UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 3, 1998
Commission file number 1-10984
BURLINGTON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1584586
(State of incorporation) ( I.R.S. Employer
Identification No.)
3330 West Friendly Avenue
Greensboro, N.C. 27410
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (336) 379-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, New York Stock Exchange
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
As of December 7, 1998, the aggregate market value of Registrant's voting stock
held of record by nonaffiliates of Registrant was approximately $582,134,324
(based upon the closing composite price on the New York Stock Exchange on that
date), excluding Treasury shares and, without acknowledging affiliate status,
470,316 shares held beneficially by Directors and executive officers as a group.
As of December 7, 1998, there were outstanding 56,919,705 shares of Registrant's
Common Stock, par value $.01 per share, and 704,301 shares of Registrant's
Nonvoting Common Stock, par value $.01 per share.
Documents Incorporated by Reference
Portions of Registrant's 1998 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV hereof.
Portions of Registrant's Proxy Statement dated December 18, 1998 in connection
with its Annual Meeting of Stockholders to be held on February 4, 1999 are
incorporated by reference into Part III hereof.
PART I
Item 1. Business
General
The Corporation is one of the world's largest and most diversified
manufacturers of textile products. It is a leading developer, marketer and
manufacturer of fabrics and other textile products used in a wide variety of
apparel and interior furnishings end uses. The Corporation operates in two
principal industry segments, products for apparel markets and products for
interior furnishings markets. References herein to the "Corporation" mean
Burlington Industries, Inc. ("Burlington") and its subsidiaries.
As of October 3, 1998, the Corporation operated 32 U.S. manufacturing
plants in six states and three manufacturing plants in Mexico (two additional
plants are substantially completed). It also held a 50% interest in two joint
ventures, one in India with one manufacturing plant and one in Mexico with one
manufacturing plant, and a minority interest in a U.S. yarn manufacturing
venture. At October 3, 1998, the Corporation employed approximately 18,900
persons.
Products for Apparel Markets
Worsted and worsted wool blend fabrics. The Corporation is the
leading domestic manufacturer of woven worsted and worsted blend fabrics
supplied to manufacturers of men's and women's apparel as well as to major
clothing retailers. Over the past two years, its product development efforts
have produced many high value-added products using finer wools, creative blends
and innovative nonwool fabrics. Products made with its fabrics are sold to the
moderate, better and bridge segments of men's and women's apparel. The
Corporation also sells worsted wool and wool blend fabrics to manufacturers of
better career and uniform apparel.
Woven synthetic fabrics. The Corporation is a leading manufacturer of
woven synthetic fabrics made with 100% polyester, 100% nylon and polyester
blended with wool, rayon or other fibers that are supplied to manufacturers of a
wide variety of apparel, activewear, interior furnishings, medical and
industrial products.
The Corporation produces lightweight polyester and polyester blend fabrics
and 100% nylon fabrics for men's, women's and children's wear sold in a variety
of price ranges, for high performance sportswear and activewear and for a
variety of other apparel, medical, interior furnishings and industrial uses. It
also produces heavyweight polyester fabrics for use in the manufacture of
slacks, suits, skirts and sport coats as well as in the manufacture of military
and law enforcement uniforms.
The Corporation is a leading manufacturer of waterproof, water repellent,
breathable and moisture management synthetic fabrics used by makers of outerwear
and high performance sportswear and activewear. A number of its products,
including the Ultrex(R) line of breathable, waterproof fabrics and the Xalt(TM)
family of composite, laminate fabrics, are used in leading brands of skiwear and
other activewear and by suppliers to leading activewear retailers. The
Corporation also produces performance fabrics for the reusable health care
market and contamination control environments.
The Corporation also markets lightweight, reusable, protective barrier
fabrics under the Maxima(R) brand name to makers of, among other things,
clothing worn by hospital personnel and by industrial workers who are required
to work in clean and static-free environments.
The Corporation is a leader in developing new applications and end uses
for synthetic fibers, such as fabrics made with microdenier filament yarn, a
yarn made from fiber thinner than silk. These products combine a natural
appearance and touch with the performance characteristics of synthetic fibers.
The Corporation's microdenier fabrics are currently being used in men's and
women's apparel fabrics, activewear, protective medical clothing and in home
furnishings. The Corporation is the leading domestic producer of microdenier
fabrics made from 100% polyester and polyester blended with wool or rayon.
Denim fabrics. The Corporation is a leading manufacturer of fashion,
value-added, specialty denim fabrics. It produces a diversified product line
that services the major brands with innovative and engineered products for denim
customization. It is a major supplier to all segments of the branded, designer
and private label business.
The Corporation has a 50% interest in a joint venture with Mafatlal
Industries Limited to manufacture denim in India. Production began in mid-1997.
It also has entered into a 50% joint venture ownership arrangement with
International Garment Processors, a leader in denim jeans processing. The
venture will commence operation in late 1999 in a new facility under
construction in the State of Chihuahua, Mexico.
Cotton fabrics. The Corporation produces 100% cotton and cotton/polyester
blend woven and knitted fabrics to serve the better men's sportswear and uniform
markets.
Apparel Services. The Corporation also offers customers the option of
purchasing fabrics in the form of customer-specified garments. To date, the
Corporation has contracted for cut and sew services with outside contractors,
principally in Mexico. During 1998, the Corporation commenced a multi-year
effort to expand its direct garment-making capabilities through the construction
in Mexico of a number of state-of-the-art facilities and will equip and train
the work forces with the aid of a leading apparel consultant. Investment in
these facilities over the next three years will exceed $80 million. When coupled
with the yarn, fabric and processing facilities currently under construction in
Mexico (as described above and below), the Corporation will be able to convert
raw materials to shelf-ready denim, worsted and worsted wool blend garments
totally within Mexico.
Yarn Disposition. The Corporation disposed of the assets of its Burlington
Madison Yarn division during the past year. The division was a major supplier of
textured and spun synthetic yarns. On May 30, 1998, the division's textured yarn
manufacturing assets, along with the textured yarn assets of Unifi, Inc., were
transferred into a newly-formed company. The Corporation holds a minority
interest in the venture, which will be managed by Unifi. On November 6, 1998,
the remaining assets of the division were sold to Carolina Mills. The
Corporation entered into long-term yarn supply agreements with each of these
entities.
Mexican operations. In Mexico, the Corporation manufactures woven fabrics
for apparel which are sold in the local market and, in the form of garments,
exported to the United States. In December 1997, construction commenced on new
facilities in Mexico to produce worsted wool and denim fabric and for a joint
venture to produce cotton yarns, principally for use in denim fabric. Yarn is
being produced by the joint venture facility, currently at partial capacity, and
is being consumed at the Corporation's Mississippi denim facility pending
commencement of denim production at the Mexican site scheduled for Spring 1999.
Worsted fabric production will commence late in the 1999 fiscal year.
Products for Interior Furnishings Markets
Interior furnishings fabrics and products. The Corporation is a leading
manufacturer of ready-made and made-to-measure draperies, window coverings and
coordinating bedroom ensembles, mattress ticking, upholstery fabrics, and
decorative fabrics for use by makers of bedroom ensembles, draperies and window
coverings.
The product lines consist of:
o ready-made and made-to-measure draperies, window coverings, coordinating
bedroom ensembles, table linens and throws sold under the Burlington
House(R) name to department and specialty stores, under the Burlington
House American Lifestyle(TM) name to discount stores and on a private
label basis to several major retailers;
o woven jacquard mattress ticking (primarily damasks) sold to all major
domestic manufacturers of mattresses for both the residential and
institutional markets (The Corporation is the leading manufacturer of
jacquard mattress ticking supplied to domestic manufacturers of
mattresses. Mattress ticking is the exterior fabric surface of a
finished mattress. The Corporation believes it produces the widest
variety of ticking patterns of any domestic manufacturer.);
o woven jacquard and textured fabrics for residential upholstered
furniture which are marketed to a broad range of furniture
manufacturers;
o woven jacquard and other decorative fabrics used by manufacturers of
bedroom ensembles, comforters, draperies and window coverings.
The Corporation manufactures flame resistant fabrics for use as draperies
and bed coverings in major hotels and health care facilities and on cruise
ships. Additionally, its fabrics are used as window coverings in the home and by
makers of upholstered furniture and wall coverings for commercial environments.
The Corporation recently introduced a new Seasons by Burlington(TM) high
performance, fade-, stain-, and mildew-resistant outdoor fabric.
Area rugs. The Corporation is a leading producer in the United States of
tufted area and bath rugs for home use, sold primarily under the Burlington
House(R) name to department and specialty stores and the Burlington House
American Lifestyle(TM) name to discount stores.
Accent rugs. The Corporation is a leading producer of printed accent rugs
and welcome mats. It markets these products, in addition to fully coordinated
bath ensembles, to diverse market segments that include the leading U.S.
department stores, mail order catalogs, mass merchants, specialty stores and
international customers.
Carpets. The Corporation is a leading domestic manufacturer of tufted
synthetic carpet for commercial uses, comprised of broadloom carpet, carpet
tiles and six-foot vinyl-backed carpet. It produces and sells a wide variety of
standard and custom commercial carpet products under the Corporation's Lees(R)
brand name primarily for use in offices, institutions, airports, hotels,
schools, stores and health care facilities. The Corporation's commercial carpet
products are sold in the middle to high priced segments of the commercial carpet
market, and are marketed through dealers primarily to architects, designers and
commercial builders, as well as directly to end users.
The Corporation developed and patented a yarn dyeing process that permits
us to produce carpeting that resists staining and fading on a permanent basis.
Products incorporating this dyeing technology, which are marketed under the
Duracolor(R) name in the commercial market, represent a major portion of the
current carpet sales of the division. It also have developed and markets a
proprietary thermoplastic carpet backing process for commercial carpets, known
as Unibond(R), which enhances the carpet's durability.
The Corporation's yarn dyeing capability allows us to offer carpeting in a
wide range of colors. Through its Colorfax(R) program, the Corporation offers
customers the ability to order sample yardage manufactured to their exact color
specifications. Such samples are generally deliverable within 72 hours after
receipt of the specifications.
Mexican operations. The Corporation manufactures residential and
commercial carpeting and fabrics for home furnishings in Mexico.
Financial Information Concerning Industry Segments
Reference is made to Note O to the Notes to Consolidated Financial
Statements in the Corporation's 1998 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning industry segments
for the Corporation's 1998, 1997 and 1996 fiscal years.
Exports
The Corporation's exports have increased to 11.8% of revenues in fiscal
year 1998, with export sales of $237 million. The Corporation's export sales
were $239 million in fiscal year 1997 and $213 million in fiscal year 1996.
Operations
The Corporation's domestic operations are organized primarily by product
category, and intercompany sales are minimal. Products are distributed through
direct sales except in a few cases, mainly export sales, where products are sold
through independent agents or distributors.
The Corporation's corporate headquarters, principal sales and
merchandising offices and principal staff operations are located in Greensboro,
North Carolina. The Corporation maintains domestic sales offices in New York
City and other major cities in the United States.
Manufacturing
The Corporation is a vertically integrated manufacturer in most of its
product areas. Generally, raw fibers are purchased and spun into yarn, or
filament yarns are purchased and processed. Yarns, whether produced by the
Corporation or purchased, are dyed in some cases, and then are woven, knitted or
tufted into fabric or carpet. Fabric is then sold either in dyed and finished
form, as greige (unfinished) goods or processed into finished home furnishing or
apparel products. Residential and commercial interior furnishings products are
further processed and packaged for sale to retailers.
"Just-in-time" manufacturing techniques, which reduce in-process
inventories, floor space requirements and the time required to process a
particular order, are used in most facilities. Programs to link customers and
suppliers of the Corporation by means of electronic data transmission are also
in place in all divisions. These programs improve efficiency and reduce lead
times by improving communication, planning and processing times at the various
stages of production. They also assist the Corporation in working effectively
with manufacturers to coordinate their operations with the demands of retailers
and, as such, are an important part of the domestic textile industry's "Quick
Response" program designed to improve its competitive position vis-a-vis
imports.
Year 2000
Considerable attention has been focused upon potential disruptions that
could result from certain computer programs' inability to recognize the year
2000. See "Year 2000" in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" in the Corporation's 1998 Annual Report to
Shareholders for information concerning the impact of this issue on the
Corporation and its efforts to address it.
Raw Materials
The Corporation uses many types of fiber, both natural (principally wool
and cotton) as well as manufactured (polyester, nylon, polypropylene, acrylic,
rayon, Tencel(R) and acetate), in the manufacture of its textile products. Total
raw material costs were 31.1% of net sales in the 1998 fiscal year, 33.4% of net
sales in the 1997 fiscal year and 33.8% of net sales in the 1996 fiscal year.
The Corporation believes that future price levels for all fibers will depend
primarily upon supply and demand conditions, general inflation, U. S. and
foreign government fiscal policies and agricultural programs, relative currency
values, and prices of underlying raw materials such as petroleum.
Generally, the Corporation has had no difficulty in obtaining raw
materials. Wool and man-made fibers are available from a wide variety of sources
both domestically and abroad. Cotton is available from a wide variety of
domestic sources. Other materials, such as dyes and chemicals, are generally
available, but, as in the case of raw materials, continued availability is
dependent to varying degrees upon the adequacy of petroleum supplies. The
Corporation purchases essentially all its raw materials and dyes.
Research and Development
Textile manufacturers generally focus their research and development
efforts on product development rather than basic research. Major innovations in
the textile industry have come primarily from fiber producers (microdenier
fiber, for example) or machinery manufacturers (high speed shuttleless looms).
While breakthroughs by textile manufacturers in fabric development have occurred
(for example, the Corporation's Duracolor(R) carpets using stain-resistant
technology), generally, textile makers have enhanced their competitiveness
through continual development and refinement of products to meet or create
consumer needs (for example, the Corporation's use of microdenier fibers in a
wide range of apparel and other applications). Accordingly, with few exceptions,
basic research and development expenditures have not been as significant a
component of textile manufacturing success as expenditures on design innovation
or capability and on capital equipment that increase the range of end products
and enhance productivity.
Basic research and development responsibility is located in each product
area and focused on specific process and product development needs. Total
expenditures for research, product development, productivity enhancements,
enhanced styling and market samples aggregated $58.9 million in the 1998 fiscal
year, $57.3 million in the 1997 fiscal year and $62.3 million in the 1996 fiscal
year. Included in these amounts are research and development expenditures, which
totaled $14.9 million in the 1998 fiscal year ($10.8 million in the apparel
products segment and $4.1 million in the interior furnishings products segment),
compared with $11.8 million and $13.5 million in the 1997 and 1996 fiscal years,
respectively.
Trademarks and Patents
The Corporation owns or has the right to use all trademarks and tradenames
that it believes are material to the operation of its business. The Corporation
markets its products under a variety of trademarks and tradenames, principally
utilizing variations of the Burlington(R) name. Certain products are marketed
under nationally recognized names such as Lees(R) for commercial carpets,
Klopman(R) for fabrics or Bacova(R) for mats and rugs.
From time to time, the Corporation's product development efforts have
resulted in new processes or products, some of which have been patented.
Examples of Burlington-developed technology include the patented Ultrex(R)
waterproof breathable woven fabric used in activewear and barrier fabrics and
Duracolor(R) carpets, manufactured using stain-resistant technology with respect
to which the Corporation has obtained patents. Because the Corporation's
business is not dependent to any significant degree upon patents and licenses
(with the possible exception of the patented stain resistant carpet technology
in the case of the interior furnishings segment), the loss of any patents or
licenses now held by the Corporation would not have a material adverse effect
upon its business or results of operations.
The Corporation derives licensing income (approximately $2.1 million in
the 1998 fiscal year) from licenses of the Corporation's technology and from
licenses of the Burlington(R) name, principally to manufacturers of socks and
hosiery products in the United States and Europe.
Competition
The global and United States textile industries are highly competitive. No
one firm dominates the United States market and many companies compete only in
limited segments of the textile market. Certain of the Corporation's products
also compete with non-textile products. Textile competition is based in varying
degrees on price, product styling and differentiation, quality, response time
and customer service. The importance of each of these factors depends upon the
needs of particular customers and the degree of fashion risk inherent in the
product.
Imports of foreign-made textile and apparel products are a significant
source of competition for most sectors of the domestic textile industry. The
U.S. Government has attempted to regulate the growth of certain textile and
apparel imports through tariffs and bilateral agreements which establish quotas
on imports from lesser-developed countries that historically account for
significant shares of U.S. imports. Despite these efforts, imported apparel and
apparel textile fabrics, which represent the area of heaviest import
penetration, represent in excess of 60% of the U.S. market, up from less than
approximately 24% in 1975.
U.S. retailers' and apparel manufacturers' sourcing decisions are affected
by numerous factors, including relative labor and raw material costs, lead
times, political instability and infrastructure deficiencies of newly
industrializing countries, fluctuating currency exchange rates, individual
government policies and international agreements regarding textile and apparel
trade. As evidence of the impact of these factors, sourcing of textile and
apparel imports for goods shipped into the United States -- once dominated
primarily by Hong Kong, Taiwan and Korea -- has been shifting to other
lower-cost producer countries such as The People's Republic of China, the
Philippines, Mexico and countries in the Caribbean Basin. The Corporation
believes that changing cost structures, delivery lead times, political
uncertainty and infrastructure deficiencies associated with many of these
producers have caused importers to reassess the degree of reliance placed upon
certain of these sources, and to reconsider the importance of the reliability of
manufacturing sources closer to point of sale. In addition to these factors, the
U.S. Government's policies designed to benefit Mexico and the Caribbean Basin,
through favored quota and tariff treatment, have accelerated the shift in
production of garments to sources in this hemisphere, indirectly benefiting U.S.
textile producers.
Under the North American Free Trade Agreement ("NAFTA") with Mexico and
Canada, there are no textile/apparel quotas between the United States and either
Mexico or Canada for products that meet certain origin criteria. Tariffs among
the three countries are either already zero or are being phased out. There are
provisions in NAFTA that should give Mexican apparel makers incentives to use
fabric made in the United States. Because the Corporation is a major U.S.
apparel fabrics manufacturer and a resident, diversified textile manufacturer in
Mexico, the Corporation believes that NAFTA is advantageous to the Corporation.
In addition, the U.S. "807" tariff program benefits U.S. textile producers whose
fabrics are incorporated into garments assembled in Caribbean countries before
returning to U.S. markets, where duty is charged on only the value added in
assembling the garments.
The impact of the economic factors and legislative/treaty provisions
described above are apparent in the rapid growth of U.S. apparel imports from
the Caribbean Basin, Canada and Mexico, primarily due to the advantages of
quota/tariff provisions described above. Apparel imports from the Caribbean
Basin and Mexico have grown from 6.5% of total apparel imports in 1984 to 38.7%
in 1997, surpassing imports from the Asian bloc. Mexico has now become the
largest exporter of apparel to the U.S., surpassing China.
Also of significance to domestic textile and apparel companies is the
ultimate impact of multilateral agreements intended to liberalize global trade.
The World Trade Organization ("WTO") established under GATT in January, 1995 has
responsibility for overseeing international trade in manufactured goods,
agriculture, intellectual property and services. The WTO will oversee the
phaseout of textile and apparel quotas over a ten-year period through 2005. In
addition, tariffs on textile/apparel products will be reduced (but not
eliminated) over the same ten-year period. After the end of the ten years,
textile/apparel trade would revert to regular GATT rules that would prohibit
quotas and most other non-tariff barriers. The Clinton Administration is also
engaged in discussions with a number of countries or trading blocs with the
intent of further liberalizing trade, although "fast track" authority to
negotiate new agreements was recently denied by Congress.
Over the years, the Corporation has attempted to offset the negative
impact of increased imports by focusing on product lines and markets that are
less vulnerable to import penetration. Capital expenditures and systems
improvements have centered on strengthening value-added product strategies and
on increasing productivity, lowering costs and improving quality. The
Corporation has also introduced manufacturing techniques such as "just-in-time"
and "Quick Response" and created electronic data links with customers and
suppliers, thereby shortening lead times and improving service. The Corporation
is also investing in apparel fabric and garment manufacturing and processing
facilities in Mexico and India in response to the forces affecting global
textile and apparel trade which have been described above.
During 1998, legislation was introduced, but failed to pass, relating to
trade between the U.S. and Sub-Saharan African nations, trade between the U.S.
and the Caribbean countries, and reduction of wool fabric tariffs. If enacted,
versions of these bills could have had significantly negative impacts on the
Corporation. The bills in various forms are likely to be re-introduced in 1999,
and the Corporation cannot predict the ultimate impact, if any, on it of
legislation and regulation which could emerge from Congress.
The long-run success of the Corporation will be influenced in varying
degrees by its response to legislation and administrative actions restricting or
liberalizing trade among world textile producing and consuming countries such as
NAFTA and the GATT/WTO changes, the effectiveness of anti-dumping and
countervailing duty remedies and of enforcement activities by the U.S.
Government, the value of the United States dollar in relation to other
currencies and world economic developments generally. The Corporation's success
will also be affected by the ability of certain of the Corporation's apparel
fabrics customers to remain competitive, the success of the Corporation's global
diversification, modernization and cost-reduction efforts and, most importantly,
the ongoing ability of the Corporation to produce innovative, quality products
to satisfy specific customer needs at competitive costs.
Employees
The number of persons employed by the Corporation in both its domestic and
foreign operations as of October 3, 1998, was approximately 18,900. The
Corporation's workforce in the United States is not represented by labor unions.
All wage employees in the Corporation's Mexican operations (approximately 1,100
persons) are represented by labor unions.
Customers
The Corporation primarily markets its products to approximately 10,500
customers in the United States. The Corporation also markets its products to
customers in Canada, Mexico, Latin America, Europe and Asian countries. For the
1998 fiscal year, no single customer represented more than 10% of the
Corporation's net sales, and the Corporation's 10 largest customers accounted
for approximately 27% of net sales.
Backlog
The Corporation's business generally is characterized by very short
forward order positions. The backlog of orders at any time is not material,
since most orders are deliverable within a few months. The backlog of forward
orders, after eliminating sales within the Corporation, was approximately 13.6%
of annual net sales at the end of the 1998 fiscal year, compared with
approximately 14.2% of annual net sales at the end of the 1997 fiscal year,
virtually all of which was expected to be shipped within less than a year.
Backlog at the end of the 1998 fiscal year for the apparel products segment was
18.1% of annual net sales of the segment and for the interior furnishings
products segment was 7.4% of annual net sales of the segment.
Governmental Regulation
The Corporation is subject to various Federal, state and local laws and
regulations limiting the production, discharge, storage, handling and disposal
of a variety of substances, particularly the Federal Clean Water Act, the
Federal Clean Air Act, the Resource Conservation and Recovery Act, the Federal
Comprehensive Environmental Response, Compensation and Liability Act as amended
by the Superfund Amendment and Reauthorization Act of 1986, and other Federal,
state and local laws and regulations for the protection of public health and the
environment. The Corporation is presently engaged in a number of environmental
remediation plans and has reported dispositions of waste that could result in
future remediation obligations. The Corporation cannot with certainty assess at
this time the impact of future emission standards and enforcement practices
under the 1990 Clean Air Act upon its operations or capital expenditure
requirements. Reference is also made to the discussion of "Legal and
Environmental Contingencies" under "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in the Corporation's 1998 Annual
Report to Shareholders, which is incorporated herein by reference.
The Corporation's operations also are governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Act and regulations thereunder which, among other things,
establish cotton dust, formaldehyde, asbestos and noise standards, and regulate
the use of hazardous chemicals in the workplace. The Corporation uses numerous
chemicals, including resins containing formaldehyde, in processing some of its
products. Although the Corporation does not use asbestos in the manufacture of
its products, some of its facilities contain some structural asbestos.
The Corporation believes that it has complied in all material respects
with the foregoing environmental or health and safety laws or regulations and
does not believe that future compliance with such laws or regulations will have
a material adverse effect on its results of operations or financial condition.
Item 2. Properties
As of October 3, 1998, the Corporation operated 32 manufacturing plants in
the United States, of which 19 were located in North Carolina, seven were in
Virginia, two each were in Arkansas and Mississippi and one each was in South
Carolina and Tennessee. All but two of these plants are owned in fee. The
aggregate floor area of these manufacturing plants in the United States is
approximately 13.0 million square feet. The Corporation's international
operations include three manufacturing plants in Mexico and a joint venture
plant in India. Two wholly-owned plants and two joint venture plants, all in the
apparel products segment, are under construction or are being equipped in
Mexico.
Of the Corporation's manufacturing plants, 21 are used principally in the
apparel products segment and 14 are used in the interior furnishings products
segment. In addition, the Corporation has seven manufacturing plants not
currently in operation. The Corporation's plants generally operate on a
three-shift basis for five-, six- or seven-day weeks during 49 weeks per year,
or fewer weeks per year during curtailments. The Corporation considers its
plants and equipment to be in excellent condition.
The corporate headquarters building in Greensboro, North Carolina,
containing approximately 430,000 square feet, was completed and occupied in
1971. The building is located on property occupied under a 99-year ground lease
that began in 1969.
Item 3. Legal Proceedings
The Corporation and its subsidiaries have sundry claims and other lawsuits
pending against them and also have made certain guarantees in the ordinary
course of business. It is not possible to determine with certainty the ultimate
liability, if any, of the Corporation in any of the matters referred to in this
item, but in the opinion of management, their outcome should have no material
adverse effect upon the financial condition or results of operations of the
Corporation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Corporation
The Corporation's executive officers are listed below.
Name Age Position
George W. Henderson, III 50 Director, Chairman of the Board and
Chief Executive Officer
Abraham B. Stenberg 63 Director and Vice Chairman
Gary P. Welchman 55 Executive Vice President
John D. Englar 51 Director, Senior Vice President,
Corporate Development and Law
Charles E. Peters, Jr. 46 Senior Vice President and Chief
Financial Officer
Judith J. Altman 40 Vice President and Chief
Information Officer
James M. Guin 55 Vice President, Human Resources
and Public Relations
Lynn L. Lane 47 Vice President, Treasurer and Investor
Relations
George C. Waldrep, Jr. 59 Group Vice President
Robert A. Wicker 54 Vice President and General Counsel
Alice Washington Grogan 42 Corporate Secretary and
Associate General Counsel
Mr. Henderson has been Chairman of the Board of the Corporation since
February 1998, and Chief Executive Officer since 1995. Prior thereto he was
President and Chief Operating Officer of the Corporation (from 1993).
Mr. Stenberg has been Vice Chairman of the Corporation since November
1997. Prior thereto, he was an Executive Vice President of the Corporation (from
1993) and Chief Operating Officer of the Burlington Interior Furnishings Group
(from 1995).
Mr. Welchman has been Executive Vice President of the Corporation since
1993. He has served as President of the Klopman Fabrics division for more than
five years.
Mr. Englar has been Senior Vice President, Corporate Development and Law
of the Corporation since 1995. Prior thereto, he was a Senior Vice President,
Finance and Law (from 1993) and Chief Financial Officer of the Corporation (from
1994).
Mr. Peters has been Senior Vice President and Chief Financial Officer of
the Corporation since 1995. He was Senior Vice President-Finance of Boston
Edison Company from 1991 until joining Burlington.
Ms. Altman joined Burlington in September, 1998 as Vice President and
Chief Information Officer. Prior thereto, she was Senior Director of Information
Systems with Polo/Ralph Lauren (from 1995), Vice President of New Product
Development of CMS, Inc. (from 1994 to 1995) and Director of Information
Services of the Clorox Company (prior to 1994).
Mr. Guin has been Vice President, Human Resources and Public Relations,
since 1996. Prior thereto, he was Director of Human Resources for the
Corporation (from 1993 through 1995).
Ms. Lane has been Vice President, Treasurer and Investor Relations since
1997. Prior thereto she was Vice President and Treasurer (from 1996). She was
Vice President and Treasurer of R.J. Reynolds Tobacco Company from 1995 until
joining Burlington and was Vice President and Assistant Treasurer, Capital
Markets of RJR Nabisco, Inc. (from 1991 to 1995).
Mr. Waldrep has been a Group Vice President of the Corporation for more
than five years.
Mr. Wicker has been Vice President and General Counsel of the Corporation
since 1995. Prior thereto, he was Associate General Counsel of the Corporation
(from 1992).
Ms. Grogan joined Burlington in October, 1998 as Corporate Secretary and
Associate General Counsel. Prior thereto, she was Corporate Secretary (from
1992) and Counsel (from 1989) of Wachovia Corporation.
Executive officers of the Corporation are elected by, and serve at the
discretion of, its Board of Directors. None of the executive officers or
Directors of the Corporation is related by blood, marriage or adoption to any
other executive officer or Director of the Corporation.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to Note S to the Notes to Consolidated Financial
Statements in the Corporation's 1998 Annual Report to Shareholders, which is
incorporated herein by reference, for information concerning the composite high
and low sales prices for the Corporation's Common Stock for each fiscal quarter
of fiscal years 1998 and 1997. The Corporation's common stock is traded on the
New York Stock Exchange.
As of November 11, 1998, there were approximately 1,526 holders of record
of the Corporation's common stock and one holder of record of the Corporation's
nonvoting common stock.
The Corporation has not paid any cash dividends on its common stock during
fiscal years 1998 and 1997. The Corporation's bank credit agreements place
annual limitations on the payment of cash dividends on the Corporation's common
stock and on stock repurchases. Under such agreements, the Corporation may not
pay dividends or repurchase stock in an aggregate amount in any fiscal year, on
a cumulative basis since the beginning of such fiscal year through such time, in
an amount exceeding 50% of Consolidated Net Income (as defined in such bank
credit agreements) for the preceding fiscal year; however, in addition, the
Corporation may repurchase stock in an aggregate amount not to exceed $200
million during the term of such agreements.
Item 6. Selected Financial Data
The information required by this Item is set forth in the table entitled
"Statistical Review" in the Corporation's 1998 Annual Report to Shareholders,
and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Corporation's 1998 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item is set forth under the subheading
"Risk Management" on page 9 in the Corporation's 1998 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Report of the Corporation's
Independent Auditors, required by this Item are incorporated herein by reference
to the Corporation's 1998 Annual Report to Shareholders. See Item 14 for a list
of those financial statements and the pages of the Corporation's 1998 Annual
Report to Shareholders from which they are incorporated.
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page No.
Burlington Industries, Inc. and Subsidiary Companies:
II. Valuation and Qualifying Accounts. S-1
All other schedules have been omitted because they are not applicable, not
required or because the required information is included in the consolidated
financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is set forth under the captions
"Information about Nominees and Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Corporation's Proxy Statement dated
December 18, 1998 and is incorporated herein by reference.
Information with respect to the Corporation's executive officers is
included in Part I of this Report.
Item 11. Executive Compensation
The information required by this Item is set forth under the captions
"Compensation of Directors"; "Report of the Compensation and Benefits Committee
on Executive Compensation"; "Executive Compensation"; and "Stock Performance
Graph" in the Corporation's Proxy Statement dated December 18, 1998 and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Corporation's Proxy Statement dated December 18, 1998 and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The information contained in the Corporation's 1998 Annual Report
to Shareholders under the captions and on the pages indicated
below is incorporated herein by reference:
Report of Ernst & Young LLP, Independent Auditors (page 30)
Consolidated Statements of Operations - for the fiscal
years ended October 3, 1998, September 27, 1997 and
September 28, 1996 (page 12)
Consolidated Balance Sheets - as of October 3, 1998 and
September 27, 1997 (page 13)
Consolidated Statements of Cash Flows - for the fiscal
years ended October 3, 1998, September 27, 1997 and
September 28, 1996 (page 14)
Notes to Consolidated Financial Statements (pages 15 to 28)
2. Financial Statement Schedules
The financial statement schedule listed under Item 8 is filed as a
part of this Report.
3. Exhibits
The exhibits listed on the accompanying Index to Exhibits are
filed as a part of this Report.
(b) The Corporation did not file any reports on Form 8-K for the
last quarter of fiscal year 1998.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Corporation has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BURLINGTON INDUSTRIES, INC.
Date: December 18, 1998
By /s/ George W. Henderson, III
George W. Henderson, III
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Corporation and in the capacities and on the dates indicated.
Signature Title Date
/s/ George W. Henderson, III Director, Chairman of the December 18, 1998
- ---------------------------- the Board and Chief
George W. Henderson, III Executive Officer (Principal
Executive Officer)
/s/ Charles E. Peters, Jr. Senior Vice President and December 18, 1998
- ---------------------------- Chief Financial Officer
Charles E. Peters, Jr. (Principal Financial Officer
and Principal Accounting
Officer)
/s/ Joseph F. Abely, Jr. Director December 18, 1998
- ----------------------------
Joseph F. Abely, Jr.
/s/ Jerald J. Blumberg Director December 18, 1998
- ----------------------------
Jerald J. Blumberg
/s/ John D. Englar Director December 18, 1998
- ----------------------------
John D. Englar
/s/ David I. Margolis Director December 18, 1998
- ----------------------------
David I. Margolis
/s/ John G. Medlin, Jr. Director December 18, 1998
- ----------------------------
John G. Medlin, Jr.
/s/ Nelson Schwab III Director December 18, 1998
- ----------------------------
Nelson Schwab III
/s/ Abraham B. Stenberg Director December 18, 1998
- ----------------------------
Abraham B. Stenberg
/s/ W. Barger Tygart Director December 18, 1998
- --------------------
W. Barger Tygart
Index to Exhibits
(Item 14(a)(3))
Exhibit
No. Description
3.1 Restated Certificate of Incorporation of the Corporation
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994).
3.2 Bylaws of the Corporation (incorporated by reference from the
Corporation's Form 10-Q Quarterly Report for the fiscal
quarter ended March 29, 1997).
4.1 Credit Agreement dated as of September 30, 1988, as amended
and restated as of November 8, 1995, among the Corporation,
the Lenders listed therein, Chemical Bank ("Chemical"), Bank
of America, N.A., The Bank of Nova Scotia ("Scotiabank"),
Chase Bank ("Chase"), First Union National Bank, NationsBank,
N.A. and Wachovia Bank, N.A. ("Wachovia"), as Managing Agents,
Chase (as successor to Chemical), as Administrative Agent, and
Scotiabank, as Fronting Bank (incorporated by reference from
the Corporation's Form 8-K Report dated November 9, 1995).
4.2 Form of Rights Agreement dated as of December 3, 1997, between
the Corporation and Wachovia, as Rights Agent, including the
Form of Rights Certificate as Exhibit A, the Summary of
Preferred Stock Purchase Rights as Exhibit B and the Form of
Certificate of Designation as Exhibit C (incorporated by
reference from the Corporation's Form-8-K Report dated
December 4, 1997).
NOTE: Pursuant to the provisions of Item
601(b)(4)(iii) of Regulation S-K, the Corporation hereby
undertakes to furnish to the Commission upon request copies of
other instruments pursuant to which various entities hold
long-term debt of the Corporation or its consolidated or
unconsolidated subsidiaries, none of which instruments governs
indebtedness exceeding 10% of the total assets of the
Corporation and its subsidiaries on a consolidated basis.
10.1 Indenture of Lease dated February 26, 1969, between Blanche S.
Benjamin and Edward B. Benjamin, and a predecessor to the
Corporation, including the amendment thereto (incorporated by
reference from Burlington Holdings Inc.'s Registration
Statement on Form S-1, File No. 33-16437, filed on August 12,
1987).
10.2 1994 Deferred Compensation Plan (incorporated by reference
from the Form 10-K Annual Report for Burlington Industries
Equity Inc. ("Burlington Equity") for the fiscal year ended
October 2, 1993). (Management contract or compensatory plan,
contract or arrangement.)
10.3 Form of Stock Purchase Agreement dated as of March 19, 1992,
between Burlington Equity and The Equitable Life Assurance
Society of the United States and its affiliates (the
"Equitable Investors") (incorporated by reference from
Amendment No. 6 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 19, 1992).
(Management contract or compensatory plan, contract or
arrangement.)
10.4 Description of Supplemental Pre-Retirement and Post-Retirement
Benefits Plan, as amended, and form of participant agreement
(incorporated by reference from the Form 10-K Annual Report
for Burlington Equity for the fiscal year ended October 2,
1993). (Management contract or compensatory plan, contract or
arrangement.)
10.5 Benefits Equalization Plan, as amended and restated on July
28, 1994 (incorporated by reference from the Corporation's
Form 10-K Annual Report for the fiscal year ended October 1,
1994). (Management contract or compensatory plan, contract or
arrangement.)
10.6 Stock Plan for Non-Employee Directors, as amended
(incorporated by reference from the Corporation's Registration
Statement on Form 8-B, filed on June 3, 1994). (Management
contract or compensatory plan, contract or arrangement.)
10.7 Deferred Compensation Plan for Non-Employee Directors
(incorporated by reference from the Form 10-Q Quarterly Report
for the fiscal quarter ended March 29, 1997). (Management
contract or compensatory plan, contract or arrangement).
10.8 Burlington Industries Equity Inc. Amended and Restated Equity
Incentive Plan (the "1990 Incentive Plan") dated as of January
16, 1992 (incorporated by reference from the 10-K Annual
Report for Burlington Equity for the fiscal year ended October
2, 1993) (Management contract or compensation plan, contract
or arrangement.)
10.9(a) Burlington Industries Equity Inc. 1992 Equity Incentive Plan
("1992 Incentive Plan") (incorporated by reference from
Amendment No. 3 to Burlington Equity's Registration Statement
on Form S-1, File No. 33-45149, filed on March 5, 1992).
(Management contract or compensatory plan, contract or
arrangement.)
10.9(b) Amendments to the 1992 Incentive Plan, effective as of July
22, 1992 (incorporated by reference from the Form 10-K Annual
Report for Burlington Equity for the fiscal year ended October
3, 1992). (Management contract or compensatory plan, contract
or arrangement.)
10.9(c) Forms of agreements under 1992 Incentive Plan (incorporated by
reference from the Form 10-K Annual Report for Burlington
Equity for the fiscal year ended October 3, 1992). (Management
contract or compensatory plan, contract or arrangement.)
10.9(d) Forms of amendments to agreements under 1992 Incentive Plan,
effective as of July 28, 1993 (incorporated by reference from
the Form 10-K Annual Report for Burlington Equity for the
fiscal year ended October 2, 1993). (Management contract or
compensatory plan, contract or arrangement.)
10.10(a) Burlington Industries, Inc. 1995 Equity Incentive Plan ("1995
Incentive Plan") (incorporated by reference from Exhibit A to
the Corporation's proxy statement dated December 18, 1995).
(Management contract or compensatory plan, contract or
arrangement.)
10.10(b) Amendment to 1995 Incentive Plan, effective as of November 1,
1995 (incorporated by reference from the Form 10-K Annual
Report for the fiscal year ended September 28, 1996)
(management contract or compensatory plan, contract or
arrangement).
10.10(c) Form of agreement under 1995 Incentive Plan (incorporated by
reference from the Corporation's Form 10-Q Quarterly Report
for the fiscal quarter ended March 30, 1996) (management
contract or compensatory plan, contract or arrangement.)
10.11 Agreement dated as of January 1, 1998, between the Corporation
and George W. Henderson, III (management contract or
compensatory plan, contract or arrangement).
10.12 Agreement dated as of January 1, 1998, between the Corporation
and Abraham B. Stenberg (management contract or compensatory
plan, contract or arrangement).
10.13 Agreement dated as of January 1, 1998, between the Corporation
and Gary P. Welchman (management contract or compensatory
plan, contract or arrangement).
10.14 Agreement dated as of January 1, 1998, between the Corporation
and John D. Englar (management contract or compensatory plan,
contract or arrangement).
10.15 Agreement dated as of January 1, 1998, between the Corporation
and Charles E. Peters, Jr. (management contract or
compensatory plan, contract or arrangement).
10.16(a) Stockholder Agreement ("Stockholder Agreement") dated as of
October 23, 1990, among Burlington Equity and the other
parties listed on the signature pages thereof (incorporated by
reference from the Form 10-K Annual Report for Burlington
Industries Capital Inc. for the fiscal year ended September
29, 1990).
10.16(b) Amendment dated January 17, 1992, to the Stockholder Agreement
(incorporated by reference from Amendment No. 3 to Burlington
Equity's Registration Statement on Form S-1, File No.
33-45149, filed on March 5, 1992).
10.16(c) Letter agreement dated October 25, 1993, with respect to the
Stockholder Agreement (incorporated by reference from the
Corporation's Form 10-K Annual Report for the fiscal year
ended September 30, 1995).
10.17 Amended and Restated Receivables Purchase Agreement dated as
of December 10, 1997, among B.I. Funding, Inc. ("BIF"), the
Corporation, B.I. Transportation, Inc. ("BIT"), Burlington
Apparel Services Company ("BASC"), Burlington International
Services Company ("BISC"), Burlington Fabrics Inc. ("Fabrics")
and The Bacova Guild, Ltd. ("Bacova") (incorporated by
reference from the Corporation's Form 10-K Annual Report for
the fiscal year ended September 27, 1997).
10.18 Facility Agreement dated as of December 10, 1997, among BIF,
the Corporation, as Servicer, and Wachovia, as Agent and
Collateral Agent. (incorporated by reference from the
Corporation's Form 10-K Annual report for the fiscal year
ended September 27, 1997).
10.19 Loan Agreement dated as of December 10, 1997, among BIF,
certain financial institutions as Liquidity Lenders, Blue
Ridge Asset Funding Corporation, as Conduit Lender, and
Wachovia as Agent for the Lenders") (incorporated by reference
from the Corporation's Form 10-K Annual Report for the fiscal
year ended September 27, 1997).
10.20 Security Agreement dated as of December 10, 1997, among BIF
and Wachovia, as Agent and Collateral Agent ") (incorporated
by reference from the Corporation's Form 10-K Annual Report
for the fiscal year ended September 27, 1997).
10.21 Amended and Restated Subordination Agreement, Consent and
Acknowledgment, dated as of December 10, 1997, among BIF, the
Corporation, BIT, BASC, BISC, Fabrics, Bacova and Wachovia, as
Agent and Collateral Agent ") (incorporated by reference from
the Corporation's Form 10-K Annual Report for the fiscal year
ended September 27, 1997).
12 Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the Corporation's 1998 Annual Report to
Shareholders expressly incorporated by reference.
22 List of subsidiaries of the Corporation.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
Schedule II
BURLINGTON INDUSTRIES INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
(Amounts in Thousands)
Additions
Charged
(Credited)
Balance at to Costs Charged Balance
Beginning and to Other at Close
Description of Period Expenses Accounts Deductions of Period
- ---------------------- ---------- --------- -------- ---------- ---------
Fiscal year ended October 3, 1998
Deducted from customer accounts receivable:
Doubtful accounts.... $ 5,439 $ 1,677 $ - $ 3,377 (2) $ 3,629
110 (3)
Discounts............ 921 (133) (1) - - 788
Returns and
allowances.......... 14,328 2,119 (1) - - 16,447
------- ------- ---- ------- -------
$20,688 $ 3,663 $ - $ 3,487 $20,864
======= ======= ==== ======= =======
Fiscal year ended September 27, 1997
Deducted from customer accounts receivable:
Doubtful accounts.... $ 6,154 $ 3,478 $ - $ 4,184 (2) $ 5,439
9 (3)
Discounts............ 909 12 (1) - - 921
Returns and
allowances.......... 14,403 (75) (1) - - 14,328
------- ------- ---- ------- -------
$21,466 $ 3,415 $ - $ 4,193 $20,688
======= ======= ==== ======= =======
Fiscal year ended September 28, 1996
Deducted from customer accounts receivable:
Doubtful accounts.... $ 4,226 $ 6,457 $ - $ 4,487 (2) $ 6,154
42 (3)
Discounts............ 1,022 (113)(1) - - 909
Returns and
allowances.......... 13,974 429 (1) - - 14,403
------- ------- ---- ------- -------
$19,222 $ 6,773 $ - $ 4,529 $21,466
======= ======= === ======= =======
(1) Represents net increase (decrease) in required reserves.
(2) Uncollectible accounts receivable written off, net of recoveries.
(3) Represents changes in reserves due to foreign exchange fluctuation.
S-1