1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
For the Quarter Ended April 2, 1994 Commission File Number 1-5315
------------------------
S P R I N G S I N D U S T R I E S, I N C.
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0252730
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 North White Street
Fort Mill, South Carolina 29715
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(803) 547-1500
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes X No
--- ---
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As of May 12, 1994, there were 10,022,179 shares of Class A Common Stock and
7,853,087 shares of Class B Common Stock of Springs Industries, Inc.
outstanding.
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There are 31 pages in the sequentially numbered, manually signed original of
this report.
Page 1 of 31
2
TABLE OF CONTENTS TO FORM 10-Q
PART I - FINANCIAL INFORMATION
- - ------------------------------
ITEM PAGE
- - ---- ----
1. FINANCIAL STATEMENTS 3
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
- - ---------------------------
4. SUBMISSION OF MATTERS TO A VOTE 9
OF SECURITY HOLDERS
6. EXHIBITS 10
SIGNATURES 11
EXHIBIT INDEX 12
Page 2 of 31
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PART I
ITEM I - FINANCIAL STATEMENTS
SPRINGS INDUSTRIES, INC.
Consolidated Statements of Operations
and Retained Earnings
(In thousands except per share data)
(Unaudited)
THIRTEEN WEEKS
----------------------------
APRIL 2, APRIL 3,
1994 1993
----------- -----------
OPERATIONS
Net sales. . . . . . . . . . . . . . . . . . . . . . . $ 485,213 $ 501,754
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . 392,139 404,809
Selling, general and
administrative expenses. . . . . . . . . . . . . . 74,772 72,162
Interest expense . . . . . . . . . . . . . . . . . . 7,179 8,041
Other (income) expense . . . . . . . . . . . . . . . 764 230
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . 474,854 485,242
---------- ----------
Income before income taxes . . . . . . . . . . . . . . 10,359 16,512
Income taxes . . . . . . . . . . . . . . . . . . . . . 4,558 7,355
---------- ----------
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . 5,801 9,157
Cumulative effects of changes in
accounting principles. . . . . . . . . . . . . . . . - (72,543)
---------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . $ 5,801 $ (63,386)
========== ==========
Per share:
Income before cumulative effects
of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . $ .33 $ .51
Cumulative effects of changes in
accounting principles. . . . . . . . . . . . . . . . - (4.07)
---------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . $ .33 $ (3.56)
========== ==========
Cash dividends - Class A shares. . . . . . . . . . . . . $ .30 $ .30
========== ==========
Cash dividends - Class B shares. . . . . . . . . . . . . $ .27 $ .27
========== ==========
Weighted average shares of
common stock . . . . . . . . . . . . . . . . . . . . 17,813 17,827
========== ==========
RETAINED EARNINGS
Retained earnings at beginning
of period. . . . . . . . . . . . . . . . . . . . . . $ 526,428 $ 571,864
Net income (loss). . . . . . . . . . . . . . . . . . . 5,801 (63,386)
Cash dividends . . . . . . . . . . . . . . . . . . . . (5,041) (5,035)
---------- ----------
Retained earnings at end of period . . . . . . . . . . $ 527,188 $ 503,443
========== ==========
Page 3 of 31
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SPRINGS INDUSTRIES, INC.
Condensed Consolidated Balance Sheet
(In thousands except share data)
(Unaudited)
APRIL 2, JANUARY 1,
1994 1994
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 3,173 $ 2,790
Accounts receivable. . . . . . . . . . . . . . . . . . . . . 318,617 315,834
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 282,812 267,842
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,163 40,073
---------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . 643,765 626,539
---------- -----------
Property, plant and equipment. . . . . . . . . . . . . . . . . 1,220,978 1,195,843
Accumulated depreciation . . . . . . . . . . . . . . . . . . (664,851) (645,938)
----------- -----------
Property, plant, and equipment, net. . . . . . . . . . . . 556,127 549,905
---------- -----------
Other assets and deferred charges. . . . . . . . . . . . . . . 113,619 115,687
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $1,313,511 $ 1,292,131
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings. . . . . . . . . . . . . . . . . . . . $ 108,400 $ 61,420
Current maturities of long-term debt . . . . . . . . . . . . 20,515 20,511
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 66,262 73,640
Accrued restructuring costs . . . . . . . . . . . . . . . . 9,193 10,317
Other accrued liabilities. . . . . . . . . . . . . . . . . . 92,375 107,122
---------- -----------
Total current liabilities. . . . . . . . . . . . . . . . . 296,745 273,010
---------- -----------
Noncurrent liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 289,714 293,028
Long-term benefit plans and deferred
compensation . . . . . . . . . . . . . . . . . . . . . . . 140,733 139,284
Deferred income taxes and other deferred
credits . . . . . . . . . . . . . . . . . . . . . . . . . . 43,197 43,616
---------- -----------
Total noncurrent liabilities . . . . . . . . . . . . . . . 473,644 475,928
---------- -----------
Shareholders' equity:
Class A common stock- $.25 par value
(9,856,752 and 9,858,035 shares issued
in 1994 and 1993, respectively). . . . . . . . . . . . . . 2,464 2,465
Class B common stock- $.25 par value
(7,853,087 and 7,853,087 shares issued
in 1994 and 1993, respectively). . . . . . . . . . . . . . 1,963 1,963
Additional paid-in capital . . . . . . . . . . . . . . . . . 11,228 11,144
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 527,188 526,428
Cost of Class A shares in treasury
(April 2, 1994-122,338 shares; January
1, 1994 - 129,460 shares). . . . . . . . . . . . . . . . . (2,659) (2,785)
Currency translation adjustment. . . . . . . . . . . . . . . 2,938 3,978
---------- -----------
Shareholders' equity . . . . . . . . . . . . . . . . . . . 543,122 543,193
---------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $1,313,511 $ 1,292,131
========== ===========
Page 4 of 31
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SPRINGS INDUSTRIES, INC.
Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
THIRTEEN WEEKS ENDED
----------------------------------
APRIL 2, APRIL 3,
1994 1993
----------- ----------
CASH PROVIDED (USED) BY:
Operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . $ 5,801 $ (63,386)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Cumulative effects of changes in
accounting principles. . . . . . . . . . . . . . . - 72,543
Other non-cash charges, net . . . . . . . . . . . . 23,205 23,931
Changes in operating assets and liabilities
excluding effects of the transfer of European
subsidiaries . . . . . . . . . . . . . . . . . . . (35,851) (52,215)
Other, net. . . . . . . . . . . . . . . . . . . . . 705 (7,777)
--------- ---------
Net cash (used) by operating activities. . . . . (6,140) (26,904)
--------- ---------
Investing activities:
Purchase of property, plant and
equipment. . . . . . . . . . . . . . . . . . . . . (26,955) (16,398)
Minority interests
acquired . . . . . . . . . . . . . . . . . . . . . - (8,780)
--------- ---------
Net cash (used) by investing activities. . . . . (26,955) (25,178)
--------- ---------
Financing activities:
Proceeds from short-term borrowings. . . . . . . . . 46,980 61,286
Proceeds from commercial paper and long-term
debt borrowings. . . . . . . . . . . . . . . . . . 106 8,034
Payment of long-term debt. . . . . . . . . . . . . . (3,528) (7,453)
Payment of dividends . . . . . . . . . . . . . . . . (10,080) (10,069)
--------- ---------
Net cash provided by financing activities. . . . 33,478 51,798
--------- ---------
Increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . . . . $ 383 $ (284)
========= =========
Page 5 of 31
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
These condensed consolidated financial statements should be read in
conjunction with the financial statements presented in the Springs
Industries, Inc. (Springs) 1993 Annual Report on Form 10K.
In the opinion of the management of Springs, these unaudited condensed
consolidated financial statements contain all adjustments of a normal
recurring nature necessary for their fair presentation. The results for
interim periods reflect estimates for certain items which can be
definitively determined only on an annual basis. These items include the
valuation of a substantial portion of inventories on a LIFO cost basis and
the provision for income taxes. These interim financial statements reflect
applicable portions of the estimated annual amounts for such items.
The results of operations for interim periods are not necessarily indicative
of operating results to be expected for the remainder of the year.
2. Inventories:
Inventories are summarized as follows (in thousands):
April 2, January 1,
1994 1994
---------- ----------
Standard cost (which approximates
average cost) or average cost:
Finished goods. . . . . . . . . . . . . . . . . . $ 191,065 $ 180,989
In process. . . . . . . . . . . . . . . . . . . . 161,468 165,190
Raw materials and supplies. . . . . . . . . . . . 55,965 50,824
--------- ---------
408,498 397,003
Less LIFO reserve. . . . . . . . . . . . . . . . (125,686) (129,161)
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . $ 282,812 $ 267,842
========= =========
3. Acquisition of Minority Interest:
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 through 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.
Page 6 of 31
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4. Legal and Environmental:
Springs is involved in certain administrative proceedings alleging
violations of environmental laws and regulations, including proceedings
under the Comprehensive Environmental Response, Compensation, and
Liability Act. See page 23 of Springs' 1993 Annual Report (Note 10. -
Other Matters). In connection with these proceedings, the Company has
accrued an amount which represents management's best estimate of Springs'
probable liability.
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
resolution of the above matters should not have a material adverse impact
on the financial condition nor the future results of operations of
Springs.
Page 7 of 31
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales
Net sales for the first quarter were down three percent from those reported in
the first quarter of 1993. While home furnishings sales were higher than last
year by one percent as a result of continued strong volume, sales for the
specialty fabrics segment decreased 11 percent. This decrease in specialty
fabrics sales is due to the exclusion of European fiberglass sales in 1994
as well as reduced volume in apparel fabrics and piece goods.
Earnings
First quarter net income of $.33 per share represented a 36 percent decrease
from net income of $.51 per share in 1993 before the effects of the required
adoption of new accounting standards in 1993. Margin pressure in the home
furnishings segment's bedding divisions produced a substantial decline from
last year's record home furnishings first-quarter operating profits. However,
specialty fabrics margins improved substantially over last year due to improved
operating efficiencies, and as a result, the segment's operating profit
improved. In addition, the results from the Company's minority equity
investment in CS-Interglas A.G. are improving.
CAPITAL RESOURCES AND LIQUIDITY
A normal seasonal increase in working capital since year-end resulted in
increased short-term borrowings. Capital expenditures are still expected to
slightly exceed the 1993 level, and cash needs for the remainder of the year are
expected to be funded from operating cash flows, commercial paper, and
short-term bank borrowings.
OTHER
In February, we communicated to our bedding customers our first general price
increase since 1988. This general price increase was partly in response to the
expected future impact of markedly higher cotton prices. We expect to see the
benefits of this price change after midyear. The Company also announced a plan
on March 22, 1994 to reduce annual operating costs by at least $15 million.
The plan includes acceleration of expense-cutting programs already in progress;
deferral of certain capital projects with associated expense; reduction of
salaried jobs through consolidations, anticipated attrition, and a hold on new
hiring; and efficiencies in administrative areas as a result of systems
improvements.
Page 8 of 31
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PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the security holders of the Company was held on
April 18, 1994.
(b) During the annual meeting, the security holders of the Company elected
the following directors to hold office until the next annual meeting of the
security holders and until a successor is duly elected and qualified:
John F. Akers John H. McArthur
Crandall Close Bowles Aldo Papone
John L. Clendenin Donald S. Perkins
Leroy S. Close Robin B. Smith
Charles W. Coker Sherwood H. Smith, Jr.
Walter Y. Elisha Stewart Turley
Dan M. Krausse
(c)
Description of Matter For Against or Abstentions
Voted Upon Withheld
(i)
Annual election of
directors:
John F. Akers 39,046,796 36,808 0
Crandall Close Bowles 39,050,294 33,310 0
John L. Clendenin 39,051,061 32,543 0
Leroy S. Close 39,050,660 32,944 0
Charles W. Coker 39,051,061 32,543 0
Walter Y. Elisha 39,051,350 32,254 0
Dan M. Krausse 39,050,771 32,833 0
John H. McArthur 39,050,588 33,016 0
Aldo Papone 39,050,804 32,800 0
Donald S. Perkins 39,050,600 33,004 0
Robin B. Smith 39,048,626 34,978 0
Sherwood H. Smith, Jr. 39,050,860 32,744 0
Stewart Turley 39,050,860 32,744 0
(ii)
Ratification of the 39,046,874 26,850 9,880
appointment of Deloitte &
Touche as the Company's
auditors
(d) N/A
Page 9 of 31
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ITEM 6 - EXHIBITS
The following exhibit is filed as part of this report:
(3) Articles of Incorporation and Bylaws
Springs Industries, Inc.'s Bylaws, amended as of April 18, 1994, are
filed herewith (19 pages).
Page 10 of 31
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, Springs
Industries, Inc. has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPRINGS INDUSTRIES, INC.
By:/s/ James F. Zahrn
-----------------------------
James F. Zahrn Vice
President-Finance and
Treasurer
(Duly Authorized Officer
and Principal Financial Officer)
DATED: May 17, 1994
Page 11 of 31
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EXHIBIT INDEX
Item (6)
(3) Articles of Incorporation and Bylaws
Springs Industries, Inc.'s Bylaws, amended as of April 18, 1994, are
filed herewith (19 pages).
Page 12 of 31