FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 1, 2000
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Commission file number 1-10984
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BURLINGTON INDUSTRIES, INC.
-------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 56-1584586
(State or other juris- (I.R.S. Employer
diction of incorpora- Identification No.)
tion or organization)
3330 West Friendly Avenue, Greensboro, North Carolina 27410
(Address of principal executive offices)
(Zip Code)
(336) 379-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of February 7, 2000 there were outstanding 51,623,604 shares of Common
Stock, par value $.01 per share, and 454,301 shares of Nonvoting Common Stock,
par value $.01 per share, of the registrant.
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations
(Amounts in thousands, except for per share amounts)
Three Three
months months
ended ended
January 1, January 2,
2000 1999
--------- ----------
Net sales $ 371,048 $ 407,182
Cost of sales 327,337 342,362
--------- ----------
Gross profit 43,711 64,820
Selling, general and administrative
expenses 32,708 36,761
Provision for doubtful accounts 269 989
Amortization of goodwill 4,449 4,462
--------- ----------
Operating income before
interest and taxes 6,285 22,608
Interest expense 15,627 14,314
Equity in income of joint ventures (1,799) (2,276)
Other expense (income) - net (6,742) (3,589)
--------- ----------
Income (loss) before income taxes (801) 14,159
Income tax expense (benefit):
Current 5,641 5,762
Deferred (1,122) 428
--------- ----------
Total income tax expense 4,519 6,190
--------- ----------
Net income (loss) $ (5,320) $ 7,969
========= ==========
Basic and diluted earnings (loss) per share $ (0.10) $ 0.14
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(Amounts in thousands)
January 1, October 2,
2000 1999
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 16,022 $ 17,402
Short-term investments 16,401 18,307
Customer accounts receivable after deductions
of $17,177 and $18,258 for the
respective dates for doubtful accounts,
discounts, returns and allowances 225,722 251,781
Sundry notes and accounts receivable 24,624 23,444
Inventories 322,258 317,554
Prepaid expenses 5,608 5,371
---------- ---------
Total current assets 610,635 633,859
Fixed assets, at cost:
Land and land improvements 31,825 31,807
Buildings 421,773 419,569
Machinery, fixtures and equipment 656,183 644,765
---------- ---------
1,109,781 1,096,141
Less accumulated depreciation and amortization 463,434 454,909
---------- ---------
Fixed assets - net 646,347 641,232
Other assets:
Investments and receivables 67,820 68,103
Intangibles and deferred charges 43,252 40,452
Excess of purchase cost over net assets acquired 489,638 492,629
---------- ---------
Total other assets 600,710 601,184
---------- ---------
$ 1,857,692 $ 1,876,275
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due currently $ 470 $ 470
Accounts payable - trade 57,654 80,176
Sundry payables and accrued expenses 67,223 79,612
Income taxes payable 4,824 1,166
Deferred income taxes 40,682 40,171
---------- ---------
Total current liabilities 170,853 201,595
Long-term liabilities:
Long-term debt 904,376 880,957
Other 58,454 57,657
---------- ---------
Total long-term liabilities 962,830 938,614
Deferred income taxes 106,166 106,817
Shareholders' equity:
Common stock issued 684 684
Capital in excess of par value 884,214 884,347
Accumulated deficit (90,663) (85,343)
Accumulated other comprehensive income (loss) (20,724) (14,658)
Cost of common stock held in treasury (155,668) (155,781)
---------- ---------
Total shareholders' equity 617,843 629,249
---------- ---------
$ 1,857,692 $ 1,876,275
========== ==========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Amounts in thousands)
Three Three
months months
ended ended
January 1, January 2,
2000 1999
--------- ---------
Cash flows from operating activities:
Net income (loss) $ (5,320) $ 7,969
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization of fixed assets 15,108 16,164
Provision for doubtful accounts 269 989
Amortization of intangibles and
deferred debt expense 4,667 4,531
Equity in loss of joint ventures 901 944
Deferred income taxes (1,122) 428
Translation gain on liquidation of subsidiary (5,507) 0
Gain on disposal of assets 0 (2,713)
Changes in assets and liabilities:
Customer accounts receivable - net 25,790 41,216
Sundry notes and accounts receivable (1,180) (669)
Inventories (4,704) (15,114)
Prepaid expenses (237) (443)
Accounts payable and accrued expenses (34,911) (35,461)
Change in income taxes payable 3,658 5,324
Other (1,122) (6,920)
--------- --------
Total adjustments 1,610 8,276
--------- --------
Net cash provided (used) by operating activities (3,710) 16,245
--------- --------
Cash flows from investing activities:
Capital expenditures (20,889) (26,804)
Proceeds from sales of assets 517 35,684
Investment in joint ventures 0 (6,766)
Change in investments 785 1,788
--------- --------
Net cash provided (used) by investing activities (19,587) 3,902
--------- --------
Cash flows from financing activities:
Changes in short-term borrowings 0 (400)
Repayments of long-term debt (13,083) (72,212)
Proceeds from issuance of long-term debt 35,000 61,000
Purchase of treasury shares 0 (6,994)
--------- --------
Net cash provided (used) by financing activities 21,917 (18,606)
--------- --------
Net change in cash and cash equivalents (1,380) 1,541
Cash and cash equivalents at beginning of period 17,402 18,163
--------- --------
Cash and cash equivalents at end of period $ 16,022 $ 19,704
========= ========
See notes to consolidated financial statements.
<PAGE>
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
As of and for the three months ended January 1, 2000
Note A.
With respect to interim quarterly financial data, which are unaudited, in
the opinion of Management, all adjustments necessary to a fair statement of
the results for such interim periods have been included. All adjustments were
of a normal recurring nature.
Note B.
Accounts of certain international subsidiaries are included as of dates
three months or less prior to that of the consolidated balance sheets.
Note C.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note D.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands):
Three Months Ended
----------------------
January 1, January 2,
2000 1999
-------- --------
Numerator:
Net income (loss)............... $ (5,320) $ 7,969
======== ========
Denominator:
Denominator for basic earnings per
share.......................... 52,072 57,830
Effect of dilutive securities:
Stock options................ - 16
Performance Unit awards...... - 21
Nonvested stock............... 6 11
-------- --------
Denominator for diluted earnings
per share...................... 52,078 57,878
======== ========
For the three month period ended January 1, 2000, stock options and
Performance Unit Awards that could potentially dilute basic earnings per share
in the future were not included in the diluted earnings per share computation
because they would have been antidilutive. However, such securities were not
significant in these periods. During the first three months of the 2000 fiscal
year, outstanding shares changed due to the issuance of 11,834 shares of
treasury stock to settle Performance Unit awards.
<PAGE>
Note E.
Inventories are summarized as follows (dollar amounts in thousands):
January 1, October 2,
2000 1999
---------- ----------
Inventories at average cost:
Raw materials............................. $ 38,049 $ 34,468
Stock in process.......................... 88,639 88,042
Produced goods............................ 209,137 207,804
Dyes, chemicals and supplies.............. 21,837 21,269
---------- ----------
357,662 351,583
Less excess of average cost over LIFO..... 35,404 34,029
---------- ----------
Total................................. $ 322,258 $ 317,554
========== ==========
Note F.
Comprehensive income (loss) totaled $(11,386,000) and $7,911,000 for
the three months ended January 1, 2000 and January 2, 1999, respectively.
Comprehensive income (loss) consists of net income (loss), foreign currency
translation adjustments during the period, reclassification of $(5,507,000)
for a foreign currency translation gain included in "Other income" arising
from the liquidation of the Company's Canadian subsidiary, and unrealized
gains and losses on securities (net of income tax).
Note G.
The following is combined summarized unaudited financial information of
the Company's investments in affiliates that are accounted for on the equity
method for the three months ended January 1, 2000 and January 2, 1999 (in
millions):
2000 1999
------- -------
Revenue............................. $ 110.4 $ 124.1
Gross profit........................ 10.2 7.1
Net income.......................... 1.5 0.7
The earnings data above includes the earnings recorded by the Company's
textured yarn joint venture combined with the income (loss) of other
affiliates. Under the terms of the textured yarn joint venture agreement, the
Company is entitled to receive the first $9.4 million of earnings for each of
the first five years of operations which began in the June quarter of 1998.
Subsequent to this five-year period, earnings are to be allocated based on
ownership percentages.
Note H.
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 three months ended January 1,
2000 and January 2, 1999.
Three Months Ended
----------------------
January 1, January 2,
2000 1999
---------- ----------
(Dollar amounts in millions)
Net sales
PerformanceWear........ $ 136.2 $ 155.9
CasualWear............. 50.6 71.0
Interior Furnishings... 185.8 174.9
Other.................. 8.5 8.6
-------- --------
381.1 410.4
Less:
Intersegment sales.... (10.1) (3.2)
-------- --------
$ 371.0 $ 407.2
======== ========
Income (loss) before income taxes
PerformanceWear........ $ 4.8 $ 8.6
CasualWear............. (5.4) 7.0
Interior Furnishings... 15.8 16.6
Other.................. (0.3) -
-------- --------
Total reportable
segments............ 14.9 32.2
Corporate expenses..... ( 2.4) (2.8)
Goodwill amortization.. ( 4.4) (4.5)
Interest expense....... (15.6) (14.3)
Other (expense)
income - net......... 6.7 3.6
-------- --------
$ ( 0.8)$ 14.2
======== ========
Intersegment net sales for the three months ended January 1, 2000 were
primarily attributable to PerformanceWear segment sales of $7.2 million and
$2.9 million included in the "Other" category. Intersegment net sales for the
three months ended January 2, 1999 were primarily attributable to the "Other"
category.
Note I.
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities --Deferral of the Effective Date
of FASB Statement No. 133." Reference is made to the Company's 1999 Annual
Report to Shareholders regarding SFAS No. 133. The Company is required to
adopt SFAS No. 133 no later than October 1, 2000, and has not yet determined
what its effect will be on the earnings and financial position of the Company.
Note J.
During the March quarter of 1999, the Company implemented a
comprehensive reorganization plan primarily related to its apparel fabrics
business. The apparel fabrics operations had been running at less than full
capacity during the preceding 9-12 month period, anticipating that the surge
of low-priced garment imports from Asia might only be the temporary result of
the Asian financial crisis. The Company viewed 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 included:
(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 were
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 1999 quarter;
three plants in North Carolina located in Cramerton (sold in April 1999),
Mooresville, and Statesville were closed during the June 1999 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 2,325 employees as of January 1, 2000).
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 January 1, 2000 and are no longer in use, were written down to their
estimated fair values less costs of sale. Assets held for sale continue to be
included in the Fixed Assets caption on the balance sheet in the amount of
$13.7 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, are charged to operations as incurred. Through January 1, 2000, $29.0
million of such costs have been incurred and charged to operations, consisting
primarily of inventory losses and plant carrying costs, including $1.9 million
and $27.1 million incurred and charged to operations during the December 1999
quarter and 1999 fiscal years, respectively.
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
Payments.............................. (1.4) (0.3)
------ -----
Balance at January 1, 2000............ $ 6.8 $ 1.4
====== =====
The Company has substantially completed all of the 1997 and 1996
restructuring efforts with the exception of the divestitures of certain
machinery and equipment and real estate. The carrying amount of such assets at
January 1, 2000, 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.
The Company, through its Real Estate and Purchasing departments, is
actively marketing the affected real estate and equipment currently available
for sale or to be available upon cessation of operations. The active plan to
sell the assets includes the preparation of a detailed property marketing
package to be used in working with real estate and used equipment brokers and
other channels, including other textile companies, the local Chamber of
Commerce and Economic Development and the State Economic Development
Department. The Company anticipates that the divestitures of real estate and
equipment will be completed within 12 to 18 months from the date of closing.
However, the actual timing of the disposition of these properties may vary due
to their locations and market conditions.
<PAGE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results Of Operations
The Company reported a net loss of $5.3 million, or $(0.10) per share
for the first quarter of fiscal year 2000, compared with net earnings of $8.0
million or $0.14 per share in the first quarter a year ago. Excluding costs
related to restructuring initiated in 1999, this year's first quarter loss was
$(0.08) per share. The loss in the quarter was primarily attributable to the
denim business in the CasualWear segment, which represented approximately 14%
of the Company's sales. Combined sales of the two apparel segments dropped
17.7% in line with capacity reductions made last year, compounded by weakness
in denim markets. The volume and pricing of denim fabric sales throughout the
industry have been hurt by the current global oversupply of denim fabrics. The
interior furnishings segment, which accounted for half of Burlington's overall
sales volume, experienced a 6.2% increase in sales.
Overall, the Company is optimistic that it can achieve improvement in
performance in the second half of this fiscal year. The major costs to
streamline the organization and put new capabilities in place have already
been incurred. As a result, capital expenditures and start-up costs will
decline. The Company has excellent global resources and growing ability to
provide consumer-ready products as well as fabrics, and the Company's new
product flow is accelerating. In addition, the Company is placing strong
strategic emphasis on new applications of advanced technology.
Comparison of Three Months ended January 1, 2000 and January 2, 1999.
NET SALES: Net sales for the first quarter of the 2000 fiscal year were
$371.0 million, 8.9% lower than the $407.2 million recorded for the first
quarter of the 1999 fiscal year. Export sales totaled $46 million and $56
million in the 2000 and 1999 periods, respectively.
PerformanceWear: Net sales for the PerformanceWear segment for the
first quarter of the 2000 fiscal year were $136.2 million, 12.6% lower than
the $155.9 million recorded in the first quarter of the 1999 fiscal year.
Excluding $4.2 million sales reduction due to the sale of the Burlington
Madison Yarn division, net sales of products for the PerformanceWear segment
were 10.2% lower than in the prior year. This decrease was due primarily to
15.2% lower prices and product mix, offset by 5.0% higher volume.
CasualWear: Net sales for the CasualWear segment for the first quarter
of the 2000 fiscal year were $50.6 million, 28.7% lower than the $71.0 million
recorded in the first quarter of the 1999 fiscal year. Excluding $7.7 million
sales reduction due to exiting the Sportswear division, net sales of products
for the CasualWear segment were 20.1% lower than in the prior year. This
decrease was due primarily to 8.7% lower volume and 11.4% lower prices and
product mix.
Interior Furnishings: Net sales of products for interior furnishings
markets for the first quarter of the 2000 fiscal year were $185.8 million,
6.2% higher than the $174.9 million recorded in the first quarter of the 1999
fiscal year. This increase was due primarily to 6.8% higher volume, partially
offset by 0.6% lower selling prices and mix.
Intersegment Sales: Increase in intersegment net sales was primarily
attributable to PerformanceWear sales to Interior Furnishings of fabrics for
end customer use of interior furnishings.
SEGMENT INCOME: Total reportable segment income for the first quarter
of the 2000 fiscal year was $14.9 million compared to $32.2 million for the
first quarter of the 1999 fiscal year.
PerformanceWear: Income of the PerformanceWear segment for the first
quarter of the 2000 fiscal year was $4.8 million compared to $8.6 million
recorded for the first quarter of the 1999 fiscal year. This decrease was due
primarily to $3.7 million reduction in margins due to price/mix, $1.3 million
runout costs associated with the 1999 apparel restructuring which have been
charged to operations, including relocation of employees and equipment and
plant carrying and other costs, and start-up costs of $1.1 million related to
the Company's new Mexican operations, partially offset by lower selling,
general and administrative expenses of $2.2 million resulting from reductions
related to the 1999 restructuring.
CasualWear: Income (loss) of the CasualWear segment for the first
quarter of the 2000 fiscal year was $(5.4) million compared to $7.0 million
recorded for the first quarter of the 1999 fiscal year. This decrease was due
primarily to $6.6 million lower margins resulting from lower volume and
inefficiencies associated with production levels, $6.3 million reduction due
to price/mix, $1.5 million higher raw material costs, and $0.6 million runout
costs associated with the 1999 apparel restructuring which have been charged
to operations, partially offset by the absence of Sportswear losses of $1.1
million and the absence of $1.1 million of Mexican start-up costs included in
the 1999 period.
Interior Furnishings: Income of the interior furnishings products
segment for the first quarter of the 2000 fiscal year was $15.8 million
compared to $16.6 million recorded for the first quarter of the 1999 fiscal
year. This decrease was due primarily to $5.2 million reduction in margins due
to price/mix offset by $3.3 million lower raw material costs and lower
selling, general and administrative expenses of $1.2 million.
CORPORATE EXPENSES: General corporate expenses not included in segment
results were $2.4 million for the first quarter of the 2000 fiscal year
compared to $2.8 million in the first quarter of the 1999 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: Operating income before
interest and taxes for the first quarter of the 2000 fiscal year was $6.3
million compared to $22.6 million for the first quarter of the 1999 fiscal
year. Amortization of goodwill was $4.4 million and $4.5 million in the 2000
and 1999 periods, respectively.
INTEREST EXPENSE: Interest expense for the first quarter of the 2000
fiscal year was $15.6 million, or 4.2% of net sales, compared with $14.3
million, or 3.5% of net sales, in the first quarter of the 1999 fiscal year.
The increase was mainly attributable to the effect of higher borrowing levels
and, to a lesser extent, higher interest rates.
OTHER EXPENSE (INCOME): Other income for the first quarter of the 2000
fiscal year was $6.7 million consisting principally of a $5.5 million
translation gain on the liquidation of the Company's Canadian subsidiary and
interest income of $1.2 million. Other income for the first quarter of the
1999 fiscal year was $3.6 million consisting principally of a gain of $2.7
million on the disposal of the Burlington Madison Yarn division and interest
income of $0.9 million.
INCOME TAX EXPENSE: Income tax expense of $4.5 million was recorded for
the first quarter of the 2000 fiscal year in comparison with $6.2 million for
the prior year period. The 2000 period includes a $5.7 million charge related
to the liquidation of the Company's Canadian subsidiary and U.S. taxes on
income previously considered permanently invested. Excluding the tax on the
Canadian liquidation, total income tax expense/benefit is different from the
amounts obtained by applying statutory rates to the income/loss 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 first
quarter of the 2000 fiscal year was $(5.3) million, or $(0.10) per share
(diluted), in comparison with $8.0 million, or $0.14 per share (diluted), for
the first quarter of the 1999 fiscal year. Net loss for the first quarter of
the 2000 fiscal year included a net charge of $(0.02) per share related to
run-out costs included in cost of sales resulting from the 1999 restructuring.
Liquidity and Capital Resources
During the first three months of the 2000 fiscal year, the Company had net
borrowings of long-term debt of $21.9 million. Debt proceeds and cash balances
were primarily used for capital expenditures totaling $20.9 million and $3.7
million for operating activities. At January 1, 2000, total debt of the
Company (consisting of current and non-current portions of long-term debt and
short-term borrowings) was $904.8 million compared with $881.4 million at
October 2, 1999 and $802.3 million at January 2, 1999.
The Company's principal uses of funds during the next several years will
be for capital investments (including the funding of acquisitions and
participations in joint ventures), repayment and servicing of indebtedness and
working capital needs. The Company intends to fund its financial needs
principally from net cash provided by operating activities and, to the extent
necessary, from funds provided by the credit facilities described in this
section. The Company believes that these sources of funds will be adequate to
meet the Company's foregoing needs.
In August 1997, the Company issued $150.0 million principal amount of
7.25% notes due August 1, 2027 ("Notes Due 2027"). Proceeds from the sale were
used to prepay revolving loans under its bank credit agreement on the same
date. The Notes Due 2027 will be redeemable as a whole or in part at the
option of the Company at any time on or after August 2, 2007, and will also be
redeemable at the option of the holders thereof on August 1, 2007 in amounts
at 100% of their principal amount. In September 1995, the Company issued
$150.0 million principal amount of 7.25% notes due September 15, 2005 ("Notes
Due 2005"). The Notes Due 2005 are not redeemable prior to maturity. The Notes
Due 2027 and the Notes Due 2005 are unsecured and rank equally with all other
unsecured and unsubordinated indebtedness of the Company.
The Company has a $550.0 million unsecured revolving credit facility that
expires in March, 2001. At February 7, 2000, the Company had approximately
$206.5 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 senior unsecured debt ratings. In the event that both
of the Company's debt ratings improve, the interest rate and facility fees
would be reduced. Conversely, deterioration in both of the Company's debt
ratings would increase the interest rate and facility fees. In January 2000,
Moody's lowered the Company's debt rating from Ba1 to Ba2; the Company's debt
rating by Standard & Poor's remains at BB plus.
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.
In November 1998, the Company established a $105 million credit
facility with a group of banks 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 semi-annually 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 February 7, 2000, the Company had no 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 February 7, 2000, $148.7 million in borrowings
under this facility with original maturities of up to 154 days was
outstanding.
Because the Company's obligations under the bank credit facilities and
the Receivables Facility bear interest at floating rates, the Company is
sensitive to changes in prevailing interest rates. The Company uses derivative
instruments to manage its interest rate exposure, rather than for trading
purposes.
Commodity Price Risk
Exposure to changes in commodity prices is managed primarily through
the Company's procurement practices. The Company enters into contracts to
purchase cotton under the Southern Mill Rules ratified and adopted by the
American Textile Manufacturers Institute, Inc. and American Cotton Shippers
Association. Under these contracts and rules, nonperformance by either the
buyer or seller may result in a net cash settlement of the difference between
the current market price of cotton and the contract price. If the Company
decided to refuse delivery of its open firm commitment cotton contracts at
January 1, 2000, and market prices of cotton decreased by 10%, the Company
would be required to pay a net settlement provision of approximately $4.1
million. However, the Company has not utilized this net settlement provision
in the past, and does not anticipate using it in the future.
Year 2000 Issue Update
The Company did not experience any significant malfunctions or errors
in its operating or business systems when the date changed from 1999 to 2000.
Based on operations since January 1, 2000, the Company does not expect any
significant impact on its ongoing business as a result of the "Year 2000
issue." However, it is possible that the full impact of the date change, which
was of concern due to computer programs that use two digits instead of four
digits to define years, has not been fully recognized. The Company believes
that any unforeseen problems are likely to be minor and correctable. In
addition, the Company could still be negatively affected if its customers or
suppliers are adversely affected by the Year 2000 or similar issues. The
Company currently is not aware of any significant Year 2000 or similar
problems that have arisen for its customers and suppliers.
Forward-Looking Statements
With the exception of historical information, the statements contained
in Management's Discussion and Analysis of Results of Operations and Financial
Condition and in other parts of this report include statements that are
forward-looking statements within the meaning of applicable federal securities
laws and are based upon the company's current expectations and assumptions,
which are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated. Such risks and
uncertainties include, among other things, global economic activity, the
success of the company's overall business strategy, the company's
relationships with its principal customers and suppliers, the success of the
company's expansion in other countries, the demand for textile products, the
cost and availability of raw materials and labor, the company's ability to
finance its capital expansion and modernization programs, the level of the
company's indebtedness and the exposure to interest rate fluctuations,
governmental legislation and regulatory changes, and the long-term
implications of regional trade blocs and the effect of quota phase-out and
lowering of tariffs under the WTO trade regime. Other risks and uncertainties
may also be described from time to time in the Company's other reports and
filings with the Securities and Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits.
--------
10.4 Burlington Industries, Inc. Supplemental Executive
Retirement Plan and form of participant agreement.
10.14 Agreement dated as of January 1, 2000, between the
Company and John P. Ganley.
27 Financial Data Schedule.
b) Reports on Form 8-K.
-------------------
The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
By /s/ CHARLES E. PETERS, JR.
----------------------------
Date: February 14, 2000 Charles E. Peters, Jr.
Senior Vice President and
Chief Financial Officer
By /s/ CARL J. HAWK
------------------
Date: February 14, 2000 Carl J. Hawk
Controller
BURLINGTON INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. Purpose. The Burlington Industries, Inc. Supplemental Executive
Retirement Plan (the "Plan"), effective as of December 1, 1999, is intended to
enhance the ability of Burlington Industries, Inc., a Delaware corporation
("Burlington"), and its affiliates, joint ventures and subsidiaries
(collectively, the "Company"), to compensate certain key senior executives of
the Company for valuable services rendered to the Company; to attract, retain
and motivate such persons by providing them with supplemental retirement
benefits; and to facilitate management succession for the Company.
2. Certain Definitions. When used herein, the words and phrases
below shall have the meanings set forth, unless a different
meaning is clearly required by the context. Masculine pronouns
include feminine pronouns wherever used and vice versa.
2.1 "Agreement" means the Supplemental Executive Retirement Plan
Agreement between Burlington and each Participant,
substantially similar to the form attached hereto as Exhibit
A, which sets forth the terms of the Participant's benefits
under the Plan.
2.2 "Board of Directors" means the Board of Directors of
Burlington.
2.3 "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
2.4 "Committee" means the Executive Benefits Administration
Committee, consisting of at least three senior executive
officers selected by the Chief Executive Officer of
Burlington, which is responsible for the administration and
interpretation of the Plan and the Agreements.
2.5 "Designated Beneficiary" means the person or persons
designated by a Participant to receive any benefits payable
with respect to the Participant under the Plan following the
Participant's death. To name a Designated Beneficiary, a
Participant must complete a beneficiary designation form
substantially similar to the form attached hereto as Exhibit
B, and such form must be filed with the Committee prior to the
Participant's death.
2.6 "Disability" occurs, and a Participant becomes "Disabled",
when the Participant has become physically or mentally
incapable of fully performing services to and as required by
the Company, and such incapacity continues, or reasonably may
be expected to continue, for more than two months as
determined by a physician mutually agreed upon by the Company
and the Participant or, in the absence of mutual agreement, a
physician selected by the Company, which determination shall
be final and conclusive.
2.7 "Measurement Date" is the first to occur of the Participant's
Retirement Date or the date of the Participant's death.
2.8 "Monthly Benefit Base" means the greater of the monthly base
salary of a Participant as of the January 1 occurring with or
immediately preceding the Measurement Date or the average
monthly base salary as of January 1 for the previous five
years (including the Measurement Date should it occur on
January 1). Monthly base salary is the total of all
remuneration for services which is payable by the Company to a
Participant as salary in a fixed amount on a monthly basis.
Such remuneration includes salary deferred pursuant to an
election permitted under Section 401(k) of the Code, any
amount which represents a Participant's contribution to a plan
described in Section 125 of the Code, and commissions to the
extent such commissions are included in the employee benefit
participation base as established for similarly compensated
employees within the division, affiliate, subsidiary or joint
venture of the Company by which the Participant is employed.
Such remuneration does not include overtime pay, bonuses,
group long-term disability benefits or other special payments
to salaried employees.
2.9 A "Participant" is an employee of the Company who is a member
of Burlington's management committee, a division president or
a key senior executive of the Company, is recommended for
participation in the Plan by the Committee and is approved by
the Chief Executive Officer of Burlington, and who enters into
an Agreement.
2.10 "Retirement Date" means the first to occur of the following:
(i) the first day of the month following the month in which a
Participant's 65th birthday occurs, (ii) if a Participant
becomes Disabled, such early retirement date as may be
selected by the Participant, (iii) if a Participant is age 50
or more and has completed fewer than 10 years of continuous
service, such early retirement date as may be approved in
writing by the Committee or (iv) if a Participant is age 50 or
more and has completed at least 10 years of continuous service
with the Company, such early retirement date as may be
selected by the Participant.
2.11 "Survivor" means the Designated Beneficiary or, if none, the
estate of a Participant.
3. Supplemental Executive Retirement Benefits. The Plan provides
for the following benefits:
3.1 The "Pre-Retirement Survivor Benefit" is payable to the
Survivor of a Participant who:
(a) dies prior to his Retirement Date,
(b) has at least three continuous years of service with the
Company prior to death or, if he has not elected to retire as
a result of Disability, has such service prior to becoming
Disabled, and
(c) has not terminated employment with the Company for any
reason other than death or Disability.
Such benefit will be paid in 120 equal monthly installments
commencing the month immediately following the Participant's
death. For those Participants whose participation in the
predecessor Supplemental Executive Benefit Plan commenced on
or before January 1, 1984, the amount of each monthly payment
will be 50% of the Participant's Monthly Benefit Base. For all
other Participants, the amount of each monthly payment will be
a percentage, determined by the Participant's age at death, of
the Participant's Monthly Benefit Base, as follows:
Prior to age 60 - 50% Age 62 - 35%
Age 60 - 45% Age 63 - 30%
Age 61 - 40% Age 64 - 25%
3.2 The "Supplemental Retirement Benefit" is payable to the
Participant following the Participant's Retirement Date. Such
benefit will be paid in 120 equal monthly installments
commencing the month immediately following the Participant's
Retirement Date, and the amount of each monthly payment will
be a percentage (20%, 22.5% or 25%) of the Participant's
Monthly Benefit Base as determined by the Committee and
specified in the Participant's Agreement.
A Participant who becomes Disabled or a Participant who has
reached age 50 or more and has at least 10 years of continuous
service with the Company shall have the irrevocable right to
elect early retirement. In addition, the Committee, in its
sole discretion, may give written approval of a Participant's
request to elect early retirement at age 50 or thereafter.
Upon any such election, the Supplemental Retirement Benefit
payable to the Participant will be reduced and will be a
percentage of the amount that would have been payable at age
65, based on his age at retirement (the benefit payable to a
Disabled Participant who elects early retirement prior to age
50 will be paid at the age 50 percentage), as follows:
Age 50 - 35% Age 55 - 60% Age 60 - 85%
Age 51 - 40% Age 56 - 65% Age 61 - 88%
Age 52 - 45% Age 57 - 70% Age 62 - 91%
Age 53 - 50% Age 58 - 75% Age 63 - 94%
Age 54 - 55% Age 59 - 80% Age 64 - 97%
If a Participant dies prior to the end of the 120-month
period, any remaining Supplemental Retirement Benefit payments
shall be paid to such Participant's Survivor. If any
Supplemental Retirement Benefit payments have been made to or
on behalf of a Participant, the Survivor will not be entitled
to any Pre-Retirement Survivor Benefit payments.
Should a Disabled Participant who is receiving Supplemental
Retirement Benefit payments cease to be Disabled and return to
work with the Company, such payments shall cease and the total
amount paid to such Participant shall be deducted from any
future benefits payable pursuant to the Plan.
3.3 Upon the request of a Participant or Survivor, the Committee,
in its sole discretion, may elect to pay any of the benefits
described herein in an actuarially equivalent, present value,
cash lump sum, such present value to be determined using the
applicable federal long-term interest rate.
4. Change of Control. Notwithstanding any other provisions of the
Plan, if a Change of Control (as defined below) occurs, a
Participant's rights to receive any benefits under the Plan
shall become fully vested and non-forfeitable and shall be
payable at the Participant's Retirement Date or death at 100%
of the benefit level regardless of age and service
requirements and percentage limitations otherwise set forth
herein. Further, a Participant whose employment with the
Company is terminated for Good Reason by the Participant or is
terminated not for Cause by the Company (both as defined
below) within two years following a Change of Control shall be
entitled to receive the Post-Retirement Supplemental Benefit
immediately following such termination.
4.1 "Change of Control" means that any of the following events
shall have occurred:
(a) Burlington is merged or consolidated or reorganized into or with
another corporation, person or entity, and as a result of such
transaction less than a majority of the combined voting power of the
then outstanding securities of such corporation, person or entity
immediately after such transaction are held in the aggregate by the
holders of Voting Stock (as that term is hereinafter defined) of
Burlington immediately prior to such transaction;
(b) Burlington sells or otherwise transfers all or substantially all
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
transaction is held in the aggregate by the holders of Voting Stock
immediately prior to such transaction;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 of the
Securities Exchange Act of 1934 (the "Exchange Act") by a person other
than a person that satisfies the requirements of Rule 13d-1(b)(1) under
the Exchange Act for filing such report on Schedule 13G, which report
as filed discloses that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become
the beneficial owner (as the term "beneficial owner" is defined under
Rule 13d-3 under the Exchange Act) of securities representing 12.5% or
more of the combined voting power of the then-outstanding securities
entitled to vote generally in the election of Directors of Burlington
("Voting Stock");
(d) Burlington files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A that a change in control of
Burlington has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals who at
the beginning of any such period constitute the members of the Board of
Directors cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by
Burlington's stockholders, of each Director of Burlington first elected
during such period was approved by a vote of at least two-thirds of the
Board of Directors then still in office who were Directors of
Burlington at the beginning of any such period.
Notwithstanding the foregoing provisions of Clause (c) or (d) hereof, a
Change of Control shall not be deemed to have occurred for purposes of
the Plan solely because (i) Burlington, (ii) an entity in which
Burlington directly or indirectly beneficially owns 50% or more of the
voting securities, or (iii) any Burlington-sponsored employee stock
ownership plan or any other employee benefit plan of Burlington (or any
trustee of any such plan on its behalf), either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, or Form 8-K or Schedule 14A under the
Exchange Act, disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 12.5% or otherwise, or because Burlington
reports that a Change of Control of Burlington has or may have occurred
or will or may occur in the future by reason of such beneficial
ownership.
4.2 Upon a Change of Control, a Participant or Survivor who is
receiving benefit payments under the Plan or who becomes eligible to
receive benefit payments within two years thereafter may demand that
all payments to be made, or remaining to be made, be accelerated and
paid to the Participant or Survivor in an actuarially equivalent,
present value, cash lump sum, such present value to be determined using
the applicable federal long-term interest rate.
5. Effect of Certain Events upon Payment Rights. The payment of or
continuation of the payment of any of the benefits provided for herein
is upon the express condition that (i) without prior, written consent
of the Compensation and Benefits Committee of the Board of Directors,
the Participant will not directly or indirectly render any advisory
services to or become employed by or participate or engage in any
business materially competitive with any of the businesses of the
Company, either during or after his or her employment with the Company,
(ii) the Participant will not have willfully engaged in any conduct
constituting fraud against the Company nor materially damaging to the
Company's interests, and (iii) the Participant is not terminated for
Cause. The provisions of this paragraph do not apply to any Participant
whose termination of employment occurs within two years following a
Change of Control and is a termination without Cause or is a voluntary
termination by the Participant with Good Reason.
A termination for "Cause" means a termination of employment with the
Company 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, (y) any other act or omission which is injurious to the financial
condition or business reputation of the Company, or (z) the willful failure or
refusal of the Participant to substantially perform the material duties of the
Participant's position with the Company.
"Good Reason" means, with respect to the Participant, (y) "good reason"
as defined in an employment agreement applicable to the Participant, or (z) 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 (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.
6. Miscellaneous.
6.1 Nothing in the Plan shall be construed as giving the
Participant the right to be retained in the employ of the
Company at all or for any specified period in any particular
position, or any right to any payment whatsoever except to the
extent provided for by the Plan.
6.2 Notwithstanding any other provisions hereof, if any person
entitled to receive payments hereunder (the "recipient") shall
be physically or mentally or legally incapable of receiving or
acknowledging receipt of such payment, the Company, upon the
receipt of satisfactory evidence that another person or
institution is maintaining the recipient and that no guardian
or committee has been appointed for the recipient, may cause
such payment to be made to such person or institution so
maintaining the recipient.
6.3 Nothing in the Plan and no action taken pursuant to the
provisions of the Plan shall create or shall be construed as
creating a trust of any kind, or a fiduciary relationship
between the Company and the Participant or any other person.
Any amounts which are or may be set aside hereunder shall
continue for all purposes to be a part of the general funds of
the Company, and no person other than the Company shall, by
virtue of the provisions of the Plan, have any interest in
such funds. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall
be no greater than the right of any unsecured general creditor
of the Company.
6.4 The benefits payable under the Plan may not be assigned by the
Participant or any other person nor anticipated in any way.
6.5 The Compensation and Benefits Committee of the Board of
Directors, in its sole discretion, may terminate, suspend or
amend the Plan at any time or from time to time, in whole or
in part and the Chief Executive Officer of Burlington and the
Committee may, in their sole discretion, revoke a
Participant's participation in the Plan; provided, that no
such termination, suspension, amendment or revocation made
following vesting of the right to receive any benefit or the
date payments commence hereunder will affect the right of any
person to receive benefits described hereunder at the time of
such termination, suspension, amendment or revocation.
Following a Change of Control, the Plan may not be amended,
revoked or terminated to the detriment of any Participant
without the express written consent of such Participant.
6.6 The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware.
IN ACCORDANCE WITH the authority granted by the Compensation and
Benefits Committee of the Board of Directors of Burlington Industries, Inc. at
its meeting on July 20, 1999, the Plan has been approved by its Chief Executive
Officer as of the day and year first above stated.
BURLINGTON INDUSTRIES, INC.
By: /s/ George W. Henderson, III
Chief Executive Officer
Attest: /s/Alice Washington Grogan
Secretary
[Corporate Seal]
EXHIBIT A
BURLINGTON INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AGREEMENT
THIS EXECUTIVE RETIREMENT AGREEMENT, made and entered into as of the
____ day of December, 1999, by and between BURLINGTON INDUSTRIES, INC., a
Delaware corporation ("Burlington"), its affiliates, joint ventures and
subsidiaries (collectively, the "Company"), and ______________________________
(the "Executive"), a key senior executive of the Company;
RECITALS
The Executive is an employee of the Company who is a member of
Burlington's management committee, a division president or a key senior
executive of the Company, has been recommended for participation in the
Burlington Industries, Inc. Supplemental Executive Retirement Plan (the "Plan")
by the Executive Benefits Administration Committee (the "Committee") and
approved by the Chief Executive Officer of Burlington and as such has rendered
and is expected to continue to render valuable services on behalf of the
Company, and has entered into this Agreement. The Company desires to provide the
Executive with supplemental retirement benefits partially in recognition of such
services. In addition, the Company has determined that providing such benefits
will make its benefits package more competitive with packages offered by many
other employers and will facilitate its management succession planning.
NOW, THEREFORE, the Company and the Executive hereby mutually agree as
follows:
1. The terms, including capitalized terms used herein, and provisions of
the Plan, a copy of which has been provided to the Executive, are
hereby made a part of this Agreement as if recited herein and the
parties hereto agree to be bound by such terms and provisions. Any
discrepancies between this Agreement and the Plan shall be resolved by
the Committee by reference to the terms of the Plan.
2. The Compensation and Benefits Committee of the Board of Directors, in
its sole discretion, may terminate, suspend or amend the Plan and this
Agreement at any time or from time to time, in whole or in part, and
the Chief Executive Officer and the Committee may, in their sole
discretion, revoke the Executive's participation in the Plan; provided,
that no such termination, suspension, amendment or revocation made
following vesting of the right to receive any benefit or the date
payments commence hereunder will affect the right of any person to
receive benefits described hereunder at the time of such termination,
suspension, amendment or revocation. Following a Change of Control,
neither the Plan nor this Agreement may be amended, revoked or
terminated to the detriment of any Participant without the express
written consent of such Participant.
3. The amount of each monthly installment of any Supplemental Retirement
Benefit payable to the Executive shall be _______% of his Monthly
Benefit Base. Such amount may be reduced in certain circumstances as
provided in Section 3.2 of the Plan.
4. This Agreement shall be administered and interpreted by the Committee
or its duly authorized designee, under such rules and regulations as it
may adopt from time to time, and all determinations of the Committee
shall be conclusive and binding upon the Executive and any other
parties interested in the benefits provided hereunder.
5. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
6. This Agreement and the Plan amend, replace and supersede all prior
Supplemental Executive Benefit Plans, and agreements and
understandings, written or oral, relating thereto, between the
Executive and the Company.
IN WITNESS WHEREOF, the Plan has been executed on behalf of the Company
by its duly authorized officers and the Executive has executed this Agreement as
of the day and year first above stated.
AGREED TO AND ACCEPTED:
______________________________(Seal)
Executive
AGREEMENT, made and entered into as of the 1st day of January, 2000,
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, 2000, 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, 2000
and continue until December 31, 2001, 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 Seventy-five Thousand Dollars ($275,000) 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
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