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.
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.
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.
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.
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.
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.
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.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits.
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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.
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The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
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.
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Date: February 14, 2000 Charles E. Peters, Jr.
Senior Vice President and
Chief Financial Officer
By /s/ CARL J. HAWK
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Date: February 14, 2000 Carl J. Hawk
Controller