Flooring News and Information

Greensboro, NC, Nov. 15— Burlington Industries and certain of its U.S. subsidiaries have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company’s business model going forward will consist of four main components: continuing to build its successful Lees Carpets business; expanding global sourcing partners and leveraging its own styling and technology capabilities internationally through Burlington WorldWide Limited, a recently formed subsidiary based in Hong Kong; providing performance and fabric innovation through proprietary technology developed by Nano-Tex, LLC; building upon and accelerating the manufacturing improvements made in its North American operations.

George W. Henderson, III, chairman and CEO, commented, "Our business model going forward adds worldwide reach to our North American capability to provide products, services and global solutions to our customers. The ability to enhance products with the technology of Nano-Tex and extend our reach beyond our borders through Burlington WorldWide Limited increases the value of our product development and technology capabilities while providing us access to broader, more comprehensive product lines. Our Lees Carpets business continues to serve the market with innovative flooring solutions and industry firsts. We are creating a more flexible and responsive company capable of meeting the diversified and ever changing needs of our customers."

The voluntary petitions for reorganization were filed in the U.S. Bankruptcy Court for the district of Delaware. International operations, joint venture partnerships, Nano-Tex, LLC and Burlington WorldWide Limited were not included in the filing.

Henderson continued, "This filing is necessitated by the excess level of debt in our capital structure which prevents us from making the changes we deem necessary to our future success."

Burlington Industries also said it’s received a commitment for up to $190 million in debtor-in-possession (DIP) financing underwritten by J.P. Morgan Chase & Co., which, subject to court approval, will augment the company's liquidity to provide adequate funding for operations during the reorganization period. The company expects to generate positive cash flow during fiscal 2002. The company anticipates no disruption to daily operations at the company's headquarters and manufacturing plants or to the delivery of customer orders. Its main priority continues to be delivering innovative, high quality products and services on time.

"This decision was not made lightly and we believe it is in the best interest of the long term viability of the company," said Henderson, commenting on the restructuring action. "We recognize the need for aggressive and comprehensive change in our business model and we can no longer afford the time needed to incrementally transition the company. By utilizing the Chapter 11 process, we can control and guide our reorganization activities under the protection of the court to expedite the debt and operational restructuring that we have been pursuing and at the same time ensure that our daily operations continue uninterrupted.

"We currently have good liquidity. As a result of our working capital and operational improvements achieved during the year, we currently have approximately $60 million cash on hand. This cash, along with the DIP, financing, once approved, will provide the funds we need to operate during the reorganization process.

"Our restructuring efforts over the last 2 1/2 years have resulted in significant progress towards transitioning Burlington to better compete with and serve the needs of an emerging global environment. We made tough decisions and streamlined many of our businesses. While we have met the goals set in these plans, outside factors, including a continuing flood of low cost and often subsidized foreign imports and a slowdown in consumer spending have hit the textile industry hard.

"A key factor that led Burlington to take these steps is the U.S. government's history of using the textile industry as a bargaining chip in international relations. The results have been devastating for the industry, leading to job losses, plant closing and liquidations. Imports have been growing rapidly for many years, but since 1999, the volume of imported apparel has grown at five times the rate of consumption, squeezing out U.S. made products to the point that four out of five garments sold in this country today are imported.

"To make matters worse, we’re not competing on a level playing field. This flood of textile and apparel imports includes not only products subsidized by foreign governments, but billions of dollars of goods that are imported illegally. Our government, with the exception of support from elected officials in our region, has made no effective response to these unfair trade practices, and our industry does not have reciprocal access to the markets of the exporting countries."

In a closing comment Henderson said, "The intensity of these challenges has worsened with the recent economic decline and uncertainty, and additional slowing in retail sales since September. It has become clear that we need to accelerate our efforts to reshape the company so that we can serve our customers' needs and add value to the company long term. We are committed to meeting the challenges of our industry head on and emerging from this process a stronger, leaner and more profitable enterprise."