1999, 0.35
for 1998 and 0.34 for 1997; dividend yields of 0%; and a weighted-average
expected life of the options of eight years for 1999 and six years for 1998 and
1997. For purposes of pro forma disclosures, the estimated fair values of the
options are amortized to expense over the option's vesting periods (in thousands
except for per share information):
1999 1998 1997
-------- -------- ---------
Net income (loss):
As reported......................... $(31,494) $ 80,452 $ 58,698
Pro forma........................... $(33,543) $ 78,212 $ 56,266
Diluted earnings (loss) per share:
As reported......................... $(0.57) $ 1.32 $ 0.95
Pro forma........................... $(0.61) $ 1.28 $ 0.91
During the initial phase-in period, as required by SFAS No. 123, the pro forma
amounts were determined based on stock options granted after the 1995 fiscal
year only. Therefore, the pro forma amounts for compensation cost may not be
indicative of the effects on pro forma net income and pro forma net income per
share for future years.
Note R - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands):
1999 1998 1997
-------- --------- ---------
Numerator:
Net income (loss)................... $(31,494) $ 80,452 $ 58,698
Effect of dilutive securities:
Convertible note................... - 116 360
-------- -------- --------
Numerator for diluted earnings
per share........................ $(31,494) $ 80,568 $ 59,058
======== ======== ========
Denominator:
Denominator for basic earnings per
share.............................. 54,978 60,428 61,289
Effect of dilutive securities:
Stock options...................... - 524 154
Convertible note................... - 183 568
Nonvested stock.................... 11 - -
Contingent Performance Unit awards. - 4 -
-------- -------- --------
Denominator for diluted earnings
per share........................ 54,989 61,139 62,011
======== ======== ========
For fiscal year 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 this period.
<PAGE>
Note S - Quarterly Results of Operations (unaudited)
The Company's unaudited quarterly results of operations are presented below (in
thousands, except for per share data). The three-month period ended October 3,
1998 represents a 14-week period; all other periods presented represent a
13-week period.
Fiscal 1999 Quarters (a)
December March June September
-------- -------- -------- ---------
Net sales.............................. $407,182 $403,905 $434,634 $405,968
Cost of sales.......................... 342,362 360,731 374,246 348,972
Income tax (expense) benefit........... (6,190) 29,777 (3,833) (3,899)
Net income (loss)...................... $ 7,969 $(47,883) $ 4,746 $ 3,674
Basic earnings (loss) share............ $ 0.14 $ (0.86) $ 0.09 $ 0.07
Diluted earnings (loss) per share...... $ 0.14 $ (0.86) $ 0.09 $ 0.07
Common stock prices
High................................. 11 1/8 11 10 1/4 9 3/8
Low.................................. 7 1/2 5 1/8 6 9/16 4 3/8
Fiscal 1998 Quarters
December March June September
-------- -------- -------- ---------
Net sales.............................. $481,703 $517,954 $511,033 $499,724
Cost of sales.......................... 402,803 423,272 414,781 418,629
Income tax expense..................... (9,369) (15,222) (15,412) (9,557)
Net income ............................ $ 13,224 $ 24,570 $ 25,951 $ 16,707
Basic earnings per share .............. $ 0.22 $ 0.41 $ 0.42 $ 0.28
Diluted earnings per share............. $ 0.22 $ 0.40 $ 0.42 $ 0.28
Common stock prices
High................................. 15 5/8 17 7/8 18 7/8 14 1/2
Low.................................. 13 1/16 13 3/16 13 3/4 8 3/16
(a) March quarter 1999 includes a $39.5 million charge for restructuring,
adjusted (reduced) by $1.9 million in the September 1999 quarter, each net of
income taxes.
<PAGE>
STATISTICAL REVIEW
Burlington Industries, Inc. and Subsidiary Companies
(Dollar amounts in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
1999 1998(a) 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales..................... $1,651,689 $2,010,414 $2,090,683 $2,182,347 $2,209,191
Operating income (loss)
before interest and taxes.... (3,154) 182,769 143,643 147,390 174,498
Interest expense.............. 58,420 59,544 60,062 65,936 56,294
Income tax expense (benefit).. (15,855) 49,560 37,673 33,747 51,707
Income (loss) before
extraordinary item (b)....... (31,494) 80,452 58,698 41,603 68,394
Per share of common stock:
Income (loss) before
extraordinary item (basic).. (0.57) 1.33 0.96 0.66 1.05
Income (loss) before
extraordinary item
(diluted)................... (0.57) 1.32 0.95 0.65 1.04
Dividends.................... - - - - -
FINANCIAL POSITION AT YEAR END
Current assets................ $ 633,859 $ 659,313 $ 697,627 $ 719,370 $ 732,837
Fixed assets - net............ 641,232 642,756 584,647 569,540 575,080
Total assets.................. 1,876,275 1,912,887 1,873,692 1,885,942 1,931,731
Current liabilities........... 201,595 227,680 263,595 265,352 272,397
Long-term liabilities......... 938,614 860,538 865,008 894,496 932,227
Shareholders' equity.......... 629,249 700,221 630,726 615,920 615,440
Current ratio................. 3.1 2.9 2.6 2.7 2.7
Total debt as % of
capitalization............... 58.3% 53.8% 56.1% 57.7% 59.7%
OTHER DATA
Capital expenditures.......... $ 141,539 $ 140,333 $ 96,500 $ 79,174 $ 101,876
Number of employees at
year end..................... 18,500 18,900 20,100 21,000 22,500
Cash interest coverage
ratio........................ 2.4 4.6 4.0 4.3 4.9
(a) Fiscal year 1998 represents a 53-week period.
(b) Includes restructuring provisions of $37.6 million in 1999 and $7.3
million in 1997, each net of income taxes.
</TABLE>
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Burlington Industries, Inc.
We have audited the accompanying consolidated balance sheets of Burlington
Industries, Inc. and Subsidiary Companies as of October 2, 1999 and October 3,
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended October 2,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Burlington Industries, Inc. and Subsidiary Companies at October 2, 1999 and
October 3, 1998, and the consolidated results of their operations and their cash
flows, for each of the three years in the period ended October 2, 1999, in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Greensboro, North Carolina
October 28, 1999
Exhibit 21
SUBSIDIARIES
Set forth below is a list of all subsidiaries of Burlington Industries, Inc.
(the "Corporation")* and, as to each person named, the percentage of voting
securities owned, or other bases of control, by its immediate parent.
Percentage of Voting
State or Power Represented by
Jurisdiction Securities Owned by
of the Corporation on
Name Incorporation October 2, 1999
- ------------------------- ------------- ---------------------
Burlington Fabrics Inc. Delaware 100%
B.I. Funding, Inc. Delaware 100%
Insuratex, Ltd. Bermuda 100%
- ---------------------------
* The names of 19 domestic subsidiaries (4 of which are inactive) and 20
foreign subsidiaries have been omitted because, considered in the
aggregate, they would not constitute a significant subsidiary. All of
the foregoing subsidiaries are included in the consolidated financial
statements of the Corporation.
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Burlington Industries, Inc. of our report dated October 28, 1999, included in
the 1999 Annual Report to Shareholders of Burlington Industries, Inc.
Our audits also included the financial statement schedule of Burlington
Industries, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-3 No. 33-95350) of Burlington Industries, Inc. and in the related
Prospectus of our report dated October 28, 1999, with respect to the
consolidated financial statements incorporated herein by reference and our
report included in the above paragraph with respect to the financial statement
schedule included in this Annual Report (Form 10-K) of Burlington Industries,
Inc.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-49894) pertaining to the Burlington Industries, Inc. 1992
Equity Incentive Plan, the Registration Statement (Form S-8 No. 333-09501)
pertaining to the Burlington Industries, Inc. 1995 Equity Incentive Plan and the
Registration Statement (Form S-8 No. 333-85629) pertaining to the Burlington
Industries, Inc. 1998 Equity Incentive Plan of our report dated October 28,
1999, with respect to the consolidated financial statements incorporated herein
by reference and our report included in the above paragraph with respect to the
financial statement schedule included in this Annual Report (Form 10-K) of
Burlington Industries, Inc.
/s/Ernst & Young LLP
Greensboro, North Carolina
December 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> OCT-02-1999
<CASH> 17,402
<SECURITIES> 18,307
<RECEIVABLES> 270,039
<ALLOWANCES> 18,258
<INVENTORY> 317,554
<CURRENT-ASSETS> 633,859
<PP&E> 1,096,141
<DEPRECIATION> 454,909
<TOTAL-ASSETS> 1,876,275
<CURRENT-LIABILITIES> 201,595
<BONDS> 880,957
0
0
<COMMON> 684
<OTHER-SE> 628,565
<TOTAL-LIABILITY-AND-EQUITY> 1,876,275
<SALES> 1,651,689
<TOTAL-REVENUES> 1,651,689
<CGS> 1,426,311
<TOTAL-COSTS> 1,426,311
<OTHER-EXPENSES> 79,879
<LOSS-PROVISION> 5,482
<INTEREST-EXPENSE> 58,420
<INCOME-PRETAX> (47,349)
<INCOME-TAX> (15,855)
<INCOME-CONTINUING> (31,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,494)
<EPS-BASIC> (0.57)
<EPS-DILUTED> (0.57)
</TABLE>
