1
Exhibit 13
I N D U S T R Y S E G M E N T
I N F O R M A T I O N (1)
Springs Industries, Inc.
SALES PER INDUSTRY
SEGMENT (millions)
(Graph)
EARNINGS PER INDUSTRY
SEGMENT (millions)
(Graph)
(In millions)
1993 1992(2) 1991
TRADE SALES:
Home furnishings . . . . . . . . . . . . $ 1,386.4 $ 1,278.4 $ 1,100.8
Specialty fabrics . . . . . . . . . . . . 636.4 697.3 789.6
- -------------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . $ 2,022.8(3) $ 1,975.7 $ 1,890.4
===========================================================================================
PROFIT FROM OPERATIONS:
Home furnishings . . . . . . . . . . . . $ 99.8 $ 100.5 $ 60.2
Specialty fabrics . . . . . . . . . . . 22.1 12.7 19.3
- -------------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . $ 121.9 $ 113.2 $ 79.5
- -------------------------------------------------------------------------------------------
Interest expense . . . . . . . . . . . . . . 30.3 31.4 32.3
Other (income) expense . . . . . . . . . . . 7.8 1.8 (2.5)
- --------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ADOPTION OF
SFAS NOS. 106 & 109 . . . . . . . . $ 83.8 $ 80.0 $ 49.7
===========================================================================================
IDENTIFIABLE ASSETS AT YEAR END:
Home furnishings . . . . . . . . . . . . $ 957.3 $ 894.5 $ 851.3
Specialty fabrics . . . . . . . . . . . 461.2 489.6 535.5
LIFO Reserve . . . . . . . . . . . . . . (129.2) (137.8) (141.3)
Corporate . . . . . . . . . . . . . . . 2.8 4.0 5.8
- -------------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . $ 1,292.1 $ 1,250.3 $ 1,251.3
- -------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Home furnishings . . . . . . . . . . . . $ 71.0 $ 59.3 $ 87.3
Specialty fabrics . . . . . . . . . . . . 17.3 21.0 28.6
- -------------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . $ 88.3 $ 80.3 $ 115.9
===========================================================================================
DEPRECIATION AND AMORTIZATION:
Home furnishings . . . . . . . . . . . . $ 64.1 $ 60.5 $ 53.4
Specialty fabrics . . . . . . . . . . . . 23.0 26.9 32.5
- -------------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . $ 87.1 $ 87.4 $ 85.9
===========================================================================================
(1) This schedule provides consolidated financial information by segment,
but not financial information of the segments as separate entities.
Profit from operations represents sales less cost of goods sold and
selling, general and administrative expenses. The allocation of the
LIFO reserve and corporate assets (cash and cash equivalents) to the
segments is not practicable. Segment information has been restated
for prior years as a result of a change in reporting segments for the
current year. See notes to financial statements for further
discussion regarding industry segments.
(2) 53 weeks
(3) Sales for 1993 include sales of $222.4 million to one major customer,
$172.1 million from the home furnishings segment and $50.3 million
from the specialty fabrics segment.
12
2
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S
O F O P E R A T I O N S A N D F I N A N C I A L C O N D I T I O N
A ten-year summary of selected financial data and a three-year analysis of
industry segment information appear on pages 26 through 27 and page 12.
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
1993 COMPARED WITH 1992
GENERAL
Results for 1993 reflect improving retail markets for home furnishings,
benefits from continued cost control, and improved operating efficiencies
resulting from modernization and restructuring. 1993 also reflects the
Company's first full year of operations in Canada.
Commencing in 1993, the Company has changed the financial statement
presentation of its segments to reflect the changing nature of its business,
the increased emphasis on its home furnishings business, and the similarities
of the markets for its specialty fabrics. The specialty fabrics segment now
combines the finished fabrics and industrial fabrics segments.
On March 25, 1993, Springs' subsidiary, Clark-Schwebel Fiber Glass, contributed
its European fiberglass subsidiaries and $8.8 million in cash to CS-Interglas
A.G., of Ulm, Germany, in consideration for a minority equity interest in
CS-Interglas A.G. and a convertible debenture. Accordingly, the results of the
European fiberglass business are now accounted for under the equity method of
accounting.
SALES
Annual sales in 1993 exceeded two billion dollars for the first time,
reflecting a two percent increase over sales reported in 1992. Increased home
furnishings sales were partially offset by a decline in sales volume in
specialty fabrics. Home furnishings sales improved eight percent due in part
to including a full year of the Company's Canadian operations in 1993. Without
the effect of the Canadian operations, home furnishings sales would have
increased four percent as a result of increased promotional programs and an
improving retail economy. The Company's specialty fabrics segment, a portion
of which has undergone a planned downsizing since 1988, reported sales nine
percent lower. The decrease resulted from the transfer of our European
subsidiaries to CS-Interglas A.G. in March 1993 and a softer retail market for
apparel and piece goods, which offset improved volume in the U. S. fiberglass
business. Without the effect of the transfer of European subsidiaries,
specialty fabrics sales would have declined five percent.
EARNINGS
Before one-time charges relating to the first quarter adoption of two new
financial accounting standards, net income for 1993 increased to $47.3 million
or $2.65 per share, a six percent improvement over 1992 net income of $44.5
million or $2.50 per share. Including these one-time charges, a net loss of
$25.3 million or $1.42 per share was reported in 1993.
Operating profits of $121.9 million in 1993 were eight percent higher than
1992. The home furnishings segment reported operating profit of $99.8 million,
only slightly below the record level of $100.5 million in 1992. The home
furnishings segment results reflect continued strong revenue performance as
well as cost reductions resulting from modernization. However, this benefit
was offset by lower margins due to increased promotional sales.
Despite lower sales, the specialty fabrics segment reported operating profits
of $22.1 million compared to $12.7 million in 1992. The improvement results
from continued cost reductions from restructuring and higher sales volume in
the fiberglass businesses. This segment's profit increase was also affected by
the transfer of the European fiberglass businesses, in March of 1993, to
CS-Interglas A.G. Without the effects of the transfer of the European
businesses, the specialty fabrics segment would have reported a 17 percent
increase in operating profits in 1993.
Net income for 1993 was unfavorably impacted by the newly enacted federal
income tax rate increase as well as foreign losses which did not give rise to a
tax benefit. However, foreign losses in 1993 were less than 1992 resulting in
a decrease in the effective tax rate to 43.6 percent in 1993 compared to 44.3
percent in 1992.
- --------------------------------------------------------------------------------
1992 COMPARED WITH 1991
SALES
Sales in 1992 gained five percent over sales reported in 1991. Increased home
furnishings sales were partially offset by declines in sales volume in the
specialty fabrics segment. Home furnishings sales improved 16 percent as a
result of the improving retail economy and as a result of the addition of the
Company's Canadian operations. Without the effect of the Canadian
acquisitions, home furnishings sales would have increased 13 percent. The
Company's specialty fabrics segment reported 12 percent lower sales primarily
as a result of the continued planned downsizing which has occurred in certain
divisions since 1988. The decline also reflects the continued low demand for
defense-related products and softness in the electronics markets world wide.
EARNINGS
Net income for 1992 advanced to $44.5 million or $2.50 per share, a 64 percent
increase over 1991 net income of $27.1 million or $1.53 per share. Operating
profits of $113.2 million
13
3
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S
O F O P E R A T I O N S A N D F I N A N C I A L C O N D I T I O N
were 42 percent higher than the previous year, primarily as a result of
increased home furnishings sales. The home furnishings segment produced a
record operating profit of $100 million, which represents a 67 percent increase
over 1991 operating profits. The home furnishings segment results reflect
continued strong revenue performance and cost reductions as a result of
marketing division realignment and modernization efforts. The specialty
fabrics segment reported operating profits of $12.7 million, or a 34 percent
decline from the prior year. Successful efforts were made to reduce costs
through restructuring. The segment also experienced an operating loss from the
European fiberglass business resulting from low sales volume which the business
has been experiencing since the latter part of 1990.
Unfavorably impacting net income in 1992 was a high effective income tax rate
primarily resulting from foreign losses in the specialty fabrics segment which
did not give rise to a tax benefit.
- --------------------------------------------------------------------------------
INFLATION AND CHANGING PRICES
The replacement cost of property, plant and equipment is generally greater than
the historical cost shown on the Balance Sheet due to inflation that has
occurred since the property was placed into service.
Springs uses the LIFO method of accounting for 84 percent of its inventories.
Under this method, the cost of goods sold reported in the Statement of
Operations approximates current costs.
- --------------------------------------------------------------------------------
CAPITAL RESOURCES AND LIQUIDITY
Expenditures for property, plant, and equipment totaling $88.3 million were
made in 1993. Springs' subsidiary Clark-Schwebel Fiber Glass contributed its
European fiberglass operations and $8.8 million in cash in consideration for a
minority equity interest and a convertible debenture in CS-Interglas A.G. The
Company's cash needs were provided from operations, commercial paper, and
short-term bank borrowings. Springs' expected cash needs for 1994 are also
expected to come from these sources.
Dividends represented 43 percent of net income before the effect of one-time
charges relating to the adoption of two new financial accounting standards.
Dividends declared in 1993 were $1.20 on Class A shares and $1.08 on Class B
shares.
- --------------------------------------------------------------------------------
OTHER
The Company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," as of January 3, 1993. In applying this pronouncement,
the Company immediately recognized, as a change in accounting principle, the
$82.8 million Accumulated Postretirement Benefit Obligation (APBO) as of the
beginning of fiscal 1993. On an after-tax basis, this charge was $51.6
million, or $2.90 per share.
The Company has also adopted SFAS No. 109, "Accounting for Income Taxes," as of
January 3, 1993. In applying this pronouncement, the Company immediately
recognized, as a change in accounting principle, a charge to income of $20.9
million, or $1.17 per share, as of the beginning of fiscal 1993. Prior years'
financial statements have not been restated to apply the provisions of this
pronouncement.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 changes the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. The
Company is required to adopt SFAS No. 115 for the fiscal year ending December
31, 1994. It is expected that implementation of this statement will not result
in any material change in the Company's consolidated financial position or
future results of operations.
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4
C O N S O L I D A T E D S T A T E M E N T
O F O P E R A T I O N S A N D R E T A I N E D E A R N I N G S
Springs Industries, Inc.
(In thousands except per share data)
For the Fiscal Years Ended January 1, 1994, January 2, 1993 (53 weeks), and December 28, 1991
1993 1992 1991
OPERATIONS
NET SALES . . . . . . . . . . . . . . . . . . $2,022,816 $1,975,692 $1,890,406
- -----------------------------------------------------------------------------------------
COST AND EXPENSES:
Cost of goods sold . . . . . . . . . . . 1,619,422 1,585,357 1,543,025
Selling, general and
administrative expenses . . . . . . . . 281,539 277,174 267,943
Interest expense . . . . . . . . . . . . 30,256 31,418 32,281
Other (income) expense . . . . . . . . . 7,786 1,748 (2,516)
- -----------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . 1,939,003 1,895,697 1,840,733
- -----------------------------------------------------------------------------------------
Income before income taxes
and cumulative effect of adoption of
SFAS Nos. 106 & 109 . . . . . . . . . . . . . 83,813 79,995 49,673
Income tax provision . . . . . . . . . . . . 36,557 35,465 22,576
- -----------------------------------------------------------------------------------------
Income before cumulative effect of
adoption of SFAS Nos. 106 & 109 . . . . . . 47,256 44,530 27,097
Cumulative effect of adoption of SFAS
Nos. 106 & 109, net of income tax. . . . . (72,543) - -
- -----------------------------------------------------------------------------------------
NET INCOME (LOSS) . . . . . . . . . $ (25,287) $ 44,530 $ 27,097
=========================================================================================
PER SHARE:
Income before cumulative effect of
adoption of SFAS Nos. 106 & 109 . . . . . $ 2.65 $ 2.50 $ 1.53
Cumulative effect of adoption of SFAS
Nos. 106 & 109, net of income tax . . . . (4.07) - -
- -----------------------------------------------------------------------------------------
NET INCOME (LOSS) . . . . . . . . . $ (1.42) $ 2.50 $ 1.533
=========================================================================================
1993 1992 1991
RETAINED EARNINGS
RETAINED EARNINGS AT BEGINNING OF YEAR . . . $ 571,864 $ 547,463 $ 540,448
Net income (loss) . . . . . . . . . . . . . . (25,287) 44,530 27,097
Class A cash dividends declared . . . . . . . (11,624) (11,538) (11,432)
Class B cash dividends declared . . . . . . . (8,525) (8,591) (8,650)
- -----------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF YEAR . . $ 526,428 $ 571,864 $ 547,463
=========================================================================================
See Notes to Consolidated Financial Statements.
DISTRIBUTION OF
THE SALES DOLLAR (1)
(millions)
(Graph)
(1) Excludes cumulative effect of adoption of SFAS Nos. 106 & 109
15
5
C O N S O L I D A T E D
B A L A N C E S H E E T
Springs Industries, Inc.
(In thousands except share data)
January 1, 1994 and January 2, 1993
1993 1992
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 2,790 $ 4,033
Accounts receivable . . . . . . . . . . . . . . . . . 315,834 298,807
Inventories . . . . . . . . . . . . . . . . . . . . . 267,842 263,041
Other . . . . . . . . . . . . . . . . . . . . . . . . 40,073 37,122
- -----------------------------------------------------------------------------------------
Total current assets . . . . . . . . . . . . . . 626,539 603,003
- -----------------------------------------------------------------------------------------
PROPERTY (at cost):
Land and improvements . . . . . . . . . . . . . . . . 17,549 16,546
Buildings . . . . . . . . . . . . . . . . . . . . . . 205,229 205,190
Machinery, equipment, etc . . . . . . . . . . . . . . 973,065 946,692
- -----------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . 1,195,843 1,168,428
Accumulated depreciation . . . . . . . . . . . . . . (645,938) (609,123)
- -----------------------------------------------------------------------------------------
Property, net . . . . . . . . . . . . . . . . . 549,905 559,305
- -----------------------------------------------------------------------------------------
OTHER ASSETS AND DEFERRED CHARGES . . . . . . . . . . . . 115,687 87,995
- -----------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . . $1,292,131 $1,250,303
=========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings . . . . . . . . . . . . . . . . $ 61,420 $ 46,014
Current maturities of long-term debt . . . . . . . . 20,511 20,943
Accounts payable . . . . . . . . . . . . . . . . . . 73,640 79,164
Accrued incentive pay and benefit plans . . . . . . . 33,928 24,224
Accrued restructuring costs . . . . . . . . . . . . . 10,317 13,743
Other accrued liabilities . . . . . . . . . . . . . . 73,194 90,726
- -----------------------------------------------------------------------------------------
Total current liabilities . . . . . . . . . . . 273,010 274,814
- -----------------------------------------------------------------------------------------
NONCURRENT LIABILITIES:
Long-term debt . . . . . . . . . . . . . . . . . . . 293,028 273,551
Long-term benefit plans and deferred compensation . . 139,284 62,083
Deferred income taxes . . . . . . . . . . . . . . . . 27,914 34,264
Deferred credits and other liabilities . . . . . . . 15,702 17,533
- -----------------------------------------------------------------------------------------
Total noncurrent liabilities . . . . . . . . . . 475,928 387,431
- -----------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Class A common stock- $.25 par value (9,858,035 and
9,801,590 shares issued in 1993 and 1992,
respectively) . . . . . . . . . . . . . . . . . 2,465 2,450
Class B common stock- $.25 par value (7,853,087 and
7,907,591 shares issued in 1993 and 1992,
respectively) . . . . . . . . . . . . . . . . . 1,963 1,977
Additional paid-in capital . . . . . . . . . . . . . 11,144 10,887
Retained earnings . . . . . . . . . . . . . . . . . . 526,428 571,864
Cost of Class A shares in treasury (1993-129,460
shares; 1992-138,322 shares) . . . . . . . . . . (2,785) (2,954)
Currency translation adjustment . . . . . . . . . . . 3,978 3,834
- -----------------------------------------------------------------------------------------
Total shareholders' equity . . . . . . . . . . . 543,193 588,058
- -----------------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . . $1,292,131 $1,250,303
=========================================================================================
See Notes to Consolidated Financial Statements.
16
6
C O N S O L I D A T E D S T A T E M E N T
O F C A S H F L O W S
Springs Industries, Inc.
(In thousands)
For the Fiscal Years Ended January 1, 1994, January 2, 1993 (53 Weeks), and December 28, 1991
1993 1992 1991
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . $(25,287) $ 44,530 $ 27,097
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Cumulative effect of adoption of SFAS
Nos. 106 & 109, net of income taxes 72,543 - -
Depreciation and amortization . . . . 87,138 87,376 85,943
Deferred income taxes . . . . . . . . 3,625 (2,260) 2,787
Changes in assets and liabilities excluding
effects of the transfer of European
subsidiaries and of businesses acquired:
Accounts receivable . . . . . . . . (29,285) 14,827 12,633
Inventories . . . . . . . . . . . . (13,599) (21,493) 13,705
Accounts payable, accrued incentive
pay and benefit plans, and other
accrued liabilities . . . . . . (5,102) 8,530 (17,734)
Accrued restructuring costs . . . . (9,495) (16,541) (18,751)
Other. . . . . . . . . . . . . . . . 501 (213) (4,286)
- ---------------------------------------------------------------------------------------------
Net cash provided by
operating activities . . . . . . . . 81,039 114,756 101,394
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property . . . . . . . . . . (88,289) (80,345) (115,946)
Businesses or minority interest acquired . (8,780) (18,591) (30,074)
Proceeds from sale of assets . . . . . . . 203 4,937 16,209
- ---------------------------------------------------------------------------------------------
Net cash used in investing activities (96,866) (93,999) (129,811)
- ---------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net . 15,406 16,814 18,025
Proceeds from long-term debt . . . . . . . 49,005 8,793 52,150
Payment of long-term debt . . . . . . . . (29,678) (27,956) (20,629)
Cash dividends paid . . . . . . . . . . . (20,149) (20,129) (20,109)
- ---------------------------------------------------------------------------------------------
Net cash provided (used)
by financing activities . . . . . . 14,584 (22,478) 29,437
- ---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . . . (1,243) (1,721) 1,020
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR . . . . . . . . . . . . 4,033 5,754 4,734
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR . . . . . . . . . . . $ 2,790 $ 4,033 $ 5,754
=============================================================================================
See Notes to Consolidated Financial Statements.
17
7
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of Springs Industries, Inc. and its
subsidiaries (Springs). Intercompany balances and transactions are eliminated
in consolidation. Investments in 20 to 50 percent owned companies are
accounted for using the equity method of accounting.
REVENUE RECOGNITION: Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer and the earnings process is
complete.
CASH EQUIVALENTS: Cash equivalents consist of liquid investments with original
maturities of three months or less when purchased.
ACCOUNTS RECEIVABLE: Springs has a diverse customer base across a variety of
industries. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The allowance for doubtful accounts was approximately $6,235,000 and
$10,738,000 in 1993 and 1992, respectively, which management believes is
adequate to provide for normal credit losses, as well as losses for customers
who have filed for protection under the bankruptcy laws.
INVENTORIES: Inventories are summarized as follows
(in thousands):
1993 1992
Standard cost (which approximates
average cost) or average cost:
Finished goods . . . . . . . $ 180,989 $ 174,516
In process . . . . . . . . . 165,190 170,957
Raw materials and supplies . 50,824 55,381
- ----------------------------------------------------------
397,003 400,854
Less LIFO reserve . . . . . . . . (129,161) (137,813)
- ----------------------------------------------------------
TOTAL . . . . . . . . . . . $ 267,842 $ 263,041
==========================================================
Inventories are valued at the lower of cost or market. Cost is determined using
the last-in, first-out method (LIFO) for approximately 84 percent of
inventories and the average cost method for all other inventories. Average
cost approximates current cost.
DEPRECIATION: Depreciation is computed for financial reporting purposes on a
straight-line basis over the estimated useful lives of the related assets.
INCOME TAXES: The provision for income taxes includes federal, state, and
foreign taxes currently payable and deferred taxes. Deferred taxes for 1993
were determined utilizing a liability approach as required by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
method gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities. This method gives immediate effect to changes in income tax laws
upon enactment. Deferred taxes for 1992 and 1991 were determined using the
deferral method as required by Accounting Principles Board Opinion No. 11.
INCOME (LOSS) PER SHARE: Per share amounts are based on the weighted average
number of shares of Class A and Class B common stock and common stock
equivalents outstanding. Certain common stock equivalents are not included in
the 1993 calculation because they are antidilutive. Such average shares
totaled 17,825,000 in 1993, 17,805,000 in 1992 and 17,710,000 in 1991.
RECLASSIFICATION: Certain previously reported amounts have been reclassified
to conform with year end 1993 presentations.
- --------------------------------------------------------------------------------
NOTE 2. ACQUISITIONS:
On March 25, 1993, Springs' subsidiary, Clark-Schwebel Fiber Glass, contributed
its European fiberglass subsidiaries (net assets of $17.1 million) and $8.8
million in cash to CS-Interglas A.G., of Ulm, Germany, in consideration for a
minority equity interest in CS-Interglas A.G. and a convertible debenture. No
gain or loss was recognized as a result of this transaction since it was
accounted for as a nonmonetary exchange. The earnings (losses) of the European
subsidiaries were consolidated in the Company's financial statements until
March 25, 1993, at which time the Company removed the assets and liabilities of
the subsidiaries from consolidation and began accounting for its interest in
CS-Interglas A.G. under the equity method of accounting.
In August and October of 1992, Springs purchased the marketing and distribution
operations of C. S. Brooks Canada Inc. and the Griffiths-Kerr division of
Finlayson Enterprises, Ltd., respectively, for $18.6 million. Both
acquisitions were accounted for using the purchase method of accounting, and
accordingly, purchase price was allocated to net assets based upon estimated
fair values at the acquisition dates. The Consolidated Statement of Operations
includes results of both from the dates of acquisition.
In April 1991, Springs purchased certain net assets comprising the rug and
shower curtain businesses of C. S. Brooks Corporation (C. S. Brooks) for
approximately $30.0 million. The acquisition was accounted for using the
purchase method of accounting, and accordingly, the purchase price was
allocated to the net assets of C. S. Brooks based upon their estimated fair
values at the acquisition date. The Consolidated Statement of Operations
includes C. S. Brooks since acquisition.
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8
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
- --------------------------------------------------------------------------------
NOTE 3. RESTRUCTURING PLAN:
In 1990, Springs recorded a $70.0 million charge ($43.9 million after taxes, or
$2.46 per share) for the estimated cost of converting certain finished fabrics
manufacturing facilities to home furnishings production, consolidating and
further reducing the Company's manufacturing operations and offering early
retirement to qualifying employees. The process of conversion and
consolidation is designed to further modernize Springs' textile operations and
to decrease capacity of certain manufacturing operations. Management believes
that its plan will not be fully implemented until 1994.
- --------------------------------------------------------------------------------
NOTE 4. INDUSTRY SEGMENT INFORMATION:
Commencing in 1993, the Company has changed the financial statement
presentation of its segments to reflect the changing nature of its business,
the increased emphasis on its home furnishings business, and the similarities
of the markets for its specialty fabrics. The specialty fabrics segment now
combines the finished fabrics and industrial fabrics segments. Segment
information for prior years has been restated to reflect this change.
Springs operates in two industry segments: home furnishings and specialty
fabrics. The home furnishings segment manufactures, purchases for resale, and
markets home furnishing products including sheets, pillowcases, bedspreads,
comforters, curtains, towels, shower curtains, bath rugs, drapery hardware and
decorative window furnishings to all major channels of retail distribution. The
specialty fabrics segment manufactures, purchases for resale, and markets woven
and non-woven fabrics, including apparel fabrics, home sewing fabrics,
fiberglass fabrics, industrial fabrics, specialty and high performance fabrics,
and protective and fire retardant fabrics to manufacturers for use in a variety
of end products. Summarized segment information appears on page12 and is an
integral part of the financial statements.
- -------------------------------------------------------------------------------------------------------------------------
NOTE 5. LONG-TERM DEBT:
Long-term debt consists of (in thousands):
1993 1992
Commercial Paper, average interest rate 3.2% in 1993, 4.1 % in 1992 . . . . . . . . . . . $ 99,613 $ 51,677
Senior Notes payable in annual installments of $6,250 in years 1994
through 1996, $12,500 in years 1997 through 2001, and $6,250
in years 2002 through 2005, effective interest rate of 10.01% . . . . . . . . . . . . . 106,250 118,750
Notes payable in quarterly installments of $3,125 through April 1,
1996, then $1,042 on July 1, 1996, interest at a variable market
rate, 3.75% at January 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,292 46,875
Senior Note payable in annual installments of $5,000 in years 1997
through 2006, interest at 9.6% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 50,000
Industrial Revenue Bond Obligations, payable in varying annual
amounts to 2019, interest at rates ranging from 2.5% to 8.3% . . . . . . . . . . . . . . 22,189 23,181
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,195 4,011
- -------------------------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,539 294,494
Current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,511) (20,943)
- -------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $293,028 $273,551
=========================================================================================================================
The Company intends to maintain commercial paper borrowings on a long-term
basis. The Company's access to the commercial paper market is facilitated by
committed long-term revolving credit agreements provided by several banks,
totaling $100.0 million. Revolving credit agreements carry no specific
expiration date but would terminate thirteen months after notice from banks.
Springs pays an annual commitment fee equal to 1/8 of 1 percent on the
revolving credit agreements.
Certain long-term debt agreements contain, among other things, requirements
concerning the maintenance of working capital and tangible net worth,
limitations on the incurrence of indebtedness, and restrictions on the payment
of dividends and redemption of stock. At January 1, 1994, retained earnings of
$173,583,000 were available for cash dividends and the redemption of Springs'
stock. Property with a net book value of $36,226,000 is pledged as collateral
for the Industrial Revenue Bonds.
Total annual maturities of long-term debt, excluding commercial paper will be:
1994 - $20,511,000; 1995 - $20,119,000; 1996 - $15,106,000; 1997 - $17,922,000;
1998 - $17,842,000 and varying amounts thereafter through 2019. Total interest
payments in 1993, 1992 and 1991 were approximately $27,894,000, $30,789,000 and
$30,102,000, respectively.
19
9
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
- --------------------------------------------------------------------------------
NOTE 6. SHAREHOLDERS' EQUITY:
Changes in shareholders' equity, exclusive of retained earnings, are (in
thousands):
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Issued Common Stock Issued Stock Held in Treasury
------------------- ------------------- Additional ---------------------- Currency
Number Par Number Par Paid-In Number Translation
Of Shares Value Of Shares Value Capital Of Shares Cost Adjustment
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 29, 1990 . . . 9,604 $ 2,401 8,048 $ 2,012 $ 9,318 150 $ 3,148 $ 9,883
Exchange of Class B common stock
for Class A common stock . . . . 76 19 (76) (19) - - - -
Shares awarded under various
employee plans . . . . . . . . . 55 14 - - 1,343 (8) (95) -
Currency translation adjustment . . - - - - - - - (531)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 28, 1991 . . . 9,735 $ 2,434 7,972 $ 1,993 $ 10,661 142 $ 3,053 $ 9,352
Exchange of Class B common stock
for Class A common stock . . . . 64 16 (64) (16) - - - -
Shares awarded under various
employee plans . . . . . . . . . 3 - - - 226 (4) (99) -
Currency translation adjustment . . - - - - - - - (5,518)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 2, 1993 . . . . 9,802 $ 2,450 7,908 $ 1,977 $ 10,887 138 $ 2,954 $ 3,834
Exchange of Class B common stock
for Class A common stock . . . . 55 14 (55) (14) - - - -
Shares awarded under various
employee plans . . . . . . . . . 1 1 - - 257 (9) (169) -
Currency translation adjustment . . - - - - - - - 144
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 1994 . . . . 9,858 $ 2,465 7,853 $ 1,963 $11,144 129 $ 2,785 $ 3,978
====================================================================================================================================
In December 1991, Springs granted certain key employees options to purchase
380,000 shares of Class A common stock at market value on the date of grant.
The options become exercisable in years 1994 through 1998. In April 1993,
Springs granted certain key employees options to purchase 59,000 shares of
Class A common stock at market value on the date of grant. The options become
exercisable in years 1996 through 1998.
As of January 1, 1994, Springs had authorized 1,000,000 shares of $1.00 par
value, voting, preferred stock, none of which was outstanding. Authorized
common stock consisted of 40,000,000 shares of $.25 par value Class A stock and
20,000,000 shares of $.25 par value Class B stock. Subject to certain
exceptions, holders of Class B stock are entitled to four votes per share on
matters brought before shareholders of the Company, while holders of Class A
stock are entitled to one vote per share. Holders of Class A stock are
entitled to cash dividends which are at least 10 percent greater than cash
dividends paid on Class B stock. Pursuant to a change in South Carolina
corporate law effective January 1, 1989, purchases by Springs of its own stock
no longer represent the acquisition of treasury shares; rather, the purchased
shares constitute authorized but unissued shares. Accordingly, shares acquired
after 1988 are accounted for as reductions of common stock, additional paid-in
capital and retained earnings. Shares purchased prior to January 1, 1989 will
continue to be accounted for in the same manner as prescribed under the
previous law.
- --------------------------------------------------------------------------------
NOTE 7. INCOME TAXES:
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" as of the beginning of 1993, and the
cumulative effect of this change is reported in the 1993 Consolidated Statement
of Operations. Prior years' financial statements have not been restated to
apply the provisions of SFAS No. 109. The cumulative effect of adoption was a
charge to income of $20.9 million, or $1.17 per share, reflecting the impact of
"temporary differences" between amounts of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws. These temporary
differences are determined in accordance with SFAS No. 109 and are more
inclusive in nature than "timing differences" as determined under previously
applicable accounting principles. During 1992 and 1991, deferred income taxes
were provided for timing differences in the recognition of revenue and expenses
for tax and financial statement purposes computed in accordance with Accounting
Principles Board Opinion No. 11.
20
10
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
The following tables present the provision for income taxes before cumulative
effect of adoption of SFAS Nos. 106 & 109, the principal items of deferred
income taxes at the beginning and end of 1993, the principal components of the
deferred income tax provision for 1992 and 1991, and a reconciliation of the
statutory U. S. income tax rate to the effective income tax rate.
INCOME TAX PROVISION BEFORE CUMULATIVE EFFECT
(In thousands):
1993 1992 1991
Current. . . . . . . . $ 32,932 $ 37,725 $ 19,789
Deferred. . . . . . . . 3,625 (2,260) 2,787
- ----------------------------------------------------------
TOTAL TAX PROVISION
BEFORE CUMULATIVE
EFFECT. . . . . . . $ 36,557 $ 35,465 $ 22,576
==========================================================
Temporary differences which give rise to a significant portion of deferred
income taxes are as follows:
JANUARY 1 January 3
1994 1993
Employee benefit accruals . . . $ 36,534 $ 36,115
Deferred compensation . . . . . 24,032 21,911
Restructuring accruals . . . . 4,080 8,655
Equity investments/subsidiaries 4,332 2,320
Accounts receivable reserves . 4,306 6,550
Environmental accruals . . . . 4,203 3,825
Other items . . . . . . . . . . 10,764 4,551
- ----------------------------------------------------------
Subtotal. . . . . . . . . . 88,251 83,927
Less valuation allowance . . . (4,332) (2,320)
- ----------------------------------------------------------
Total deferred tax assets . $ 83,919 $ 81,607
- ----------------------------------------------------------
Property . . . . . . . . . . . $ (71,813) (66,649)
Equity investments . . . . . . (8,523) (7,072)
Intangibles . . . . . . . . . . (3,690) (2,701)
Other items . . . . . . . . . . (3,241) (4,660)
- ----------------------------------------------------------
Total deferred tax
liabilities . . . . . . . $ (87,267) (81,082)
- ----------------------------------------------------------
NET DEFERRED TAX ASSET
(LIABILITY) . . . . . . . $ (3,348) $ 525
==========================================================
As a result of increases in a deferred tax asset related to an equity
investment, a valuation allowance has been recorded to the extent of such
deferred tax asset. Realization of this asset is contingent on the Company's
ability to generate future capital gains in an amount sufficient to utilize
this tax asset.
DEFERRED INCOME TAX PROVISION (Benefit)
(In thousands):
1992 1991
Depreciation . . . . . . . . . $ 1,603 $ (412)
Restructuring costs . . . . . . 2,611 6,393
Deferred compensation . . . . . (1,864) (1,343)
Employee benefit plans . . . . 275 (32)
Inventories . . . . . . . . . . (190) (23)
Other . . . . . . . . . . . . . (4,695) (1,796)
- -----------------------------------------------------------
TOTAL DEFERRED INCOME
TAX PROVISION (BENEFIT) . $ (2,260) $ 2,787
===========================================================
RECONCILIATION TO EFFECTIVE TAX RATES:
1993 1992 1991
Provision at statutory
U.S. tax rate . . . . . . 35.0% 34.0% 34.0%
Effective state income
tax rate . . . . . . . . 4.8 4.2 4.2
Foreign losses without
tax benefit. . . . . . . 2.4 3.4 4.7
Amortization of acquisition
price not deductible for
tax purposes . . . . . . 0.5 1.1 2.5
Other . . . . . . . . . . . 0.9 1.6 -
- -------------------------------------------------------------
TOTAL. . . . . . . . . . 43.6% 44.3% 45.4%
=============================================================
Income before income taxes includes foreign losses of $6,377,000, $8,449,000,
and $6,119,000 in 1993, 1992, and 1991, respectively. The provision for income
taxes includes state income taxes of $6,225,000 in 1993, $5,127,000 in 1992,
and $3,195,000 in 1991. Springs made income tax payments of approximately
$45,837,000, $29,930,000, and $21,260,000 in 1993, 1992, and 1991,
respectively.
- --------------------------------------------------------------------------------
NOTE 8. EMPLOYEES' BENEFIT PLANS:
EMPLOYEES' PROFIT SHARING AND RETIREMENT PLANS
Substantially all associates of Springs are covered by defined contribution
plans or defined benefit plans. The Company makes contributions to defined
contribution plans which are computed as a percentage of each participant's
base pay. In addition, in the event that eligible participants contribute a
percentage of their compensation to defined contribution plans, the Company
matches a portion of their contributions.
Company contributions to defined benefit plans are made in accordance with
ERISA and benefits are generally based upon years of service and compensation.
Assets held by plans are invested in money market and other fixed income
securities including United States government obligations and in diversified
equity securities.
Defined contribution plan expense for 1993, 1992, and 1991 was $22,827,000,
$19,695,000, and $18,666,000, respectively. The net assets available for
benefits under defined contribution plans had a market value of $427,602,000 as
of January 1, 1994.
21
11
N o t e s T o C o n s o l i d a t e d
F I N A N C I A L S T A T E M E N T S
Defined benefit retirement plan expense was $1,486,000 in 1993, $1,669,000 in
1992 and $1,817,000 in 1991. The following assumptions and components were
used to develop the net pension expense (in thousands):
1993 1992 1991
ASSUMPTIONS:
Discount rate for obligations . . . . . . . . . . . 7.0% 8.0% 8.0%
Discount rate for expenses . . . . . . . . . . . . 8.0% 8.0% 8.0%
Expected long-term rate of return on assets . . . . 7.5% 7.5% 7.5%
COMPONENTS:
Service cost . . . . . . . . . . . . . . . . . . . $ 423 $ 649 $ 816
Interest cost on projected benefit obligations . . 1,278 1,221 1,164
Actual return on assets . . . . . . . . . . . . . . (255) (259) (816)
Net amortization and deferral . . . . . . . . . . . 40 58 653
- --------------------------------------------------------------------------------
PENSION EXPENSE, NET . . . . . . . . . . . . . . . $1,486 $1,669 $1,817
================================================================================
The following table sets forth the funding status of Springs' defined benefit
pension plans (in thousands):
JANUARY 1 JANUARY 2
1994 1993
ACCUMULATED BENEFIT OBLIGATION:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . $(17,740) $(16,651)
Non-vested . . . . . . . . . . . . . . . . . . . . . . . (18) (11)
- -------------------------------------------------------------------------------------
Accumulated benefit obligation . . . . . . . . . . . . . $(17,758) $(16,662)
=====================================================================================
Projected benefit obligation . . . . . . . . . . . . . . . $(17,758) $(16,662)
Plan assets at fair value . . . . . . . . . . . . . . . . . 3,908 4,121
- -------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets . . . (13,850) (12,541)
Unrecognized net loss and effects of changes in
assumptions . . . . . . . . . . . . . . . . . . . . . . . 2,240 1,366
Additional minimum liability . . . . . . . . . . . . . . . (2,240) (1,385)
- -------------------------------------------------------------------------------------
ACCRUED PENSION COST RECOGNIZED IN THE BALANCE SHEET . . . $(13,850) $(12,560)
=====================================================================================
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," as of January 3, 1993. In applying this pronouncement,
the Company immediately recognized, as a change in accounting principle, the
$82.8 million Accumulated Postretirement Benefit Obligation (APBO) as of the
beginning of fiscal 1993. On an after-tax basis, this charge was $51.6
million, or $2.90 per share.
The Company sponsors a defined benefit postretirement medical plan which covers
substantially all salaried and nonsalaried employees. The plan provides
medical benefits and is contributory, with retiree contributions adjusted
periodically.
The following table sets forth the status of Springs' obligation under SFAS No.
106 at January 1, 1994 and January 3, 1993 (in thousands):
JANUARY 1 JANUARY 3
1994 1993
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees . . . . . . . . . . . . . . . . . . . $ (40,144) $ (43,380)
Fully eligible active plan participants . . . (7,150) (23,324)
Other active plan participants . . . . . . . . (20,497) (16,066)
- -------------------------------------------------------------------------------
Accumulated postretirement benefit obligation . $ (67,791) $ (82,770)
Unrecognized effects of changes resulting from
experience different from that assumed . . . . (14,901) -
- -------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION
RECOGNIZED IN THE BALANCE SHEET . . . . . . . . $ (82,692) $ (82,770)
===============================================================================
22
12
N O T E S T O C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
At the date of adoption, the substantive plan provided for eligible active
associates to elect to receive benefits based on service and age provisions
consistent with the provisions of then current retirees. This election was
offered for a limited time period and a significant number of these associates
did not elect this option; therefore, the number of fully eligible associates
was substantially less at January 1, 1994. The $14.9 million actuarial gain
primarily represents lower health care costs than assumed offset by a decrease
in the discount rate. Net postretirement benefit cost for 1993 consisted of
the following components:
Service cost - benefits earned . . . . . . . . $ 1,132
Interest cost on accumulated
postretirement benefit obligation . . . . . 6,320
- ----------------------------------------------------------
NET POSTRETIREMENT BENEFIT COST . . . . . . . . $ 7,452
==========================================================
The actuarial valuation of the APBO for this plan includes provisions for
anticipated future cost-sharing changes that are consistent with the Company's
expressed intent to adjust future retiree contributions. The Company continues
to fund this plan on the "pay-as-you-go" basis. In 1992 and 1991, retiree
"pay-as-you-go" expense was $7,712,000 and $6,482,000, respectively.
For measurement purposes, a 12.5 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1994; this 12.5
percent rate was assumed to decrease gradually to six percent until the year
2006 and remain at that level thereafter. If the health care cost trend rate
were increased by one percent, the APBO would increase by 13 percent and the
aggregate of the service and interest cost components of net postretirement
benefit cost would increase by 26 percent. The discount rate used in
determining the APBO at January 1, 1994 was seven percent and at January 3,
1993 was eight percent.
- --------------------------------------------------------------------------------
NOTE 9. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the fair value amounts of financial instruments as
required by SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments", using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
would realize in a current market exchange.
The carrying amounts of cash and cash equivalents, accounts receivable, other
assets, accounts payable, and short-term borrowings are reasonable estimates of
their fair value at January 1, 1994 and January 2, 1993.
Long-term debt including commercial paper of $314 million had an estimated fair
value at January 1, 1994 of $340 million. Long-term debt including commercial
paper of $294 million had an estimated fair value at January 2, 1993 of $304
million. Fair value was estimated using interest rates that were available to
the Company at those dates for issuance of debt with similar terms and
remaining maturities.
- --------------------------------------------------------------------------------
NOTE 10. OTHER MATTERS:
TRANSACTIONS WITH RELATED PARTIES: Springs transacts business with companies
which are controlled by two members of the Board of Directors, their family and
related entities. In the opinion of Springs' management, the cost of services
provided by these companies is not material and the services have been obtained
at competitive prices or rates. Management reviews its conclusions with the
Audit Committee of the Board of Directors.
CONTINGENCIES: The action filed in the United States District Court of South
Carolina by the Catawba Indian Tribe of South Carolina against Springs and
other defendants, including the State of South Carolina and a number of other
governmental entities, claiming title to approximately 140,000 acres of land in
York and Lancaster counties, South Carolina, including certain property owned
by
Springs, has been settled and the plaintiff's title claims have been formally
dismissed by order of the United States District Court entered on January 5,
1994.
Springs is involved in certain administrative proceedings governed by
environmental laws and regulations, including proceedings under the
Comprehensive Environmental Response, Compensation, and Liability Act. The
potential costs to the Company related to all of these environmental matters
are uncertain due to such factors as: the unknown magnitude of possible
pollution and cleanup costs; the complexity and evolving nature of governmental
laws and regulations and their interpretations; the timing, varying costs and
effectiveness of alternative cleanup technologies; the determination of the
Company's liability in proportion to other potential responsible parties; and
the extent, if any, to which such costs are recoverable from insurance or other
parties. The Company has accrued a liability of approximately $11 million,
which represents management's best estimate of Springs' probable liability
concerning all known environmental matters. This accrual has not been reduced
by any potential insurance recovery the Company may have regarding
environmental matters. The only major component of the Company's accrued
liability for environmental matters involves a site listed on the United States
Environmental Protection Agency's ("EPA") National Priority List ("NPL") where
Springs is the sole responsible party. Springs, the United States
Environmental Protection Agency and the United States Department of Justice
have executed a consent decree related to this site. Soil cleanup was
completed in 1993, subject to final approval by EPA. The remedial design for
groundwater cleanup is nearing completion. Management believes the $11 million
accrual will be paid out over the next ten years.
Springs is also involved in various other legal proceedings and claims
incidental to its business. Springs is defending its position in all such
proceedings.
In the opinion of management, based on the advice of counsel, the likelihood
that the resolution of the above matters would have a material adverse impact
on either the financial condition or the future results of operations of
Springs is remote.
23
13
I N D E P E N D E N T
A U D I T O R S ' R E P O R T
To the Board of Directors of Springs Industries, Inc.
We have audited the accompanying consolidated balance sheet of Springs
Industries, Inc. as of January 1, 1994 and January 2, 1993, and the related
consolidated statements of operations and retained earnings and of cash flows
for each of the three fiscal years in the period ended January 1, 1994. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Springs Industries, Inc. at
January 1, 1994 and January 2, 1993, and the results of its operations and its
cash flows for each of the three fiscal years in the period ended January 1,
1994 in conformity with generally accepted accounting principles.
As discussed in Notes 7 and 8 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes and its method of
accounting for postretirement benefits other than pensions to conform with
Statements of Financial Accounting Standards Nos. 109 and 106, respectively.
SIGNATURE on file
DELOITTE & TOUCHE
Charlotte, North Carolina
January 31, 1994
- --------------------------------------------------------------------------------
M A N A G E M E N T ' S R E P O R T
O N F I N A N C I A L S T A T E M E N T S
The management of the Company is responsible for the preparation of the
consolidated financial statements and related financial information included in
this annual report. The statements, which include amounts based on judgments
of management, have been prepared in conformity with generally accepted
accounting principles consistently applied.
In fulfilling the Company's responsibilities for maintaining the integrity of
financial information and for safeguarding assets, Springs relies upon internal
control systems designed to provide reasonable assurance that the Company's
records properly reflect business transactions and that these transactions are
in accordance with management's authorization. There are limits inherent in
all systems of internal accounting controls based on the recognition that the
cost of such systems should not exceed the benefits to be derived. Springs
believes its system provides this appropriate balance. The internal control
system is augmented by an internal audit staff which evaluates and reports on
the adequacy and effectiveness of internal control and procedures.
Management also recognizes its responsibility for conducting the Company's
affairs in an ethical and socially responsible manner. Springs has
communicated to its employees its intentions to maintain the highest standards
of ethical conduct in all of its business activity. Ongoing review programs
are carried out to monitor compliance with this policy.
The Board of Directors pursues its oversight responsibility for the Company's
systems of internal control and financial statements through its Audit
Committee, which is composed solely of outside directors. The Audit Committee
meets regularly with Springs' management, internal auditors, and independent
auditors. Both the independent auditors and internal auditors have access to
and meet privately with this Committee without the presence of management.
The Company's independent auditors, Deloitte & Touche, consider the Company's
internal control structure to the extent they deem necessary and perform tests
and other procedures they deem necessary to express an opinion on the fairness
of the presentation of the financial statements, which management believes
provides an objective assessment of the degree to which management meets its
responsibility for fairness of financial reporting.
SIGNATURE on file
STEPHEN P. KELBLEY
Executive Vice President
and Chief Financial Officer
24
14
Q U A R T E R L Y F I N A N C I A L D A T A
( U N A U D I T E D )
(In millions except per share data)
1993 1992
QUARTER 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH* YEAR*
Net sales . . . . . . $501.7 $483.9 $514.5 $522.7 $2,022.8 $462.9 $486.0 $495.0 $531.8 $1,975.7
Gross profit . . . . . 96.9 94.0 103.7 108.8 403.4 84.8 93.3 97.8 114.5 390.4
Income before
cumulative effect . . 9.1 8.9 13.7 15.5 47.3 5.3 11.2 13.3 14.7 44.5
Cumulative effect . . (72.5)(a) - - - (72.5)(a) - - - - -
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) . . (63.4) 8.9 13.7 15.5 (25.3) 5.3 11.2 13.3 14.7 44.5
========================================================================================================================
Per share:
Income before
cumulative effect . .51 .50 .77 .87 2.65 .30 .63 .75 .82 2.50
Cumulative effect . . (4.07)(a) - - - (4.07)(a) - - - - -
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) . . (3.56) .50 .77 .87 (1.42) .30 .63 .75 .82 2.50
========================================================================================================================
* 14 weeks for the quarter and 53 weeks for the year.
(a) One-time charges for adoption of SFAS Nos. 106 and 109.
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
1993 1992
QUARTER 1ST 2ND 3RD 4TH YEAR 1ST 2ND 3RD 4TH* YEAR*
Per share:
Class A dividends . . .30 .30 .30 .30 1.20 .30 .30 .30 .30 1.20
Class B dividends . . .27 .27 .27 .27 1.08 .27 .27 .27 .27 1.08
- --------------------------------------------------------------------------------------------------------------------------
Common stock prices:
High . . . . . . . 45 7/8 49 37 3/4 42 1/4 49 39 3/4 40 1/8 43 7/8 43 1/8 43 7/8
Low . . . . . . . . 35 3/4 33 1/2 34 5/8 34 3/4 33 1/2 30 1/2 34 7/8 35 5/8 31 1/2 30 1/2
- ------------------------------------------------------------------------------------------------------------------------
PRICE RANGE
OF COMMON STOCK
(by quarter)
(Graph)
25
15
S E L E C T E D F I N A N C I A L D A T A
Springs Industries, Inc.
1993 1992(c) 1991 1990 1989
SUMMARY OF OPERATIONS (in millions):
Net sales . . . . . . . . . . . . . . . . . . $2,022.8 $1,975.7 $1,890.4 $1,878.0 $1,909.3
Income (loss) before income taxes . . . . . . 83.8 80.0 49.7 (7.1)(a) 100.7
Income taxes . . . . . . . . . . . . . . . . . 36.6 35.5 22.6 (.3) 35.8
Net income (loss) . . . . . . . . . . . . . . (25.3)(h) 44.5 27.1 (6.8)(a) 64.9
Operating cash flow(d) . . . . . . . . . . . . 201.2 198.8 167.9 174.9 204.0
Class A cash dividends declared. . . . . . . . 11.6 11.5 11.4 11.6 11.5
Class B cash dividends declared . . . . . . . 8.5 8.6 8.7 8.7 8.7
- --------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Net income (loss) . . . . . . . . . . . . . . (1.42)(h) 2.50 1.53 (.39)(a) 3.64
Class A cash dividends declared . . . . . . . 1.20 1.20 1.20 1.20 1.20
Class B cash dividends declared . . . . . . . 1.08 1.08 1.08 1.08 1.08
Shareholders' equity . . . . . . . . . . . . . 30.90 33.47 32.39 32.05 33.08
Class A stock price range:
High . . . . . . . . . . . . . . . . . . . 49 43 7/8 36 1/4 39 1/2 45 1/4
Low . . . . . . . . . . . . . . . . . . . . 33 1/2 30 1/2 21 1/4 16 7/8 30 1/2
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STATISTICAL DATA:
Income to net sales . . . . . . . . . . . . . (1.3)% 2.3% 1.4% (0.4)% 3.4%
Net income to average shareholders' equity . . (4.7)% 7.7% 4.9% (1.2)% 11.6%
Operating return on assets employed (e) . . . 8.8% 8.7% 6.6% 7.7% 11.2%
Inventory turnover (f) . . . . . . . . . . . . 5.6 6.0 6.0 5.6 5.8
Accounts receivable turnover (g) . . . . . . . 6.5 6.5 6.3 6.2 6.4
Net sales divided by average assets . . . . . 1.6 1.6 1.5 1.6 1.7
Current ratio . . . . . . . . . . . . . . . . 2.3 2.2 2.2 2.5 2.4
Capital expenditures (in millions) . . . . . . $ 88.3 $ 80.3 $ 115.9 $ 117.8 $ 108.3
Depreciation (in millions) . . . . . . . . . . $ 78.1 $ 77.7 $ 75.2 $ 72.6 $ 67.5
Approximate number of shareholders . . . . . . 3,200 3,300 3,500 3,400 3,500
Average number of associates . . . . . . . . . 20,300 20,900 21,700 23,200 24,100
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SELECTED BALANCE SHEET DATA (in millions):
Working capital . . . . . . . . . . . . . . . $ 353.5 $ 328.2 $ 329.7 $ 356.5 $ 354.9
Property:
Cost . . . . . . . . . . . . . . . . . . . 1,195.8 1,168.4 1,123.6 1,087.9 978.0
Accumulated depreciation . . . . . . . . . (645.9) (609.1) (551.5) (563.7) (503.0)
Net . . . . . . . . . . . . . . . . . . . . 549.9 559.3 572.1 524.2 475.0
Total assets . . . . . . . . . . . . . . . . . 1,292.1 1,250.3 1,251.3 1,201.1 1,188.4
Long-term debt . . . . . . . . . . . . . . . . 293.0 273.6 287.8 260.4 227.5
Shareholders' equity . . . . . . . . . . . . . 543.2 588.1 568.9 560.9 585.1
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(a) Includes a $70.0 million charge ($43.9 million after tax, or $2.46 per share) for restructuring.
(b) Includes an $18.0 million charge ($11.2 million after tax or $.63 per share) for restructuring.
(c) Fifty-three weeks.
(d) Pretax income plus restructuring costs, depreciation and amortization, and interest expense.
(e) Pretax income before restructuring costs and interest expense divided by average of month-end total assets
used in operations.
(f) Cost of goods sold divided by average of month-end inventories.
(g) Net sales divided by average of month-end receivables.
(h) Includes a charge of $ (72.5) million, net of income taxes, or $(4.07) per share for cumulative effect of
adoption of SFAS Nos. 106 & 109.
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S E L E C T E D F I N A N C I A L D A T A
Springs Industries, Inc.
1988 1987 1986 1985(c) 1984
SUMMARY OF OPERATIONS (in millions):
Net sales . . . . . . . . . . . . . . . . . . $1,824.8 $1,661.1 $1,505.0 $1,013.5 $ 945.0
Income (loss) before income taxes . . . . . . 85.1(b) 101.5 58.8 20.6 55.1
Income taxes . . . . . . . . . . . . . . . . . 32.3 45.8 26.2 7.3 19.0
Net income (loss) . . . . . . . . . . . . . . 52.8(b) 55.7 32.6 13.3 36.1
Operating cash flow(d) . . . . . . . . . . . . 195.1 186.6 144.6 67.3 92.5
Class A cash dividends declared. . . . . . . . 14.7 14.5 13.5 13.4 13.4
Class B cash dividends declared . . . . . . . 2.8 - - - -
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PER SHARE OF COMMON STOCK:
Net income (loss) . . . . . . . . . . . . . . 2.98(b) 3.13 1.83 .75 2.03
Class A cash dividends declared . . . . . . . 1.01 .82 .76 .76 .76
Class B cash dividends declared . . . . . . . .27 - - - -
Shareholders' equity . . . . . . . . . . . . . 30.67 28.64 26.24 25.03 25.03
Class A stock price range:
High . . . . . . . . . . . . . . . . . . . 38 3/4 38 1/4 28 7/16 23 20 1/8
Low . . . . . . . . . . . . . . . . . . . . 27 20 3/4 20 1/2 15 5/8 15 1/4
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STATISTICAL DATA:
Income to net sales . . . . . . . . . . . . . 2.9% 3.4% 2.2% 1.3% 3.8%
Net income to average shareholders' equity . . 10.2% 11.5% 7.3% 3.0% 8.4%
Operating return on assets employed (e) . . . 12.0% 12.3% 8.8% 4.4% 9.7%
Inventory turnover (f) . . . . . . . . . . . . 6.2 5.8 5.0 5.7 5.8
Accounts receivable turnover (g) . . . . . . . 6.4 6.5 6.3 6.2 6.2
Net sales divided by average assets . . . . . 1.7 1.6 1.5 1.5 1.5
Current ratio . . . . . . . . . . . . . . . . 2.7 3.0 3.3 3.1 4.8
Capital expenditures (in millions) . . . . . . $ 77.1 $ 69.9 $ 57.0 $ 37.4 $ 50.9
Depreciation (in millions) . . . . . . . . . . $ 62.1 $ 57.8 $ 55.6 $ 37.6 $ 31.9
Approximate number of shareholders . . . . . . 3,700 3,400 3,300 3,400 3,500
Average number of associates . . . . . . . . . 23,400 23,100 23,500 17,000 16,800
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SELECTED BALANCE SHEET DATA (in millions):
Working capital . . . . . . . . . . . . . . . $ 389.8 $ 428.1 $ 402.2 $ 381.1 $ 279.8
Property:
Cost . . . . . . . . . . . . . . . . . . . 872.5 803.6 749.3 710.3 561.7
Accumulated depreciation . . . . . . . . . (448.0) (410.5) (366.0) (324.6) (311.2)
Net . . . . . . . . . . . . . . . . . . . . 424.5 393.1 383.3 385.7 250.5
Total assets . . . . . . . . . . . . . . . . . 1,118.3 1,083.7 1,010.4 1,013.1 615.0
Long-term debt . . . . . . . . . . . . . . . . 238.5 256.8 271.0 308.1 39.1
Shareholders' equity . . . . . . . . . . . . . 541.6 505.0 464.6 442.2 441.2
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Note: Selected financial data includes M. Lowenstein Corporation, Uniglass, Andre' Richard, Carey-McFall,
C. S. Brooks, C. S. Brooks Canada, and Griffiths-Kerr from their dates of acquisition in November 1985,
February 1988, March 1988, March 1989, April 1991, August 1992, and October 1992, respectively.
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Description of two graphs on page twelve should read as follows:
Pie graph depicting sales per industry segment, which shows home
furnishings at 69% of total and specialty fabrics at 31% of total.
Pie graph depicting earnings per industry segment, which shows home furnishings
at 82% of total and specialty fabrics at 18% of total.
Description of graph on page fifteen should read as follows:
Pie graph depicting distribution of the sales dollar, which shows the
following:
Raw materials and purchased goods 701.0
Wages, salary, & benefits 616.7
Other manufacturing, selling, general
and administrative expenses, etc. 621.2
Income taxes 36.6
Cash dividends and retained earnings 47.3
(1) Excluding cumulative effect of adoption of SFAS Nos. 106 & 109.
Description of graph on page 25 should read as follows:
Bar graph depicting price range of common stock, noted above, by quarters for
1992 and 1993.