MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

Burlington Industries, Inc. and Subsidiary Companies

Overview

Fiscal year 1999 was a difficult year throughout most of the textile and apparel
industry,  and for the Company,  it was in sharp contrast to a near-record  1998
fiscal year. The Company has taken aggressive  action to size its U.S.  capacity
appropriately  while building new textile and garment making capacity in Mexico.
The new  integrated  apparel  fabric and  garment  operations  in Mexico are now
coming on line.

         The apparel products businesses  (approximately 53% of sales), like the
rest of the U.S. apparel products  industry,  were adversely affected by a surge
of Asian garment imports and worldwide  over-capacity.  During 1999, the Company
streamlined  its  business  and put new  capabilities  in place.  In the  United
States, the apparel fabrics operations were consolidated into the Company's most
modern  plants.  In  Mexico,  the  Company  completed  the  core  of its  growth
initiatives,  including two new fabric plants, two garment  facilities,  a joint
venture cotton yarn facility and a joint venture jeans  laundry,  all part of an
integrated  system that enables the Company to offer full garment service to its
customers. The interior furnishings business (approximately 46% of total company
sales)  experienced  relatively good activity in 1999 and is well positioned for
growth.  A  number  of new  products  were  introduced  during  the year and two
divisions  were  combined to create a more  comprehensive  product line in floor
accents and bath accessories.

         Net sales were  $1,651.7  million  for the 1999 fiscal year (52 weeks),
compared  with $2,010.4  million in fiscal year 1998 (53 weeks).  On an adjusted
basis,  comparable sales of continuing businesses were down approximately 11.0%.
As a  result  of  the  restructuring  and  run-out  costs  associated  with  the
reorganization,  primarily  related to the Company's  apparel fabrics  business,
there was a net loss of $31.5  million,  or $0.57 per share  (diluted),  for the
1999 fiscal year, compared with fiscal year 1998 net income of $80.5 million, or
$1.32 per share (diluted).

         Looking ahead, the Company believes  performance will improve in all of
its businesses in 2000,  with one  exception:  the  CasualWear  business,  which
represents approximately 16% of total company sales, will be negatively affected
until the  oversupply  problem in denim  begins to improve.  However,  the denim
business  is well  positioned,  with  competitive  products  and the most modern
facilities in North America.

         PERFORMANCE  BY SEGMENT:  The Company  conducts its operations in three
principal   operating   segments:   PerformanceWear,   CasualWear  and  Interior
Furnishings.  The Company evaluates performance and allocates resources based on
profit or loss before interest, amortization of goodwill, restructuring charges,
certain unallocated  corporate  expenses,  and income taxes. The following table
sets forth certain  information  about the segment  results for the fiscal years
ended October 2, 1999, October 3, 1998 and September 27, 1997.

                                              1999      1998      1997
                                            --------  --------  --------
                                                      (53-week
                                                        year)
Net sales
         PerformanceWear........            $  611.7  $  852.3  $  930.9
         CasualWear.............               257.1     342.1     340.4
         Interior Furnishings...               758.0     792.2     790.6
         Other..................                36.0      39.4      51.1
                                            --------  --------  --------
                                             1,662.8   2,026.0   2,113.0
         Less:
          Intersegment sales....               (11.1)    (15.6)    (22.3)
                                            --------   -------  --------
                                            $1,651.7  $2,010.4  $2,090.7
                                            ========  ========  ========

Income (loss) before income taxes
         PerformanceWear........            $   18.4 $   90.0  $  121.4
         CasualWear.............                (2.9)    38.0      13.8
         Interior Furnishings...                78.0     88.0      51.1
         Other..................                 1.9      2.5       2.5
                                            -------- --------  --------
           Total reportable
            segments............                95.4    218.5     188.8
         Corporate expenses.....               (12.3)   (14.7)    (14.8)
         Goodwill amortization..               (17.8)   (18.1)    (18.2)
         Restructuring charges..               (62.1)       -     (12.1)
         Interest expense.......               (58.4)   (59.5)    (60.1)
         Other (expense)
           income - net.........                 7.9      3.8      12.8
                                            -------- --------  --------
                                            $  (47.3)$  130.0  $   96.4
                                            ======== ========  ========


<PAGE>


Results of Operations

Comparison of Fiscal Years ended October 2, 1999 and October 3, 1998

1999 Restructuring Plan

During the March  quarter  of 1999,  the  Company  implemented  a  comprehensive
reorganization  plan  primarily  related to its apparel  fabrics  business.  The
apparel  fabrics  operations had been running at less than full capacity  during
the  preceding  9-12 month  period,  anticipating  that the surge of  low-priced
garment  imports  from  Asia  might  only be the  temporary  result of the Asian
financial  crisis.  The Company  views this  situation  to be more  permanent in
nature  and  therefore  decided  to  reduce  its  U.S.   manufacturing  capacity
accordingly and utilize only its most modern  facilities to be competitive.  The
major elements of the plan include:

         (1) The  combination of two businesses that had  complementary  product
lines and serve many of the same customers.  The merger of the  two---Burlington
Klopman Fabrics and Burlington Tailored  Fashions--created  an organization with
an improved cost structure, called Burlington PerformanceWear.  Also, Burlington
Global Denim and a portion of the former Sportswear  division have been combined
to form Burlington CasualWear.

         (2) The reduction of U.S.  apparel fabrics capacity by approximately 25
percent and the  reorganization  of  manufacturing  assets,  including  overhead
reductions  throughout the Company.  Seven plants have been or will be closed or
sold by the dates indicated:  one department in Raeford,  North Carolina and one
plant in Forest City,  North  Carolina were closed in the March  quarter;  three
plants in North Carolina located in Cramerton (sold in April 1999), Mooresville,
and Statesville were closed during the June quarter and one plant in Hillsville,
Virginia was sold in June 1999; one plant in Bishopville, South Carolina and one
plant  located  in  Oxford,  North  Carolina  are  being  closed in phases to be
completed during the March quarter 2000.

         (3) The plan  will  result  in the  reduction  of  approximately  2,900
employees,  with severance  benefit payments to be paid over periods of up to 12
months from the termination  date depending on the employee's  length of service
(reduction of approximately 2,200 employees as of October 2, 1999).

The cost of the reorganization was reflected in a restructuring  charge,  before
income taxes, of $62.1 million ($58.5 million  applicable to the apparel fabrics
business) recorded in the second fiscal quarter ended April 3, 1999, as adjusted
by $3.2  million  in the  fourth  quarter of 1999.  The  components  of the 1999
restructuring  charge included the  establishment of a $19.0 million reserve for
severance  benefit  payments,  write-down of pension  assets of $3.2 million for
curtailment and settlement  losses,  write-downs for impairment of $37.7 million
related to fixed assets resulting from the  restructuring  and a reserve of $2.2
million for lease cancellations and other exit costs expected to be paid through
September  2001.  Assets that have been sold, or are held for sale at October 2,
1999 and are no longer in use, were written down to their  estimated fair values
less costs of sale.  These  assets held for sale  continue to be included in the
Fixed Assets caption on the balance sheet in the amount of $14.5 million. Assets
at  Bishopville  and Oxford  remaining in use and  considered  impaired based on
estimated future cash flows were written down by $2.7 million to their estimated
fair value of $3.5 million. The impaired assets continue to be depreciated while
in use. Cash costs of the reorganization are expected to be substantially offset
by cash receipts from asset sales and lower working capital needs.

Other  expenses  related  to  the  1999   restructuring   (including  losses  on
inventories of discontinued styles,  relocation of employees and equipment,  and
plant carrying and other costs) of  approximately  $33.0 million,  before income
taxes, will be charged to operations as incurred. Through October 2, 1999, $27.1
million of such costs have been incurred and charged to  operations,  consisting
primarily of inventory losses and plant carrying costs.

Following  is a summary of activity in the related 1999  restructuring  reserves
(in millions):
                                                                 Lease
                                                             Cancellations
                                                 Severance     and Other
                                                 Benefits      Exit Costs
                                                 ---------   -------------
         March 1999 restructuring charge.......   $ 20.1         $ 2.2
         Payments..............................     (1.5)         (0.2)
                                                  ------         -----
         Balance at April 3, 1999..............     18.6           2.0
         Payments..............................     (5.7)         (0.2)
                                                  ------         -----
         Balance at July 3, 1999...............     12.9           1.8
         Payments..............................     (3.6)         (0.1)
         Adjustments...........................     (1.1)            -
                                                  ------         -----
         Balance at October 2, 1999............   $  8.2         $ 1.7
                                                  ======         =====

The Company,  through its Real Estate and  Purchasing  departments,  is actively
marketing the affected real estate and equipment currently available for sale or
to be available upon cessation of operations. The active plan to sell the assets
includes the preparation of a detailed property  marketing package to be used in
working  with  real  estate  and used  equipment  brokers  and  other  channels,
including  other textile  companies,  the local Chamber of Commerce and Economic
Development  and  the  State  Economic  Development   Department.   The  Company
anticipates that the divestitures of real estate and equipment will be completed
within 12 to 18 months from the date of closing.  However,  the actual timing of
the  disposition of these  properties may vary due to their locations and market
conditions.

         NET SALES:  Net sales for the 1999 fiscal year were  $1,651.7  million,
17.8%  lower than the  $2,010.4  million  recorded  for the 1998  fiscal year (a
53-week  year).  Exports  totaled  $236 million and $237 million in the 1999 and
1998 fiscal years, respectively.
         PerformanceWear: Net sales for the PerformanceWear segment for the 1999
fiscal year were $611.7 million, 28.2% lower than the $852.3 million recorded in
the 1998 fiscal year.  Excluding $79.6 million sales reduction due to the exited
portion  of the  Burlington  Madison  Yarn  division,  which  has  been  sold or
transferred  to a joint venture,  net sales of products for the  PerformanceWear
segment were 21.0% lower than in the prior year. This decrease was due primarily
to 17.8% lower volume and 3.1% lower prices and product mix.
         CasualWear:  Net sales for the  CasualWear  segment for the 1999 fiscal
year were $257.1  million,  24.8% lower than the $342.1 million  recorded in the
1998  fiscal  year.   Excluding   $22.6  million  sales  reduction  due  to  the
sold/discontinued  portion of the Sportswear business, net sales of products for
the  CasualWear  segment were 20.6% lower than in the prior year.  This decrease
was due primarily to 19.1% lower volume and 1.4% lower prices and product mix.
         Interior  Furnishings:  Net sales of products for interior  furnishings
markets for the 1999 fiscal year were $758.0 million, 4.3% lower than the $792.2
million  recorded in the 1998 fiscal year.  This  reduction was due primarily to
the absence of Burlington  Madison Yarn division  sales of $20.7 million in this
segment,  lower volume of $25.2 million,  partially  offset by improved  selling
prices and mix of $11.7 million.

         SEGMENT  INCOME:  Total  reportable  segment income for the 1999 fiscal
year was $95.4 million compared to $218.5 million for the 1998 fiscal year.
         PerformanceWear:  Income of the  PerformanceWear  segment  for the 1999
fiscal year was $18.4 million  compared to $90.0  million  recorded for the 1998
fiscal year.  This  decrease was due  primarily to $40.3  million  lower margins
resulting  from  lower  volume and  inefficiencies  associated  with  production
levels,  $16.9  million  reduction due to price/mix,  increased  provisions  for
doubtful  accounts of $2.0 million,  and start-up costs of $11.0 million related
to the Company's new Mexican operations,  partially offset by lower raw material
costs of $14.9 million and lower selling, general and administrative expenses of
$3.9  million   resulting  from  personnel   reductions   related  to  the  1999
restructuring.  Also,  PerformanceWear  segment  results  include costs of $17.4
million  associated  with the apparel  restructuring  which have been charged to
operations,  including  inventory losses on discontinued  styles,  relocation of
employees and equipment and plant carrying and other costs.  Segment results for
1999 include $9.4 million equity in income of the Company's  textured yarn joint
venture,  compared to $11.3 million for 1998 which represents four months of the
joint venture activity and eight months of the Burlington  Madison Yarn textured
business as a separate division.
         CasualWear: Income (loss) of the CasualWear segment for the 1999 fiscal
year was $(2.9) million  compared to $38.0 million  recorded for the 1998 fiscal
year.  This decrease was due primarily to $22.7 million lower margins  resulting
from lower  volume and  inefficiencies  associated  with  production  levels and
start-up costs of $8.9 million related to the Company's new Mexican  operations,
partially offset by lower selling,  general and administrative  expenses of $0.9
million resulting from personnel  reductions related to the 1999  restructuring.
Also,  CasualWear  segment results include costs of $9.4 million associated with
the apparel  restructuring,  which have been  charged to  operations,  including
inventory losses on discontinued  styles,  relocation of employees and equipment
and plant carrying and other costs.  Segment  results for 1999 include losses of
$3.0 million related to joint venture activity, compared to joint venture losses
of $1.2 million in 1998.
         Interior  Furnishings:  Income  of the  interior  furnishings  products
segment  for the 1999 fiscal year was $78.0  million  compared to $88.0  million
recorded for the 1998 fiscal  year.  This  decrease  was due  primarily to lower
volume and inefficiencies  associated with lower production levels in the amount
of $18.2 million, increased provisions for doubtful accounts of $1.8 million and
increased  selling  expenses  of $2.6  million,  partially  offset  by lower raw
material costs of $13.0 million.

         CORPORATE EXPENSES:  General corporate expenses not included in segment
results were $12.3 million for the 1999 fiscal year compared to $14.7 million in
the 1998 fiscal year.  The decrease  from the prior year period is  attributable
mainly  to  lower  compensation  expense  resulting  from  cost  reductions  and
restructuring.

         OPERATING  INCOME BEFORE INTEREST AND TAXES:  Before the 1999 provision
for  restructuring,  operating  income  before  interest  and taxes for the 1999
fiscal year was $58.9  million  compared  to $182.8  million for the 1998 fiscal
year. After the 1999 provision for restructuring, operating loss before interest
and taxes for the 1999 fiscal year was $3.2  million.  Amortization  of goodwill
was  $17.8  million  and  $18.1  million  in the  1999 and  1998  fiscal  years,
respectively.

         INTEREST  EXPENSE:  Interest expense for the 1999 fiscal year was $58.4
million,  or 3.5% of net  sales,  compared  with $59.5  million,  or 3.0% of net
sales,  in the 1998 fiscal year. The effect of higher  borrowing  levels in 1999
were offset by lower  interest rates and the impact of the one extra week in the
1998 fiscal year.

         OTHER EXPENSE (INCOME):  Other income for the 1999 fiscal year was $7.9
million  consisting  principally  of $4.3  million in gains on the  disposal  of
assets and  interest  income of $3.5  million.  Other income for the 1998 fiscal
year was $3.8 million consisting  principally of interest income of $3.4 million
and $0.5 million in gains on disposal of assets.

         INCOME TAX EXPENSE (BENEFIT): Income tax benefit of $(15.9) million was
recorded for the 1999 fiscal year in comparison with income tax expense of $49.6
million for fiscal year 1998.  Total  income tax expense is  different  from the
amounts  obtained by applying  statutory rates to the income before income taxes
primarily  as a result  of  amortization  of  nondeductible  goodwill,  which is
partially  offset by the  favorable  tax  treatment  of export  sales  through a
foreign sales corporation.

         NET  INCOME AND  EARNINGS  PER  SHARE:  Net income  (loss) for the 1999
fiscal year was $(31.5) million,  or $(0.57) per share (diluted),  in comparison
with $80.5 million, or $1.32 per share (diluted),  for the 1998 fiscal year. Net
loss for the 1999  fiscal  year  included  a net  charge  of  $(0.98)  per share
resulting  from the 1999  restructuring  provision  and  related  run-out  costs
included in cost of sales.

Comparison of Fiscal Years ended October 3, 1998 and September 27, 1997

1997 Restructuring Plan

During the June 1997  quarter,  the  Company  recorded a $12.1  million  pre-tax
provision for  restructuring  associated with reducing staff,  consolidation  of
certain yarn  facilities  and exiting the  residential  carpet product line. The
staff  reduction  included  severance  costs  of  $5.2  million  related  to 215
employees.  The  components  of  the  yarn  manufacturing  restructuring  charge
included  costs of $1.3 million for  severance  related to 286  employees,  $2.2
million for  divestitures  of  machinery  and  equipment,  and $1.4  million for
divestitures  of real estate.  Costs related to exiting the  residential  carpet
product  line  included  primarily  $1.2  million  for  severance  related to 70
employees. In addition,  exiting the residential carpet product line resulted in
an inventory  write-down  and other  claims of $4.9 million  included in cost of
sales. Combining these charges, the restructuring  activities resulted in a 1997
pre-tax charge of $17.0 million,  $10.3 million after income taxes, or $0.17 per
share.  Net sales of the  residential  carpet  product  line were $38.7  million
during the 1996 fiscal year, and net operating loss before  interest,  taxes and
restructuring  charges was $8.4 million during the same period.  The Company has
substantially completed all of the 1997 restructuring efforts with the exception
of the  divestitures  of certain  machinery and  equipment and real estate.  The
carrying amount of such assets at October 2, 1999,  included in the Fixed Assets
caption  on the  balance  sheet,  is $8.8  million,  and the  Company  does  not
anticipate  any  material  adjustments  to  this  amount.  See  Note  B  to  the
consolidated financial statements.

         NET SALES:  Net sales for the 1998  fiscal  year (a 53-week  year) were
$2,010.4  million,  a decrease of 3.8% from the $2,090.7 million recorded in the
1997 fiscal year.  Exports totaled $237 million and $239 million in the 1998 and
1997 fiscal years, respectively.
         PerformanceWear: Net sales for the PerformanceWear segment for the 1998
fiscal year were $852.3 million, 8.4% lower than net sales of $930.9 million for
the 1997 fiscal year.  This reduction was primarily due to 7.9% lower volume and
the transfer of the textured yarn business to a joint venture in May 1998.
         CasualWear:  Net sales for the  CasualWear  segment for the 1998 fiscal
year were $342.1  million,  compared to net sales of $340.4 million for the 1997
fiscal year.  This increase was primarily due to 8.6% higher volume in the Denim
business, partially offset by 34.7% lower volume in the Sportswear division.
         Interior  Furnishings:  Net sales of products for interior  furnishings
markets for the 1998 fiscal year were $792.2 million, compared to $790.6 million
recorded  in the  1997  fiscal  year.  The  change  in  sales  of  the  interior
furnishings  segment  was  mainly  attributable  to  4.5%  increased  volume  in
continuing  operations  which  offset  0.9% lower  price/mix  and $25.9  million
reductions due to the closure in 1997 of the residential carpet product line.

         SEGMENT  INCOME:  Total  reportable  segment income for the 1998 fiscal
year was $218.5 million compared to $188.8 million for the 1997 fiscal year.
         PerformanceWear:  Income of the  PerformanceWear  segment  for the 1998
fiscal year was $90.0 million  compared to $121.4 million  recorded for the 1997
fiscal year.  This  decrease was due  primarily to $40.1  million  lower margins
resulting  from  lower  volume and  inefficiencies  associated  with  production
levels,  partially  offset  by  $11.2  million  of  margin  improvements  due to
price/mix.
         CasualWear:  Income of the CasualWear  segment for the 1998 fiscal year
was $38.0 million  compared to $13.8 million  recorded for the 1997 fiscal year.
This increase was due primarily to $14.0 million higher  margins  resulting from
higher  volume  and  production  levels  and  lower raw  material  costs of $9.9
million.
         Interior  Furnishings:  Income  of the  interior  furnishings  products
segment for the 1998 fiscal year was $88.0  million,  compared to $51.1  million
recorded in the 1997 fiscal year. This increase was mainly attributable to $20.5
million  higher  margins  resulting  from $18.1  million  higher volume and $2.4
million  better  product mix, the absence of $10.1 million of losses  related to
the residential carpet product line,  including inventory  write-downs and other
claims of $4.9 million,  and the absence of a $3.8 million  charge for closing a
yarn spinning plant.

         CORPORATE EXPENSES:  General corporate expenses not included in segment
results were $14.7 million for the 1998 fiscal year compared to $14.8 million in
the 1997 fiscal year.

         OPERATING  INCOME BEFORE  INTEREST AND TAXES:  Operating  income before
interest  and taxes for the 1998  fiscal  year was $182.8  million  compared  to
$143.6  million  for the  1997  fiscal  year.  Before  the  1997  provision  for
restructuring,  the 1997 charge for exiting the residential  carpet product line
and the 1997 charge for closing a yarn spinning plant,  operating  income before
interest and taxes for the 1997 fiscal year was $164.4 million.  Amortization of
goodwill was $18.1  million and $18.2 million in the 1998 and 1997 fiscal years,
respectively.

         INTEREST  EXPENSE:  Interest expense for the 1998 fiscal year was $59.5
million, or 3.0% of net sales, compared with $60.1 million, or 2.9% of net sales
in the 1997 fiscal year.  The  decrease is  principally  due to lower  borrowing
levels during 1998,  partially offset by the inclusion of interest charges for a
53-week period in 1998 compared to a 52-week period for the 1997 fiscal year.

         OTHER EXPENSE (INCOME):  Other income for the 1998 fiscal year was $3.8
million  consisting  principally  of  interest  income of $3.4  million and $0.5
million in gains on  disposal of assets.  Other  income for the 1997 fiscal year
was  $12.8  million  consisting  principally  of $9.5  million  in  gains on the
disposal  of  certain  non-core  operating  assets and  interest  income of $3.0
million.

         INCOME TAX  EXPENSE:  Income tax expense of $49.6  million was recorded
for the 1998 fiscal year in comparison  with $37.7 million for fiscal year 1997.
Total  income tax expense is  different  from the  amounts  obtained by applying
statutory  rates to the income  before  income  taxes  primarily  as a result of
amortization  of  nondeductible  goodwill,  which  is  partially  offset  by the
favorable tax treatment of export sales through a foreign sales corporation.

         NET INCOME AND EARNINGS PER SHARE:  Net income for the 1998 fiscal year
was $80.5  million,  or $1.32 per share  (diluted),  in  comparison  with  $58.7
million, or $0.95 per share (diluted),  for the 1997 fiscal year. Net income for
the 1997 fiscal year included a net charge of $0.12 per share for one-time costs
associated  with  various  streamlining   actions,   including  reducing  staff,
consolidation  of yarn  facilities  and exiting the  residential  carpet product
line, offset by gains on sales of Sedgefield  Specialties and Advanced Textiles,
Inc.

Liquidity and Capital Resources

During the 1999 fiscal year,  the Company  generated  $66.7 million of cash from
operating  activities  and  $55.9  million  from  sales of  assets,  and had net
borrowings of long- and  short-term  debt of $67.9  million.  Cash was primarily
used for capital  expenditures and investment in joint ventures  totaling $146.9
million,  and $42.0  million  for the  purchase of  treasury  shares.  Shares of
Company  common stock  purchased are expected to be used during the next several
years in part to satisfy  Company  obligations  to  contribute  stock  under its
employee  incentive  plans and potential  acquisitions,  and will,  accordingly,
minimize  further  future cash  outlays for such  purposes.  At October 2, 1999,
total debt of the Company  (consisting  of current and  non-current  portions of
long-term  debt and  short-term  borrowings)  was $881.4  million  compared with
$816.2 million at October 3, 1998.
         The  Company's  principal  uses of funds during the next several  years
will be for  capital  investments  (including  the funding of  acquisitions  and
participations  in joint ventures),  repayment and servicing of indebtedness and
working  capital  needs.  The  Company  intends  to  fund  its  financial  needs
principally  from net cash provided by operating  activities  and, to the extent
necessary,  from funds provided by the credit  facilities  described  below. The
Company  believes  that  these  sources of funds  will be  adequate  to meet the
Company's foregoing needs.
         During the 1999 fiscal year,  investment  in capital  expenditures  and
joint ventures  totaled $146.9  million,  compared to $147.7 million in the 1998
fiscal year and $99.3 million in the 1997 fiscal year.  The Company  anticipates
that the level of capital  expenditures and joint venture investments for fiscal
year 2000 could total  approximately  $100 million to $120 million,  principally
for growth and modernization of U.S. and Mexican plants.
     In August 1997, the Company issued $150.0 million principal amount of 7.25%
notes due August 1, 2027 ("Notes Due 2027"). Proceeds from the sale were used to
prepay  revolving  loans under its bank credit  agreement on the same date.  The
Notes Due 2027  will be  redeemable  as a whole or in part at the  option of the
Company at any time on or after August 2, 2007,  and will also be  redeemable at
the option of the holders  thereof on August 1, 2007 in amounts at 100% of their
principal amount. In September 1995, the Company issued $150.0 million principal
amount of 7.25% notes due September  15, 2005 ("Notes Due 2005").  The Notes Due
2005 are not redeemable prior to maturity.  The Notes Due 2027 and the Notes Due
2005 are unsecured and rank equally with all other unsecured and  unsubordinated
indebtedness of the Company.
     The Company has a $550.0 million  unsecured  revolving credit facility that
expires in March 2001. At November 5, 1999, the Company had approximately $248.0
million in unused capacity under this facility. The Company also maintains $42.0
million  in  additional  overnight  borrowing  availability  under bank lines of
credit.
         Loans  under the bank  credit  agreement  bear  interest  at either (i)
floating rates generally payable quarterly based on an adjusted  Eurodollar rate
plus 0.40% or (ii) Eurodollar rates or fixed rates that may be offered from time
to time by a Lender  pursuant  to a  competitive  bid request  submitted  by the
Company,  payable  up to 360  days.  In  addition,  the  Company  pays an annual
facility fee of 0.225%.  The interest rate and the facility fee are based on the
Company's  implied senior unsecured debt ratings.  In the event that both of the
Company's  debt ratings  improve,  the interest  rate and facility fees would be
reduced.  Conversely,  deterioration in both of the Company's debt ratings would
increase the interest rate and facility fees.
         The bank credit agreement imposes various  limitations on the liquidity
of the Company.  The agreement requires the Company to maintain minimum interest
coverage  and maximum  leverage  ratios and a specified  level of net worth.  In
addition, the agreement limits dividend payments, stock repurchases, leases, the
incurring of additional indebtedness by consolidated subsidiaries,  the creation
of  additional  liens and the making of  investments  in non-U.S.  persons,  and
restricts the Company's  ability to enter into certain  merger,  liquidation  or
asset sale or purchase transactions.
         On November 23, 1998,  the Company  established a $105.0 million credit
facility with a group of banks. On that date, $57.0 million of proceeds from the
facility  were used to repay  loans  under the  Company's  existing  bank credit
agreement.  Additional  proceeds  from this facility will be used to finance the
construction  and working  capital needs of the Company's  Mexican  subsidiaries
related to the expansion  projects in Mexico.  The facility  includes  terms and
covenants similar to the $550.0 million bank credit  agreement,  except that the
outstanding  balance on the third  anniversary of the facility will convert to a
two-year term loan payable semiannually in four equal installments.  Loans under
the new  facility are made  directly to a Mexican  financing  subsidiary  of the
Company and are guaranteed by the Company.  At November 5, 1999, the Company had
approximately $10.0 million in unused capacity under this facility.
         In December 1997, the Company  established a five-year,  $225.0 million
Trade Receivables Financing Agreement ("Receivables  Facility") with a bank. The
amount of borrowings  allowable under the Receivables  Facility at any time is a
function of the amount of then-outstanding eligible trade accounts receivable up
to $225.0  million.  Loans under the  Receivables  Facility bear interest,  with
terms up to 270 days, at the bank's commercial paper dealer rate plus 0.1875%. A
commitment  fee of 0.125% is charged on the  unused  portion of the  Receivables
Facility.  At November 5, 1999, $164.3 million in borrowings under this facility
with remaining maturities of up to 117 days was outstanding.

Risk Management

Interest Rate Risk

         Because the Company's  obligations under the bank credit agreements and
the  receivables-backed  financing programs bear interest at floating rates, the
Company is sensitive to changes in prevailing  interest rates.  The Company uses
derivative  instruments  to manage its long-term  debt  interest rate  exposure,
rather than for trading purposes.  Interest rate movements also affect the value
and returns on the Company's investment  securities.  A 10% increase or decrease
in market interest rates that affect the Company's  financial  instruments would
not have a material  impact on  earnings  or cash flows  during the next  fiscal
year, and would not materially affect the fair value of the company's  financial
instruments.

Foreign Currency Risk

         In  order  to  reduce  the  risk  of  foreign  currency  exchange  rate
fluctuations,  the  Company  follows  a  policy  of  hedging  substantially  all
transactions  denominated  in a currency  other than the  functional  currencies
applicable to each of its various entities. The instruments used for hedging are
readily marketable  exchange-traded forward contracts with banks. The changes in
market value of such contracts  have a high  correlation to the price changes in
the  currency  of the  related  hedged  transactions.  The  potential  impact on
earnings, cash flows or fair value for such net currency position resulting from
a 10% increase or decrease in foreign currency exchange rates on each individual
currency would not be material.

Commodity Price Risk

         The Company uses many types of fiber, both natural and man-made, in the
manufacture  of its textile  products.  The Company  believes  that future price
levels for all fibers will depend  primarily upon supply and demand  conditions,
weather  conditions,   general  inflation,  domestic  and  foreign  governmental
regulations and  agricultural  programs,  and prices of underlying raw materials
such as  petroleum.  The Company  manages its  exposure to changes in  commodity
prices primarily through its procurement  practices  (foreign exchange contracts
are utilized to offset the impact of currency fluctuations on wool purchases).
         The Company enters into contracts to purchase cotton under the Southern
Mill Rules ratified and adopted by the American Textile Manufacturers Institute,
Inc. and American Cotton Shippers Association.  Under these contracts and rules,
nonperformance by either the buyer or seller may result in a net cash settlement
of the  difference  between the current  market price of cotton and the contract
price.  If the Company  decided to refuse  delivery of its open firm  commitment
cotton  contracts at October 2, 1999,  and market prices of cotton  decreased by
10%,  the  Company  would  be  required  to pay a net  settlement  provision  of
approximately  $5.2  million.  However,  the Company has not  utilized  this net
settlement  provision  in the  past,  and  does not  anticipate  using it in the
future.

Legal and Environmental Contingencies

The Company and its  subsidiaries  have sundry claims and other lawsuits pending
against  them and also have  certain  guarantees  that were made in the ordinary
course of business.  The Company has made provisions in its financial statements
for litigation based on the Company's assessment of the possible outcome of such
litigation,  including the possibility of settlement, and related legal fees and
costs.
         Also,  the Company  and  certain of its  current and former  direct and
indirect corporate predecessors, subsidiaries and divisions have been identified
by the United  States  Environmental  Protection  Agency,  by the  environmental
agencies in several  states and by private  parties as  potentially  responsible
parties  ("PRPs") at 19 hazardous  waste disposal sites under the  Comprehensive
Environmental  Response Compensation and Liability Act of 1980 ("Superfund") and
comparable  state laws and,  as such,  may be liable for the cost of cleanup and
other  remedial  activities  at these  sites.  With  respect to certain of these
sites,  other  persons  have also been  identified  as  potentially  responsible
parties,  and in such  circumstances  the  responsibility  for cleanup and other
remedial  activities  is  typically  shared  among  such  parties  based  on  an
allocation formula.  The Company is currently involved in remedial activities at
three of these sites under federal  laws.  It is also involved in  environmental
cleanups at 16 other sites under state laws.  The Company may also be liable for
environmental   contingencies   at  25  other  sites   pursuant  to  contractual
obligations  resulting from divested  property or with respect to  environmental
cleanups  that may be  identified  in the future.  The  Company has  established
reserves in its financial  statements for such environmental  liabilities in the
aggregate  amount of $3.5  million  at October  2,  1999,  estimated  to be paid
primarily over the next five years. The provision for environmental  liabilities
is based on the Company's estimate of allocations of liability among potentially
responsible  parties  (and the  likelihood  of  contribution  by such  parties),
information concerning the scope of contamination,  estimated remediation costs,
estimated transaction costs and other factors.
         It is not possible with  certainty to determine the ultimate  liability
of  the  Company  with  respect  to  the  matters  described  in  the  preceding
paragraphs,  but in the  opinion of  management  their  outcome  should  have no
material  adverse effect on the financial  condition or results of operations of
the Company.

Year 2000

As the turn of the  century  approaches,  much  attention  has  been  given to a
serious  problem  that exists in many  computers  and  programs in use today,  a
problem  that arose from the earliest  days of  computing  when systems had very
limited memory storage  capacities.  To save space and data entry time, only the
last two  digits  of a year were used when  performing  date  calculations  and,
consequently,  these  systems  may  not be  able  to  properly  recognize  dates
beginning  with the year  2000.  Many of these  programs  are still in use today
throughout the world.
         Any  date-reliant   system  is  at  risk.  This  includes   information
technology  applications  and embedded  systems such as heating and ventilation,
security, voice and data communications,  ordering and supply, manufacturing and
distribution,  labeling,  bar coding,  billing and paying. For several years the
Company has conducted a company-wide  effort to prepare its computer systems and
applications  to  recognize  dates  later  than  December  31,  1999 in order to
continue to function properly. The Company has modified a significant portion of
its  computer  software  to  handle  the Year  2000  problem.  The  Company  has
substantially completed this portion of its project.
         The  Company  also is  dependent  upon the  successful  efforts  of its
customers  and suppliers of goods,  services and  essential  utilities to modify
their  software  and could be  affected  by the  failure of one or more of these
efforts.  The  Company has  communicated  with most of its major  suppliers  and
customers and is following up with others.  Efforts  include the  collection and
evaluation  of  voluntary  representations  made or  provided  by those  parties
together with independent  research.  The goal of all these efforts is to reduce
business  risk and avoid  interruption  of service.  Although  the Company  will
continue to take reasonable care to gather  information  about external parties,
such information is not always provided voluntarily, is not otherwise available,
or may not be reliable.
         Contingency  plans and recovery  procedures for Year 2000 problems have
been completed  dealing with potential  problems ranging from systems failure to
failure of a utility or a supplier.  Although  the Company  expects its critical
systems to be compliant,  there can be no assurances that the Company identifies
all susceptible  systems and will not be adversely affected by the failure of an
external party to adequately  address the Year 2000 problem.  A most  reasonable
likely worst case scenario  might be loss of electrical  power to one or more of
the  Company's  significant  manufacturing  or  information  technology  systems
causing a delay or curtailment in the production and/or distribution of goods, a
delay or curtailment in the billing and collection of revenues,  an inability to
maintain  accounting  records  accurately,  and/or an  inability  to manage  its
financial  resources,  potentially  causing a material  impact on the  Company's
results of operations  and financial  position.  In case of power failure at the
Company's  headquarters,  which includes the data center, there will be a switch
to its diesel  power  generator  systems.  A full  supply of diesel fuel will be
maintained  from December 1, 1999 forward.  In case of an extended power failure
at one or more of the  Company's  manufacturing  facilities,  production  may be
shifted,  to the extent capacity is available,  to a similar facility in another
area not impacted by power interruption.
         The Company recognizes the potential  widespread impact of Year 2000 in
its systems and manufacturing facilities and is working toward compliance of all
software  and  office  and  manufacturing   equipment,   environmental  systems,
telecommunications,  utilities,  safety and  monitoring  equipment  and systems.
Total costs for addressing the Year 2000 issue are currently  estimated to reach
approximately $15.5 million.  These costs are expensed as incurred and are being
funded with cash from  operations.  As of October 2, 1999, the Company had spent
$15.1 million on the project since its inception. The Company views Year 2000 as
a company-wide business issue of the highest priority. The Company is engaged in
extensive  efforts  to  provide a  continuous,  uninterrupted  flow of goods and
services to customers.

Conversion to the Euro Currency

         Various  member  countries of the  European  Union in which the Company
conducts  its business  adopted the Euro as their single  currency on January 1,
1999.  National  currencies  will  continue  to exist as  legal  tender  and may
continue to be used in commercial transactions through January 1, 2002, at which
time Euro notes and coins will be issued. By July 2002, the respective  national
currencies will be withdrawn.  During this transition period, permanent rates of
exchange between the members' national currency and the Euro will be established
and banking,  finance and foreign exchange markets will convert to the Euro. The
Euro  conversion  has not impacted the Company,  and the Company does not expect
the conversion to have a material  adverse effect on its financial  condition or
results of operations.

New Accounting Pronouncement

         In June 1998, the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities," which was required to be adopted
in fiscal years beginning after June 15, 1999. In July, the FASB issued SFAS No.
137,  which delayed the effective  date of SFAS No. 133 for one year.  Under the
statement,  all  derivatives  will be required to be  recognized  on the balance
sheet at fair  value.  Derivatives  that are not hedges must be adjusted to fair
value through income. See Note A to the consolidated  financial statements.  The
Company  has not yet  determined  what the effect of SFAS No. 133 will be on the
earnings and financial position of the Company.

Forward-Looking Statements

     With the exception of historical  information,  the statements contained in
Management's  Discussion  and Analysis of Results of  Operations  and  Financial
Condition and in other parts of this report include  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
represent  management's current expectations or beliefs as to the future and are
subject to risks and uncertainties that could affect the Company's actual future
results  and that  could  cause  those  results  to differ  materially  from the
expectations or beliefs expressed in the forward-looking  statements. Such risks
and  uncertainties  include,  but are not  limited  to: the  outlook  for global
economic activity and its impact upon the Company's  businesses;  the demand for
textile  products;   the  possible   imbalances   between  consumer  demand  and
inventories of the Company's  customers;  the Company's  relationships  with its
principal customers and suppliers, including its and their success in addressing
the Year 2000  computer  problem;  cost and  availability  of raw  materials and
labor; the success of the Company's value-added product strategy;  the Company's
strategic  plans to expand its global sourcing  capabilities,  which include the
delivery  of garment  packages;  the  Company's  ability to finance  its capital
expansion and modernization  programs (including the terms of the renewal of its
revolving  credit  facility  which expires in March 2001),  and the level of the
Company's   indebtedness  and  the  exposure  to  interest  rate   fluctuations;
governmental  legislation  and regulatory  changes that impose higher costs,  or
greater  restrictions,  on the Company's  operations and that alter the existing
regulation of international trade; and the long-term implications of the current
development  of  regional  trade  blocs  and  the  effect  of  the   anticipated
elimination  of quotas and  lowering of tariffs  under the GATT trade  regime by
2005 or as a result of the Seattle round of GATT trade discussions commencing in
December 1999. Other risks and  uncertainties may also be described from time to
time in the Company's other reports and filings with the Securities and Exchange
Commission.


<PAGE>



CONSOLIDATED STATEMENTS OF OPERATIONS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES

For the 52 weeks ended  October 2, 1999,  the 53 weeks ended October 3, 1998 and
 the 52 weeks ended September 27, 1997

(Amounts in thousands, except for per share amounts)

                                            1999         1998          1997
                                        ------------ ------------  ------------

Net sales                               $  1,651,689 $  2,010,414  $  2,090,683
Cost of sales                              1,426,311    1,659,485     1,758,698
                                        ------------ ------------  ------------
Gross profit                                 225,378      350,929       331,985
Selling, general and administrative
 expenses                                    143,171      148,383       154,648
Provision for doubtful accounts                5,482        1,677         3,478
Amortization of goodwill                      17,810       18,100        18,158
Provision for restructuring                   62,069            0        12,058
                                        ------------ ------------  ------------
Operating income (loss)
 before interest and taxes                    (3,154)     182,769       143,643
                                              58,420       59,544        60,062
Equity in income of joint ventures            (6,357)      (2,980)            0
Other expense (income) - net                  (7,868)      (3,807)      (12,790)
                                        ------------ ------------  ------------
Income (loss) before income taxes            (47,349)     130,012        96,371
Income tax expense (benefit):
  Current                                      4,163       38,681        33,048
  Deferred                                   (20,018)      10,879         4,625
                                        ------------ ------------  ------------
    Total income tax (expense) benefit       (15,855)      49,560        37,673
                                        ------------ ------------  ------------
Net income (loss)                       $    (31,494) $    80,452   $    58,698
                                        ============ ============  ============


Net income per common share:
  Basic earnings (loss) per share       $      (0.57) $      1.33   $      0.96
  Diluted earnings (loss) per share     $      (0.57) $      1.32   $      0.95


See notes to consolidated financial statements.


<PAGE>

CONSOLIDATED BALANCE SHEETS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES

As of October 2, 1999 and October 3, 1998

(Amounts in thousands)
                                                     1999          1998
                                                -------------  -----------
ASSETS
Current assets:
Cash and cash equivalents                       $     17,402   $    16,222
Short-term investments                                18,307        12,729
Customer accounts receivable after deductions
  of $18,258 and $20,864 for the
  respective dates for doubtful accounts,
  discounts, returns and allowances                  251,781       288,806
Sundry notes and accounts receivable                  23,444        15,810
Inventories                                          317,554       322,548
Prepaid expenses                                       5,371         3,198
                                                -------------  -----------
    Total current assets                             633,859       659,313
Fixed assets, at cost:
Land and land improvements                            31,807        39,374
Buildings                                            419,569       442,828
Machinery, fixtures and equipment                    644,765       636,439
                                                -------------  -----------
                                                   1,096,141     1,118,641
Less accumulated depreciation and amortization       454,909       475,885
                                                -------------  -----------
    Fixed assets - net                               641,232       642,756
Other assets:
Investments and receivables                           68,103        61,455
Intangibles and deferred charges                      40,452        35,211
Excess of purchase cost over net assets acquired     492,629       514,152
                                                -------------  -----------
    Total other assets                               601,184       610,818
                                                -------------  -----------
                                                $  1,876,275   $ 1,912,887
                                                =============  ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings                           $          0   $    14,200
Long-term debt due currently                             470           470
Accounts payable - trade                              80,176        87,999
Sundry payables and accrued expenses                  79,612        73,995
Income taxes payable                                   1,166         6,440
Deferred income taxes                                 40,171        44,576
                                                -------------  -----------
      Total current liabilities                      201,595       227,680
Long-term liabilities:
Long-term debt                                       880,957       801,486
Other                                                 57,657        59,052
                                                -------------  -----------
     Total long-term liabilities                     938,614       860,538
Deferred income taxes                                106,817       124,448
Shareholders' equity:
Common stock issued (Note H)                             684           684
Capital in excess of par value                       884,347       884,685
Accumulated deficit                                  (85,343)      (53,849)
Accumulated other comprehensive income (loss)        (14,658)      (17,357)
Cost of common stock held in treasury               (155,781)     (113,942)
                                                -------------  -----------
     Total shareholders' equity                      629,249       700,221
                                                -------------  -----------
                                                 $ 1,876,275   $ 1,912,887
                                                =============  ===========

See notes to consolidated financial statements.


<PAGE>



CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES

For the 52 weeks ended  September  27, 1997,  the 53 weeks ended October 3, 1998
 and the 52 weeks ended October 2, 1999

(Amounts in thousands)

<TABLE>
<CAPTION>

                                                                     Accumulated
                                          Capital in                    other        Treasury
                                 Common   excess of   Accumulated    comprehensive    shares,
                                 Stock    par value     deficit      income (loss)   at cost       Total
                               --------- -----------  -------------  -------------- ------------ -----------
<S>                            <C>        <C>         <C>            <C>            <C>          <C>
Balance September 28, 1996     $     684  $  885,185  $   (192,999)  $      (9,263) $   (67,687) $   615,920
Net income for the period                                   58,698                                    58,698
Translation adjustments                                                       (948)                     (948)
                                                                                                   ---------
Comprehensive income                                                                                  57,750
Purchase of treasury stock                                                              (53,419)     (53,419)
Issuance of treasury stock                    (4,613)                                     8,890        4,277
Awards issued under Equity
   Incentive Plans                             2,082                                                   2,082
Amortization of unearned
    compensation                                 176                                                     176
Exercise of stock options                       (224)                                     3,933        3,709
Tax benefit on stock options                     231                                                     231
                               --------- ----------- -------------  -------------- ------------ ------------
Balance September 27, 1997           684     882,837      (134,301)        (10,211)    (108,283)     630,726
Net income for the period                                   80,452                                    80,452
Translation adjustments                                                     (7,146)                   (7,146)
                                                                                                   ---------
Comprehensive income                                                                                  73,306
Purchase of treasury stock                                                              (38,747)     (38,747)
Issuance of treasury stock                    (2,285)                                     2,436          151
Amortization of unearned
    compensation                                 125                                                     125
Exercise of stock options                     (1,254)                                    25,746       24,492
Conversion of note                             1,199                                      4,906        6,105
Tax benefit on stock options                   4,063                                                   4,063
                               --------- ----------- -------------  -------------- ------------ ------------
Balance October 3, 1998              684     884,685       (53,849)        (17,357)    (113,942)     700,221
Net loss for the period                                    (31,494)                                  (31,494)
Translation adjustments                                                      1,084                     1,084
Unrealized gain on securities
 (net of income taxes of $870)                                               1,615                     1,615
                                                                                                   ---------
Comprehensive income (loss)                                                                          (28,795)
Purchase of treasury stock                                                              (41,994)     (41,994)
Issuance of treasury stock                      (378)                                       155         (223)
Amortization of unearned
    compensation                                  40                                                      40
                               --------- ----------- -------------  -------------- ------------ ------------
Balance October 2, 1999        $     684  $  884,347  $    (85,343)  $     (14,658) $  (155,781) $   629,249
                               ========= =========== =============  ============== ============ ============
</TABLE>

See notes to consolidated financial statements.
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
BURLINGTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES

For the 52 weeks ended  October 2, 1999,  the 53 weeks ended October 3, 1998 and
 the 52 weeks ended September 27, 1997

(Amounts in thousands)
                                                 1999       1998        1997
                                              ---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                             $  (31,494)$   80,452 $    58,698
Adjustments to reconcile net income (loss) to
 net cash provided by operating activities:
   Depreciation and amortization
    of fixed assets                               64,757     68,375      66,742
   Provision for doubtful accounts                 5,482      1,677       3,478
   Amortization of intangibles and
    deferred debt expense                         18,170     18,455      18,600
   Equity in loss of joint ventures                3,052          0           0
   Deferred income taxes                         (20,018)    10,879       4,625
   Gain on disposal of assets                     (4,328)      (512)    (11,821)
   Provision for restructuring                    62,069          0      12,058
   Changes in assets and liabilities:
      Customer accounts receivable - net          31,543     40,974       6,400
      Sundry notes and accounts receivable        (7,634)    (7,114)       (154)
      Inventories                                 (5,560)   (14,877)     11,478
      Prepaid expenses                            (2,288)      (479)        120
      Accounts payable and accrued expenses      (29,174)   (39,577)     (3,404)
   Change in income taxes payable                    726     (5,903)      1,821
   Other                                         (18,577)   (14,969)     (2,361)
                                              ---------- ---------- -----------
        Total adjustments                         98,220     56,929     107,582
                                              ---------- ---------- -----------
Net cash provided by operating activities         66,726    137,381     166,280
                                              ---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                          (141,539)   (140,333)   (96,500)
  Proceeds from sales of assets                   55,884     10,559      20,672
  Investment in joint ventures                    (5,366)    (7,375)     (2,750)
  Change in investments                             (451)      (233)     (2,817)
                                              ---------- ---------- -----------
Net cash used by investing activities            (91,472)   (137,382)   (81,395)
                                              ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net change in short-term borrowings            (14,200)    14,200           0
  Repayments of long-term debt                   (36,880)   (217,606)  (200,472)
  Proceeds from issuance of long-term debt       119,000    216,021     167,768
  Proceeds from exercise of stock options              0     24,492       3,709
  Purchase of treasury stock                     (41,994)   (38,747)    (53,419)
                                              ---------- ---------- -----------
Net cash provided (used) by
 financing activities                             25,926     (1,640)    (82,414)
                                              ---------- ---------- -----------
Net change in cash and cash equivalents            1,180     (1,641)      2,471
Cash and cash equivalents at
 beginning of period                              16,222     17,863      15,392
                                              ---------- ---------- -----------
Cash and cash equivalents at end of period    $   17,402 $   16,222 $    17,863
                                              ========== ========== ===========

See notes to consolidated financial statements.

<PAGE>


Notes to Consolidated Financial Statements

Burlington Industries, Inc. and Subsidiary Companies


Note A - Summary of Significant Accounting Policies

Consolidation: The consolidated financial statements include the accounts of the
Company and all its subsidiaries. The accounts of foreign subsidiaries have been
included on the basis of fiscal periods ended no more than three months prior to
the dates of the consolidated balance sheets. Investments in affiliates in which
the Company  owns 20 to 50 percent of the voting stock are  generally  accounted
for using the  equity  method.  The  Company  has an  ownership  interest  in an
affiliated  limited  liability  company  of  approximately  15  percent  that is
accounted  for using the equity  method  because  the  Company  has  significant
influence over the operations of the entity,  including control of 40 percent of
the Board and certain  additional  rights that require  unanimous votes to pass.
All significant intercompany accounts and transactions have been eliminated.

Cash  equivalents:  Cash and cash  equivalents  include time  deposits and other
short-term investments with an original maturity of three months or less.

Investments:    The   Company    classifies   all   of   its    investments   as
available-for-sale.  Available-for-sale  securities  are  carried at fair value,
with the unrealized  gains and losses  reported as a component of  shareholders'
equity  in  comprehensive  income  (loss),  net  of  income  taxes.  Investments
available for current  operations  are  classified in the  consolidated  balance
sheet as current assets;  investments held for long-term purposes are classified
as  noncurrent  assets.  Interest  income  and  realized  gains  and  losses  on
securities  are included in "Other expense  (income) - net" in the  consolidated
statements of operations.  The cost of securities  sold is based on the specific
identification method.

Inventories:  Inventories  are  valued at the lower of cost or  market.  Cost of
substantially  all  components  of textile  inventories  in the United States is
determined using the dollar value Last-in,  First-out  (LIFO) method.  All other
inventories are valued principally at average cost.

Fixed assets:  Depreciation  and amortization of fixed assets is calculated over
the  estimated  useful  lives  of  the  related  assets  principally  using  the
straight-line  method: 15 to 20 years for land improvements,  15 to 50 years for
buildings and 5 to 15 years for machinery, fixtures and equipment.

Excess of purchase  cost over net assets  acquired:  The excess of purchase cost
over net assets acquired is amortized as goodwill using the straight-line method
over not more  than 40 years.  The  accumulated  amortization  of  goodwill  was
$217,654,000   and  $199,844,000  at  October  2,  1999  and  October  3,  1998,
respectively.  In  connection  with  the  transfer  of  certain  assets  of  the
Burlington  Madison Yarn division to a joint venture in fiscal year 1998 and the
sale of the remaining  assets in fiscal year 1999,  excess of purchase cost over
net assets  acquired  was reduced by $6.7  million and $3.7  million in 1998 and
1999, respectively.


<PAGE>


Impairment  of  long-lived  assets:  When  circumstances  indicate,  the Company
evaluates the  recoverability  of its long-lived  assets by comparing  estimated
future  undiscounted cash flows with the asset's carrying amount to determine if
a write-down to market value or discounted cash flow is required.

Deferred debt expense:  Deferred debt expense is amortized over the lives of the
related debt as an adjustment to interest expense.

Revenue recognition: Sales are recorded upon shipment or designation of specific
goods for later  shipment at  customers'  request with related risk of ownership
passing to such customers.

Research expenditures: Expenditures for research and development are expensed as
incurred.   Total   expenditures   for  research  and   development   aggregated
$12,090,000,  $14,934,000  and  $11,841,000  in the 1999,  1998 and 1997  fiscal
years, respectively.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Reclassification: Certain prior period amounts have been reclassified to conform
to current presentations.

Fiscal year:  The Company uses a 52 - 53 week fiscal year. The fiscal year ended
October 3, 1998 represents a 53-week period.

Other:  In June 1998,  the Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities," which was required to be adopted
in fiscal years beginning after June 15, 1999. In July, the FASB issued SFAS No.
137,  which  delayed  the  effective  date of SFAS  No.  133 for one  year.  The
statement permits early adoption as of the beginning of any fiscal quarter after
its issuance.  The Company expects to adopt the new statement  effective October
1, 2000. Under the statement,  all derivatives will be required to be recognized
on the  balance  sheet at fair  value.  Derivatives  that are not hedges must be
adjusted to fair value through income.  If the derivative is a hedge,  depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities, or
firm commitments  through earnings or recognized in other  comprehensive  income
until the hedged  item is  recognized  in  earnings.  Under the  statement,  any
ineffective  portion of a derivative's  change in fair value must be immediately
recognized in earnings.  The Company has not yet  determined  what the effect of
SFAS No. 133 will be on the earnings and financial position of the Company.


<PAGE>


Note B - Restructuring Activities

In June  1996,  the  Company  announced  its plan to close the  Knitted  Fabrics
division,  which  resulted in a $29.9 million  pre-tax charge in the 1996 fiscal
year.  In  addition,  the closing  resulted in an inventory  write-down  of $3.7
million included in cost of sales.  Combining these charges,  the closing of the
division  resulted in a pre-tax  charge of $33.6  million,  $20.3  million after
income taxes, or $0.33 per share. Production of the Knitted Fabrics division was
phased out during  September and October 1996. The components of the 1996 charge
include  costs of $12.7  million for  severance  and other  benefits  related to
approximately  1,150  employees,  $8.3 million for divestitures of machinery and
equipment,  $8.0 million for  divestitures of real estate,  and $0.8 million for
cancellation of leases.  Net sales of the Knitted  Fabrics  division were $108.2
million  during the 1996 fiscal year,  and net operating  loss before  interest,
taxes and restructuring charges was $17.2 million during the same period.

During the June 1997  quarter,  the  Company  recorded a $12.1  million  pre-tax
provision for  restructuring  associated with reducing staff,  consolidation  of
certain yarn  facilities  and exiting the  residential  carpet product line. The
staff  reduction  included  severance  costs  of  $5.2  million  related  to 215
employees.  The  components  of  the  yarn  manufacturing  restructuring  charge
included  costs of $1.3 million for  severance  related to 286  employees,  $2.2
million for  divestitures  of  machinery  and  equipment,  and $1.4  million for
divestitures  of real estate.  Costs related to exiting the  residential  carpet
product  line  included  primarily  $1.2  million  for  severance  related to 70
employees. In addition,  exiting the residential carpet product line resulted in
an inventory  write-down  and other  claims of $4.9 million  included in cost of
sales. Combining these charges, the restructuring  activities resulted in a 1997
pre-tax charge of $17.0 million,  $10.3 million after income taxes, or $0.17 per
share.  Net sales of the  residential  carpet  product  line were $38.7  million
during the 1996 fiscal year, and net operating loss before  interest,  taxes and
restructuring charges was $8.4 million during the same period.

The Company has substantially  completed all of the 1997 and 1996  restructuring
efforts  with  the  exception  of the  divestitures  of  certain  machinery  and
equipment and real estate. The severance  adjustment during fiscal year 1997 was
substantially   offset  by  higher  than  expected  losses  on  dispositions  of
equipment.  The carrying  amount of such assets at October 2, 1999,  included in
the Fixed Assets caption on the balance sheet, is $8.8 million,  and the Company
does not anticipate any material adjustments to this amount.

Following is a summary of activity in the 1997 and 1996  restructuring  reserves
(in millions):


<PAGE>


                                                                  Lease
                                                              Cancellations
                                                 Severance      and Other
                                                  Benefits      Exit Costs
                                                 ---------    -------------
         June 1996 restructuring charge........   $ 12.7         $ 0.8
         Payments..............................     (5.1)            -
                                                  ------         -----
         Balance at September 28, 1996.........      7.6           0.8
         June 1997 restructuring charge........      7.7           0.8
         Payments..............................     (7.6)         (0.6)
         Adjustments...........................     (1.4)            -
                                                   -----         -----
         Balance at September 27, 1997.........      6.3           1.0
         Payments..............................     (5.3)         (0.5)
                                                   ------        -----
         Balance at October 3, 1998............      1.0           0.5
         Payments..............................     (1.0)         (0.3)
         Adjustments...........................        -          (0.2)
                                                   -----         -----
         Balance at October 2, 1999............   $    -         $   -
                                                  ======         =====

During the March  quarter  of 1999,  the  Company  implemented  a  comprehensive
reorganization  plan  primarily  related to its apparel  fabrics  business.  The
apparel  fabrics  operations had been running at less than full capacity  during
the  preceding  9-12 month  period,  anticipating  that the surge of  low-priced
garment  imports  from  Asia  might  only be the  temporary  result of the Asian
financial  crisis.  The Company  views this  situation  to be more  permanent in
nature  and  therefore  decided  to  reduce  its  U.S.   manufacturing  capacity
accordingly and utilize only its most modern  facilities to be competitive.  The
major elements of the plan include:

         (1) The  combination of two businesses that had  complementary  product
lines and serve many of the same  customers.  The merger of the  two--Burlington
Klopman Fabrics and Burlington Tailored  Fashions--created  an organization with
an improved cost structure, called Burlington PerformanceWear.  Also, Burlington
Global Denim and a portion of the former Sportswear  division have been combined
to form Burlington CasualWear.

         (2) The reduction of U.S.  apparel fabrics capacity by approximately 25
percent and the  reorganization  of  manufacturing  assets,  including  overhead
reductions  throughout the Company.  Seven plants have been or will be closed or
sold by the dates indicated:  one department in Raeford,  North Carolina and one
plant in Forest City,  North  Carolina were closed in the March  quarter;  three
plants in North Carolina located in Cramerton (sold in April 1999), Mooresville,
and Statesville were closed during the June quarter and one plant in Hillsville,
Virginia was sold in June 1999; one plant in Bishopville, South Carolina and one
plant  located  in  Oxford,  North  Carolina  are  being  closed in phases to be
completed during the March quarter 2000.

         (3) The plan  will  result  in the  reduction  of  approximately  2,900
employees,  with severance  benefit payments to be paid over periods of up to 12
months from the termination  date depending on the employee's  length of service
(reduction of approximately 2,200 employees as of October 2, 1999).

The cost of the reorganization was reflected in a restructuring  charge,  before
income taxes, of $62.1 million ($58.5 million  applicable to the apparel fabrics
business) recorded in the second fiscal quarter ended April 3, 1999, as adjusted
by $3.2  million  in the  fourth  quarter of 1999.  The  components  of the 1999
restructuring  charge included the  establishment of a $19.0 million reserve for
severance  benefit  payments,  write-down of pension  assets of $3.2 million for
curtailment and settlement  losses,  write-downs for impairment of $37.7 million
related to fixed assets resulting from the  restructuring  and a reserve of $2.2
million for lease cancellations and other exit costs expected to be paid through
September  2001.  Assets that have been sold, or are held for sale at October 2,
1999 and are no longer in use, were written down to their  estimated fair values
less costs of sale.  These  assets  continue to be included in the Fixed  Assets
caption  on the  balance  sheet  in the  amount  of  $14.5  million.  Assets  at
Bishopville  and  Oxford  remaining  in use and  considered  impaired  based  on
estimated future cash flows were written down by $2.7 million to their estimated
fair value of $3.5 million. The impaired assets continue to be depreciated while
in use. Cash costs of the reorganization are expected to be substantially offset
by cash receipts from asset sales and lower working capital needs.

Other  expenses  related  to  the  1999   restructuring   (including  losses  on
inventories of discontinued styles,  relocation of employees and equipment,  and
plant carrying and other costs) of  approximately  $33.0 million,  before income
taxes, will be charged to operations as incurred. Through October 2, 1999, $27.1
million of such costs have been incurred and charged to  operations,  consisting
primarily of inventory losses and plant carrying costs.

Following  is a summary of activity in the related 1999  restructuring  reserves
(in millions):
                                                                 Lease
                                                             Cancellations
                                                 Severance     and Other
                                                 Benefits      Exit Costs
                                                 ---------   -------------
         March 1999 restructuring charge.......   $ 20.1         $ 2.2
         Payments..............................     (1.5)         (0.2)
                                                  ------         -----
         Balance at April 3, 1999..............     18.6           2.0
         Payments..............................     (5.7)         (0.2)
                                                  ------         -----
         Balance at July 3, 1999...............     12.9           1.8
         Payments..............................     (3.6)         (0.1)
         Adjustments...........................     (1.1)            -
                                                  ------         -----
         Balance at October 2, 1999............   $  8.2         $ 1.7
                                                  ======         =====

The Company,  through its Real Estate and  Purchasing  departments,  is actively
marketing the affected real estate and equipment currently available for sale or
to be available upon cessation of operations. The active plan to sell the assets
includes the preparation of a detailed property  marketing package to be used in
working  with  real  estate  and used  equipment  brokers  and  other  channels,
including  other textile  companies,  the local Chamber of Commerce and Economic
Development  and  the  State  Economic  Development   Department.   The  Company
anticipates that the divestitures of real estate and equipment will be completed
within 12 to 18 months from the date of closing.  However,  the actual timing of
the  disposition of these  properties may vary due to their locations and market
conditions.

Note C - Investments

The Company's  investments in marketable securities at October 2, 1999 consisted
of U.S.  municipal  bonds due after five years through ten years,  international
bond funds,  equity  securities  and money market  funds with an amortized  cost
basis  of  $20.3  million,   $3.7  million,   $4.4  million  and  $8.3  million,
respectively.  The aggregate  estimated fair value was $39.2 million,  including
gross  unrealized  gains of $2.8  million  and gross  unrealized  losses of $0.3
million. The Company's  investments in marketable  securities at October 3, 1998
consisted  of U.S.  municipal  bonds due after  five  years  through  ten years,
international  bond funds,  equity  securities  and money  market  funds with an
amortized  cost basis of $20.4  million,  $3.7  million,  $4.5  million and $6.6
million, respectively. The aggregate estimated fair value approximated amortized
cost at October 3, 1998.  Proceeds from sales of  available-for-sale  securities
were $19.8  million and $20.2  million  during the 1999 and 1998  fiscal  years,
respectively,  and  gross  purchases  were  $20.7  million  and  $24.4  million,
respectively.  Gross gains (losses)  realized on these sales in fiscal year 1999
and  1998  were not  significant.  Approximately  $23.3  million  of  marketable
securities are required to be maintained in conjunction with insurance programs.

The following is combined  summarized  unaudited  financial  information  of the
Company's  investments in affiliates that are accounted for on the equity method
(in millions):
                                                1999         1998         1997
                                              --------     --------     --------

   Earnings data:
         Revenue.............................  $ 453.5      $ 194.2      $   -
         Gross profit........................     27.6         13.1          -
         Net income (loss)...................      0.9          3.5          -
   Balance sheet data:
         Current assets......................  $ 102.2      $  68.8
         Noncurrent assets...................    221.0        228.5
         Current liabilities.................     38.2         12.5
         Noncurrent liabilities..............     37.2         19.6

The earnings data above includes the earnings recorded by the Company's textured
yarn joint  venture  combined  with the  results of other  affiliates  reporting
losses.  Under the terms of the  textured  yarn  joint  venture  agreement,  the
Company is entitled to receive the first $9.4  million of earnings for the first
five years of operations.  Subsequent to this five-year period,  earnings are to
be allocated based on ownership percentages. The Company purchased raw materials
in the amount of $42.1  million  from these  affiliates  during the 1999  fiscal
year.

Note D - Inventories

Inventories are summarized as follows (in thousands):
                                                             1999         1998
                                                          ---------   ---------
    Inventories at average cost:
        Raw materials................................     $  34,468   $  40,594
        Stock in process.............................        88,042      98,922
        Produced goods...............................       207,804     204,169
        Dyes, chemicals and supplies.................        21,269      22,358
                                                          ---------   ---------
                                                            351,583     366,043
        Less excess of average cost over LIFO........        34,029      43,495
                                                          ---------   ---------
            Total....................................     $ 317,554   $ 322,548
                                                          =========   =========

Inventories valued using the LIFO method comprised  approximately 90% and 91% of
consolidated  inventories at October 2, 1999 and October 3, 1998,  respectively.
Liquidation  of prior years' LIFO  inventory  layers in the 1999 fiscal year did
not materially affect cost of sales in that period.

Note E - Sundry Payables and Accrued Expenses

Sundry payables and accrued expenses consisted of the following (in thousands):

                                                             1999        1998
                                                          ---------   ---------
     Sundry accounts payable.........................     $   3,880   $   3,346
     Accrued expenses:
         Payroll and employee benefits...............        48,891      44,264
         Taxes, other than income taxes..............         8,735       8,648
         Interest....................................         4,413       6,078
         Other.......................................        13,693      11,659
                                                          ---------   ---------
             Total...................................     $  79,612   $  73,995
                                                          =========   =========


<PAGE>



Note F - Long-term Debt

Long-term debt consisted of the following (in thousands):
                                                             1999         1998
                                                          ----------  ----------
  1995 Bank Credit Agreement...........................   $  319,000  $  294,000
  1998 Bank Credit Agreement...........................       94,000           -
  Receivables Facility.................................      165,157     204,058
  Senior Debentures due 2005...........................      149,931     149,921
  Senior Debentures due 2027...........................      149,299     149,208
  Other indebtedness with various rates and maturities.        4,040       4,769
                                                          ----------  ----------
                                                             881,427     801,956
  Less long-term debt due currently....................          470         470
                                                          ----------  ----------
    Total..............................................   $  880,957  $  801,486
                                                          ==========  ==========

Bank Financing: The Company has an unsecured credit agreement ("1995 Bank Credit
Agreement"),  consisting of a $550.0 million  Revolving  Credit  Facility with a
final  maturity on March 31, 2001.  The  Agreement  provides for the issuance of
letters of credit by the fronting bank in an  outstanding  aggregate face amount
not to exceed  $75.0  million,  provided  that at no time  shall  the  aggregate
principal amount of Revolving Loans,  together with the aggregate face amount of
such  letters  of credit  issued,  exceed  $550.0  million.  At October 2, 1999,
letters of credit  outstanding  issued by the fronting  bank were  approximately
$3.7 million,  and the unused portion of the revolving  facility  commitment was
approximately  $227.3  million.  Additional  overnight  borrowings  up to  $42.0
million are also available under bank lines of credit.

Loans under the 1995 Bank Credit  Agreement bear interest at either (i) floating
rates generally  payable  quarterly  based on the Adjusted  Eurodollar Rate plus
0.40% or (ii)  Eurodollar  rates or fixed rates that may be offered from time to
time by a Lender pursuant to a competitive bid request submitted by the Company,
payable up to 360 days. In addition,  the Company pays an annual facility fee of
0.225%.  The  interest  rate and the  facility  fee are  based on the  Company's
implied senior  unsecured debt ratings.  In the event that both of the Company's
debt  ratings  improve,  the interest  rate and facility  fees would be reduced.
Conversely,  deterioration  in both of the Company's debt ratings would increase
the interest rate and facility  fees. At October 2, 1999,  the average  interest
rate under this agreement was 5.84%.

The 1995 Bank Credit Agreement  imposes various  limitations on the liquidity of
the Company.  The Agreement  requires the Company to maintain  minimum  interest
coverage  and maximum  leverage  ratios and a specified  level of net worth.  In
addition, the Agreement limits dividend payments and stock repurchases (equal to
50% of the previous fiscal year's domestic net income less any after-tax gain or
loss on asset sales  outside  the  ordinary  course of  business),  leases,  the
incurrence of additional indebtedness by domestic subsidiaries,  the creation of
additional liens and the making of investments in foreign entities and restricts
the Company's ability to enter into certain merger, liquidation or asset sale or
purchase transactions.

In November, 1998, the Company established a $105 million credit facility with a
group of banks  ("1998 Bank  Credit  Agreement").  On that date,  $57 million of
proceeds  from the new  agreement  were used to repay  loans under the 1995 Bank
Credit Agreement. Additional proceeds from this facility will be used to finance
the construction and working capital needs of the Company's Mexican subsidiaries
related  to  expansion  projects  in Mexico.  The  facility  includes  terms and
covenants similar to the 1995 Bank Credit Agreement, except that the outstanding
balance on the third anniversary of the facility will convert to a two-year term
loan payable  semiannually in four equal  installments.  At October 2, 1999, the
average interest rate under this agreement was 6.52%.  Loans under the 1998 Bank
Credit  Agreement  are made  directly to a Mexican  financing  subsidiary of the
Company and are guaranteed by the Company.

Receivables-Backed  Financing:  In  December  1997,  the Company  established  a
five-year,  $225.0 million Trade Receivables  Financing Agreement  ("Receivables
Facility") with a bank. The amount of borrowings allowable under the Receivables
Facility  at any time is a function of the amount of then  outstanding  eligible
trade  accounts  receivable up to $225.0  million.  Loans under the  Receivables
Facility  bear  interest,  with terms up to 270 days,  at the bank's  commercial
paper dealer rate plus  0.1875%.  A  commitment  fee of 0.125% is charged on the
unused  portion of the  Receivables  Facility.  The  Company  has the intent and
ability to maintain  the  receivables-backed  borrowings  on a long-term  basis.
Accordingly,  receivables-backed  borrowings  have been  classified as long-term
debt.

Senior  Debentures:  In  August  1997,  the  Company  issued,  through  a public
offering,  $150.0 million  principal amount of 7.25% unsecured senior debentures
due August 1, 2027 ("Senior  Debentures Due 2027").  The securities  were issued
under an indenture (the "Indenture") dated as of September 1, 1995 pursuant to a
shelf  registration  filed with the  Securities and Exchange  Commission,  under
which  $100.0  million of debt  securities  may still be issued.  The  Indenture
contains covenants  limiting certain liens and sale and leaseback  transactions.
The  Senior  Debentures  Due 2027 were  issued at a  discount  to yield  7.335%.
Interest on the Senior Debentures Due 2027 is payable semiannually on February 1
and August 1. The Senior Debentures Due 2027 will be redeemable as a whole or in
part at the option of the  Company  at any time on or after  August 2, 2007 at a
price equal to the greater of 100% of the principal  amount  redeemed or the sum
of the present  values of the  remaining  scheduled  payments of  principal  and
interest thereon.  The Senior Debentures Due 2027 will also be redeemable at the
option of the  holders  thereof  on August 1, 2007 in  amounts  at 100% of their
principal amount.

The  Company  also has  outstanding  $150.0  million  principal  amount of 7.25%
unsecured  senior  debentures  due September 15, 2005  ("Senior  Debentures  Due
2005")  under the  Indenture.  The Senior  Debentures  Due 2005 were issued at a
discount to yield 7.26%.  Interest on the Senior  Debentures Due 2005 is payable
semiannually on March 15 and September 15, and the debentures are not redeemable
prior to maturity and are not entitled to any sinking fund.

Maturities: As of October 2, 1999, aggregate annual maturities of long-term debt
for the next five years are $0.5 million in 2000,  $319.5 million in 2001,  $0.0
million in 2002, $165.2 million in 2003 and $94.0 million in 2004.

See Note P for information on financial  instruments utilized to manage interest
rate exposure.

Note G - Leases

Minimum  commitments  for rental  expenditures  under  noncancellable  operating
leases are as follows (in thousands):

          2000.............................................    $ 15,695
          2001.............................................      10,615
          2002.............................................       6,887
          2003.............................................       4,323
          2004.............................................       2,235
          Later years......................................       5,438
                                                               --------
                Total minimum lease payments...............    $ 45,193
                                                               =========

Approximately 27% of the operating leases pertain to real estate.  The remainder
covers  a  variety  of  machinery  and  equipment.   Certain  operating  leases,
principally for office  facilities,  contain escalation clauses for increases in
operating  costs,  property  taxes and  insurance.  For the 1999,  1998 and 1997
fiscal  years,   rental  expense  for  all  operating  leases  was  $22,038,000,
$20,384,000, and $19,751,000,  respectively. Sublease income was not material in
any of these years.

Note H - Shareholders' Equity

Shares of the Company's  voting and nonvoting  common stock,  par value $.01 per
share,  authorized,  issued and  outstanding  at October 2, 1999 and  October 3,
1998, respectively, were as follows:

                                       Shares          Shares           Shares
   October 2, 1999                   Authorized        Issued        Outstanding
   ---------------                  -----------      ----------      -----------
   Common Stock..................   200,000,000      67,939,148      51,611,431
   Nonvoting Common Stock........    15,000,000         454,301         454,301
                                    -----------      ----------      ----------
                                    215,000,000      68,393,449      52,065,732
                                    ===========      ==========      ==========

                                       Shares          Shares           Shares
   October 3, 1998                   Authorized        Issued        Outstanding
   ---------------                  -----------      ----------      -----------
   Common Stock..................   200,000,000      67,689,148       57,687,155
   Nonvoting Common Stock........    15,000,000         704,301          704,301
                                    -----------      ----------      -----------
                                    215,000,000      68,393,449       58,391,456
                                    ===========      ==========      ===========

All shares have similar rights and privileges except for voting rights.  Holders
of  Nonvoting  Common Stock are  entitled,  subject to certain  limitations,  to
exchange such shares for Common Stock.

On October 2, 1999 and October 3, 1998,  the Company  had  30,000,000  shares of
preferred stock authorized,  par value $.01 per share, none of which were issued
and  outstanding.  On December 3, 1997,  the Board of  Directors  of the Company
approved the adoption of a Stockholder Rights Plan. Under the Stockholder Rights
Plan, Preferred Stock Purchase Rights were distributed as a dividend at the rate
of one Right for each share of Common  Stock held as of the close of business on
December 15, 1997. Each Right will entitle a stockholder to a Unit consisting of
a portion of a newly issued share of Junior Participating Preferred Stock of the
Company,  at an exercise  price of $50.00 per Unit,  subject to adjustment  from
time to time to prevent dilution.  The Rights will not initially be exercisable.
The Rights will become  exercisable  only if another person acquires  beneficial
ownership  of 15  percent  or more  of the  Company's  voting  Common  Stock  or
commences a tender offer that would result in such person beneficially owning 15
percent or more of the Company's  voting Common Stock. If any person becomes the
beneficial  owner of 15 percent or more of the Company's voting Common Stock, or
if a holder of 15 percent or more of the  Company's  voting Common Stock engages
in certain other  acquisition  transactions,  then each outstanding Right (other
than Rights  owned by such 15 percent  stockholder)  will  entitle its holder to
purchase,  at the Right's  then-current  exercise price,  units of the Company's
Junior  Participating  Preferred  Stock having a market value equal to twice the
then-current  exercise  price.  The Rights  expire on December  4, 2007,  unless
earlier redeemed.  The Company may generally redeem the Rights at $.01 per right
at any time until the tenth day following public  announcement that a person has
acquired 15 percent or more of the Company's voting Common Stock.

During the 1999 fiscal year, the Company  exchanged  250,000 shares of Nonvoting
Common Stock for voting Common Stock.  During the 1999 fiscal year,  outstanding
shares also changed due to (i) the purchase of  6,339,503  additional  shares of
treasury  stock and (ii) the  issuance  of 13,779  shares of  treasury  stock to
settle Performance Unit awards (see Note Q).

The components of accumulated other comprehensive  income (loss), net of related
tax, at October 2, 1999 and October 3, 1998 are as follows (in thousands):

                                                         1999         1998
                                                       --------     ---------
  Foreign currency translation adjustments........     $(16,273)    $(17,357)
  Unrealized gains (losses) on securities.........        1,615            -
                                                       --------     ---------
                                                       $(14,658)    $(17,357)

Note I - Other Expense (Income) - Net

Other expense (income) - net consisted of the following (in thousands):

                                              1999         1998         1997
                                            --------     --------     --------
    Gain on sale of assets - net.........   $ (4,328)    $   (512)    $ (9,487)
    Interest income......................     (3,523)      (3,408)      (2,991)
    Other................................        (17)         113         (312)
                                            ---------    --------     --------
         Total...........................   $ (7,868)    $ (3,807)    $(12,790)
                                            ========     ========     ========

In  November  1998,  the Company  sold the  remaining  assets of the  Burlington
Madison Yarn division,  including manufacturing  facilities located in Ranlo and
St. Pauls, North Carolina, for a pre-tax gain of $2.7 million. Net sales of this
division  were $58.4  million  during the 1998 fiscal  year,  and net  operating
income before  interest and taxes was $1.3 million during the same period.  Also
during fiscal year 1999, the Company sold two idle plant facilities and recorded
pre-tax  gains on the sales of $1.6  million.  During the 1997 fiscal year,  the
Company sold  Advanced  Textiles,  Inc. (a small  fiberglass  business) for $4.6
million in cash and $4.1 million in securities  and recognized a pre-tax gain of
$4.8 million from the sale.  Also during the 1997 fiscal year,  the Company sold
its Sedgefield  chemical business for cash and recognized a pre-tax gain of $4.3
million  from the sale.  These  businesses  had  combined  sales of $5.3 million
during the 1997 fiscal year.



<PAGE>


Note J - Income Taxes

The sources of income (loss) before income taxes were as follows (in thousands):

                                                    1999       1998       1997
                                                  --------   --------   --------

  United States...............................    $(48,168)  $125,764   $ 89,987
  Foreign.....................................         819      4,248      6,384
                                                  --------   --------   --------
       Total                                      $(47,349)  $130,012   $ 96,371
                                                  =========  ========   ========

Income tax expense consisted of (in thousands):
                                                    1999       1998       1997
                                                  --------   --------   --------
  Current:
       United States..........................    $  3,923   $ 39,228   $ 32,799
       Foreign................................         240       (547)       249
                                                  --------   --------   --------
            Total current                            4,163     38,681     33,048
  Deferred:
       United States..........................     (20,149)    10,174      4,048
       Foreign................................         131        705        577
                                                  --------   --------   --------
            Total deferred....................     (20,018)    10,879      4,625
                                                  ---------  --------   --------
                                                  $(15,855)  $ 49,560   $ 37,673
                                                  ========   ========   ========

Income tax expense is  different  from the amount  computed by applying the U.S.
federal  income tax rate of 35% to income  before  income  taxes as follows  (in
thousands):
                                                   1999       1998       1997
                                                 --------   --------   --------
  U.S. tax at statutory rate..................   $(16,572)  $ 45,504   $ 33,730
  Goodwill charges with no tax benefits.......      7,318      6,119      6,140
  State income taxes, net of federal effect...     (3,349)     1,888      1,712
  Foreign Sales Corporation...................     (3,166)    (3,581)    (2,865)
  Other.......................................        (86)      (370)    (1,044)
                                                 ---------  ---------  --------
                                                 $(15,855)  $ 49,560   $ 37,673
                                                 ========   ========   ========

At October 2, 1999,  the  Company had $39.7  million of deferred  tax assets and
$186.7  million  of  deferred  tax   liabilities   that  have  been  netted  for
presentation  purposes.  At October 3, 1998,  the Company  had $37.1  million of
deferred  tax assets and $206.1  million of deferred tax  liabilities  that have
been  netted  for   presentation   purposes.   Operating  loss  and  tax  credit
carryforwards  with  related tax  benefits of $2.4  million (net of $4.0 million
valuation  allowance) at October 2, 1999,  and $1.3 million (net of $2.9 million
valuation  allowance) at October 3, 1998, expire from 2003 to 2014. Net deferred
tax  liabilities  at  October  2,  1999 and  October  3, 1998  consisted  of the
following (in thousands):

                                       1999                    1998
                               --------------------    --------------------
                                Current  Noncurrent     Current  Noncurrent
                               --------  ----------    --------  ----------
   Fixed assets..............  $      -  $  92,881     $      -  $ 110,439
   Inventory valuation.......    60,142          -       60,142          -
   Accruals, allowances
     and other...............   (17,564)    13,936      (15,020)    14,782
   Tax credit and state
     operating loss
     carryforwards...........    (2,407)         -        (546)      (773)
                               --------  ---------     --------  ---------
        Total................  $ 40,171  $ 106,817     $ 44,576  $ 124,448
                               ========  =========     ========  =========


<PAGE>


Note K - Supplemental Disclosures of Cash Flow Information

     (in thousands)                            1999         1998         1997
                                             --------     --------     --------

     Interest paid - net...................  $ 57,835     $ 56,118     $ 56,565
                                             ========     ========     ========

     Income taxes paid - net...............  $  2,811     $ 45,131     $ 37,086
                                             ========     ========     ========

On May 30,  1998,  the  Company  formed a joint  venture  with  Unifi,  Inc.  of
Greensboro,  North Carolina, to manufacture and market textured polyester yarns.
Each of the partners  transferred its textured yarn manufacturing  assets into a
newly-formed  limited  liability  company.  Under the  agreement,  Unifi  owns a
majority ownership  interest and manages the business,  while the Company owns a
minority interest.  The noncash transfer of assets from the Company's Burlington
Madison Yarn division  included  $24.6  million of  inventory,  fixed assets and
excess of purchase cost over net assets acquired for an equity investment.

Note L - Retirement and Other Postretirement Benefits

The Company's U.S. defined benefit pension plan provides benefits to most of its
U.S.  employees  and  certain  employees  in foreign  countries,  based on their
compensation over their working careers.  The funding policy for this plan is to
contribute annually an amount based on the recommendation of the plan's actuary.
Employees  also  contribute a  percentage  of their  compensation.  Participants
become fully vested at the end of five years of service.

In addition,  the Company has a health care plan for  employees  electing  early
retirement  between  the ages of 55 and 65 and a  Medicare  supplement  plan for
retired  employees  age 65 and older.  These plans are  available to most of the
Company's U.S.  employees who elect  participation.  The Company also has a life
insurance plan that was closed to new members in 1973.  The Company's  policy is
to fund the cost of the medical  plans and the life  insurance  plan as expenses
are  incurred.  The  cost  of  postretirement  benefits  are  accrued  over  the
employees' service lives.

                                                               Postretirement
                                        Pension Benefits          Benefits
                                      -------------------   -------------------
                                        1999      1998        1999       1998
                                      --------- ---------   --------   --------
                                                  (in thousands)
Change in benefit obligations:
  Balance at beginning of year....... $(354,986)$(337,730)  $(14,323)  $(13,241)
  Service cost.......................    (7,832)   (7,520)      (379)      (248)
  Interest cost......................   (21,238)  (24,722)    (1,305)    (1,045)
  Contributions by plan participants.   (10,727)  (12,553)    (5,983)    (5,778)
  Benefits paid......................    37,233    58,864      8,146      8,063
  Actuarial gains (losses)...........    29,227   (31,325)    (3,935)    (2,074)
  Curtailment gains (losses).........    (4,995)        -      1,025          -
  Settlements........................    49,151         -          -          -
                                      --------- ---------   --------   --------
  Balance at end of year.............  (284,167) (354,986)   (16,754)   (14,323)
                                      --------- ---------   --------   --------

Change in fair value of plan assets:
  Balance at beginning of year.......   327,754   349,069      2,843      2,365
  Actual return on plan assets, net
   of plan expenses..................    58,803    14,996       (468)      (428)
  Contributions by employer..........     8,000    10,000      1,963      3,191
  Contributions by plan participants.    10,727    12,553      5,983      5,778
  Benefits paid......................   (37,233)  (58,864)    (8,146)    (8,063)
  Settlements........................   (49,151)        -          -          -
                                      --------- ---------   --------   --------
  Balance at end of year.............   318,900   327,754      2,175      2,843
                                      --------- ---------   --------   --------

Funded status........................    34,733   (27,232)   (14,579)   (11,480)
Unrecognized prior service cost......       125       313          -          -
Unrecognized net (gain) loss.........    (2,185)   59,678      9,598      7,041
                                      --------- ---------   --------   --------
Net amount recognized in the
  consolidated balance sheet......... $  32,673 $  32,759   $ (4,981)  $ (4,439)
                                      ========= =========   ========   ========

Pension plan assets consist  primarily of listed stocks and bonds and short-term
investment funds. Postretirement benefit plan assets consist primarily of bonds.

The  fiscal  year 1999  pension  plan  curtailment  losses  were  recognized  as
components of the 1999 restructuring provision or the gain on disposition of the
Burlington  Madison Yarn  division in accordance  with SFAS No. 88,  "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination  Benefits." The curtailment gain in the  postretirement  benefit
plans resulting from the 1999  restructuring plan was not recognized in earnings
but rather  reduced the  unrecognized  net loss in that plan in accordance  with
SFAS No. 106,  "Employers'  Accounting  for  Postretirement  Benefits Other Than
Pensions."  Components of net benefit expense and assumptions at the fiscal year
end measurement  dates for the plans were as follows for the 1999, 1998 and 1997
fiscal years:

                                                            Postretirement
                               Pension Benefits                Benefits
                           ------------------------  -------------------------
                             1999     1998    1997     1999     1998     1997
                           -------- ------- -------  -------  -------  -------
                                      (dollar amounts in thousands)

  Service cost............ $  7,832 $ 7,520 $ 7,354  $   379  $   248  $   204
  Interest cost...........   21,238  24,722  25,128    1,305    1,045    1,085
  Expected return on plan
   assets, net of plan
   expenses...............  (26,399)(28,069)(24,077)     413      549      481
  Amortization:
   Unrecognized prior
    service cost..........      138     156     156        -        -        -
   Unrecognized losses....       99       -   1,982      763      328      312
                           -------- ------- -------  -------  -------  -------
  Net expense............. $  2,908 $ 4,329 $10,543  $ 2,860  $ 2,170  $ 2,082
                           ======== ======= =======  =======  =======  =======

  Discount rate...........   7.75%    6.75%   7.75%    7.75%    6.75%    7.75%
  Long-term rate of return
   on plan assets.........    8.5%     8.5%    8.5%     8.5%     8.5%     8.5%
  Long-term rate of
   compensation increase..   3.75%    3.75%   3.75%     N/A      N/A      N/A

For the  postretirement  benefit  plans,  the assumed annual rate of increase in
health care  expenses  was 6% in the 1999 and 1998 fiscal  years.  This rate was
assumed to remain at 6% after fiscal year 1999. A one percentage  point increase
in the assumed health care cost trend rate would have increased the  Accumulated
Projected  Benefit  Obligation  (APBO) by $1.0  million  at  October 2, 1999 and
increased the aggregate  service and interest cost components of  postretirement
benefit  expense for fiscal year 1999 by $0.2 million.  A one  percentage  point
decrease in the assumed  health  care cost trend rate would have  decreased  the
APBO by $0.9 million at October 2, 1999 and decreased the aggregate  service and
interest cost components of postretirement  benefit expense for fiscal year 1999
by $0.1 million.

Note M - Defined Contribution Plans

Effective January 1, 1999, the Company  instituted a 401(k) Savings Plan for all
U.S.  employees (and certain  employees in foreign  countries)  with one or more
years of service.  The Company discontinued making contributions to its Employee
Stock  Ownership Plan ("ESOP") after the 1998 plan year, and the ESOP was merged
into the 401(k)  Savings  Plan.  The 401(k)  Savings  Plan  provides for Company
contributions  of cash and/or Common Stock on a sliding scale based on the level
of the employee's contribution.  During the 1999 fiscal year, cash contributions
of $7.8 million were made to the 401(k)  Savings Plan and charged to operations.
Pursuant to a Board-established formula linked to the Company's annual operating
results,  cash  contributions  of $5.3 million and $3.1 million were made to the
ESOP and charged to operations for fiscal years 1998 and 1997, respectively.

Note N - Contingencies

The Company and its  subsidiaries  have sundry claims and other lawsuits pending
against  them and also have  certain  guarantees  that were made in the ordinary
course of business.  The Company has made provisions in its financial statements
for litigation based on the Company's assessment of the possible outcome of such
litigation,  including the possibility of settlement, and related legal fees and
costs.

Also,  the Company and  certain of its  current and former  direct and  indirect
corporate  predecessors,  subsidiaries and divisions have been identified by the
United States Environmental  Protection Agency, by the environmental agencies in
several  states  and by  private  parties  as  potentially  responsible  parties
("PRPs")  at  19  hazardous   waste  disposal  sites  under  the   Comprehensive
Environmental  Response Compensation and Liability Act of 1980 ("Superfund") and
comparable  state laws and,  as such,  may be liable for the cost of cleanup and
other  remedial  activities  at these  sites.  With  respect to certain of these
sites,  other  persons  have also been  identified  as  potentially  responsible
parties,  and in such  circumstances  the  responsibility  for cleanup and other
remedial  activities  is  typically  shared  among  such  parties  based  on  an
allocation formula.  The Company is currently involved in remedial activities at
three of these sites under federal  laws.  It is also involved in  environmental
cleanups at 16 other sites under state laws.  The Company may also be liable for
environmental   contingencies   at  25  other  sites   pursuant  to  contractual
obligations  resulting from divested  property or with respect to  environmental
cleanups that may be identified in the future.

The Company has  established the following  aggregate  reserves in its financial
statements for such  environmental  liabilities,  estimated to be paid primarily
over the next five years. The provision for  environmental  liabilities is based
on  the  Company's  estimate  of  allocations  of  liability  among  potentially
responsible  parties  (and the  likelihood  of  contribution  by such  parties),
information concerning the scope of contamination,  estimated remediation costs,
estimated transaction costs and other factors.

                                                (In millions)

         Balance at September 27, 1997.........   $   5.7
         Payments..............................      (1.0)
         Balance at October 3, 1998............       4.7
         Payments..............................      (1.2)
                                                  -------
         Balance at October 2, 1999............   $   3.5
                                                  =======

It is not possible to determine  with  certainty  the ultimate  liability of the
Company  in these  matters,  if any,  but in the  opinion of  management,  their
outcome should have no material  adverse effect upon the financial  condition or
results of operations of the Company.

Note O - Segment and Other Information

The Company is one of the largest and most diversified manufacturers of softgood
products in the world. It is a leading  developer,  marketer and manufacturer of
fabrics and other  textile  products  utilized in a wide  variety of apparel and
interior furnishings end uses.

In fiscal  year 1999,  the Company  adopted  SFAS No.  131,  "Disclosures  About
Segments  of an  Enterprise  and  Related  Information."  The  Company has three
reportable  segments  under  SFAS  No.  131  that  are  based  on  its  internal
organizational structure: PerformanceWear,  CasualWear and Interior Furnishings.
The  PerformanceWear  segment  includes  woven  synthetic  fabrics,  worsted and
worsted  wool  blend  fabrics  and  apparel,  and yarn  operations  that  supply
PerformanceWear  products.  The CasualWear  segment  consists of denim and woven
cotton and cotton blend fabrics and apparel.  Products  included in the Interior
Furnishings  segment are  fabrics  for  upholstery,  window  coverings,  bedroom
ensembles,  and  mattress  ticking;  bath,  area and  accent  rugs;  and  tufted
synthetic  carpet and carpet tiles for  commercial  uses.  The "Other"  category
includes transportation and miscellaneous ancillary operations.

Sales,  income  (loss)  before  income  taxes and  identifiable  assets  for the
Company's  reportable  segments are presented  below (in millions).  The Company
evaluates  performance  and allocates  resources  based on profit or loss before
interest,  amortization of goodwill,  restructuring charges, certain unallocated
corporate expenses,  and income taxes. The accounting policies of the reportable
segments  are  the  same  as  those  described  in the  summary  of  significant
accounting  policies.  Intersegment sales and transfers are recorded at cost and
are  primarily  related to  transportation  operations  included  in the "Other"
category.

                                              1999     1998      1997
                                            -------- --------  --------
                                                     (53-week
                                                       year)
Net Sales
         PerformanceWear........            $  611.7 $  852.3  $  930.9
         CasualWear.............               257.1    342.1     340.4
         Interior Furnishings...               758.0    792.2     790.6
         Other..................                36.0     39.4      51.1
                                            -------- --------  --------
                                             1,662.8  2,026.0   2,113.0
         Less:
          Intersegment sales....               (11.1)   (15.6)    (22.3)
                                            -------- --------  --------
                                            $1,651.7 $2,010.4  $2,090.7
                                            ======== ========  ========

Income (Loss) before
  Income Taxes
         PerformanceWear........            $   18.4 $   90.0  $  121.4
         CasualWear.............                (2.9)    38.0      13.8
         Interior Furnishings...                78.0     88.0      51.1
         Other..................                 1.9      2.5       2.5
                                            -------- --------  --------
           Total reportable
            segments............                95.4    218.5     188.8
         Corporate expenses.....               (12.3)   (14.7)    (14.8)
         Goodwill amortization..               (17.8)   (18.1)    (18.2)
         Restructuring charges..               (62.1)       -     (12.1)
         Interest expense.......               (58.4)   (59.5)    (60.1)
         Other (expense)
           income - net.........                 7.9      3.8      12.8
                                            -------- --------  --------
                                            $  (47.3)$  130.0  $   96.4
                                            ======== ========  ========

Total Assets
         PerformanceWear........            $  542.6 $  584.9  $  556.3
         CasualWear.............               301.3    282.1     234.5
         Interior Furnishings...               440.4    437.9     454.4
         Other..................                66.9     60.7      59.3
         Corporate (including
          goodwill).............               525.1    547.3     569.2
                                            -------- --------  --------
                                            $1,876.3 $1,912.9  $1,873.7
                                            ======== ========  ========

The following items are included in income (loss) before income taxes:

                                              1999     1998      1997
                                            -------- --------  --------
   Equity in Income (Loss) of
    Equity Method Investees
         PerformanceWear........            $    9.4 $    4.2  $      -
         CasualWear.............            $   (3.0)$   (1.2) $      -

   Depreciation and Amortization
         PerformanceWear........            $   25.7 $   29.8  $   28.9
         CasualWear.............                12.7     11.9      10.5
         Interior Furnishings...                23.5     24.3      24.4
         Other..................                 0.5      0.6       0.8
         Corporate..............                 2.4      1.7       2.1
                                            -------- --------  --------
                                            $   64.8 $   68.3  $   66.7
                                            ======== ========  ========

The following items are included in the determination of identifiable assets:

                                              1999     1998      1997
                                            -------- --------  --------
   Investments in Equity
    Method Investees
         PerformanceWear........            $   10.9 $   12.4  $      -
         CasualWear.............            $   16.4 $   11.1  $    5.0

   Capital Expenditures
         PerformanceWear........            $   67.3 $   61.6  $   43.4
         CasualWear.............                57.3     55.7      28.2
         Interior Furnishings...                16.3     20.5      19.1
         Other..................                   -        -       0.2
         Corporate..............                 0.6      2.5       5.6
                                            -------- --------  --------
                                            $  141.5 $  140.3  $   96.5
                                            ======== ========  ========

The Company primarily  markets its products to approximately  8,700 customers in
the United States. The Company also markets its products to customers in Canada,
Mexico,  Central  and  South  America,  Europe,  Africa,  Australia,  and  Asian
countries.  For the 1999 fiscal year, no single customer  represented  more than
10% of the Company's net sales, and the Company's 10 largest customers accounted
for  approximately  26% of net sales.  The following  table  presents  sales and
long-lived  asset  information by geographic  area as of and for the fiscal year
ended  1999,  1998 and 1997 (in  millions).  The  geographic  sales  dollars are
determined generally based on the ultimate destination of the product.

                                                 1999       1998        1997
                                            ----------- -----------  ---------
   Net Sales:
         United States.........             $  1,415.6  $  1,773.5   $ 1,851.4
         Foreign...............             $    236.1  $    236.9   $   239.3
   Long-lived Assets:
         United States.........             $    548.3  $    585.8   $   559.4
         Foreign...............             $     92.9  $     56.9   $    25.2

Note P - Financial Instruments

The Company utilizes interest rate agreements and foreign exchange  contracts to
manage interest rate and foreign currency exposures.  The principal objective of
such contracts is to minimize the risks and/or costs  associated  with financial
and  global  operating  activities.  The  Company  does  not  utilize  financial
instruments for trading or other  speculative  purposes.  The  counterparties to
these   contractual   arrangements  are  a  diverse  group  of  major  financial
institutions  with which the  Company  also has other  financial  relationships.
These counterparties  expose the Company to the risk of credit loss in the event
of nonperformance.  However,  the Company does not anticipate  nonperformance by
the  other  parties,   and  no  material  loss  would  be  expected  from  their
nonperformance.

INTEREST RATE INSTRUMENTS: The Company enters into interest rate swap agreements
to reduce the impact of  changes  in  interest  rates on all or a portion of its
floating rate debt. The swap agreements are contracts to exchange  variable rate
for fixed interest payments periodically over the life of the agreements without
the  exchange  of the  underlying  notional  amounts.  The  notional  amounts of
interest rate agreements are used to measure interest to be paid or received and
do not  represent  the amount of exposure to credit  loss.  The net cash amounts
paid or received on swap  agreements are accrued and recognized as an adjustment
to interest expense.  If an arrangement is replaced by another instrument and no
longer qualifies as a hedge instrument,  then it is marked to market and carried
on the balance sheet at fair value.

         As of  October  2,  1999 and  October  3,  1998,  the  Company  had the
following interest rate swap instruments in effect (the variable rates are based
on three-month LIBOR):
                           Notional
                            Amount    Fixed
                          (millions)   Rate      Period
                          ----------  -----   -----------
                             $200      7.37%  10/95-10/00
                               50      6.10%  11/97-11/04
                               50      5.72%  01/98-01/05

    FOREIGN  EXCHANGE  INSTRUMENTS:  The Company  enters into  forward  currency
exchange  contracts  in the regular  course of  business to manage its  exposure
against foreign  currency  fluctuations  on sales,  raw material and fixed asset
purchase  transactions  denominated  in  foreign  currencies.  Foreign  currency
receivables that have forward exchange contracts are recorded in U.S. dollars at
the applicable  forward rate.  The foreign  exchange  contracts on  receivables,
$17.4  million at  October 2, 1999,  require  the  Company to  exchange  British
pounds,  Italian lira and Euro currencies for U.S.  dollars and mature in one to
ten months.  The foreign  exchange  contracts on  receivables at October 3, 1998
($29.7 million)  required the Company to exchange British pounds,  German marks,
French  francs,  Canadian  dollars,  Spanish  pesetas and Italian  lira for U.S.
dollars and matured in one to eight months.  Forward exchange  contracts related
to raw  material  and  fixed  asset  purchase  transactions  are  recognized  as
adjustments  to the bases of the  underlying  assets.  At October  2, 1999,  the
Company had $6.2 million of forward currency exchange  contracts maturing in one
to four months  related to  purchases of wool and fixed  assets  denominated  in
Australian dollars, Italian lira and Euro currencies,  compared to $31.1 million
at October 3, 1998. At October 2, 1999 and October 3, 1998,  deferred  gains and
losses on  foreign  exchange  contracts  are not  material  to the  consolidated
financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS:  It is estimated that the carrying value of
the Company's financial  instruments  approximated fair value at October 2, 1999
and October 3, 1998, unless indicated otherwise below. The following methods and
assumptions were used in estimating the fair values of financial instruments:

Cash and Cash Equivalents:  The carrying amount  approximates fair value because
of the short maturity of those instruments.

Short-term  Investments:  The fair values are  estimated  based on quoted market
prices for these or similar instruments.

Long-term  Investments and  Receivables:  The fair values are estimated based on
one of the following methods:  (i) quoted market prices;  (ii) current rates for
similar issues;  (iii) recent  transactions for similar issues;  or (iv) present
value of expected cash flows.

Short-term and Long-term  Debt: The fair value is estimated by obtaining  quotes
from brokers or based on current  rates  offered for similar debt. At October 2,
1999,  long-term  debt with a carrying  value of $881.4 million had an estimated
fair value of $795.5 million. At October 3, 1998, long-term debt with a carrying
value of $802.0 million had an estimated fair value of $804.3 million.

Interest Rate  Instruments:  The fair values are the estimated  amounts that the
Company would receive or pay to terminate the agreements at the reporting  date,
taking into account current interest rates and the current  creditworthiness  of
the counterparties. At October 2, 1999 and October 3, 1998, the carrying amounts
of these instruments were a $0.9 million liability and a $0.7 million liability,
respectively.  At October 2, 1999 and October 3, 1998, the Company  estimates it
would  have  paid  $1.6  and  $16.0   million  to  terminate   the   agreements,
respectively.

Foreign Currency Contracts:  The fair values of foreign currency contracts (used
for hedging purposes) are estimated by obtaining quotes from brokers. At October
2, 1999 and  October  3, 1998,  carrying  amounts  related  to foreign  currency
contracts in the  consolidated  balance sheets were not material.  At October 2,
1999, foreign currency contracts to pay $6.2 million had an estimated fair value
of $6.1 million,  and foreign currency contracts to receive $17.4 million had an
estimated  fair value of $17.6  million.  At October 3, 1998,  foreign  currency
contracts to pay $31.1 million had an estimated fair value of $27.8 million, and
foreign currency  contracts to receive $29.7 million had an estimated fair value
of $31.6 million.

Note Q - Stock-Based Compensation

Under the Company's various Equity Incentive Plans, the Company is authorized to
award  restricted  shares of the  Company's  common  stock,  options to purchase
common  stock,  or  Performance   Unit/Share  awards  that  are  dependent  upon
achievement of specified  performance  goals and are payable in common stock and
cash.  Stock options  granted  generally have a maximum term of 10 years.  Under
these plans at October 2, 1999,  85,368  shares of common  stock are reserved to
settle Performance  Unit/Share awards currently outstanding and 2,736,145 shares
to settle additional future awards remain available.


<PAGE>



A summary  of the  Company's  stock  option  activity  and  related  information
follows:

                               1999               1998                1997
                         -----------------  -----------------  -----------------
                                 Weighted-          Weighted-          Weighted-
                                  Average            Average            Average
                         Options Exercise   Options Exercise   Options Exercise
                          (000)    Price     (000)    Price     (000)    Price
                         ------- ---------  ------- ---------  ------- ---------
Outstanding at
 beginning of year.....   3,689    $11.79     5,754   $11.58    6,203   $11.57
Granted................   1,093      9.15       253    14.78       27    11.70
Exercised..............       -         -    (2,136)   11.46     (323)   11.41
Forfeited..............    (274)    10.83      (182)   13.07     (153)   11.68
                         ------              ------            ------
Outstanding at
 end of year...........   4,508    $11.21     3,689   $11.79    5,754   $11.58
                         ======              ======            ======

Exercisable at end
 of year...............   3,313    $11.58     3,447   $ 8.40    3,483   $11.57

Per share weighted-average
 fair value of options
 granted during the year..     $5.47              $6.66             $5.24

The following table summarizes  information  about stock options  outstanding at
October 2, 1999:

                           Options Outstanding            Options Exercisable
                 ------------------------------------     -------------------
                                            Weighted-               Weighted-
  Range of               Weighted-Average    Average                 Average
  Exercise        Number     Remaining      Exercise       Number   Exercise
   Prices         (000)   Contractual Life    Price        (000)      Price
---------------  -------- ----------------  ---------     --------  --------

$ 5.38 to 11.00    1,509        7.3          $ 9.44           531    $ 9.98
$11.63 to 13.63    2,707        4.7          $11.66         2,700    $11.65
$14.00 to 21.93      292        6.8          $16.17            82    $19.49
                  ------                                   ------
                   4,508        5.7          $11.21         3,313    $11.58
                  ======                                   ======

The Company has elected to follow Accounting  Principles Board (APB) Opinion No.
25,  "Accounting  for Stock Issued to Employees."  Under APB 25, no compensation
expense is recognized  for the  Company's  employee  stock  options  because the
exercise price of the options equals the market price of the underlying stock on
the date of grant.  Total compensation cost charged (credited) to income related
to  restricted  share and  Performance  Unit  awards  was $0.0  million,  $(0.8)
million,   and  $4.3  million  for  the  1999,   1998  and  1997  fiscal  years,
respectively.

The following pro forma  information  regarding net income (loss) and net income
(loss)  per  share  is  required  when APB 25  accounting  is  elected,  and was
determined as if the Company had accounted for its employee  stock options under
the  fair  value   method  of  SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation."  The fair values for these options were  estimated at the date of
grant  using  a   Black-Scholes   option   pricing   model  with  the  following
weighted-average  assumptions:  risk-free  interest rates of 4.82%,  5.84%,  and
6.12% for fiscal year 1999, 1998 and 1997,  respectively;  volatility factors of
the expected  market price of the Company's  common stock of 0.49 for 1999, 0.35
for 1998 and  0.34 for  1997;  dividend  yields  of 0%;  and a  weighted-average
expected  life of the options of eight years for 1999 and six years for 1998 and
1997.  For purposes of pro forma  disclosures,  the estimated fair values of the
options are amortized to expense over the option's vesting periods (in thousands
except for per share information):

                                             1999        1998         1997
                                           --------    --------    ---------

Net income (loss):
  As reported.........................     $(31,494)   $ 80,452    $ 58,698
  Pro forma...........................     $(33,543)   $ 78,212    $ 56,266

Diluted earnings (loss) per share:
  As reported.........................      $(0.57)     $ 1.32      $ 0.95
  Pro forma...........................      $(0.61)     $ 1.28      $ 0.91

During the initial phase-in  period,  as required by SFAS No. 123, the pro forma
amounts were  determined  based on stock  options  granted after the 1995 fiscal
year only.  Therefore,  the pro forma amounts for  compensation  cost may not be
indicative  of the  effects on pro forma net income and pro forma net income per
share for future years.

Note R - Earnings Per Share

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share (in thousands):

                                             1999       1998      1997
                                           --------  --------- ---------
Numerator:
  Net income (loss)...................     $(31,494) $ 80,452  $ 58,698
  Effect of dilutive securities:
   Convertible note...................            -       116       360
                                           --------  --------  --------
    Numerator for diluted earnings
     per share........................     $(31,494) $ 80,568  $ 59,058
                                           ========  ========  ========

Denominator:
  Denominator for basic earnings per
   share..............................       54,978    60,428    61,289
  Effect of dilutive securities:
   Stock options......................            -       524       154
   Convertible note...................            -       183       568
   Nonvested stock....................           11         -         -
   Contingent Performance Unit awards.            -         4         -
                                           --------  --------  --------
  Denominator for diluted earnings
     per share........................       54,989    61,139    62,011
                                           ========  ========  ========

For fiscal  year 1999,  stock  options  and  Performance  Unit Awards that could
potentially  dilute basic  earnings per share in the future were not included in
the  diluted  earnings  per  share  computation  because  they  would  have been
antidilutive. However, such securities were not significant in this period.


<PAGE>



Note S - Quarterly Results of Operations (unaudited)

The Company's  unaudited quarterly results of operations are presented below (in
thousands,  except for per share data). The three-month  period ended October 3,
1998  represents  a 14-week  period;  all other  periods  presented  represent a
13-week period.

Fiscal 1999 Quarters (a)
                                        December    March     June    September
                                        --------  --------  --------  ---------
Net sales.............................. $407,182  $403,905  $434,634  $405,968
Cost of sales..........................  342,362   360,731   374,246   348,972
Income tax (expense) benefit...........   (6,190)   29,777    (3,833)   (3,899)
Net income (loss)...................... $  7,969  $(47,883) $  4,746  $  3,674

Basic earnings (loss) share............ $   0.14  $  (0.86) $   0.09  $   0.07
Diluted earnings (loss) per share...... $   0.14  $  (0.86) $   0.09  $   0.07

Common stock prices
  High.................................   11 1/8    11       10 1/4      9 3/8
  Low..................................    7 1/2     5 1/8    6 9/16     4 3/8


Fiscal 1998 Quarters
                                        December    March     June    September
                                        --------  --------  --------  ---------
Net sales.............................. $481,703  $517,954  $511,033  $499,724
Cost of sales..........................  402,803   423,272   414,781   418,629
Income tax expense.....................   (9,369)  (15,222)  (15,412)   (9,557)
Net income ............................ $ 13,224  $ 24,570  $ 25,951  $ 16,707

Basic earnings per share .............. $   0.22  $   0.41  $   0.42  $   0.28
Diluted earnings per share............. $   0.22  $   0.40  $   0.42  $   0.28

Common stock prices
  High.................................  15 5/8    17 7/8    18 7/8    14 1/2
  Low..................................  13 1/16   13 3/16   13 3/4     8 3/16


(a) March  quarter  1999  includes a $39.5  million  charge  for  restructuring,
adjusted  (reduced) by $1.9 million in the September  1999 quarter,  each net of
income taxes.


<PAGE>

STATISTICAL REVIEW

Burlington Industries, Inc. and Subsidiary Companies

(Dollar amounts in thousands, except per share data and ratios)

<TABLE>
<CAPTION>

                                     1999      1998(a)     1997       1996       1995
                                  ---------- ---------- ---------- ---------- ----------
<S>                               <C>        <C>        <C>        <C>        <C>

   SUMMARY OF OPERATIONS
   Net sales..................... $1,651,689 $2,010,414 $2,090,683 $2,182,347 $2,209,191
   Operating income (loss)
    before interest and taxes....     (3,154)   182,769    143,643    147,390    174,498
   Interest expense..............     58,420     59,544     60,062     65,936     56,294
   Income tax expense (benefit)..    (15,855)    49,560     37,673     33,747     51,707
   Income (loss) before
    extraordinary item (b).......    (31,494)    80,452     58,698     41,603     68,394

   Per share of common stock:
    Income (loss) before
     extraordinary item (basic)..      (0.57)      1.33       0.96       0.66       1.05
    Income (loss) before
     extraordinary item
     (diluted)...................      (0.57)      1.32       0.95       0.65       1.04
    Dividends....................          -          -          -          -          -


   FINANCIAL POSITION AT YEAR END
   Current assets................ $  633,859 $  659,313 $  697,627 $  719,370 $  732,837
   Fixed assets - net............    641,232    642,756    584,647    569,540    575,080
   Total assets..................  1,876,275  1,912,887  1,873,692  1,885,942  1,931,731
   Current liabilities...........    201,595    227,680    263,595    265,352    272,397
   Long-term liabilities.........    938,614    860,538    865,008    894,496    932,227
   Shareholders' equity..........    629,249    700,221    630,726    615,920    615,440
   Current ratio.................        3.1        2.9        2.6        2.7        2.7
   Total debt as % of
    capitalization...............       58.3%      53.8%      56.1%      57.7%      59.7%

   OTHER DATA
   Capital expenditures.......... $  141,539 $  140,333 $   96,500 $   79,174  $ 101,876
   Number of employees at
    year end.....................     18,500     18,900     20,100     21,000     22,500
   Cash interest coverage
    ratio........................        2.4        4.6        4.0        4.3        4.9



(a)      Fiscal year 1998 represents a 53-week period.
(b)      Includes  restructuring  provisions of $37.6 million in 1999 and $7.3
         million in 1997,  each net of income taxes.
</TABLE>

<PAGE>


                         Report of Independent Auditors



Shareholders and Board of Directors
Burlington Industries, Inc.

We have  audited the  accompanying  consolidated  balance  sheets of  Burlington
Industries,  Inc. and Subsidiary  Companies as of October 2, 1999 and October 3,
1998,  and the related  consolidated  statements  of  operations,  shareholders'
equity and cash flows for each of the three years in the period ended October 2,
1999.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Burlington  Industries,  Inc.  and  Subsidiary  Companies at October 2, 1999 and
October 3, 1998, and the consolidated results of their operations and their cash
flows,  for each of the three  years in the period  ended  October  2, 1999,  in
conformity with generally accepted accounting principles.

/s/Ernst & Young LLP

Greensboro, North Carolina
October 28, 1999